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Exhibit 10.12    
    

COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE AGREEMENT 

BETWEEN

AMERICAN
EQUITY INVESTMENT LIFE INSURANCE COMPANY

West Des Moines, Iowa 

AND

HANNOVER
LIFE REASSURANCE COMPANY OF AMERICA

Orlando, Florida 

1

 
COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE  

	ARTICLE
	 	 
	 	PAGE

	I.	 	PREAMBLE AND REINSURANCE PROVIDED	 	3
	

II.	
 	

TERM, TERMINATION AND RECAPTURE	
 	

3
	

III.	
 	

REINSURANCE COVERAGE	
 	

4
	

IV.	
 	

REINSURANCE PREMIUMS AND EXPENSE ALLOWANCES	
 	

5
	

V.	
 	

COINSURANCE RESERVES	
 	

6
	

VI.	
 	

LOSS CARRY FORWARD BALANCE	
 	

6
	

VII.	
 	

NET SETTLEMENT ADJUSTMENTS	
 	

7
	

VIII.	
 	

FINANCIAL COVENANTS	
 	

7
	

IX.	
 	

REPORTS AND REMITTANCES	
 	

9
	

X.	
 	

NET RETAINED LINES	
 	

9
	

XI.	
 	

EXCLUSIONS	
 	

9
	

XII.	
 	

INSOLVENCY	
 	

10
	

XIII.	
 	

ARBITRATION	
 	

11
	

XIV.	
 	

AGREEMENT, AMENDMENTS AND MERGER	
 	

12
	

XV.	
 	

MISCELLANEOUS	
 	

12
	

 	
 	

SIGNATURE PAGE	
 	

14
	

 	
 	

Schedule A1—SUBJECT BUSINESS CONTRACTS (TYPES)	
 	

 
	

 	
 	

Schedule A2—ASSETS IN SEGREGATED ACCOUNT	
 	

 
	

 	
 	

Schedule B—BASE RATE BY AGE (NEAREST BIRTHDAY)	
 	

 
	

 	
 	

Schedule C1—TARGET LOSS CARRY FORWARD BALANCES	
 	

 
	

 	
 	

Schedule C2—ALTERNATIVE TARGET LOSS CARRY FORWARD BALANCES	
 	

 
	

 	
 	

Schedule D—SAMPLE NET SETTLEMENT CALCULATION AND REPORT FORMAT	
 	

 

2

  

 
 

ARTICLE I: PREAMBLE AND REINSURANCE PROVIDED    
    

	1.01 -	 	This is an Agreement of Coinsurance and Yearly Renewable Term Reinsurance between:
	

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

West Des Moines, Iowa

(hereinafter referred to as the "Company")

and

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

Orlando, Florida
	

(hereinafter referred to as the "Reinsurer")

whereby, the Reinsurer agrees to indemnify the Company for Covered Losses paid by

the Company subject to all of the terms and conditions of this Agreement.
	
ARTICLE II: TERM, TERMINATION AND RECAPTURE
	

2.01 -	
 	
Effective Date: The Effective Date of this Agreement shall be 12:01 a.m., Central Standard Time, November 1, 2002.
	

2.02 -	
 	
Term: This Agreement shall remain in force and the Term of this Agreement shall be from the Effective Date until the earlier of (i) the date of decrement of the last contract holder of a
Subject Business agreement, or (ii) the Recapture Date.
	

2.03 -	
 	
Termination and Recapture: The Company may terminate this Agreement and recapture all Subject Business reinsured hereunder at any time after June 30, 2003 by providing written notice to
the Reinsurer by registered or certified mail, return receipt requested, at least one-hundred-twenty (120) days in advance, such notice to include the effective date of termination and recapture.
	

 	
 	

The Reinsurer may terminate this Agreement only if the Company fails to pay any amount due to Reinsurer by Company hereunder when due, subject to thirty (30) days' notice and demand for such payment by the Reinsurer.
	

 	
 	

The date on which this Agreement is terminated by the Company or by the Reinsurer as set forth in this Section 2.03 shall hereinafter be referred to as the "Recapture Date". On the Recapture Date, the Company shall pay to the Reinsurer the LCF
from the last Accounting Period and as determined in accordance with Article VI below adjusted to include interest and applicable Risk Charge through the Recapture Date (the "Recapture Payment"). The parties acknowledge and agree that the
Recapture Payment is made based upon the scheduled LCF (whether on Schedule C1 or C2, as applicable), and the parties agree to true-up the Recapture Payment by calculating the actual LCF as of the Recapture Date utilizing actual earned investment
rates on the Assets, mortality experience, reserves, Funds Withheld Balance, and Experience Refunds in which case the parties agree to promptly pay the amount owing to the other based upon such true-up calculation. In the event the parties disagree
as to the true-up calculation, the parties agree to submit the calculation to Milliman USA (Atlanta office), whose calculation shall be final and binding upon the parties, and whose costs and expenses the parties agree to share equally. Except for
amounts owed, if any, by the Reinsurer to the Company pursuant to the true-up of the Recapture Payment, on the Recapture Date the Reinsurer shall be released from all past, current and future liabilities under this Agreement, except as expressly
reserved by either of the parties. The true-up calculation shall occur within thirty (30) days after the Recapture Payment is made.
	 	 	 	 	 	 	 

3

 

	

 	
 	

To eliminate any doubt regarding the calculation of the Recapture Payment, the parties may look to the Letter of Intent dated December 19, 2002, between them as evidence of the manner in which the Subject Business may be recaptured and payment
made to the Reinsurer.
	
ARTICLE III: REINSURANCE COVERAGE
	

3.01 -	
 	
Coverage:
	

 	
 	

(a)	
 	
Section A—Coinsurance (Funds Withheld Basis): The Reinsurer shall indemnify the Company for Section A Covered Losses paid by the Company.
	

 	
 	

(b)	
 	
Section B—YRT: The Reinsurer shall indemnify the Company for Section B Covered Losses paid by the Company.
	

3.02 -	
 	
Subject Business: Subject Business shall mean all contracts issued by the Company and listed on Schedule A1 attached hereto and incorporated herein. The coverage pertains only to that portion
of the 2002 Subject Business not previously reinsured.
	

 	
 	

It is understood and agreed that the Company shall continue to administer the Subject Business during the Term of this Agreement.
	

3.03 -	
 	
Subject Losses:
	

 	
 	

(a)	
 	

Section A Subject Losses shall mean all benefits paid by the Company to contract holders of the Subject Business contracts, including surrender values paid, death benefits paid, and interest and premium bonuses credited in accordance with the
terms of such Subject Business contracts. Section A Subject Losses shall not include rider benefits, extracontractual payments, extracontractual damages, loss adjustment expenses and other benefits not expressly specified under the terms of the
Subject Business contracts.
	

 	
 	

(b)	
 	

Section B Subject Losses shall mean all surrender charges waived by the Company upon death of the contract holders of the Subject Business contracts, but only as respects that portion of the Subject Business that is not reinsured under
Section A of this Agreement.
	

3.04 -	
 	
Covered Losses:
	

 	
 	

(a)	
 	

Section A Covered Losses shall equal six and 88/100 percent (6.88%) of Section A Subject Losses on Fixed Annuity policies.
	

 	
 	

(b)	
 	

Section B Covered Losses shall equal (i) ninety-three and 12/100 percent (93.12%) of Section B Subject Losses on Fixed Annuity policies and (ii) one hundred percent (100%) of Section B Subject Losses on Equity Index
Annuity policies.
	

 	
 	

The Reinsurer's aggregate liability under this Agreement for Section B Covered Losses shall not exceed fifty million dollars ($50,000,000).
	

 	
 	

(c)	
 	

The sum of Section A Covered Losses and Section B Covered Losses shall hereinafter be referred to collectively as "Covered Losses". Section A Covered Losses and Section B Covered Losses shall pertain only to that portion of 2002
Subject Business not previously reinsured.
	

3.05 -	
 	
Coinsurance Funds Withheld Reserve. During the effectiveness of this Agreement and while the Reinsurer has reinsurance obligations to the Company hereunder, the Company agrees to maintain
Assets in a segregated account, as listed in Schedule A2 hereto, with a book value (determined in accordance with Statutory Accounting Principles) at least equal to the Funds Withheld Balance.
	 	 	 	 	 	 	 

4

 

	

 	
 	

(a)	
 	

The Funds Withheld Balance shall equal the Coinsured Reserves for the Subject Business, as adjusted for the Net Settlement Amount determined in accordance with Article VII below.
	

 	
 	

(b)	
 	

The Company agrees to promptly supply the Reinsurer with investment reports, in a mutually agreed to format, compiled by a nonrelated third party detailing the Assets that are being maintained to back the Funds Withheld Balance.
	

 	
 	

(c)	
 	

The Funds Withheld Balance shall accrue Interest at a rate equal to the actual investment income realized on the Assets comprising the Funds Withheld Balance, including capital gains and losses, which shall be offset by a change in IMR (but only IMR
created after the Effective Date).
	

3.06 -	
 	
Crediting Rates. The Company will be responsible for determining credited rates regarding the Subject Business; provided, however, that the Company shall notify the Reinsurer in writing of all
credited rates as and when determined by the Company and the Reinsurer shall have ten (10) Business Days during which to object to any proposed increase in credited rates which case the Company shall not implement such increased credited rates.
The parties agree to cooperate with each other to resolve the objections identified by the Reinsurer as soon as practicable to permit the Company to implement mutually agreeable credited rates of the Subject Business. To the extent the Reinsurer does
not object to the credited rates within such ten (10) Business Day period, the credited rates of the Subject Business determined by the Company shall be deemed approved by the Reinsurer and the Company shall have the right to implement such
credited rates. The Company agrees not to reduce credited interest rates of the Subject Business below contractual minimum levels.
	
ARTICLE IV: REINSURANCE PREMIUMS AND EXPENSE ALLOWANCES
	

4.01 -	
 	
Reinsurance Premium:
	

 	
 	

(a)	
 	

Section A Reinsurance Premium shall equal six and 88/100 percent (6.88%) of all single, first-year and renewal premiums received by the Company for the year 2002 on Subject Business.
	

 	
 	

(b)	
 	

Section B Reinsurance Premium shall equal, for the Accounting Period commencing January 1, 2003, and each Accounting Period thereafter, the sum of the following:
	

 	
 	

 	
 	

(i)	
 	

for each Subject Business contract in force, the applicable rate from Schedule B attached hereto and incorporated herein, based on the contract holder's age at the nearest birthday at the beginning of that Accounting Period, multiplied by the Net Amount at Risk at the beginning of that Accounting Period; and
	

 	
 	

 	
 	

(ii)	
 	

a policy fee of eighteen and 75/100 dollars ($18.75) for each Subject Business contract in force at the beginning of that Accounting Period.
	

 	
 	

 	
 	

"Net Amount at Risk" as used herein shall mean, as respects each Subject Business contract, the amount by which the account value payable to the beneficiary upon death of the contract holder exceeds the cash surrender value at such time.
	

 	
 	

(c)	
 	

The sum of Section A Reinsurance Premium and Section B Reinsurance Premium shall hereinafter be referred to collectively as the "Reinsurance Premiums". The Reinsurance Premiums for each Accounting Period shall be due and payable from the
Company to the Reinsurer as part of the Total Settlement for that Accounting Period in accordance with Section 9.05.

5

 

	

4.02 -	
 	
Expense Allowances:
	

 	
 	

(a)	
 	
Section A:
	

 	
 	

 	
 	

(i)	
 	

For the year 2002, the Section A First Year Expense Allowances shall equal the portion of the Section A Reinsurance Premium paid for that Accounting Period that relates to single and first-year premiums received by the Company.
	

 	
 	

 	
 	

(ii)	
 	

For each Accounting Period in 2003 and later years, the Section A Renewal Expense Allowances shall be equal to 86/100 dollars ($0.86) per contract plus 6.88% of the applicable premium taxes and agent commissions actually paid by the Company with
respect for each Subject Business contract in force.
	

 	
 	

 	
 	

        The Section A First Year Expense Allowances and the Section A Renewal Expense Allowances for each Accounting Period shall hereinafter be referred to collectively as the "Section A Expense
Allowances".
	

 	
 	

(b)	
 	
Section B: Section B Expense Allowances for each Accounting Period shall equal zero.
	

 	
 	

(c)	
 	

The Section A Expense Allowances and the Section B Expense Allowances for each Accounting Period shall hereinafter be referred to collectively as the "Expense Allowances". The Expense Allowances for each Accounting Period shall be due and
payable from the Reinsurer to the Company as part of the Total Settlement for that Accounting Period in accordance with Section 9.05.
	

 	
 	

(d)	
 	

All direct or allocable expenses or taxes are included in the Expense Allowances.
	
ARTICLE V: COINSURANCE RESERVES
	

5.01 -	
 	
Coinsurance Reserves: The Coinsurance Reserves at the end of each Accounting Period shall equal six and 88/100 percent (6.88%) of the statutory reserves held for the Subject Business as
of the end of that Accounting Period.
	
ARTICLE VI: LOSS CARRY FORWARD BALANCE
	

6.01 -	
 	
Loss Carry Forward Balance: The Loss Carry Forward ("LCF") on the Effective Date shall be equal to zero (0). The LCF at December 31, 2002 shall be an amount equal to the Cover A Coinsured
Reserves on that date, as set forth on Schedule D. The LCF for each Accounting Period thereafter shall be the Target LCF or the Alternative LCF, as applicable, determined with reference to Schedule C1 and C2.
	

6.02 -	
 	
Target Risk Charge on LCF: If Company is not, and was not, in violation of one or more of the Financial Covenants at any time during that Accounting Period or any prior Accounting Periods,
then the Target Risk Charge on the LCF at each Settlement Date shall equal (a) the Target Risk Charge Rate on that Settlement Date, multiplied by (b) the LCF on the prior Settlement
Date.
	

6.03 -	
 	
Target Risk Charge Rate: The Target Risk Charge Rate at each Settlement Date shall equal (a) four and one-half percent (4.5%), multiplied by
(b) the ratio of the number of days during that Accounting Period to three-hundred-sixty (360) days.
	

6.04 -	
 	
Alternative Target Risk Charge on Alternative LCF: If Company is or was in violation of one or more of the Financial Covenants at any time during that Accounting Period or any prior Accounting
Periods, then the Alternative Target Risk Charge on the Alternative LCF at each Settlement Date shall equal (a) the Alternative Target Risk Charge Rate on that Settlement Date, multiplied by
(b) the LCF on the prior Settlement Date.
	 	 	 	 	 	 	 

6

 

	

6.05 -	
 	
Alternative Target Risk Charge Rate: The Alternative Target Risk Charge Rate at each Settlement Date shall equal (a) five and one-half percent (5.5%), multiplied
by (b) the ratio of the number of days during that Accounting Period to three-hundred-sixty (360) days.
	
ARTICLE VII: NET CASH SETTLEMENT
	

7.01 -	
 	
Net Cash Settlement: The Net Cash Settlement for each Accounting Period shall be calculated on or before the Settlement Date for such Accounting Period in accordance with the illustration set
forth in Schedule D attached hereto. If the Net Cash Settlement for an Accounting Period is greater than zero (0) and the Company is not, and was not, in violation of one or more of the Financial Covenants at any time during that Accounting
Period or any prior Accounting Periods, an Experience Refund equal to (i) the statutory profits on the Subject Business for the Accounting Period less (ii) the difference between (a) the Target LCF on the last day of the immediately
preceding Accounting Period and (b) the Target LCF on the last day of the current Accounting Period less (iii) the Funds Brought Forward Balance, shall be paid by the Reinsurer to the Company as part of the Total Settlement for that
Accounting Period in accordance with Section 9.05. If the Net Cash Settlement for an Accounting Period is greater than zero (0) and the Company is or was in violation of one or more of the Financial Covenants at any time during that
Accounting Period or any prior Accounting Periods, an Experience Refund equal to (i) the statutory profits on the Subject Business for the Accounting Period less (ii) the difference between (a) the Alternative Target LCF on the last
day of the immediately preceding Accounting Period and (b) the Alternative Target LCF on the last day of the current Accounting Period less (iii) the Funds Brought Forward Balance, shall be paid by the Reinsurer to the Company as part of
the Total Settlement for that Accounting Period in accordance with Section 9.05. If the Net Cash Settlement for an Accounting Period is less than zero (0), the absolute value of such Net Cash Settlement shall be added to the Funds Brought
Forward Balance. The Funds Brought Forward Balance shall accrue with interest at a rate consistent with the interest rate of the Assets underlying the Subject Business and the Risk Charges set forth in Article VI.
	

 	
 	

At the sole option of the Reinsurer, the Experience Refund may be recalculated at the end of any Accounting Period to include Total Settlements for all Accounting Periods in a calendar year. Upon any such recalculation of the Experience Refund, the
Total Settlement will be recalculated accordingly and the parties agree to immediately pay each other amounts due based upon such recalculation.
	

 	
 	

To eliminate any doubt regarding the calculation of the Experience Refund, the parties may look to the Letter of Intent dated December 19, 2002, between them as evidence of the manner in which the Experience Refund is calculated and paid to the
Company.
	
ARTICLE VIII: FINANCIAL COVENANTS
	

8.01 -	
 	
Non-Compliance with Financial Covenants: The Company shall notify the Reinsurer within five (5) Business Days of any failure by the Company to comply with one or more of the Financial
Covenants
	

8.02 -	
 	
Financial Covenants: The Financial Covenants are:
	

 	
 	

(a)	
 	

the Company shall maintain Risk Based Capital, as measured by the formula prescribed by the insurance department of the Company's state of domicile, of no less than one-hundred twenty-five percent (125%) of the Company Action Level;
	

 	
 	

(b)	
 	

the Company shall maintain Total Surplus of no less than one-hundred-twenty-five-million dollars ($125,000,000);
	 	 	 	 	 	 	 

7

 

	

 	
 	

(c)	
 	

there shall be no Change of Control of the Company, where "Change of Control" is signaled by the requirement that the Company, or the parent of the Company, file such change with any insurance department or with the Securities Exchange
Commission;
	

 	
 	

(d)	
 	

there shall be no material change in the Company's underwriting guidelines from those in effect as of the Effective Date, unless the Company obtains the prior written approval of the Reinsurer to such change;
	

 	
 	

(e)	
 	

there shall be no material change in the overall credit quality of the Company's investment portfolio from the Effective Date;
	

 	
 	

(f)	
 	

the insurance financial strength rating of the Company as assigned by A.M. Best Company shall not be less than "B+";
	

 	
 	

(g)	
 	

the Financial Leverage Ratio (as defined in Section 8.03) of the Company and its corporate parent combined shall not be greater than sixty percent (60%); and
	

 	
 	

(h)	
 	

the Cash Coverage Ratio (as defined in Section 8.04) of the Company and its parent combined shall not be less than one-and-two-tenths (1.2).
	

8.03 -	
 	
Financial Leverage Ratio: The Financial Leverage Ratio at any time shall be determined as follows, with the result expressed as a percentage:
	

 	
 	

(a)	
 	

the sum of (i) the principal amount of loans outstanding at American Equity Investment Life Holding Company (the "Holding Company"), and (ii) the principal amount of loans outstanding at American Equity Investment Service Company (the
"Service Company"), excluding any such loans that may be included in (a)(i) herein;
	

 	
 	
divided by
	

 	
 	

(b)	
 	

the sum of (i) the Company's Total Capital and Surplus, (ii) the Company's Asset Valuation Reserve, and (iii) the Company's Interest Maintenance Reserve, where items (i), (ii) and (iii) are the respective amounts as reported
on the Company's most recent certified statutory financial statements.
	

8.04 -	
 	
Cash Coverage Ratio: The Cash Coverage Ratio at any time shall equal:
	

 	
 	

(a)	
 	

the sum of (i) amounts available to the Company at that time for dividends to stockholders in accordance with the statutes and regulations of the State of Iowa, (ii) any commissions paid by the Company to the Service Company during the
current Accounting Period, (iii) investment income of the Holding Company, excluding income from investments in subsidiaries, during the current Accounting Period, (iv) cash operating expenses of the Holding Company during the current
Accounting Period, and (v) restricted payments (dividends paid to shareholders) by the Holding Company during the current Accounting Period;
	

 	
 	
divided by
	

 	
 	

(b)	
 	

the sum of (i) interest on loans outstanding at the Holding Company, (ii) distribution by the Holding Company on trust preferreds, and (iii) twenty percent (20%) of the principal amounts of loans outstanding at the Holding Company and
at the Service Company.

8

 

	
ARTICLE IX: REPORTS AND REMITTANCES
	

9.01 -	
 	
Company Reports: The Company shall provide to the Reinsurer, no less than three (3) Business Days prior to each Settlement Date, all information and data required by the Reinsurer to
fulfill its obligations and rights under this Agreement and to satisfy its legal reporting requirements. A suggested format for such reporting is attached hereto as Schedule D. The Company shall also furnish to the Reinsurer, on a quarterly
basis, a copy of its certified statutory financial statements at the time such statements are submitted by the Company to the regulatory authority in its state of domicile, and shall furnish the Reinsurer with a statement at the end of each
Accounting Period that demonstrates the Company's compliance with the Financial Covenants.
	

9.02 -	
 	
Accounting Period: Accounting Period shall mean each calendar quarter during the Term of this Agreement. In the event the Recapture Date occurs at any time other than at the end of a calendar
quarter, the last Accounting Period shall be the period from the beginning of that calendar quarter to the Recapture Date, both dates inclusive.
	

9.03 -	
 	
Settlement Dates: The Settlement Date for each Accounting Period shall be the fifteenth (15th) Business Day after the end of that Accounting Period.
	

9.04 -	
 	
Business Day: Business Day shall mean any day other than a Saturday, a Sunday, or a day on which commercial banks in, the State of Florida or the State of Iowa are authorized by law or
executive order to close.
	

9.05 -	
 	
Total Settlement: The Total Settlement for each Accounting Period shall be calculated in accordance with Schedule D. If the Total Settlement for an Accounting Period is greater than zero,
then such Total Settlement shall be due and payable by the Reinsurer to the Company on the Settlement Date for that Accounting Period. If the Total Settlement is less than zero, then the absolute value of such Total Settlement shall be due and
payable by the Company to the Reinsurer on the Settlement Date for that Accounting Period.
	
ARTICLE X: NET RETAINED LINES
	

10.01 -	
 	
Application of Other Reinsurance Proceeds: This Agreement applies only to that portion of insurance or reinsurance which, after the application of all reinsurance other than the reinsurance
hereunder, the Company retains net for its own account. In calculating the amount of loss hereunder for which the Company shall be reimbursed, only the loss with respect to such retained portion shall be included.
	

10.02 -	
 	
Collection of Other Reinsurance Proceeds: The amount of the Reinsurer's liability hereunder shall not be increased by reason of the Company's inability to collect from any other reinsurers,
whether specific or general, any amounts which may have become due from them, whether such inability arises from the insolvency of such other reinsurers, or otherwise.
	

10.03 -	
 	
Other Reinsurance: In order to provide that the Reinsurer's liability under this Agreement shall not be increased in any calendar year by a change in reinsurance ceded or recoverable by the
Company, the reinsurance arrangements, including treaties, facultative certificates and interpretations with respect to obligations thereunder, which were in effect on November 1, 2002 are deemed to continue in effect for purposes of all
computations hereunder.

9

 

	
ARTICLE XI: EXCLUSIONS
	

11.01 -	
 	
Extracontractual Damages: This Agreement does not cover extracontractual damages or extracontractual liability resulting from fraud, oppression, bad faith, strict liability, or negligent,
reckless or intentional wrongs, or otherwise, on the part of the Company or its directors, officers, employees and agents. The following types of damages are examples of damages excluded under this Agreement for the conduct described above: actual
damages, damages for emotional distress, punitive or exemplary damages and attorneys fees.
	

11.02 -	
 	
Insolvency Funds: The Reinsurer shall not be obligated to pay to the Company any share of any liability of the Company arising, by contract, operation of law, or otherwise, from its
participation or membership, whether voluntary or involuntary, in any insolvency fund or from reimbursement of any person for any such liability. "Insolvency Fund" includes any guaranty or insolvency fund, plan, pool, association, or other
arrangement howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by any person or part of all of any claim, debt, charge, fee or other obligation of any insurer, or its successors or assigns
which has been declared to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
	

11.03 -	
 	
Dividends: The Reinsurer shall not participate in the determination of, nor reimburse the Company for, any policyholder or other dividends paid by the Company.
	
ARTICLE XII: INSOLVENCY
	

12.01 -	
 	
Reinsurer's Obligation: In the event of the insolvency of the Company, the reinsurance afforded by this Agreement shall be payable by the Reinsurer on the basis of the liability of the Company
under the Subject Business, without diminution because of such insolvency, directly to the Company or its liquidator, receiver, conservator, or statutory successor.
	

12.02 -	
 	
Reinsurer's Notice and Defense of Claims: The Reinsurer shall be given written notice of the pendency of each claim or loss which may involve the reinsurance afforded by this Agreement within
a reasonable time after such claim or loss is filed in the insolvency proceedings. The Reinsurer shall have the right to investigate each such claim or loss and interpose at its own expense, in the proceeding where the claim or loss is to be
adjudicated, any defense which it may deem available to the Company or its liquidator, receiver, conservator, or statutory successor. If more than one reinsurer is involved, such reinsurers may designate one reinsurer to act for all.
	

12.03 -	
 	
Defense Expense: The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as part of the expense of liquidation to the extent of
a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
	

12.04 -	
 	
Offset: Any debts or credits, liquidated or unliquidated, in favor of or against either party on the date of the receivership or liquidation order (except where the obligation was purchased by
or transferred to be used as an offset) are deemed mutual debts or credits and shall be set off with the balance only to be allowed or paid. Although such claim on the part of either party may be unliquidated or undetermined in amount on the date of
the entry of the receivership or liquidation order, such claim will be regarded as being in existence as of such date and any credits or claims then in existence and held by the other party may be offset against it.

10

 

	

12.05 -	
 	
Rights of Parties: Nothing hereinabove set forth in this Article shall in any way change the relationship or status of the parties hereto, nor enlarge the obligations of any party to any other
except as specifically hereinabove provided, to wit, to pay the statutory successor on the basis of the amount of liability determined in the liquidation or receivership proceeding, rather than on the basis of the actual amount of loss (dividends)
paid by the liquidator, receiver, conservator, or statutory successor to allowed claimants. Nor, except as hereinabove specifically provided, shall anything in this Article in any manner create any obligation or establish any right against the
Reinsurer in favor of any third parties or any other persons not parties to this Agreement.
	
ARTICLE XIII: ARBITRATION
	

13.01 -	
 	
Resolution of Disputes: As a condition precedent to any right arising under this Agreement, any dispute between the Company and the Reinsurer arising out of the provisions of this Agreement,
or concerning its interpretation or validity, whether arising before or after termination of this Agreement, shall be submitted to arbitration in the manner set forth in this Article. Either party may initiate arbitration of any dispute arising out
of the provisions of this Agreement by giving written notice to the other party, by registered or certified mail, return receipt requested, of its intention to arbitrate and of its appointment of an arbitrator in accordance with
Section 13.03.
	

13.02 -	
 	
Composition of Panel: Unless the parties agree upon a single arbitrator within fifteen (15) days after the receipt of a notice of intention to arbitrate, all disputes shall be submitted
to an arbitration panel composed of two arbitrators and an umpire, chosen in accordance with Section 13.03 and Section 13.04.
	

13.03 -	
 	
Appointment of Arbitrators: The members of the arbitration panel shall be chosen from disinterested persons knowledgeable in the life insurance and life reinsurance business. The party
requesting arbitration (hereinafter referred to as the "claimant") shall appoint an arbitrator and give written notice thereof, by registered or certified mail, return receipt requested, to the other party (hereinafter referred to as the
"respondent") together with its notice of intention to arbitrate. Unless a single arbitrator is agreed upon within fifteen (15) days after the receipt of the notice of intention to arbitrate, the respondent shall, within thirty (30) days
after receiving such notice, also appoint an arbitrator and notify the claimant thereof in a like manner. Before instituting a hearing, the two arbitrators so appointed shall choose an umpire. If, within twenty (20) days after they are both
appointed, the arbitrators fail to agree upon the appointment of an umpire, the umpire shall be appointed by the executive director of the American Council of Life Insurers.
	

13.04 -	
 	
Failure of Party to Appoint Arbitrator: If the respondent fails to appoint an arbitrator within thirty (30) days after receiving a notice of intention to arbitrate, such arbitrator shall
be appointed by the executive director of the American Council of Life Insurers, and shall then, together with the arbitrator appointed by the claimant, choose an umpire as provided in Section 13.03.
	

13.05 -	
 	
Choice of Law and Forum: Any arbitration instituted pursuant to this Article shall be held in Orlando, Florida, or in a location to be mutually agreed upon by the Company and the Reinsurer and
the laws of the State of Iowa, without regard to its conflict of laws rules, shall govern the interpretation and application of this Agreement.
	

13.06 -	
 	
Submission of Dispute to Panel: Unless otherwise extended by the arbitration panel, or agreed to by the parties, each party shall submit its case to the panel within thirty (30) days
after the selection of an umpire.
	 	 	 	 	 	 	 

11

 

	

13.07 -	
 	
Procedure Governing Arbitration: All proceedings before the panel shall be informal and the panel shall not be bound by the formal rules of evidence. The panel shall have the power to fix all
procedural rules relating to the arbitration proceeding. In reaching any decision, the panel shall give due consideration to the customs and usage of the insurance and reinsurance business.
	

13.08 -	
 	
Arbitration Award: The arbitration panel shall render its decision within sixty (60) days after termination of the proceeding, which decision shall be in writing, stating the reasons
therefor. The decision of the majority of the panel shall be final and binding on the parties to the proceeding.
	

13.09 -	
 	
Cost of Arbitration: Unless otherwise allocated by the panel, each party shall bear the expense of its own arbitrator and its own witnesses and shall jointly and equally bear with the other
parties the expense of the umpire and the arbitration.
	

13.10 -	
 	
Limit of Jurisdiction: The arbitration panel does not have the jurisdiction to authorize any punitive damage awards between the parties.
	
ARTICLE XIV: AGREEMENT, AMENDMENTS AND MERGER
	

14.01 -	
 	
Agreement: This Agreement states the agreement originally made between the Company and the Reinsurer effective November1, 2002 as evidenced by the Letter of Intent dated December 19,
2002. This Agreement supersedes that Letter of Intent as the statement of the terms and conditions which the Company and the Reinsurer have agreed shall govern the obligations originally undertaken in the Letter of Intent, except that the Letter of
Intent shall be considered as evidence of the parties intent as to the meaning or application of any terms and conditions set forth herein.
	

14.02 -	
 	
Amendments: This Agreement may be amended only by mutual consent of the parties expressed in a written addendum executed by the parties with the same formalities as this Agreement, and such
addendum shall be deemed to be an integral part of this Agreement and binding on the parties hereto.
	

14.03 -	
 	
Merger Clause: The parties hereto acknowledge that they have read this Agreement, understand it, and agree to be bound by its terms and conditions. Further, the parties hereto agree that this
Agreement is the complete and exclusive statement of the Agreement between the parties, superseding all proposals or prior agreements, oral or written, and all other communications between the parties relating to the subject matter
hereof.
	
ARTICLE XV: MISCELLANEOUS
	

15.01 -	
 	
Access to Records: The Reinsurer shall have the right to examine, at any reasonable time, all papers, books, accounts, documents and other records of the Company relating to the Subject
Business. Upon request, the Company shall supply the Reinsurer, at the Reinsurer's expense, with copies of the whole or any part of such papers, books, accounts, documents and other records relating to the Subject Business. The Reinsurer's right of
inspection under this Section 15.01 shall continue to exist after termination of this Agreement as long as one of the parties hereto has a claim against the other arising from this Agreement.
	

15.02 -	
 	
Counterparts: This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
	

15.03 -	
 	
Currency: All payments hereunder shall be made in United States dollars. All monetary amounts herein are in United States dollars. All reports and accounts hereunder shall be rendered in
United States dollars.
	 	 	 	 	 	 	 

12

 

	

15.04 -	
 	
Disclosures and Approvals: The Company represents and warrants, with respect to this Agreement and the transactions hereunder and with respect to any insurance or reinsurance written or
assumed by the Company which is covered by this Agreement and all transactions thereunder, that all disclosures and approvals which are necessary or appropriate under any law or regulation have been made or obtained, or will be made or obtained in a
timely manner.
	

15.05 -	
 	
Errors and Omissions: Inadvertent errors and omissions of any nature made by either party shall neither increase nor reduce the liability of either party from what that liability would have
been had no such error or omission taken place. Upon discovery, the party committing an error or omission shall correct such error or supply such omission retroactively to the time such error or omission occurred, and advise the other party thereof
as soon as possible.
	

15.06 -	
 	
Parties to this Agreement: This Agreement is a reinsurance agreement solely between the Company and the Reinsurer, and performance of the obligations of each party under this Agreement will be
rendered solely to the other party. In no instance will any party other than the Company and the Reinsurer have any rights under this Agreement, and the Company will be and shall remain the only party hereunder that is liable to any contract holder
or beneficiary of any Subject Business contract.
	

 	
 	

This Agreement shall be binding upon all successors, assignees and transferees of the parties to this Agreement, provided, however, that neither this Agreement nor any rights or obligations under this Agreement may be assigned or transferred by
either party without the prior written consent of the other party.
	

15.09 -	
 	
Reliance on Information Supplied by the Company: The Company acknowledges that, at the Reinsurer's request, it has provided the Reinsurer, prior to execution of this Agreement by the parties,
with the information described in Schedule D attached hereto and incorporated herein (hereinafter, the "Company Information"). The Company represents that any assumptions the Company made in preparing the Company Information were based upon
informed judgment and are consistent with sound actuarial principles. The Company represents that all factual information contained in the Company Information was, as of the date provided, complete and accurate in all material respects to the best of
the Company's knowledge and belief. The Reinsurer has relied on Company Information and the foregoing representations in entering into this Agreement.
	

15.10	
 	
Right of Offset: Both the Company and the Reinsurer shall have, and may exercise at any time, the right to offset any balance or balances due the other. Such offset may include balances due
under this Agreement, regardless of whether such balances are in respect of premiums, or losses or otherwise, and regardless of the capacity of any party, whether as reinsurer or reinsured or otherwise, under the various agreements
involved.
	

15.11 -	
 	
Taxes: The Company shall be liable for all taxes, except income and profit taxes of the Reinsurer, on amounts paid to the Reinsurer under the terms of this Agreement, and shall indemnify and
hold the Reinsurer harmless for any taxes which the Reinsurer may become obligated to pay on the Company's behalf.
	
[SIGNATURES ON FOLLOWING PAGE]

13

 

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives, 

        In
West Des Moines, Iowa, this 26TH day of March, 2003 

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY  

	By:	
	 	By:	

	

Name:	

	
 	

Name:	

	

Title:	

	
 	

Title:	

        And
in Orlando, Florida this 26TH day of March, 2003 

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA  

	By:	
	 	By:	

	

Name:	

	
 	

Name:	

	

Title:	

	
 	

Title:	

14

Schedule A - Contract Forms Covered Under Agreement 

Section A Covered Forms 

	Bravo	FPDA-5
	FPDA-2+7	GFIR
	FPDA-0	SPDA-1
	FPDA-1	sPDA-1
	FPDA-2	SPDA-2
	FPDA-2Plus	Super-7
	FPDA-3	SPDA-6
	FPDA-4	 
	

Section B Covered Forms	

 
	

Bravo	

Index-2000
	FPDA-2+7	Index-2001
	FPDA-0	Index-2002
	FPDA-1	Index-13
	FPDA-2	Index-15
	FPDA-2Plus	Index-17
	FPDA-3	Index-18
	FPDA-4	Index-19
	FPDA-5	Index-22
	GFIR	Index-23
	SPDA-1	Index-24
	SPDA-1	Index-25
	SPDA-2	Index-5
	Super-7	Index-8
	SPDA-6	 

	Par
	 	Cusip
	 	Issuer
	 	Coupon(%)
	 	Maturity
	 	Rating
	 	Amort

Cost
	 	Book Value
	 	Market

Price
	 	2/28/03

Market Value
	 	Unrealized G/L

(Mkt - Book)
	 	Yield

At Cost
	 
	$	4,000,000.00	 	84258RAC	 	SOUTHERN CO CAP TRUST	 	8.140	 	2/15/27	 	BAA1/BBB+	 	$	105.60	 	$	4,224,090.00	 	$	110.27	 	$	4,410,627.26	 	$	186,537.26	 	7.384	%
	$	8,000,000.00	 	46623MAA	 	JPM CAP TRUST II *	 	7.950	 	2/1/27	 	A2/A-	 	$	105.14	 	$	8,410,952.00	 	$	109.39	 	$	8,751,138.00	 	$	340,186.00	 	7.304	%
	$	8,000,000.00	 	428040BQ	 	HERTZ CORP	 	7.400	 	3/1/11	 	BAA2/BBB	 	$	99.70	 	$	7,976,189.00	 	$	97.94	 	$	7,835,360.00	 	$	(140,829.00	)	7.448	%
	$	3,000,000.00	 	69331VAA	 	PECO ENERGY CAP TRUST III	 	7.380	 	4/6/28	 	BAA1/BBB	 	$	99.26	 	$	2,977,745.00	 	$	102.18	 	$	3,065,400.00	 	$	87,655.00	 	7.444	%
	$	6,000,000.00	 	3133MWRB	 	FEDERAL HOME LN BANK	 	5.830	 	3/25/23	 	AGY	 	$	99.90	 	$	5,994,000.00	 	$	99.90	 	$	5,994,000.00	 	$	—	 	5.861	%
	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	
 	

 	
 	
$	

29,582,976.00	
 	
 	

 	
 	
$	

30,056,525.26	
 	
 	

 	
 	

7.076	
%

  

 
 

SCHEDULE B—
  RATES BY AGE (NEAREST BIRTHDAY)    
    

	AGE
	 	RATE
	 	AGE
	 	RATE
	 	AGE
	 	RATE

	0	 	0.026198	 	35	 	0.006799	 	69	 	0.085706
	1	 	0.002021	 	36	 	0.007140	 	70	 	0.093004
	2	 	0.001444	 	37	 	0.007455	 	71	 	0.100774
	3	 	0.001050	 	38	 	0.007744	 	72	 	0.109174
	4	 	0.000866	 	39	 	0.007954	 	73	 	0.118204
	5	 	0.000761	 	40	 	0.008190	 	74	 	0.127995
	6	 	0.000709	 	41	 	0.008505	 	75	 	0.138600
	7	 	0.000656	 	42	 	0.008951	 	76	 	0.150203
	8	 	0.000578	 	43	 	0.009555	 	77	 	0.162934
	9	 	0.000499	 	44	 	0.010290	 	78	 	0.176111
	10	 	0.000394	 	45	 	0.011130	 	79	 	0.192386
	11	 	0.000420	 	46	 	0.012049	 	80	 	0.209685
	12	 	0.000630	 	47	 	0.013020	 	81	 	0.229110
	13	 	0.001103	 	48	 	0.013965	 	82	 	0.251108
	14	 	0.001706	 	49	 	0.014989	 	83	 	0.303949
	15	 	0.002389	 	50	 	0.016091	 	84	 	0.327154
	16	 	0.003045	 	51	 	0.017351	 	85	 	0.352249
	17	 	0.003544	 	52	 	0.018926	 	86	 	0.380074
	18	 	0.003859	 	53	 	0.020843	 	87	 	0.408293
	19	 	0.003990	 	54	 	0.023048	 	88	 	0.436223
	20	 	0.004095	 	55	 	0.025515	 	89	 	0.464625
	21	 	0.004279	 	56	 	0.028114	 	90	 	0.494760
	22	 	0.004384	 	57	 	0.030923	 	91	 	0.528281
	23	 	0.004436	 	58	 	0.033941	 	92	 	0.565478
	24	 	0.004541	 	59	 	0.037223	 	93	 	0.605850
	25	 	0.004568	 	60	 	0.040714	 	94	 	0.646826
	26	 	0.004620	 	61	 	0.049954	 	95	 	0.686411
	27	 	0.004725	 	62	 	0.048431	 	96	 	0.720248
	28	 	0.004883	 	63	 	0.052658	 	97	 	0.752168
	29	 	0.005119	 	64	 	0.057199	 	98	 	0.782171
	30	 	0.005381	 	65	 	0.061976	 	99	 	0.810259
	31	 	0.005618	 	66	 	0.067121	 	100	 	0.836456
	32	 	0.005854	 	67	 	0.072739	 	101	 	0.860790
	33	 	0.006143	 	68	 	0.078934	 	102	 	0.875000
	34	 	0.006431	 	 	 	 	 	 	 	 

15

	Section A Cover: Coins.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Prems	 	 	 	 	 	 	 	34.09	 	—	 	—	 	—	 	—	 	—	 	 	 
	Inv. Income	 	 	 	 	 	 	 	—	 	2.10	 	1.76	 	1.73	 	1.71	 	1.68	 	1.66	 
	Benefits	 	 	 	% coins share	 	 	 	—	 	3.49	 	5.69	 	5.80	 	5.92	 	6.04	 	6.17	 
	Allowances	 	 	 	=premium

(FY only) + renewal maintenance	 	 	 	34.09	 	0.03	 	0.03	 	0.03	 	0.03	 	0.02	 	0.02	 
	Incr in Res.	 	 	 	 	 	 	 	30.00	 	(4.90	)	(0.34	)	(0.35	)	(0.36	)	(0.36	)	(0.37	)
	Section A Gain	 	 	 	 	 	 	 	(30.00	)	3.48	 	(3.62	)	(3.74	)	(3.88	)	(4.02	)	(4.17	)
	 	 	 	 	 	 	 	 	—	 	—	 	—	 	—	 	—	 	—	 	—	 
	 	 	Reserve	 	 	 	 	 	30.00	 	25.10	 	24.76	 	24.41	 	24.05	 	23.69	 	23.32	 
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 
	Section B Cover: YRT	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fund Value	 	 	 	 	 	 	 	1,126.10	 	1,143.66	 	1,125.56	 	1,107.76	 	1,090.23	 	1,072.98	 	1,056.01	 
	

Cash Value	
 	

 	
 	

 	
 	

 	
 	

1,073.40	
 	

1,006.42	
 	

1,001.75	
 	

996.98	
 	

992.11	
 	

987.15	
 	

982.09	
 
	Net Amt at Risk	 	 	 	Average	 	 	 	79.16	 	164.11	 	150.26	 	136.81	 	123.74	 	111.05	 	98.74	 
	Mort Rates	 	 	 	multilpe of 2000 basic	 	100.00	%	—	 	0.02	 	0.02	 	0.02	 	0.02	 	0.02	 	0.03	 
	Mort Cost	 	 	 	NAR x mort rates	 	 	 	—	 	1.20	 	2.78	 	2.84	 	2.88	 	2.89	 	2.87	 
	YRT premium	 	 	 	 	 	 	 	—	 	—	 	—	 	—	 	—	 	—	 	 	 
	 	 	 	 	 	 	 	 	—	 	—	 	—	 	YRT Policy fee	 	—	 	75.00	 	—	 
	 	 	 	 	 	 	 	 	—	 	—	 	—	 	Avg size policy	 	—	 	50.00	 	—	 
	

Sched B YRT Premium /K for initial age =	
 	

 	
 	

YRT rates per	
 	

 	
 	

290.96	
 	

315.74	
 	

342.83	
 	

372.02	
 	

403.10	
 	

436.70	
 	

472.82	
 
	YRT Premium	 	 	 	Sched B + 75/pol	 	 	 	—	 	39.84	 	55.21	 	54.62	 	53.63	 	52.29	 	50.53	 
	Mort Cost	 	 	 	per above	 	 	 	—	 	1.20	 	2.78	 	2.84	 	2.88	 	2.89	 	2.87	 
	Section B Gain	 	 	 	Net	 	 	 	—	 	38.64	 	52.43	 	51.77	 	50.75	 	49.40	 	47.66	 
	Combined Covers	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Experience Refund	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NRG - Net Reins Gain	 	 	 	Coins plus YRT	 	 	 	(30.00	)	42.12	 	48.81	 	48.03	 	46.87	 	45.38	 	43.49	 
	

Earned Interest on LCF	
 	

 	
 	

 	
 	

 	
 	

 	
 	

2.10	
 	

1.73	
 	

1.34	
 	

0.93	
 	

0.48	
 	

—	
 
	Change in LCF	 	 	 	 	 	 	 	 	 	5.22	 	5.58	 	5.97	 	6.39	 	6.84	 	—	 
	LCF Adjustment	 	 	 	 	 	 	 	 	 	7.32	 	7.32	 	7.32	 	7.32	 	7.32	 	—	 
	Funds Brought Forward Balance	 	 	 	 	 	 	 	 	 	—	 	—	 	—	 	—	 	—	 	—	 
	Loss Carry Forward Balance (LCF)	 	 	 	 	 	 	 	30.00	 	24.78	 	19.20	 	13.23	 	6.84	 	0.00	 	0.00	 
	DP—Distributable Profits=NRG-RC-LCFA	 	 	 	 	 	 	 	 	 	33.45	 	40.38	 	39.85	 	38.96	 	37.76	 	43.49	 
	PS—Profit Share percentage	 	 	 	100% until LCF = 0; 50% thereafter	 	 	 	 	 	100%	 	100%	 	100%	 	100%	 	100%	 	50%	 
	ER—Experience Refund=PS*DP	 	 	 	 	 	 	 	—	 	33.45	 	40.38	 	39.85	 	38.96	 	37.76	 	21.75	 
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 

	Settlements	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net due reinsurer prior to funds withheld adjustment	 	 	 	 	 	 	 	—	 	1.67	 	6.33	 	6.10	 	5.85	 	5.58	 	19.72	 
	Funds Withheld Adjustment	 	 	 	 	 	 	 	 	 	—	 	—	 	—	 	—	 	—	 	—	 
	 	Beginning funds withheld (by cedent)	 	 	 	 	 	 	 	—	 	—	 	0.32	 	5.56	 	11.18	 	17.21	 	23.69	 
	Interest on funds withheld @	 	 	 	=block earned rate	 	 	 	—	 	—	 	0.02	 	0.39	 	0.78	 	1.20	 	1.66	 
	 	Change in funds withheld	 	 	 	 	 	 	 	—	 	(0.32	)	(5.22	)	(5.23	)	(5.25	)	(5.27	)	2.03	 
	 	Ending funds withheld	 	 	 	=Reserve—LCF	 	 	 	—	 	0.32	 	5.56	 	11.18	 	17.21	 	23.69	 	23.32	 
	Net cash settlement (due reins)	 	 	 	 	 	 	 	—	 	1.35	 	1.12	 	0.86	 	0.60	 	0.31	 	—	 
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 
	Notes: Recapture allowed at any time with payment of LCF to reinsurer.	 	30.00	 	28.33	 	22.00	 	15.90	 	10.05	 	4.48	 	(15.24	)
	Premium Ceded	 	 	 	 	 	 	 	34.09	 	39.84	 	55.21	 	54.62	 	53.63	 	52.29	 	50.53	 
	Benefits Ceded	 	 	 	 	 	 	 	—	 	(3.49	)	(5.69	)	(5.80	)	(5.92	)	(6.04	)	(6.17	)
	Allowances	 	 	 	 	 	 	 	(34.09	)	(1.23	)	(2.81	)	(2.87	)	(2.91	)	(2.92	)	(2.89	)
	Experience Refund	 	 	 	 	 	 	 	—	 	(33.45	)	(40.38	)	(39.85	)	(38.96	)	(37.76	)	(21.75	)
	Net Due to Reinsurer	 	 	 	 	 	 	 	—	 	1.67	 	6.33	 	6.10	 	5.85	 	5.58	 	19.72	 
	Cash Settlement	 	 	 	 	 	 	 	—	 	1.35	 	1.12	 	0.86	 	0.60	 	0.31	 	—	 
	 	 	 	 	 	 	 	 	—	 	—	 	—	 	—	 	—	 	—	 	—	 
	Income Statement	 	 	 	 	 	 	 	—	 	—	 	—	 	—	 	—	 	—	 	—	 
	Increase In Reserves	 	 	 	 	 	 	 	30.00	 	(4.90	)	(0.34	)	(0.35	)	(0.36	)	(0.36	)	(0.37	)
	Investment Income Due to Reinsurer	 	 	 	 	 	 	 	—	 	(2.10	)	(1.76	)	(1.73	)	(1.71	)	(1.68	)	(1.66	)
	Change in Ending Funds Withheld	 	 	 	 	 	 	 	—	 	(0.32	)	(5.20	)	(4.85	)	(4.47	)	(4.06	)	(18.06	)
	Interest on Funds Withheld	 	 	 	 	 	 	 	—	 	—	 	(0.02	)	(0.39	)	(0.78	)	(1.20	)	(1.66	)
	Risk Charge	 	 	 	 	 	 	 	—	 	(1.35	)	(1.12	)	(0.86	)	(0.60	)	(0.31	)	—	 
	Total Impact to American Equity	 	 	 	 	 	 	 	30.00	 	(8.67	)	(8.43	)	(8.18	)	(7.91	)	(7.62	)	(21.75	)
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 

QuickLinks

Exhibit 10.12

ARTICLE I: PREAMBLE AND REINSURANCE PROVIDED

SCHEDULE B— RATES BY AGE (NEAREST BIRTHDAY)QuickLinks
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Exhibit 10.1  

        Execution Copy  

 THE NASDAQ STOCK MARKET, INC.  

 FIRST AMENDMENT

Dated as of June 27, 2003  

 to  

 NOTE PURCHASE AGREEMENTS

Dated as of May 9, 2002  

 Re: $150,000,000 5.83% Senior Notes

Due May 9, 2007  

 
 

FIRST AMENDMENT TO NOTE PURCHASE AGREEMENTS    
    

        This First Amendment dated as of June 27, 2003 (the or this "First Amendment") to the Note Purchase
Agreements each dated as of May 9, 2002 is between The Nasdaq Stock Market, Inc., a Delaware corporation (the "Company"), and each of the
institutions which is a signatory to this First Amendment (collectively, the "Noteholders"). 

RECITALS:  

        A. The Company and each of the Noteholders have heretofore entered into separate and several Note Purchase Agreements each dated as of May 9, 2002
(collectively, the "Note Purchase Agreements"). The Company has heretofore issued the $150,000,000 5.83% Senior Notes Due May 9, 2007 (the  "Notes")
dated May 9, 2002 pursuant to the Note Purchase Agreements. The Noteholders are the holders of 86% of the outstanding principal amount
of the Notes. 

        B.
The Company and the Noteholders now desire to amend the Note Purchase Agreements in the respects, but only in the respects, hereinafter set forth. 

        C.
Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreements unless herein defined or the context shall otherwise require. 

        D.
All requirements of law have been fully complied with and all other acts and things necessary to make this First Amendment a valid, legal and binding instrument according to its terms
for the purposes herein expressed have been done or performed. 

        NOW,
THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this First Amendment set forth in  Section 3.1 hereof, and in consideration of good and
valuable consideration the receipt and sufficiency of which is hereby acknowledged, the
Company and the Noteholders do hereby agree as follows: 

SECTION 1.    AMENDMENTS. 

        Section 1.1.    The definition of "Consolidated EBITDA" contained in
Schedule B to the Note Purchase Agreements shall be and hereby is amended to read in its entirety as follows: 

        ""Consolidated EBITDA" for any period means the sum of (a) Consolidated Net Operating Income during such period  plus (to the extent deducted in determining
Consolidated Net Operating Income) (b) all provisions for depreciation and amortization (other than
amortization of debt discount) made by the Company and its Subsidiaries during such period, all as it appears in the Company's consolidated statement of income prepared in accordance with GAAP, except
as otherwise shall be calculated as and to the extent contemplated by the definition of "Consolidated Net Operating Income"." 

        Section 1.2. The definition of "Consolidated Net Operating Income" contained in
Schedule B to the Note Purchase Agreements shall be and hereby is amended to read in its entirety as follows: 

        ""Consolidated Net Operating Income" means the Company's net operating income as it appears in its consolidated statement of income
prepared in accordance with GAAP; provided, that for purposes of determining compliance with  Section 10.1 as at the end of the fiscal quarter ended
June 30, 2003, there shall be excluded from computations of Consolidated Net
Operating Income for the fiscal quarter ended June 30, 2003 any and all charges relating to (a) the Company's European operations (including without limitation charges associated with
Nasdaq Europe S.A./N.V., Nasdaq Deutschland AG, Nasdaq Europe Planning Company Limited and Nasdaq Global Holdings), (b) the Company's product profitability review and (c) costs related
to severance of employees of the Company and its Subsidiaries, with the aggregate amount of the charges described in the foregoing clauses (a) through (c) not to exceed $70,000,000 (the
charges described in the foregoing clauses (a) through (c) up to, but not exceeding, $70,000,000 aggregate amount being herein referred to as "Restructuring
Charges"), but such Restructuring Charges shall not be excluded from computations of Consolidated Net Operating Income for the fiscal quarter ended 

 

June 30,
2003 or any following fiscal quarter in connection with any determination of compliance with Section 10.1 as at the end of the
fiscal quarter ended September 30, 2003 or at any time thereafter." 

        Section 1.3. The following term shall be added as a new definition in alphabetical order to Schedule B attached to the Note
Purchase Agreements: 

        ""First Amendment" means the First Amendment dated as of June 27, 2003 to this Agreement." 

SECTION 2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

        Section 2.1. To induce the Noteholders to execute and deliver this First Amendment (which representations shall survive the
execution and delivery of this First Amendment), the Company represents and warrants to the Noteholders that: 

        (a)   this
First Amendment has been duly authorized, executed and delivered by it and this First Amendment constitutes the legal, valid and binding obligation, contract and
agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors' rights generally; 

        (b)   the
Note Purchase Agreements, as amended by this First Amendment, constitute the legal, valid and binding obligations, contracts and agreements of the Company
enforceable against it in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally; 

        (c)   the
execution, delivery and performance by the Company of this First Amendment (i) has been duly authorized by all requisite corporate action, (ii) does
not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its
certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (3) any provision of any
material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, or (B) result in a breach or constitute (alone or with due
notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this  Section 2.1(c); and 

        (d)   as
of the date hereof and after giving effect to this First Amendment, no Default or Event of Default has occurred which is continuing. 

SECTION 3.    CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT. 

        Section 3.1. This First Amendment shall not become effective until, and shall become effective when, each and every one of the
following conditions shall have been satisfied: 

        (a)   executed
counterparts of this First Amendment, duly executed by the Company and the holders of at least 51% of the outstanding principal of the Notes, shall have been
delivered to the Noteholders; 

        (b)   the
Noteholders shall have received a copy of the resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance by the Company
of this First Amendment, certified by its Secretary or an Assistant Secretary; 

        (c)   the
representations and warranties of the Company set forth in Section 2 hereof are true and correct on and with
respect to the date hereof; and 

2

 

        (d)   the
Company shall have paide the reasonable fees and expenses of Chapman and Cutler, counsel to the Noteholders, in connection with the negotiation, preparation,
approval, execution and delivery of this First Amendment. 

Upon
receipt of all of the foregoing, this First Amendment shall become effective. 

SECTION 4.    MISCELLANEOUS. 

        Section 4.1. This First Amendment shall be construed in connection with and as part of each of the Note Purchase Agreements, and
except as modified and expressly amended by this First Amendment, all terms, conditions and covenants contained in the Note Purchase Agreements and the Notes are hereby ratified and shall be and
remain in full force and effect. 

        Section 4.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and
delivery of this First Amendment may refer to the Note Purchase Agreements without making specific reference to this First Amendment but nevertheless all such references shall include this First
Amendment unless the context otherwise requires. 

        Section 4.3. The descriptive headings of the various Sections or parts of this First Amendment are for convenience only and shall
not affect the meaning or construction of any of the provisions hereof. 

        Section 4.4. This First Amendment shall be governed by and construed in accordance with the law of the State of New York excluding
choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

        Section 4.5. The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth,
and this First Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement. 

	 	 	THE NASDAQ STOCK MARKET, INC.

	

 	
 	

By	
 	

/s/ David P. Warren

	 	 	Its	 	EVP & Chief Financial Officer

[Noteholders'
signature pages follow] 

3

The Foregoing is hereby agreed

to as of the date thereof 

	 	 	ACACIA NATIONAL LIFE INSURANCE COMPANY
	

 	
 	

By:	
 	

Ameritas Investment Advisors Inc., as Agent
	

 	
 	

 	
 	

By	

/s/  ANDREW S. WHITE      
 Name: Andrew S. White

Title: Vice President

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	AMERITAS VARIABLE LIFE INSURANCE COMPANY

	

 	
 	

By:	
 	

Ameritas Investment Advisors Inc., as Agent
	

 	
 	

 	
 	

By	

/s/  ANDREW S. WHITE      
 Name: Andrew S. White

Title: Vice President

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	AIG SUNAMERICA LIFE ASSURANCE COMPANY
 F/K/A and D/B/A
 ANCHOR NATIONAL LIFE INSURANCE COMPANY

	

 	
 	
FIRST SUNAMERICA LIFE INSURANCE COMPANY
	

 	
 	
SUNAMERICA LIFE INSURANCE COMPANY
	

 	
 	

By:	
 	

AIG Global Investment Corp., investment adviser
	

 	
 	

 	
 	

By	

/s/  GERALD F. HERMAN      
 Name: Gerald F. Herman

Title: Vice President

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY

	

 	
 	

By	
 	

GE Asset Management Incorporated,

its Investment Adviser
	

 	
 	

 	
 	

By	

/s/  JOHN R. ENDRES      
 Name: John R. Endres

Title: Vice President-Private Investments

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	GE LIFE AND ANNUITY ASSURANCE COMPANY
	

 	
 	

By	
 	

GE Asset Management Incorporated,

its Investment Adviser
	

 	
 	

 	
 	

By	

/s/  JOHN R. ENDRES      
 Name: John R. Endres

Title: Vice President – Private Investments

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	JEFFERSON-PILOT LIFE INSURANCE COMPANY

	

 	
 	

 	
 	

By	

/s/  JAMES E. MCDONALD, JR.      
 Name: James E. McDonald, Jr.

Title: Vice President

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

	

 	
 	

By:	
 	

David L. Babson & Company Inc.,

as Investment Adviser
	

 	
 	

 	
 	

By	

/s/  EMEKA O. ONUKWUGHA      
 Name: Emeka O. Onukwugha

Title: Managing Director

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	MASSMUTUAL ASIA LIMITED

	

 	
 	

By:	
 	

David L. Babson & Company Inc.

as Investment Adviser
	

 	
 	

 	
 	

By	

/s/  EMEKA O. ONUKWUGHA      
 Name: Emeka O. Onukwugha

Title: Managing Director

The Foregoing is hereby agreed

to as of the date thereof 

	 	 	C.M. LIFE INSURANCE COMPANY
	

 	
 	

By	
 	

David L. Babson & Company,

as Investment Sub-Adviser
	

 	
 	

 	
 	

By	

/s/  MARK A. AHMED      
 Name: Mark A. Ahmed

Title: Managing Director

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	NATIONWIDE LIFE INSURANCE COMPANY

	

 	
 	

By	
 	

/s/  JOSEPH P. YOUNG      
 Name: Joseph P. Young

Title: Associate Vice President

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	PHOENIX LIFE INSURANCE COMPANY
	

 	
 	

By	
 	

 Name:

Title:

The
Foregoing is hereby agreed

to as of the date thereof: 

	 	 	TEACHERS INSURANCE AND ANNUITY

ASSOCIATION OF AMERICA

	

 	
 	

By	
 	

/s/  ESTELLE SIMSOLO      
 Name: Estelle Simsolo

Director-Private Placements

The
Foregoing is hereby agreed

to as of the date thereof: 

	 	 	TIAA-CREF LIFE INSURANCE COMPANY

	

 	
 	

By:	
 	

Teachers Insurance and Annuity Association of America, as Authorized Agent.
	

 	
 	

 	
 	

By	

/s/  ESTELLE SIMSOLO      
 Name: Estelle Simsolo

Director-Private Placements

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

	

 	
 	

By:	
 	

Delaware Lincoln Investment Advisers, a series of Delaware Management Business Trust, Attorney-In-Fact
	

 	
 	

 	
 	

By	

 Name:

Title:

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	THE UNION CENTRAL LIFE INSURANCE COMPANY
	

 	
 	

By	
 	

 Name:

Title:

The
Foregoing is hereby agreed

to as of the date thereof 

	 	 	THE TRAVELERS INSURANCE COMPANY
	

 	
 	

By	
 	

/s/  DENISE T. DUFFEE      
 Name: Denise T. Duffee

Title: Investment Officer

QuickLinks

FIRST AMENDMENT TO NOTE PURCHASE AGREEMENTS

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