Document:

EXHIBIT NO. 10.1

                            SHARE EXCHANGE AGREEMENT

         THIS AGREEMENT (the "Agreement") is dated as of June 22, 2002, between
B&B Capital Group, Inc., a Florida corporation ("B&B"), The American Life and
Annuity Company, Inc., a Tennessee corporation ("American"), and the
shareholders of American set forth on Exhibit A attached hereto and incorporated
herein by such reference (the "Shareholders").

                                    PREAMBLE

         WHEREAS, B&B is a corporation duly organized and existing under the
laws of the State of Florida, and having authorized capital stock consisting of
100,000,000 shares of common stock, par value $.001 per share, and 5,000,000
shares of preferred stock, par value $.001 per share, of which 50,150 shares of
common stock and no shares of preferred stock are issued and outstanding; and

         WHEREAS, American is a corporation duly organized and existing under
the laws of the State of Tennessee, having authorized capital stock consisting
of 5,000,000 shares of common stock, par value $.35 per share and 5,000,000
shares of preferred stock, par value $.35 per share; and

         WHEREAS, the Shareholders own 319,794 shares of the common stock of
American (the "American Common Stock"), which represents 100% of the issued and
outstanding shares of capital stock of American; and

         WHEREAS, the laws of the States of Florida and Tennessee permit the
Shareholders to exchange their shares of American Common Stock for shares of
common stock of B&B ("B&B Common Stock"); and

         WHEREAS, it is intended that this transaction be a tax-free exchange
pursuant to the provisions of the Internal Revenue Code, as amended; and

         WHEREAS, as a result of this Agreement, the parties hereto intend that
American will be a wholly-owned subsidiary of B&B, and B&B will be the parent
corporation of American.

         NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, as of the "Effective Date," as
hereinafter defined, it is agreed that the Shareholders shall exchange their
shares of American Common Stock for shares of B&B Common Stock, subject to the
terms and conditions set forth and the mode of carrying it into effect as are
and shall be as follows:

         1. RECITALS. The above recitals are true, correct and are herein
incorporated by reference.

         2. EXCHANGE OF SHARES. The Shareholders hereby agree to transfer to B&B

<PAGE>

at the Closing referred to in Section 3 below all of the shares of American
Common Stock currently held of record by the Shareholders in exchange for shares
of B&B Common Stock, and B&B agrees to deliver to each of the Shareholders a
certificate representing shares of the B&B Common Stock so acquired on the basis
of one share of B&B Common Stock for each share of American Common Stock so
exchanged.

         The Shareholders agree to deliver, as applicable, any certificates
representing the shares of American Common Stock held by the Shareholders as set
forth above to B&B on the Closing Date. The certificate to be delivered by the
Shareholders at the Closing shall be in negotiable form, and the certificate
delivered by B&B at the Closing shall be subject to restrictions on
transferability pursuant to Federal and state securities laws including, but not
limited to, Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act") or as applicable.

         3. CLOSING DATE. The closing ("Closing") shall be held on the date
hereof or such other date and time as may be agreed upon by the parties
("Closing Date").

         4. EFFECTIVE DATE. The "Effective Date" shall be the Closing Date.

         5. REPRESENTATIONS OF AMERICAN. American hereby makes the following
representations and warranties to B&B, each of which is true as of the date
hereof and will be true as of the Closing Date with the same effect as though
such representations and warranties had been made on the Closing Date:

                  (a) American is a corporation duly organized and existing
under and by virtue of the laws of the State of Tennessee, and is in good
standing under the laws thereof with an authorized capitalization of consisting
of 5,000,000 shares of common stock, par value $.35 per share and 5,000,000
shares of preferred stock, par value $.35 per share of which 319,794 shares of
common stock and no shares of preferred stock are issued and outstanding, with
100% of the issued and outstanding American Common Stock held by the
Shareholders. There are no outstanding options, contracts, calls, commitments or
demands of any character relating to the authorized but unissued capital stock
of American, except as set forth on Schedule 5a hereto.

                  (b) The shares of American Common Stock to be exchanged at the
Closing are validly issued, fully paid and non-assessable.

                  (c) The execution and delivery of this Agreement by American
and the performance by American of its covenants and undertakings hereunder have
been duly authorized by all requisite corporate action, and American has the
full corporate power and authority to enter into this Agreement and to perform
the covenants and undertakings to be performed by it hereunder.

                  (d) American has the corporate power to carry on its business
as now

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<PAGE>

conducted. There has been no material adverse change in the condition of
American since the date of organization. To the best of the knowledge of
American, the only changes in the financial condition of American since said
date are those arising from the normal and regular conduct of the business of
American.

                  (e) There is no litigation, governmental proceeding or
investigation threatened or in respect to American which could materially affect
American, its business and operations. Except for the approval of the Tennessee
Department of Insurance, which such approval American believes will be granted,
there are government or other approvals or filings necessary to consummate the
exchange herein contemplated.

                  (f) Neither the execution nor the delivery of this Agreement,
nor the consummation of the transaction herein contemplated, nor compliance with
the terms hereof, will conflict with or result in a breach of any of the terms,
conditions or provisions of Articles of Incorporation or the Bylaws of American,
as amended, any agreement or instrument to which American is now a party or by
which its assets are bound.

         6. REPRESENTATIONS OF THE SHAREHOLDERS. Each of the Shareholders
severally and not jointly represent, warrant and agree that:

                  (a) The Shareholder is the beneficial owner of the shares of
American Common Stock set forth opposite his/her/its respective name on Exhibit
A attached hereto. The shares of American Common Stock to be transferred by the
Shareholder to B&B hereunder are free and clear of all voting trusts,
agreements, arrangements, encumbrances, liens, claims, equities and liabilities
of every nature and the Shareholder is conveying clear and unencumbered title
thereto to American.

                  (b) The Shareholder does not own, nor does the Shareholders
know of any other person, corporation or firm that owns any material interest in
any property, invention, license, patent, patent application, copyright, trade
secret or trade-mark used by American or relating in any way to its business.

                  (c) There are no agreements to which Shareholder is a party
nor does the Shareholder know of any other agreements that in any way materially
restrict or impinge upon the business of American or the transfer of the shares
of American Common Stock contemplated hereby.

                  (d) The Shareholder has (i) such knowledge and experience in
financial, investment and business matters that he/she/is capable of evaluating
the merits and risks of the prospective investment in the securities of B&B, and
(ii) consulted with such independent legal counsel or other advisers as the
Shareholder has deemed appropriate to assist he/she/it in evaluating the
proposed investment in B&B.

                  (e) The Shareholder represents that he/she/it has adequate
means of providing for his/hers/its current financial needs and possible
personal contingencies and

                                        3
<PAGE>

has no need for liquidity of investment in B&B and can afford to hold
unregistered securities for an indefinite period of time.

                  (f) The Shareholder has been afforded the opportunity to ask
questions of, and receive answers from the officers and/or directors of each B&B
and American acting on their respective behalf concerning the terms and
conditions of this transaction and to obtain any additional information, to the
extent that either company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information furnished; and the Shareholder has availed himself/herself/itself of
such opportunity to the extent the Shareholder considers appropriate in order to
permit the undersigned to evaluate the merits and risks of an investment in B&B.

                  (g) The Shareholder acknowledges that neither B&B nor American
are making any investment or other recommendations to the Shareholder concerning
the transactions herein contemplated.

         7. REPRESENTATIONS OF B&B. B&B hereby makes the following
representations and warranties to the Shareholders and American, each of which
is true as of the date hereof and will be true as of the Closing Date with the
same effect as though such representations and warranties had been made on the
Closing Date:

                  (a) B&B is a corporation duly organized and existing under and
by virtue of the laws of the State of Florida, and is in good standing under the
laws thereof with an authorized capitalization of consisting of 100,000,000
shares of common stock, par value $.001 per share and 5,000,000 shares of
preferred stock, par value $.001 per share of which 50,150 shares of common
stock and no shares of preferred stock are issued and outstanding, with 100% of
the issued and outstanding B&B Common Stock held by the B&B shareholders. There
are no outstanding options, contracts, calls, commitments or demands of any
character relating to the authorized but unissued capital stock of B&B.

                  (b) The shares of B&B Common Stock to be issued to the
Shareholders at the Closing will be validly issued, fully paid and
non-assessable.

                  (c) The execution and delivery of this Agreement by B&B and
the performance by B&B of its covenants and undertakings hereunder have been
duly authorized by all requisite corporate action, and B&B has the full
corporate power and authority to enter into this Agreement and to perform the
covenants and undertakings to be performed by it hereunder.

                  (d) B&B has never commenced operations. There is no
litigation, government proceeding or investigation or in respect to B&B which
could materially affect B&B.

                  (c) The copies of the Articles of Incorporation and the Bylaws
of B&B heretofore delivered to the Shareholders are true and correct copies.

                                       4
<PAGE>

                  (d) Neither the execution nor the delivery of this Agreement,
nor the consummation of the transaction herein contemplated, nor compliance with
the terms hereof, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Articles of Incorporation or the Bylaws of B&B,
as amended, or any agreement or instrument to which B&B is now a party.

         8. CONDITIONS OF CLOSING. All of the obligations of B&B under this
Agreement are subject to the fulfillment, prior to or on the Closing Date set
forth in Section 3 of this Agreement, of each of the following conditions:

                  (a) Delivery by the Shareholders of the following:

                           (i) Certificates representing the shares of American
Common Stock, endorsed in blank and with signatures guaranteed by a bank or
trust company, and

                           (ii) Delivery by B&B of the certificates for the
shares of B&B Common Stock as set forth on Exhibit A attached hereto.

                  (b) American shall have obtained such consents and approvals
as are necessary from the Tennessee Department of Insurance or such other
regulatory body as are necessary for the continued conduct of American's
business following the share exchange.

                  (c) T. Lynn Tarpy, the sole officer and director of B&B, shall
tender his resignation as an officer and director of B&B and the following
individuals will be elected or appointed to the positions set forth opposite
their respective names below:

                Name                                Positions

         Dr. Archer W. Bishop, Jr.             Chairman of the Board
         Stanley P. Brown, III                 President, CEO and director
         Lila K. Pfleger                       Secretary, Treasurer and director
         Oscar R. Scofield                     Director
         Dr. John H. Bell                      Director

         9. INVESTMENT PURPOSE. The Shareholders represent that each are
acquiring the shares of B&B Common Stock to be delivered at the Closing solely
for investment and not for distribution or resale. By such representation, the
Shareholder means that no other person has a beneficial interest in the shares
of B&B Common Stock to be issued at the Closing. The Shareholder does not intend
to dispose of all or any part of the shares of B&B Common Stock except in
compliance with the provisions of the Securities Act and applicable state
securities laws. The Shareholders acknowledge that the shares of B&B Common
Stock to be issued at Closing have not been registered under the Securities Act

                                       5
<PAGE>

in reliance on an exemption available under the rules and regulations of the
Securities Act, and further understands that the undersigned is acquiring the
shares of B&B Common Stock without being furnished any offering material. The
Shareholder hereby agrees that the following or similar legend will be placed on
the face of the certificates evidencing shares of B&B Common Stock if required
in compliance with the Securities Act or state securities laws:

         "These securities have not been registered under the Securities Act of
         1933, as amended ("Act"), or any state securities laws and may not be
         sold or otherwise transferred or disposed of except pursuant to an
         effective registration statement under the Act and any applicable state
         securities laws, or an opinion of counsel satisfactory to counsel to
         the issuer that an exemption from registration under the act and any
         applicable state securities laws is available."

         10. REPRESENTATIONS TO SURVIVE CLOSING. All the terms, conditions,
warranties, representations and guarantees contained in this Agreement shall
survive delivery of the shares of American Common Stock transferred hereunder at
the Closing and any investigations made by or on behalf of B&B at any time.

         11. SHAREHOLDER CONSENT TO POST-CLOSING ACTIONS. By executing this
Agreement, in addition to consenting to the share exchange and related
transactions herein contemplated, each Shareholder hereby irrevocable grants
his/her/its written consent pursuant to Section 607.0821 of the Florida Business
Corporations Act to an amendment to B&B's articles of incorporation changing
B&B's corporate name to "American Life Holding Company, Inc."

         12. FUTURE ISSUANCE OF PREFERRED STOCK WITH SUPER MAJORITY VOTING
RIGHTS. Following the Closing, as consideration for Dr. Archer W. Bishop, Jr.
providing B&B with a $250,000 line of credit, B&B will issue to Dr. Bishop a
series of to-be-created shares of preferred stock, which such series will
consist of 250,000 shares and be designated as Series A Preferred Stock (the
"Series A Preferred"). It is anticipated that the designations, rights and
preference of the Series A Preferred will include the following provisions:

                  i.       the stated value of each share is $ 1.00 per share,

                  ii.      the shares will not be redeemable without the consent
                           of the holders of a majority of the issued and
                           outstanding shares of Series A Preferred,

                  iii.     each share of Series A Preferred will be convertible
                           into shares of B&B's Common Stock at B&B's option at
                           a ratio to be agreed upon by the B&B and the holder
                           at the time of conversion,

                                       6
<PAGE>

                  iv.      the shares of Series A Preferred will not pay any
                           dividends,

                  v.       each share of Series A Preferred will carry voting
                           rights equal to 75 votes, and

                  vi.      so long as the shares of Series A Preferred are
                           outstanding, B&B will be prohibited from taking
                           certain actions without the approval of the holders
                           of a majority of the issued and outstanding shares of
                           Series A Preferred, including:

                           -        selling, conveying, or otherwise disposing
                                    of or encumbering all or substantially all
                                    of B&B' property or business on a
                                    consolidated basis or merging into or
                                    consolidating with any other corporation
                                    (other than a wholly-owned subsidiary
                                    corporation) or effecting any transaction or
                                    series of related transactions in which more
                                    than 50% of the voting power of B&B is
                                    transferred or disposed of;

                           -        altering or changing the rights, preferences
                                    or privileges of shares of Series A
                                    Preferred;

                           -        increasing or decreasing the total number of
                                    authorized shares of Series A;

                           -        authorizing or issuing, or obligating B&B to
                                    issue, any other equity security, including
                                    any other security convertible into or
                                    exercisable for any equity security having
                                    rights, preferences or privileges over, or
                                    being on a parity with or similar to, the
                                    Series A Preferred ;

                           -        redeeming, purchasing or otherwise acquiring
                                    (or paying into or setting aside for a
                                    sinking fund for such purpose) any of B&B's
                                    securities;

                           -        amending B&B's articles of incorporation or
                                    bylaws;

                           -        changing the authorized number of its
                                    directors; or

                           -        declaring, ordering or paying any dividends
                                    on any class of B&B's securities.

         B&B's articles of incorporation grant its Board of Directors the right
to establish a series of preferred stock with such designations, rights and
preferences as the Board of Directors may determine in their sole discretion
without shareholder consent. Accordingly, the designations, rights and
preferences of the Series A Preferred, when ultimately

                                       7
<PAGE>

finalized, may differ materially from those set forth above, and the consent of
the Shareholders is not required to finalize the designations, rights and
preferences of the Series A Preferred, nor to authorize its issuance.

         13. NOTICES. Any notice or communication necessary or desirable
hereunder shall be considered sufficient and delivery thereof shall be deemed
complete if delivered in person or mailed by registered mail to:

If to B&B and/or Tarpy:             c/o 900 South Gay Street
                                    Suite 2100
                                    Knoxville, Tennessee 37902
                                    Attn: T. Lynn Tarpy, Esq.

If to American:                     4823 Old Kingston Pike
                                    Suite 125
                                    Knoxville, Tennessee 37919
                                    Attention: Stanley P. Brown, III, President

If to the Shareholders:             to the addresses on the books and records
                                    of American

or to such other address as either party may hereafter specify in writing as her
or its own address to the other party.

         14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith.

         15. SEVERABILITY. The Shareholders and American hereby agree and affirm
that none of the above provisions is dependent on the validity of any other
provision and invalidity as to any provision or any part thereof shall not
affect any other provision.

         16. CONSTRUCTION AND ENFORCEMENT. This Agreement shall be construed in
accordance with the laws of the State of Florida, without and application of the
principles of conflicts of laws. If it becomes necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
and such legal action results in a final judgment in favor of such party
("Prevailing Party"), then the party or parties against whom said final judgment
is obtained shall reimburse the Prevailing Party for all direct, indirect or
incidental expenses incurred, including, but not limited to, all attorney's's
fees, court costs and other expenses incurred throughout all negotiations,
trials or appeals undertaken in order to enforce the Prevailing Party's rights
hereunder. Any suit, action or proceeding with respect to this Agreement shall
be brought in the state or federal courts located in Broward County in the State
of Florida. The parties hereto hereby accept the exclusive jurisdiction and
venue of those courts for the purpose of any such suit, action or proceeding.
The parties hereto hereby irrevocably waive, to the fullest extent permitted by

                                       8
<PAGE>
law, any objection that any of them may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any judgment entered by any court in respect thereof brought in
Broward County, County Florida, and hereby further irrevocably waive any claim
that any suit, action or proceeding brought in Broward County, Florida, has been
brought in an inconvenient forum.

         IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.

                              B&B Capital Group, Inc.

                              By: /s/  T. Lynn Tarpy
                                  ---------------------------------------------
                                       T. Lynn Tarpy, President

                              The American Life & Annuity Company, Inc.

                              By: /s/  Stanley P. Brown, III
                                  ----------------------------------------------
                                       Stanley P. Brown, III

                              /s/ Roxanne K. Beilly
                              --------------------------------------------------
                              Roxanne K. Beilly

                              SHAREHOLDERS:

                              /s/ Dr. Archer W. Bishop, Jr.
                              --------------------------------------------------
                              Dr. Archer W. Bishop, Jr.

                              /s/ Stanley P. Brown, III
                              --------------------------------------------------
                              Stanley P. Brown, III

                              /s/ Lila K. Pfleger
                              --------------------------------------------------
                              Lila K. Pfleger

                              /s/ Dr. John H. Bell
                              --------------------------------------------------
                              Dr. John H. Bell

                              /s/ Oscar R. Scofield
                              --------------------------------------------------
                              Oscar R. Scofield

                                       9
<PAGE>
                              /s/ Ann Scofield
                              --------------------------------------------------
                              Ann Scofield

                              /s/ Dr. Archer W. Bishop, Jr.
                              --------------------------------------------------
                              Dr. Archer W. Bishop, Jr. Trustee for the Kristin
                              K. Bishop Irrevocable Trust

                              /s/ Dr. Archer W. Bishop, Jr.
                              --------------------------------------------------
                              Dr. Archer W. Bishop, Jr. Trustee for the Archer
                              W. Bishop Irrevocable Trust

                              /s/ Dr. Archer W. Bishop, Jr.
                              --------------------------------------------------
                              Dr. Archer W. Bishop, Jr. Trustee for the Baker
                              O. Bishop Irrevocable Trust

                              /s/ Dr. Archer W. Bishop, Jr.
                              --------------------------------------------------
                              Dr. Archer W. Bishop, Jr. Trustee for the
                              Thompson A. Bishop Irrevocable Trust

                              /s/ Dr. John H. Bell f/b/o Jane P. Bell
                              --------------------------------------------------
                              Dr. John H. Bell f/b/o Jane P. Bell

                              /s/ John T. Bible
                              --------------------------------------------------
                              John T. Bible

                              /s/ Henry F. Bertelkamp, Jr.
                              --------------------------------------------------
                              Henry F. Bertelkamp, Jr.

                              /s/ Stanley P. Brown Jr.
                              --------------------------------------------------
                              Stanley P. Brown Jr.

                              /s/ Kathryn M. Brown
                              --------------------------------------------------
                              Kathryn M. Brown

                                       10
<PAGE>

                              /s/ Ronnie Callihan
                              --------------------------------------------------
                              Ronnie Callihan

                              /s/ Dr. David W. Dickey, III
                              --------------------------------------------------
                              Dr. David W. Dickey, III

                              /s/ Bruce Fox, Trustee
                              --------------------------------------------------
                              Bruce Fox, Trustee, Ridenour & Ridenour
                              KEOGH

                              /s/ Larry L. Johnson
                              --------------------------------------------------
                              Larry L. Johnson

                              /s/ James P. Lowe
                              --------------------------------------------------
                              James P. Lowe

                              /s/ Charles F. Troutt
                              --------------------------------------------------
                              Charles F. Troutt

                              /s/ Lindsay Young
                              --------------------------------------------------
                              Lindsay Young

                              /s/ Amanda L. Williams
                              --------------------------------------------------
                              Amanda L. Williams

                              /s/ Judy R. Powell
                              --------------------------------------------------
                              Judy R. Powell

                              /s/ Dr. David W. Dickey, III
                              --------------------------------------------------
                              Dr. David W. Dickey, III

                              /s/ Bruce D. Fox
                              --------------------------------------------------
                              Bruce D. Fox

                                       11
<PAGE>

                              /s/ Marc P. Powell
                              --------------------------------------------------
                              Marc P. Powell

                              /s/ Chadwick S. Lange
                              --------------------------------------------------
                              Chadwick S. Lange

                                     12Exhibit No. 10.2

                              REINSURANCE AGREEMENT

                                     Between

                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA

                                       of

                             Minneapolis, Minnesota

                                       and

                     AMERICAN LIFE AND ANNUITY COMPANY, INC.

                                       of

                              Knoxville, Tennessee

<PAGE>
                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
A.  REINSURANCE COVERAGE                                                    3
B.  PLACING INSURANCE IN EFFECT                                             3
C.  PAYMENTS BY REINSURED                                                   3
D.  PAYMENTS BY REINSURER                                                   4
E.  TERMS OF REINSURANCE                                                    4
F.  RECAPTURE PROVISION                                                     5
G.  UNUSUAL EXPENSES AND ADJUSTMENTS                                        5
H.  ERRORS                                                                  6
I.  REDUCTIONS                                                              6
J.  AUDIT OF RECORDS AND PROCEDURES                                         6
K.  ARBITRATOR                                                              6
L.  INSOLVENCY                                                              6
M.  OFFSET                                                                  7
N.  PARTIES TO AGREEMENT                                                    7
O.  EFFECTIVE DATE                                                          7
P.  DURATION OF AGREEMENT                                                   7
Q.  JURISDICTION AND SERVICE OF SUIT                                        8
R.  MISCELLANEOUS                                                           8
S.  EXECUTION                                                               9
SCHEDULE I
   POLICIES SUBJECT TO REINSURANCE                                          10
SCHEDULE II
   AMOUNT OF REINSURANCE                                                    11
SCHEDULE III
   ANNUITY COINSURANCE MONTHLY REPORT                                       12
SCHEDULE IV
   ANNUAL REPORT                                                            14
SCHEDULE V
   ALLOWANCES                                                               15
SCHEDULE VI
   FUND WITHHELD INTEREST RATE                                              16
SCHEDULE VII
   ARBITRATION SCHEDULE                                                     17
SCHEDULE VIII
   INTEREST RATE CREDITING STRATEGY                                         19
SCHEDULE IX
   SECTION 1.848-2(g)(8)                                                    20

<PAGE>
                              REINSURANCE AGREEMENT
                                     Between
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                                       of
                             Minneapolis, Minnesota
                         referred to as the "REINSURED"
                                       and
                     AMERICAN LIFE AND ANNUITY COMPANY, INC.
                                       of
                              Knoxville, Tennessee,
                         referred to as the "REINSURER".

                        Effective Date: December 1, 1996

                             A. REINSURANCE COVERAGE
                                --------------------

1.       The REINSURED shall cede, and the REINSURER shall accept, reinsurance
         of the policies described in Schedule I. Reinsurance shall be accepted
         on a funds withheld basis.

2.       The reinsurance shall cover a Quota Share of the policies as specified
         in Schedule II.

3.       The liability of the REINSURER shall begin simultaneously with that of
         the REINSURED but in no event prior to the effective date of this
         Agreement. Reinsurance with respect to any policy shall not be in force
         and binding unless the insurance issued by the REINSURED is in force
         and unless the issuance and delivery of such insurance constituted the
         doing of business in a state of the United States of American, the
         District of Columbia, or a country in which the issuing insurer was
         properly licensed.

4.       Reinsurance under this Agreement shall be funds withheld on the portion
         of the policy which is reinsured with the REINSURER and shall follow
         the forms of the REINSURED.

5.       The reinsurance under this Agreement with respect to any policy shall
         be maintained in force without reduction so long as the liability of
         the REINSURED under such policy reinsured hereunder remains in force
         without reduction, unless reinsurance is terminated or reduced as
         provided herein.

                        B. PLACING REINSURANCE IN EFFECT
                           -----------------------------

Reinsurance with respect to policies issued after the effective date of this
Agreement shall become effective simultaneously with the liability of the
REINSURED, provided however, that the REINSURED shall give notification of such
reinsurance to the REINSURER simultaneously with the monthly reconciliation
prescribed in Section E, paragraph 2.

<PAGE>
                            C. PAYMENTS BY REINSURED
                               ---------------------

1.       Premiums
         --------
         The REINSURED shall pay the REINSURER as reinsurance premiums the
         premiums the REINSURED receives on and after the effective date of this
         Agreement with respect to the portion of all policies reinsured
         hereunder.

2.       REINSURER'S Funds Withheld Account
         ----------------------------------
         (a)      The REINSURED shall maintain a funds withheld account for the
                  benefit of the REINSURER during the term of this Agreement.
                  The balance on the effective date of this Agreement shall be
                  zero.
         (b)      Adjustments to the REINSURER'S Funds Withheld Account shall be
                  made monthly.
         (c)      The monthly adjustment shall be computed by deducting (i) the
                  total amount of the statutory reserves on the last day of the
                  preceding month on the portions of the policies reinsured
                  hereunder from (ii) the total amount of the statutory reserves
                  on the last day of the current month on the portions of the
                  policies reinsured hereunder and then in force under this
                  Agreement. For any accounting period in which "(ii)" exceeds
                  "(i)", the REINSURED shall add such excess to the REINSURER'S
                  Funds Withheld Account. For any accounting in which "(i)"
                  exceeds "(ii)" the REINSURED shall subtract such excess from
                  the REINSURER'S Funds Withheld Account.
         (d)      Notwithstanding the above, in no event shall the amount in the
                  REINSURER'S Funds Withheld Account be less than zero.

3.       Gross Investment Income
         -----------------------
         The REINSURED shall retain the gross investment income derived from the
         assets held by the REINSURED in the REINSURER'S Funds Withheld Account
         but shall monthly pay the REINSURER gross investment income which shall
         be equal to the monthly equivalent of the interest rate, as calculated
         in Schedule VI, earned on the REINSURER'S Funds Withheld Account times
         the average of the REINSURER'S Funds Withheld Account balance on the
         last day of the preceding month and the last day of the current month.
         With respect, however, to the accounting period during which the
         effective date of this Agreement occurs, the reference above, to "the
         last day of the preceding month" shall refer to the effective date of
         this Agreement. With respect, however, to the accounting period during
         which the termination of this Agreement occurs, the reference above, to
         "the last day of the current month" shall refer to the day immediately
         prior to the terminal accounting date.

                            D. PAYMENTS BY REINSURER
                            ------------------------
1.       Benefits
         --------
         The REINSURER shall pay the REINSURED:
                  (a)      the gross amount of all death and annuity benefits
                           paid by the REINSURED (i.e., without deduction for
                           reserves) with respect to the portion of the policies
                           reinsured hereunder; and

                  (b)      the net cash surrender values paid by the REINSURED
                           with respect to the portion of the policies reinsured
                           hereunder.

<PAGE>

2.       Policy Expense Allowances.
         --------------------------
         The REINSURER shall pay the REINSURED the full amount of Allowances and
         Expense Reimbursements as defined in Schedule V.

3.       State Premium Taxes.
         --------------------
         The REINSURER shall reimburse the REINSURED for any state premium taxes
         that the REINSURED may be required to pay with respect to that part of
         the premiums paid to the REINSURER as reinsurance premiums.

4.       Guaranty Fund Assessments.
         --------------------------
         The REINSURER shall reimburse the REINSURED for any state guaranty fund
         assessments that the REINSURED may be required to pay with respect to
         that part of the assessments paid to the REINSURER as reinsurance
         assessments.

                             E. TERMS OF REINSURANCE
                             -----------------------

1.       Amounts Due REINSURED or REINSURER.
         -----------------------------------
         Except as otherwise specifically provided herein, all amounts due to be
         paid to either the REINSURER or the REINSURED shall be determined on a
         net basis as of the last day of the calendar month to which such amount
         is attributable. In determining the amounts due, consideration shall be
         given to any change in the REINSURER'S Funds Withheld Account occurring
         during the month. An increase in the REINSURER's Funds Withheld Account
         will reduce any amount otherwise due to the REINSURER by the REINSURED,
         while a decrease in the REINSURER'S Funds Withheld Account will reduce
         any amounts otherwise due to the REINSURED by the REINSURER. All
         amounts shall be due and accrued as of such date. The payment of such
         amounts shall be submitted in accordance with the provisions of Section
         E, paragraph 2.

2.       Payment Dates.
         --------------
         (a)      The REINSURED shall submit monthly, not later than twenty (20)
                  days after the end of each calendar month, a Periodic Report
                  substantially in accord with Schedule III. Any amounts
                  indicated in the Periodic Report as due the REINSURER shall
                  accompany such report.
         (b)      Any amounts indicated in the Periodic Report as due the
                  REINSURED shall be paid by the REINSURER within ten (10) days
                  after the receipt of the Periodic Report.
         (c)      Not later than twenty (20) days after the end of each calendar
                  year, the REINSURED shall submit to the REINSURER an Annual
                  Report substantially in accord with Schedule IV.
         (d)      Interest as specified in Schedule VI shall be paid on amounts
                  not paid when due.
         (e)      If the REINSURED ever becomes aware that its monthly reports
                  for an Accounting Period as required in this section did not
                  accurately reflect the actual experience of the Policies
                  during the Accounting Period, it shall promptly submit a
                  revised summary to the REINSURER. Any amount shown by the
                  revised summary as owed by either the REINSURED or the
                  REINSURER to the other shall be paid promptly.

<PAGE>

         (f)      The REINSURER may change Schedules III and IV in order to
                  obtain the data it reasonably needs to properly administer
                  this Agreement or to prepare its financial statements.

3.       DAC Election
         ------------
         The parties elect to have this Agreement treated in accordance with
         Section 1.848-2(g)(8) of the Income Tax Regulations issued under
         Section 848 of the Internal Revenue Code of 1986. Specific details of
         this election are set forth in Schedule IX.

4.       Expense.
         --------
         The REINSURED shall bear all expenses incurred in connection with the
         policies reinsured hereunder, except as otherwise provided herein.

5.       Credit Interest Rate.
         ---------------------
         The REINSURER agrees to accept the decisions, of the REINSURED with
         respect to crediting interest rates. The interest rate crediting
         strategy is shown in Schedule VIII.

                             F. RECAPTURE PROVISION
                             ----------------------

Within the first 36 months after the effective date of this Agreement and upon
90 days written notice to the REINSURED, the REINSURER shall have the right to
terminate reinsurance under this Agreement on an "all or none" basis, with
respect to policies that have not yet attained the third anniversary of having
been reinsured hereunder. For each policy so terminated, the REINSURER shall pay
to the REINSURED 101% of the Statutory reserves on the terminated policy.

                       G. UNUSUAL EXPENSES AND ADJUSTMENTS
                       -----------------------------------

2.       Any unusual expenses incurred by the REINSURED in defending or
         investigating a claim for policy liability or rescinding a policy
         reinsured hereunder, but net of unusual expenses receivable under other
         reinsurance agreements with respect to the portion of the policies
         reinsured hereunder, shall be participated in by the REINSURER in the
         same proportion as its reinsurance bears to the total insurance under
         such policy.

3.       For purposes of this Agreement (but not as a limitation on the
         REINSURER'S liability under paragraph 1), it is agreed that penalties,
         attorney's fees, and interest imposed automatically by statute against
         the REINSURED and arising solely out of a judgment rendered against the
         REINSURED in a suit for policy benefits reinsured hereunder shall be
         considered unusual expenses.

4.       In no event, however, shall the following categories of expenses or
         liabilities be considered for purposes of this Agreement as "unusual
         expenses".
                  (a)      routine investigative or administrative expenses;
                  (b)      expenses incurred in connection with a dispute or
                           contest arising out of conflicting claims of
                           entitlement to policy proceeds or benefits which the
                           REINSURED admits are payable;

<PAGE>

                  (c)      Expenses, fees, settlements, or judgments arising out
                           of or in connection with claims against the REINSURED
                           for punitive or exemplary damages; and
                  (d)      expenses, fees, settlements, or judgments arising out
                           of or in connection with claims made against the
                           REINSURED and based on alleged or actual bad faith,
                           failure to exercise good faith, or tortious conduct.

                                    H. ERRORS
                                    ---------

If either the REINSURED or the REINSURER shall fail to perform an obligation
under this Agreement and such failure shall be the result of an error on the
part of the REINSURED or the REINSURER, such error shall be corrected by
restoring both the REINSURED and the REINSURER to the positions they would have
occupied had no such error occurred; and "error" is a clerical mistake made
inadvertently and excludes errors of judgment and all other forms of error.

                                  I. REDUCTIONS
                                  -------------

If a portion of the insurance issued by the REINSURED on a policy reinsured
hereunder is terminated, reinsurance on that policy hereunder shall be reduced.

                       J. AUDIT OF RECORDS AND PROCEDURES
                       ----------------------------------

The REINSURER and the REINSURED each shall have the right to audit, at the
office of the other, all records and procedures relating to reinsurance under
this Agreement.

                                 K. ARBITRATION
                                 --------------

1.       If the REINSURED and the REINSURER cannot mutually resolve a dispute
         regarding the interpretation or operation of this Agreement, the
         dispute shall be decided through arbitration as set forth in Schedule
         VII. The arbitrators shall base their decision on the terms and
         conditions of this Agreement. However, if the terms and conditions of
         this Agreement do not explicitly dispose of an issue in dispute between
         the parties, the Arbitrators may base their decision on the customs and
         practices of the insurance and reinsurance industry rather than solely
         on an interpretation of applicable law. The arbitrator's decision shall
         take into account the right to offset mutual debts and credits as
         provided in this Agreement. There shall be no appeal from the
         arbitrator's decision. Any court having jurisdiction over the subject
         matter and over the parties may reduce the arbitrator's decision to
         judgment.

2.       The parties intend this section to be enforceable in accordance with
         the Federal Arbitration Act (9 U.S.C. Section 1) including any
         amendments to that Act which are subsequently adopted. In the event
         that either party refuses to submit to arbitration as required by
         paragraph 1, the other party may request a United States Federal
         District Court to compel arbitration in accordance with the Federal
         Arbitration Act. Both parties consent to the jurisdiction of such court
         to enforce this section and to confirm and enforce the performance of
         any award of the arbitrators.

<PAGE>

                                  L. INSOLVENCY
                                  -------------

1.       In the event of the insolvency of the REINSURED and the appointment of
         a conservator, liquidator or statutory successor of the REINSURED,
         reinsurance shall be payable immediately upon demand to such
         conservator, liquidator or statutory successor, with reasonable
         provision for verification before payment, on the basis of claims
         allowed against the REINSURED by and court of competent jurisdiction or
         by the conservator, liquidator or statutory successor of the REINSURED
         without diminution because of the insolvency of the REINSURED or
         because such conservator, liquidator or statutory successor has failed
         to pay all or a portion of any claims.

2.       In the event of the insolvency of the REINSURED, the conservator,
         liquidator, or statutory successor of the REINSURED shall give the
         REINSURER written notice of the pendency of a claim on a Policy within
         a reasonable time after such claim is filed in the insolvency
         proceeding. During the pendency of any such claim, the REINSURER may
         investigate such claim and interpose in the name of the proceeding
         where such claim is to be adjudicated, any defense which the REINSURER
         may deem available to the REINSURED or its conservator, liquidator or
         statutory successor.

3.       The expense thus incurred by the REINSURER shall be chargeable, subject
         to court approval, against the REINSURED as part of the expense of
         liquidation to the extent or a proportionate share of the benefit which
         may accrue to the REINSURED solely as a result of the defense
         undertaken by the REINSURER. Where two or more reinsurers are
         participating in the same claim and a majority in interest elect to
         interpose a defense or defenses to any such claim, the expense shall be
         apportioned in accordance with the terms of the reinsurance agreement
         as though such expense had been incurred by the REINSURED.

                                    M. OFFSET
                                    ---------

Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against either
the REINSURED or the REINSURER with respect to this Agreement or any other
agreement or any other claim of one party against the other are deemed to be
mutual debts and credits and shall be set off and only the balance shall be
allowed or paid.

                             N. PARTIES TO AGREEMENT
                             -----------------------

This is an Agreement for indemnity reinsurance solely between the REINSURED and
the REINSURER. The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the REINSURER and the insured, or the
beneficiary under any policy reinsured hereunder, and the REINSURED shall be and
remain solely liable to such insured or beneficiary under any such policy.

                                O. EFFECTIVE DATE
                                -----------------

The effective date of this Agreement is December 1, 1996.

<PAGE>

                            P. DURATION OF AGREEMENT
                            ------------------------

1.       Except as otherwise provided herein, this Agreement shall be unlimited
         in duration.

2.       This Agreement may be terminated at any time by either the REINSURER or
         the REINSURED upon ninety (90) day's written notice with respect to
         reinsurance not yet placed in force. THE REINSURER shall continue to
         accept reinsurance during the ninety (90) day notice period, and shall
         remain liable on all reinsurance placed in effect under this Agreement
         until the termination or expiry of the insurance reinsured.

3.       Upon ninety (90) days' written notice to the REINSURER, the REINSURED
         shall have the right to terminate reinsurance under this Agreement with
         respect to those policies which have attained the fifteenth or any
         subsequent anniversary or having been reinsured hereunder. Any such
         termination shall apply to all policies which attain the same or any
         subsequent anniversary within the twelve (12) month period following
         the effective date of such notice of termination. Termination with
         respect to each affected policy shall be effective as of the
         anniversary of such policy having been reinsured hereunder. The
         REINSURER shall pay to the REINSURED a surrender benefit equal to the
         surrender value of each policy for which reinsurance is terminated.

4.       If the REINSURED fails to pay reinsurance premiums when due, the
         REINSURER may terminate this Agreement with respect to all reinsurance
         hereunder. To effect such termination, the REINSURER shall give the
         REINSURED written notice of termination. The REINSURED may avoid
         termination by paying all delinquent reinsurance premiums, plus all
         additional reinsurance premiums that may have become due, within (30)
         days following its receipt of notice of termination. Termination shall
         be effective as of the last date to which reinsurance premiums had been
         paid.

5.       The termination of this Agreement or of the reinsurance in effect under
         this Agreement shall not extend to or affect any of the rights or
         obligations of the REINSURED and the REINSURER applicable to any period
         prior to the effective date of such termination. In the event that,
         subsequent to the termination of this Agreement, an adjustment is made
         necessary with respect to any accounting hereunder, a supplementary
         accounting shall take place. Any amount owed to either party by reason
         of such supplementary accounting shall be paid promptly upon the
         completion thereof.

                                 Q. JURISDICTION
                                 ---------------

1.       If the REINSURED fails to perform any of its obligations under this
         Agreement, the REINSURER may request the REINSURED to submit to the
         jurisdiction of a court of competent jurisdiction within any state of
         the United States. The REINSURED will comply with all reasonable
         requirements necessary to give such court jurisdiction over it and will
         abide by the final decision of such court or of any appellate court in
         the event of an appeal.

<PAGE>

2.       The REINSURED hereby designates the Commissioner of Insurance of the
         REINSURER'S state of domicile as its true and lawful attorney within
         such state upon whom any lawful process in any action, suit or
         proceeding instituted by or on behalf of the REINSURED may be served.

3.       This section is not intended to conflict with or override the
         obligation of the parties to arbitrate disputes hereunder.
         Consequently, it shall only apply as necessary to enforce the terms of
         the Arbitration article or enforce a written decision of the
         arbitrators.

                                R. MISCELLANEOUS
                                ----------------

1.       This Agreement represents the entire arrangement between the REINSURED
         and the REINSURER and supersedes, with respect to its subject matter,
         any prior or oral written agreements between the parties.

2.       No modification of any provision of this Agreement shall be effective
         unless set forth in a written amendment to this Agreement shall be
         effective unless set forth in a written amendment to this Agreement
         which is executed by both parties.

3.       A waiver shall constitute a waiver only with respect to the particular
         circumstances for which it is given and not a waiver of any future.

                                  S. EXECUTION
                                  ------------

                           IN WITNESS WHEREOF the said
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                                       of
                             Minneapolis, Minnestoa
                                  and the said
                     AMERICAN LIFE AND ANNUITY COMPANY, INC.
                                       of
                              Knoxville, Tennessee

have by their respective officers executed this Agreement in duplicate on the
dates shown below.

ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Signed at Minneapolis, Minnesota

By: /s/Mark Solverud                    By: /s/Michael W. Farley
   --------------------------------        -------------------------------------
     (TITLE) Vice President                    (TITLE) Assistant, Vice President

Date   December 17, 1996                Date December 17, 1996
     ------------------------------     ----------------------------------------

AMERICAN LIFE AND ANNUITY COMPANY, INC.
Signed at Knoxville, Tennessee

By s/s Archer W. Bishop                 By s/s Stanley Brown, III
  ---------------------------------       --------------------------------------
       (TITLE) Chairman                   (TITLE) President

Date    12-20-96                        Date 12-20-96
     ------------------------------          -----------------------------------

<PAGE>

                                   SCHEDULE I

                         POLICIES SUBJECT TO REINSURANCE

All "Ultima" Flexible Premium Deferred Annuity contracts issued by Allianz Life
Insurance Company of North America and its affiliates.

<PAGE>

                                   SCHEDULE II
                              AMOUNT OF REINSURANCE

The amount of reinsurance under this Agreement shall be 15% of the liability of
the REINSURED on all policies in the forms listed in Schedule I, not to exceed
the State of Tennessee's statutory limit.

<PAGE>

                                  SCHEDULE III

                       ANNUITY COINSURANCE MONTHLY REPORT
                                       TO
                     AMERICAN LIFE AND ANNUITY COMPANY, INC.
                                      FROM
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA

<TABLE>
<CAPTION>
AMOUNTS DUE AMERICAN LIFE AND ANNUITY COMPANY, INC.
---------------------------------------------------
<S>                                                                                     <C>
First Year Premiums - 3 year surrender charge plans (gross first year)                  $ ___________________________
premium received during the month, multiplied by the quota share
percentage)

First Year Premiums - 5, -7 and 9 year surrender charge plans (gross                    $ ___________________________
first year premiums received during the month, multiplied by the
quota share percentage)

Renewal Premiums (gross premiums received during the month,                             $ ___________________________
multiplied by the quota share percentage)

Commission charge backs on early deaths or withdrawals.                                 $ ___________________________

Gross Investment Income                                                                 $ ___________________________

Sum of amounts due to American Life and Annuity Company, Inc.                           $ ___________________________

AMOUNTS DUE ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
-----------------------------------------------------------

First Year allowances (4.625% of first year premium for the 3-year
surrender charge plans, multiplied by the quota share percentage)                       $ ___________________________

First Year allowances (7.125% of first year premium for the 5-, 7 -                     $ ___________________________
and 9 year surrender charge plans, multiplied by the quota share
percentage)

First Year allowances (0.225% for the first $25 million of premium
collected on all policies covered by this agreement.)                                   $ ___________________________

Trails (0.02125% of account values at the end of the month on all                       $ ___________________________
policies in force at least one year, multiplied by the quota share
percentage.)

Renewal allowances (2.0% of renewal premium, multiplied by the                          $ ___________________________
quota share percentage.)
</TABLE>

<PAGE>

                                   SCHEDULE IV

                                  ANNUAL REPORT

The Annual Report shall provide the following information:

         (a) Exhibit B from the NAIC-prescribed annual statement.

         (b) a breakdown of the reserves by withdrawal characteristic of the
             annuity contract.

         (c) "Analysis of Increase in Reserves" from the NAIC-prescribed annual
             statement.

         (d) "Exhibit of Annuities" from the NAIC-prescribed annual statement.

         (e) an actuarial certification of the reported statutory reserves.

         (f) tax reserves and required interest.

<PAGE>

<TABLE>
<S>                                                                                     <C>
Surrender values paid during the month, multiplied by the quota share                   $ ___________________________
percentage.

Annuity payments paid during the month, multiplied by the quota share                   $ ___________________________
percentage.

Death benefits paid during the month, multiplied by the quota share                     $ ___________________________
percentage.

State premium taxes paid on reinsured policies, multiplied by the quota                 $ ___________________________
share percentage.

Guaranty Fund Assessments paid on reinsured policies, multiplied by                     $ ___________________________
the quota share percentage.

Sum of amounts due to Allianz Life Insurance Company of North America.                  $ ___________________________

MONTHLY SETTLEMENT
------------------

Gross amount due (sum of amounts due to American Life and Annuity                       $ ___________________________
Company, Inc. minus sum of amounts due to Allianz Life Insuranace
Company of North America).

REINSURER'S Funds Withheld Account (Last day of current month)                          $ ___________________________

REINSURER'S Funds Withheld Account (Last day of preceding)                              $ ___________________________

Change in REINSURER'S Funds Withheld Account (REINSURER'S                               $ ___________________________
Fund Withheld Account last day of current month minus REINSURER'S
Fund Withheld Account last day of preceding month).

Net amount due (Gross amount due minus the Change in REINSURER'S                        $ ___________________________
Funds Withheld Account).

Note: If the net amount due is negative, then that amount is due from American
Life and Annuity Company, Inc. to Allianz Life Insurance Company of North
America.

ADDITIONAL ITEMS NEEDED BY AMERICAN LIFE AND ANNUITY COMPANY, INC.
------------------------------------------------------------------
FOR FINANCIAL REPORTING
-----------------------

Surrender charges realized during the month, multiplied by the quota                     $ ___________________________
share percentage.

Surrender charges waived on death during the month, multiplied by the                    $ ___________________________
quota share percentage.

A monthly listing of reserves, account values, and interest credit.
</TABLE>

<PAGE>

                                   SCHEDULE V

                                   ALLOWANCES
                                   ----------

<TABLE>
<CAPTION>
                           ULTIMA - 3 YEAR                                      ULTIMA - 5, 7 and 9 YEAR
                         SURRENDER CHARGE                                          SURRENDER CHARGE

------------------------------------------------------------------------------------------------------------------

         Year              Allowances                Monthly           Annual           Allowances        Monthly
                                                     Trails            Trail                              Trails
------------------------------------------------------------------------------------------------------------------
         <S>               <C>                    <C>                  <C>              <C>            <C>

         1                 4.625%                    0.0%                               7.125%            0.0%
         2+                2.0                    0.02125                                  2.0         0.02125
         4+                                                            1.0
</TABLE>

An additional first year allowance of 0.225% for the first $25,000,000 of
premium collect and 0.125% for the next $25,000,000 of premium collected under
this agreement.

NOTES:            (1)      If the "free look" provision is exercised, the
______                     REINSURED will refund the entire allowance to the
                           REINSURER.

                  (2)      In the event of a surrender or death in the first
                           policy year, the REINSURED shall refund to the
                           REINSURER all commissions charge back to the agent or
                           setting institution.

                  (3)      The allowance percentages are applied to the
                           reinsured portion of any new premiums received.

                  (4)      The monthly trails apply to the reinsured portion of
                           the account values at the end of each month following
                           the 1st anniversary.

                  (5)      The annual trail applies to the reinsured portion of
                           the account value at the end of the anniversary
                           month. This trail is for the three year surrender
                           charge product only.

<PAGE>

                                   SCHEDULE VI

                          FUNDS WITHHELD INTEREST RATE
                          ----------------------------

The Funds Withheld interest shall be calculated using a layer approach. A layer
shall be defined as (a) less (b) where (a) is the Funds Withheld Reserve less
the reinsured portion of policy loans at the end of a calendar month; and (b) is
the Funds Withheld less the Reinsured Portion of policy loans at the beginning
of the month.

The monthly determined layers shall be further divided into sublayers where 20%,
60% and 20% of each layer will receive then current market interest rates based
on a 2 year, 5 year and 8 year average duration investments, respectively. The
interest rates established for each 2 year, 5 year and 8 year duration sublayer
will be fixed for periods of 2 years, 6 years and 12 years respectively. At the
end of these years, each sublayer will be rolled over into new sublayers created
that month and to be subject to the current rates applicable to that newly
created sublayer for the corresponding duration and period of time.

The monthly interest rates shall be established based on month-end market
interest rates obtained from publicly available information and as documented by
the investment operation of Allianz of America, Inc. for A/AA quality bonds with
average durations of 2 years, 5 years and 8 years, as applicable. The monthly
interest rates shall be further adjusted such that on a weighed average basis,
the rates equal the corresponding month-end rate for a custom index developed by
Lehman Brothers for Allianz of America, Inc. That index shall be composed of 30%
government bonds, 30% AA rated corporate bonds and 40% A rated corporate bonds,
all of which mature within 3.5 to 15 years. Further, the portfolio of bonds
making up the Lehman Brothers index will be established to maintain a modified
duration of approximately 5 years. Finally, 50 basis points will be added to the
monthly interest rates.

<PAGE>

                                  SCHEDULE VII

                              ARBITRATION SCHEDULE

To initiate arbitration, either the REINSURED or the REINSURER shall notify the
other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent shall
respond to the notification in writing within ten (10) days of its receipt.

The arbitration hearing shall be before a panel of three arbitrators, each of
whom must be a present or former officer of a life insurance company. An
arbitrator may not be a present or former officer, attorney or consultant of the
REINSURED or the REINSURER or either's affiliates.

The REINSURED and the REINSURER shall each name five (5) candidates to serve as
an arbitrator. The REINSURED and the REINSURER shall each choose one candidate
from the other party's list, and these two candidates shall serve as the first
two arbitrators. If one or more candidates so chosen shall decline to serve as
an arbitrator, the party which named such candidate shall add an additional
candidate to its list, and the other party shall again choose one candidate from
the list. This process shall continue until two arbitrators have been chosen and
accepted. The REINSURED and the REINSURER shall present their initial lists of
five (5) candidates by written notification to the other party within
twenty-five (25) days of the date of the mailing of the notification initiating
the arbitration. Any subsequent additions to the list which are required shall
be presented within ten (10) days of the date the naming party receives notice
that a candidate that has been chosen declines to serve.

The two arbitrators shall then select the third arbitrator from the eight (8)
candidates remaining on the lists of the REINSURED and the REINSURER within
fourteen (14) days of the acceptance of their positions as arbitrators. If the
two arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to the REINSURED and REINSURER. The REINSURED and the REINSURER
shall take turns striking the name of one of the remaining candidates from the
initial eight (8) candidates until only one candidate remains. If the candidate
so chosen shall decline to serve as the third arbitrator, the candidate whose
name was stricken last shall be nominated as the third arbitrator. This process
shall continue until a candidate has been chosen and has accepted. This
candidate shall serve as the third arbitrator. The first turn at striking the
name of a candidate shall belong to the party that is responding to the other
party's initiation of the arbitration. Once chosen, the arbitrators are
empowered to decide all substantial and procedural issues by a majority of
votes.

It is agreed that each of the three arbitrators should be impartial regarding
the dispute and should resolve the dispute on the basis described in the
"ARBITRATION" section. Therefore, at no time will either the REINSURED or the
REINSURER contact or otherwise communicate with any person who is to be or has
been designated as a candidate to serve as an arbitrator concerning the dispute,
except upon the basis of jointly drafted communications (which may include
independently prepared statements) provided by both the REINSURED and the
REINSURER to inform those candidates actually chosen as arbitrators of the
nature and facts of the dispute. Likewise, any written or oral arguments
provided to the arbitrators concerning the dispute shall be coordinated with the
other party and shall be provided simultaneously to the other party or shall
take place in the presence of the other party. Further, at no time shall any
arbitrator be informed that the arbitrator has been named or chosen by one party
or the other.

<PAGE>

The arbitration hearing shall be held on the date fixed by the arbitrators. In
no event shall this date be later than six (6) months after the appointment of
the third arbitrator. The arbitration hearing shall be held in the city where
the home office of the party responding to the arbitration is located. As soon
as possible, the arbitrators shall establish prearbitration procedures as
warranted by the facts and issues of the particular case at least ten (10) days
prior to the arbitration hearing, particular case. At least ten (10) days prior
to the arbitration hearing, each party shall provide the other party and the
arbitrators with a detailed statement of the facts and arguments it will present
at the arbitration hearing. The arbitrators may consider any relevant evidence;
they shall give the evidence such weight as they deem it entitled to after
consideration of any objections raised concerning it. The party initiating the
arbitration shall have the burden of proving its case by a preponderance of the
evidence. Each party may examine any witnesses who testify at the arbitration
hearing. Within twenty (20) days following the end of the arbitration hearing,
the arbitrators shall issue a written decision which shall set forth their
decision and the factual basis for their decision. In their written decision the
arbitrators shall demonstrate that they have offset mutual debts and credits as
provided in this Agreement. In no event, however, may the arbitrators award
punitive or exemplary damages. In their decision, the arbitrators shall also
apportion the costs of arbitration, which shall include, but not be limited to,
their own fees and expenses.

<PAGE>

                                  SCHEDULE VIII

                        INTEREST RATE CREDITING STRATEGY
                        --------------------------------

THE REINSURER and the REINSURED expect to follow a constrained market crediting
strategy. Credited rates move in the direction of market rates, but with a lag.
The lag is greater when rates are increasing. The formula used to model this
strategy may be described as follows:

MBt      = Nominal yield expected in the market at time t , as defined by the
           funds withheld interest rate in Schedule VI.

SPRDt    = Target spread at time t.

CNt      = Credited rate on new business issued at time t,

SCt      = Surrender charge at time t,

* If MBt  >| MBt-1, then

         CRt = CRt-1 + 1/4 (MBt - MBt-1) - SPRDt - SPRDt-1); with the additional
         restriction that CRt >= CNt - 1/3 SCt - 2%

*        If MBt   <= MBt-1, then
                               CRt = CRt-1 -1/2(MBt-1 - MBt) - (SPRDt - SPRDt-1)

In words, the formula recognizes 25% of the change in rates when rates are
increasing and 50% of any decline in rates, but the formula does not allow
credited rates (allowing for the effect of surrender charges) to get too far
from market rates.

<PAGE>

                                   SCHEDULE IX

                         SECTION 1.848-2(G)(8) ELECTION
                         ------------------------------

The REINSURED and the REINSURER agrees to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the
Internal Revenue Code of 1986 (hereinafter "Section 1.848-2(g)(8)").

         1.       As used below, the term "party" will refer to the REINSURED or
                  the REINSURER as appropriate.
         2.       As used below, the phrases "net positive consideration".
                  Capitalize specified policy acquisition expenses", "general
                  deductions limitation", and "net consideration" shall have the
                  meaning used in Section 1.848-2(g)(8).
         3.       The party with net positive consideration for this Agreement
                  for any taxable year beginning with the taxable year
                  prescribed in paragraph 5 below will capitalize specified
                  policy acquisition expenses with respect to this Agreement
                  without regard to the general deductions limitation.
         4.       The parties agree to exchange information pertaining to the
                  amount of net consideration under this Agreement to ensure
                  consistency. This will be accomplished as follows:
                  (a)      The REINSURED shall submit to the REINSURER by the
                           fifteenth day of May in each year its calculation of
                           the net consideration for the preceding calendar
                           year. Such calculation will be accompanied by a
                           statement signed by an officer of the REINSURED
                           stating that the REINSURED will report such net
                           consideration in its tax return for the preceding
                           year.

                  (b)      The REINSURER may contest such calculation by
                           providing an alternative calculation to the REINSURED
                           in writing within thirty (30) days of the REINSURER'S
                           receipt of the REINSURED'S calculation. If the
                           REINSURER does not so notify the REINSURED, the
                           REINSURER will report the net consideration
                           determined by the REINSURED in the REINSURER'S tax
                           return for the previous calendar year.

                  (c)      If the REINSURER contests the REINSURED'S calculation
                           of the net consideration, the parties will act in
                           good faith to reach an agreement as to the current
                           amount within thirty (30) days of the date the
                           REINSURER submits its alternative calculation. If the
                           REINSURED and the REINSURER reach agreement on an
                           amount of net consideration, each party shall report
                           such amount in their respective tax returns for the
                           preceding calendar year.

         5.       The election shall be effective for 1996 and all subsequent
                  taxable years for which the Reinsurance Agreement remains in
                  effect.

<PAGE>

                                 ADDENDUM NO. 1

                                     to the

                              REINSURANCE AGREEMENT
                           Effective: January 31, 1997
                  (hereinafter referred to as the "Agreement")
                                     between

                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                                  of Minnesota

                                       and

                      AMERICAN LIFE & ANNUITY COMPANY, INC.
                                  of Tennessee

IT IS HEREBY AGREED, effective on January 15, 1997, that SCHEDULE V, attached to
the Agreement, shall be replaced by the SCHEDULE V attached to this Addendum.

The provisions of this Agreement shall remain otherwise unchanged.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates shown below:

AMERICAN LIFE AND ANNUITY COMPANY, INC.

         By   /s/ Stanley Brown, III
             --------------------------------------------

         Title   President
               ------------------------------------------

         Witness /s/ Tammy Brown
                -----------------------------------------

         Date 2/6/97
              -------------------------------------------

ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA

         By   /s/ Mark L. Solverud
             --------------------------------------------

         Title    VP
               ------------------------------------------

         Witness
                 ----------------------------------------

         Date   1/27/97
              -------------------------------------------

<PAGE>

                                   SCHEDULE V

<TABLE>
<CAPTION>
                                   ALLOWANCES
                                   ----------

                           ULTIMA - 3 YEAR                                      ULTIMA - 5, 7 and 9 YEAR
                         SURRENDER CHARGE                                          SURRENDER CHARGE

         Year              Allowances                Monthly           Annual           Allowances        Monthly
                                                     Trails            Trail                              Trails

         <S>               <C>                   <C>                   <C>              <C>              <C>
         1                 4.625%                    0.0%                               7.125%            0.0%
         2+                2.0                    0.02125                                  2.0         0.02125
         4+                                                            1.0
</TABLE>

An additional first year allowance of 0.225% for the first $25,000,000 of
premium collect and 0.125% for the next $25,000,000 of premium collected under
this agreement.

NOTES:            (1)      If the "free look" provision is exercised, the
                           REINSURED will refund the entire allowance to the
                           REINSURER.

                  (2)      In the event of a surrender or death in the first
                           policy year, the REINSURED shall refund to the
                           REINSURER all commissions charge back to the agent or
                           setting institution.

                  (3)      The allowance percentages are applied to the
                           reinsured portion of any new premiums received.

                  (4)      The monthly trails apply to the reinsured portion of
                           the account values at the end of each month following
                           the 1st anniversary.

                  (5)      The annual trail applies to the reinsured portion of
                           the account value at the end of the anniversary
                           month. This trail is for the three year surrender
                           charge product only.

<PAGE>

                                   SCHEDULE V

<TABLE>
<CAPTION>
                                   ALLOWANCES
                                   ----------

                           ULTIMA - 3 YEAR                             ULTIMA - 5, 7 and 9 YEAR
                         SURRENDER CHARGE                                 SURRENDER CHARGE

         Year              Allowances       Monthly           Annual            Allowances       Monthly
                                            Trails            Trail                               Trails
         <S>               <C>              <C>               <C>               <C>              <C>

         1                 4.625%           0.0%
         2+                 2.0%            0.02541%                            7.125%            0.0%
         4+                                                   1.0%                2.0%        0.02541%
</TABLE>

An additional first year allowance of 0.225% for the first $25,000,000 of
premium collect and 0.125% for the next $25,000,000 of premium collected under
this agreement.

NOTES:            (1)      If the "free look provision" is exercised, the
______                     REINSURED will refund the
                           entire allowance to the REINSURER.

                  (2)      In the event of a surrender or death in the first
                           policy year, the REINSURED shall refund to the
                           REINSURER all commissions charge back to the agent or
                           selling institution.

                  (3)      The allowance percentages are applied to the
                           reinsured portion of any new premiums received.

                  (4)      The monthly trails apply to the reinsured portion of
                           the account value at the end of each month following
                           the anniversary.

                  (5)      The annual trail applies to the reinsured portion of
                           the account value at the end of the anniversary
                           month. This trail is for the three year surrender
                           charge product only.

<PAGE>

                                 ADDENDUM NO. 2

                                     to the

                              REINSURANCE AGREEMENT
                  (hereinafter referred to as the "Agreement")

                                     between

                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
                                  of Minnesota

                                       and

                      AMERICAN LIFE & ANNUITY COMPANY, INC.
                                  of Tennessee

IT IS HEREBY AGREED, effective on December 1, 1996, that SCHEDULE III and
SCHEDULE V, attached to the Agreement, shall be replaced by the SCHEDULE III and
SCHEDULE V attached to this Addendum.

The provisions of this Agreement shall remain otherwise unchanged.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Addendum as of the dates shown below:

AMERICAN LIFE AND ANNUITY COMPANY, INC.

         By /s/ Stanley Brown, III
            -----------------------------------------

         Title President
              ---------------------------------------

         Witness
                 ------------------------------------

         Date    6/1/98
              ---------------------------------------

ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA

         By /s/ Mark L. Solverud
            -----------------------------------------

         Title   VP
               --------------------------------------

         Witness
                 ------------------------------------

         Date 5/27/98
             ----------------------------------------

<PAGE>

                                  SCHEDULE III

                       ANNUITY COINSURANCE MONTHLY REPORT
                                       TO
                     AMERICAN LIFE AND ANNUITY COMPANY, INC.
                                      FROM
                 ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA

<TABLE>
<CAPTION>

AMOUNTS DUE AMERICAN LIFE AND ANNUITY COMPANY, INC.
---------------------------------------------------
<S>                                                                                     <C>

First Year Premiums - 3 year surrender charge plans (gross firs year                    $ ____________
premium received during the month, multiplied by the quota share
percentage).

First Year Premiums - 5, 7 and 9 year surrender charge plans (gross first               $ ___________
year premium received during the month, multiplied by the quota share
percentage).

First Year Premiums - ULTIMA II (gross first year premiums received                     $ ___________
during the month, multiplied by the quota share percentage).

First Year Premiums - ULTIMA III (gross first year premiums received                    $ ___________
during the month, multiplied by the quota share percentage).

First Year Premiums - ULTIMA V (gross first year premiums received                      $ ___________
during the month, multiplied by the quota share percentage).

Renewal Premiums - 3 year surrender charge plans (gross premiums                        $ ___________
received during the month, multiplied by the quota share percentage).

Renewal Premiums - 5, 7 and 9 year surrender charge plans (gross                        $ ___________
premiums received during the month, multiplied by the quota share
percentage).

Renewal Premiums - ULTIMA II (gross premiums received during the                        $ ___________
month, multiplied by the quota share percentage).

Renewal Premiums - ULTIMA III (gross premiums received during the                       $ ___________
month, multiplied by the quota share percentage).

Renewal Premiums - ULTIMA V (gross premiums received during the                         $ ___________
month, multiplied by the quota share percentage.

Commission charge backs on early deaths or withdrawals.                                 $ ___________

Sum of amounts due to American Life and Annuity Company, Inc.                           $ ___________
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
AMOUNTS DUE ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
-----------------------------------------------------------
<S>                                                                                     <C>
First Year Commission Allowances as defined in Schedule V, multiplied                   $ ___________
by first year premium for the 3 year surrender charge plans, multiplied by
the quota share percentage.

First Year Commission Allowances as defined in Schedule V, multiplied                   $ ___________
by first year premium for the 5, 7 and 9 - year surrender charge plans,
multiplied by the quota share percentage.

First Year Commission Allowances as defined in Schedule V, multiplied                   $ ___________
by first year premium for the ULTIMA II plan, multiplied by the quota
share percentage.

First Year Commission Allowances as defined in Schedule V, multiplied                   $ ___________
by first year premium for the ULTIMA III plan, multiplied by the quota
share exchange.

First Year Commission Allowances as defined in Schedule V, multiplied                   $ ___________
by first year premium for the ULTIMA V plan, multiplied by the quota
share percentage.

First Year Acquisition Allowance as defined in Schedule V, multiplied                   $ ___________
by the premium collected, multiplied by the quota share percentage,

Monthly Maintenance Trail Allowance as defined in Schedule V,                           $ ___________
multiplied by the account value at the end of the month on all policies
in force at least one year, multiplied by the quota share percentage.

Annual Commission Trail Allowance as defined in Schedule V,                             $ ___________
multiplied by the account value at the beginning of policy years 4+ on
all 3-year surrender charge plans, multiplied by the quota share percentage.

Renewal Commission Allowances multiplied by the renewal premium                         $ ___________
for the 5, 7 and 9 year surrender charge plans, multiplied by the quota
share percentage.

Renewal Commission Allowances multiplied by the renewal premium                         $ ___________
for the ULTIMA II plan, multiplied by the quota share percentage.

Renewal Commission Allowances multiplied by the renewal premium                         $ ___________
for the ULTIMA III plan, multiplied by the quota share percentage.

Renewal Commission Allowances multiplied by the renewal premium                         $ ___________
for the ULTIMA V plan, multiplied by the quota share percentage.

Surrender values paid during the month, multiplied by the quota share                   $ ___________
percentage.

Annuity payments paid during the month, multiplied by the quota share                   $ ___________
percentage.

Death benefits paid during the month, multiplied by the quota share                     $ ___________
percentage.

State premium taxes paid during the month, multiplied by the quota                      $ ___________
share percentage.

Guaranty Fund Assessments paid during the month, multiplied by the                      $ ___________
quota share percentage.

Sum of amounts due to Allianz Life Insurance Company of North                           $ ___________
America.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MONTHLY SETTLEMENT
------------------
<S>                                                                                     <C>
Monthly net cash flow (sum of amounts due to American Life and                          $ ___________
Annuity Company, Inc. minus sum of amounts due Allianz Life
Insurance Company of North America.

REINSURER'S Funds Withheld Account (Reserves multiplied by the $ quota share
percentage) as of the last day of the current month.

REINSURER'S Funds Withheld Account (Reserves multiplied by the $ quota share
percentage) as of the last day of the preceding month.

Change in REINSURER'S Funds Withheld Account.                                           $ ___________

Gross Investment Income (on REINSURER'S Funds Withheld $ Account) as defined in
C.3.

Net amount due (Monthly net cash flow plus Gross Investment Income $ minus the
Change in REINSURER'S Funds Withheld Account).

Note: If the net amount due is negative, then that amount is due from American Life and Annuity
Company, Inc. to Allianz Life Insurance Company of North America.  If the net amount due is
positive, then the amount is due from Allianz Life Insurance Company of North American Life and
Annuity Company, Inc.

ADDITIONAL ITEMS NEEDED BY AMERICAN LIFE AND ANNUITY COMPANY, INC. FOR FINANCIAL
REPORTING

Surrender charges realized during the month, multiplied by the quota                    $ ___________
share percentage.

Surrender charges waived on death during the month, multiplied by                       $ ___________
the quota share percentage.

A monthly listing of reserves, account values, and interest credited.
</TABLE>

                                   SCHEDULE V

                                   ALLOWANCES
                                   ----------

II       COMMISSION ALLOWANCES
         ---------------------

<TABLE>
<CAPTION>
ULTIMA I

                           3 YEAR SURRENDER CHARGE                              5,7 AND 9 YEAR SURRENDER
                           -----------------------                              ------------------------
                                                                                        CHARGE
                                                                                        ------
                  Policy Year               Allowances                 Annual Trail              Allowances
                  -----------               ----------                 ------------              ----------
                        <S>                     <C>                        <C>                       <C>
                        1                       4.25%                                                7.25%
                        2+                      4.25%                                                7.25%
                        4+                                                  1.0%

ULTIMA II

                           5 YEAR SURRENDER CHARGE

                  Policy Year               Allowance
                  -----------               ---------
                       1                        2.25%
                       2+                       2.25%

ULTIMA III
                           5 YEAR SURRENDER CHARGE
                           -----------------------

                  Policy Year               Allowance
                  -----------               ---------
                      1                         3.25%
                      2+                        3.25%

ULTIMA V
                           5 YEAR SURRENDER CHARGE
                           -----------------------

                  Policy Year               Allowance
                  -----------               ---------
                       1                        5.25%
                       2+                       5.25%
</TABLE>

II.      ADMINISTRATION ALLOWANCE

         A.       Acquisition Allowance

                  0.85% For the first $25,000,000 of premium collected.
                  0.75% For the next $25,000,000 of premium collected.
                  0.625% For all premium collected in excess of $50,000.00.

         B.       Maintenance Allowance
                           Policy Year                        Monthly Trail
                           -----------                        -------------
                                 1                                      0%
                                 2+                                0.02958%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}]]