Document:

EXHIBIT 10.1

 

REINSURANCE AGREEMENT

 

between

 

AMERICAN HERITAGE LIFE INSURANCE COMPANY

 

and

 

ALLSTATE LIFE INSURANCE COMPANY

 

RECITALS

 

This
Reinsurance Agreement dated July 13, 2010 (hereinafter “Agreement”) is
made and entered into by and between AMERICAN HERITAGE LIFE INSURANCE COMPANY,
a life insurance company domiciled in the State of Florida (hereinafter “Ceding
Company”) and ALLSTATE LIFE INSURANCE COMPANY, a life insurance company
domiciled in the State of Illinois (hereinafter the “Reinsurer”).

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

C.             “Effective Date” shall mean
the effective date of this Agreement, which shall be 12:01am on July 1,
2010.

 

1

 

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

 

E.              “Net Benefits” shall mean
the actual amounts paid or incurred by the Ceding Company with respect to the
Policies.

 

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

 

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

 

H.            “Policy or Policies” shall
mean the policies and riders defined in Exhibit A which are underwritten
by the Ceding Company.

 

I.                 “Statutory Reserves” means
the statutory reserves of the Ceding Company with respect to the Policies
determined pursuant to accounting practices prescribed by applicable regulatory
authorities and in accordance with sound actuarial practices, as such reserves
would have been included in lines 1, 2, 3, 4, and 8 of the NAIC Annual
Statement Blank page 3 (2009 format)

 

ARTICLE II

BASIS OF REINSURANCE

 

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

 

ARTICLE III

LIABILITY OF REINSURER; COINSURANCE PROVISIONS

 

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

 

B.                                     The liability
of the Reinsurer with respect to Policies in force on the Effective Date will
begin on the Effective Date.  The
liability of the Reinsurer with respect to any application received or any
contract issued after the Effective Date and reinsured hereunder will 

 

2

 

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

 

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

 

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

 

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

 

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

 

G.                                     Conversions,
exchanges, or replacements of Policies to or with policies not listed in Exhibit A
are not reinsured under this Agreement, unless agreed to in writing by
Reinsurer.

 

ARTICLE IV

CLAIMS

 

A.                                   Reinsurer shall
not be liable to pay Ceding Company for any Excluded Liabilities, except to the
extent such liabilities or obligations arise directly from and are proximately
caused by the gross negligence or willful acts or omissions of Reinsurer, its
agents, contractors or 

 

3

 

employees in the performance of Reinsurer’s duties and obligations
under this Agreement.

 

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

 

ARTICLE V

RESERVE TRANSFERS

 

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

 

ARTICLE VI

SETTLEMENT AND REPORTING

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

(c)                                  equals insurance taxes,
licenses and fees (including allocated taxes, licenses and fees, but excluding
income taxes) paid or incurred by Ceding Company with respect to the Policies.

 

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

 

(e)                                  equals general
insurance expenses (including allocated expenses) paid or incurred by Ceding
Company with respect to the Policies.

 

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

 

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

 

ARTICLE VII

TAX MATTERS

 

With
respect to this Agreement, the Ceding Company and the Reinsurer hereby make the
election as set forth in Exhibit B and as provided for in section
1.848-2(g)(8) of the Treasury Regulations. 
Each of the parties hereto agrees to take such further actions as may be
necessary to ensure the effectiveness of such election.

 

ARTICLE VIII

RESERVE CREDIT

 

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

 

5

 

of
the reserve that the Ceding Company would have established for the Policies if
it had retained the Policies.

 

ARTICLE IX

OVERSIGHTS

 

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

 

ARTICLE X

INSPECTION OF RECORDS

 

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

 

ARTICLE XI

INSOLVENCY

 

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

 

6

 

without diminution because of such insolvency or because such
conservator, liquidator or statutory successor has failed to pay all or a
portion of any claims.  Payments by the
Reinsurer as above set forth shall be made directly to the Ceding Company or
its conservator, liquidator or statutory successor.

 

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

 

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

 

ARTICLE XII

ARBITRATION

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

ARTICLE XIII

PARTIES TO AGREEMENT

 

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

 

ARTICLE XIV

DURATION OF AGREEMENT AND
TERMINATION

 

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

 

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

 

ARTICLE XV

GENERAL PROVISIONS

 

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

 

B.                                     Notices.  Any notice or communication given pursuant to
this Agreement must be in writing and (1) delivered personally, (2) sent
by facsimile transmission, (3) delivered by overnight express, or (4) sent
by registered or certified mail, postage prepaid, to such address or addresses
each party may designate from time to time for receipt of notices or
communications.  The initial notice
addresses are as follows:

 

	
  If
  to the Reinsurer:

  	
   

  	
  Allstate
  Life Insurance Company

  
	
   

  	
   

  	
  3100
  Sanders Rd.

  
	
   

  	
   

  	
  Northbrook, Illinois
  60062

  
	
   

  	
   

  	
  Attn:
  John Pintozzi, Chief Financial Officer

  
	
   

  	
   

  	
  Facsimile
  No.: (847) 326-7315

  
	
   

  	
   

  	
   

  
	
  If
  to the Ceding Company:

  	
   

  	
  American
  Heritage Life Insurance Company

  
	
   

  	
   

  	
  1776
  American Heritage Life Drive

  
	
   

  	
   

  	
  Jacksonville,
  Florida 32224-6688

  
	
   

  	
   

  	
  Attn:

  	
  Laura
  Clark, Senior Vice President

  
	
   

  	
   

  	
   

  	
  Finance
  and Distribution Support

  
	
   

  	
   

  	
  Facsimile
  No.: (904) 992-2658

  

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

afforded,
shall be cumulative and not alternative, except as otherwise provided by law.

 

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

 

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

 

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

 

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

 

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

 

N.                                    Governing Law.  This Agreement shall be governed by the laws
of the state of Florida.

 

11

 

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

 

 

	
  ALLSTATE LIFE INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/
  Samuel H. Pilch

  	
   

  
	
   

  	
  Samuel
  H. Pilch

  	
   

  
	
  Title

  	
  Group
  Vice President and Controller

  	
   

  
	
   

  	
   

  
	
  Date

  	
  7/13/10

  
	
   

  	
   

  
	
   

  	
   

  
	
  AMERICAN HERITAGE LIFE INSURANCE COMPANY

  
	
   

  	
   

  
	
  By

  	
  /s/
  Samuel H. Pilch

  	
   

  
	
   

  	
  Samuel
  H. Pilch

  
	
  Title

  	
  Group
  Vice President

  
	
   

  	
   

  
	
  Date

  	
  7/13/10

  

 

12

 

EXHIBIT A

ELIGIBLE AND INELIGIBLE POLICIES

 

Policies
reinsured under this Agreement shall be all individual universal life insurance
policies, and all endorsements and riders attached thereto, marketed as the “GoodForLife”
product and represented by “Policy Company #66” on Ceding Company’s Life-70 administration
system, including:

 

Universal
Life Base Policy

Accidental
Death and Severe Injury Rider

Critical
Illness Rider

Accelerated
Death Benefit Rider

Enhanced
Grace Period Rider

Children’s
Level Term Rider

Total
Disability Premium Waiver Rider

Accidental
Death Benefit Rider

Other
Insured Person Level Term Rider

Primary
Insured Level Term Rider

Future
Purchase Option Rider

 

13

 

EXHIBIT B

TAX ELECTION

 

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

 

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

 

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

 

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

 

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

 

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

 

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AGREEMENT

    

    Know all
men by these presents, the LOAN
AGREEMENT entered into by ST. LAWRENCE ALLUVIAL SERVICES AND
LOGISTICS CORP.  (LENDER), a company
incorporated and existent under the laws
of  Panama   and domiciled to this effect at 16th
Floor, Marbella, 53rd E
Street, Panama, Republic of Panama, and, CONSTITUTION MINING CORP.
(CONSTITUTION), a company incorporated
and existent under the laws of Delaware, and domiciled to this effect
at  Pasaje Mártir Olaya 129, Oficina 1203, Centro Empresarial José
Pardo Torre A, Miraflores, Lima, Perú.

    

    This
agreement is executed in accordance to the following terms and
conditions:

    

    First:              Background

    

    
      	
              1.1  

            	
              CONSTITUTION
      is a company engaged in mining activities that
      requires  financing to be utilized for expenditures on mining
      pediments in Peru.

            

    

    

    
      	
              1.2  

            	
              LENDER
      has the funds required by CONSTITUTION and, by means of this instrument,
      is willing to grant them as a loan.

            

    

    

    Second:         Agreement

    

    
      	
              2.1

            	
              By
      means of this agreement, hereinafter referred to as the “Agreement”,
      LENDER obliges to grant CONSTITUTION a loan of money of US$320,000.00 (three
      hundred twenty thousand and 00/100 Dollars of U.S.A.), to be disbursed to
      CONSTITUTION no later than June 30, 2010, through a wire transfer to the
      following bank account:

            

    

     

    
      
        	
                Bank:

              	
                XXXXXXXX

              
	
                Swift
      code:

              	
                XXXXXXXX

              
	
                Beneficiary:

              	
                Constitution
      Mining Corp.

              
	
                Number
      of account:

              	
                XXXXXXXX

              
	
                Address
      of the bank: 

              	
                XXXXXXXX

              

      

       

    

    
      	
              2.2

            	
              CONSTITUTION
      agrees to repay the loan in the same currency and within a maximum term of
      90 (ninety) days as from the execution of this document, provided that
      CONSTITUTION will be entitled to pay back the loan to LENDER at any time
      before the lapsing of such 90 day term and will make its best efforts to
      pay back the loan earlier.

            

    

    

    
      	
              2.3  

            	
              The
      loan will accrue an interest equivalent to 12% (twelve percent) per year
      (i.e. US$ 3,200.00 per month).  Interest shall be paid upon
      maturity of the loan.

            

    

    

    
      	
              2.4  

            	
              In
      the unlikely event that CONSTITUTION fails to comply with the repayment
      conditions within the stipulated term, it automatically shall fall into
      arrears, not needing intimation or any further notification of future
      legal proceedings on behalf of LENDER. Default will cause interest to
      continue to accrue at a rate of 12% (twelve percent) per
    year.

            

    

     

     

     

    
      
        
        

      

      
        - 1
-

        
          

        

      

      
        
        

      

    

    
 

    Three:         Additional
provisions

    

    
      	
              3.1

            	
              A
      waiver of any term, provision or condition of, or consent granted under,
      this Agreement shall be effective only if given in writing and signed by
      the waiving or consenting party and then only in the instance and for the
      purpose for which it is given.

            

    

    

    
      	
              3.2

            	
              The
      fact that a party fails to or delays the exercise of any right, power or
      privilege under this Agreement shall not operate as a waiver thereof. Any
      single or partial exercise of any such right, power or privilege shall not
      preclude any further exercise thereof or the exercise of any other right,
      power or privilege. The above, is without prejudice to the forfeiture of
      any such right, power or privilege.

            

    

    

    
      	
              3.3

            	
              No
      breach of any provision of this Agreement shall be waived or discharged
      except with the express written consent of the party that is waiving or
      discharging the relevant breach.

            

    

    

    
      	
              3.4

            	
              The
      rights and remedies herein provided are cumulative with and do not exclude
      any other rights or remedies provided by law or
  equity.

            

    

    

    
      	
              3.5

            	
              All
      communication amongst the parties will be in written form and remitted to
      the addresses referred to in the introduction of this document. In order
      for any address modification to be in effect in relation to this
      agreement, such modification shall be informed through the deliver of a
      letter to the other party. Otherwise, any notification delivered to the
      domicile here stated will be valid.

            

    

    

    
      	
              3.6

            	
              If
      any provision in this agreement becomes invalid, illegal or
      non-enforceable, the remainder of this agreement shall be valid and
      enforceable.

            

    

    

    
      	
              3.7

            	
              This
      agreement shall be governed by the laws of
  Delaware.

            

    

    
      	
               
      

            	 

    

    

    WITNESS
WHEREOF, the parties have caused this Agreement to be duly executed as of June
30, 2010.­

    

    
      	
              CONSTITUTION MINING
      CORP.

            	 
      	
              ST. LAWRENCE ALLUVIAL SERVICES
      

              AND LOGISTICS
      CORP.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              By:
      /s/ Michael
      Stocker                           
      

            	 
      	
              By:
      /s/ Yessinia
      A.
      Agudo                                       
      

            
	            
      Michael Stocker	 	            
      Yessinia A. Agudo

    

    

     

    

 

    
      
         

      

      
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