Exhibit 10.1
SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE
     This Separation of Employment Agreement and General Release (the
“Agreement”) is made as of September 23, 2005, by and among ANNUITY AND LIFE RE
(HOLDINGS), LTD., a Bermuda corporation (“Holdings”), and ANNUITY AND LIFE
REASSURANCE, LTD., a Bermuda corporation (“Annuity Reassurance” and together
with Holdings, “Employer”), and JOHN F. BURKE (“Executive”).
WITNESSETH
     WHEREAS Executive is employed as President and Chief Executive Officer of
Employer pursuant to that certain Amended and Restated Employment Agreement by
and among Holdings, Annuity Reassurance and Executive, dated as of July 28, 2003
(the “Employment Agreement”); and
     WHEREAS Executive and Employer mutually desire to terminate amicably
Executive’s employment with Employer; and
     WHEREAS Executive and Employer desire to set forth the terms and conditions
for the termination of their employment relationship and to resolve all other
matters between them.
AGREEMENTS
     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
     1. (a) Executive, for and in consideration of the undertakings of Employer
set forth herein, does hereby permanently and irrevocably sever his employment
relationship with Employer effective as of September 16, 2005, and Executive
does hereby remise, release and forever discharge Employer, its subsidiaries and
affiliated entities, and each of its and their officers, directors,
shareholders, employees, attorneys, insurers and other agents, and its and their
respective successors and assigns, heirs, executors, administrators and
representatives (hereinafter referred to collectively as the “Employer
Releasees”) of and from any and all rights, obligations, promises, agreements,
losses, controversies, claims, actions, causes of action, suits, debts, claims
and demands, and expenses, including without limitation attorneys’ fees and
costs, of any nature whatsoever, in law or in equity, whether known or unknown,
asserted or unasserted, which Executive ever had, now has, or hereafter may have
against the Employer Releasees, or any of them, relating to Executive’s service
as a director of Employer or any other member of the Affiliated Group (as
defined in the Employment Agreement), Executive’s employment relationship with
Employer, the Employment Agreement or Executive’s separation from Employer that
arose or occurred at any time up to and including the date hereof, including,

 

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but not limited to, any claims relating to Executive’s service as a director of
Employer or any other member of the Affiliated Group, Executive’s employment
relationship with Employer, the Employment Agreement or Executive’s separation
from Employer arising under any foreign, Island of Bermuda or United States
federal, state or local statutes, ordinances or common law principles, including
without limitation the Employment Act 2000 (Bermuda), the Human Rights Act 1981
(Bermuda), Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the Employee Retirement
Income Security Act of 1974, the Family and Medical Leave Act of 1993, the New
York State Human Rights Law, the New York City Human Rights Law, and other
employee-protective law of any jurisdiction that may apply.
     (b) Employer does hereby remise, release and forever discharge Executive of
and from any and all rights, obligations, promises, agreements, losses,
controversies, claims, actions, causes of action, suits, debts, claims and
demands, and expenses, including without limitation attorneys’ fees and costs,
of any nature whatsoever, in law or in equity, whether known or unknown,
asserted or unasserted, which Employer ever had, now has, or hereafter may have
against Executive, relating to Executive’s service as a director of Employer or
any other member of the Affiliated Group (as defined in the Employment
Agreement), Executive’s employment relationship with Employer, the Employment
Agreement or Executive’s separation from Employer that arose or occurred at any
time up to and including the date hereof, including, but not limited to, any
claims relating to Executive’s service as a director of Employer or any other
member of the Affiliated Group, Executive’s employment relationship with
Employer, the Employment Agreement or Executive’s separation from Employer
arising under any foreign, Island of Bermuda or United States federal, state or
local statutes, ordinances or common law principles, including without
limitation the Employment Act 2000 (Bermuda), the Human Rights Act 1981
(Bermuda), Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the Employee Retirement
Income Security Act of 1974, the Family and Medical Leave Act of 1993, the New
York State Human Rights Law, the New York City Human Rights Law, and other
employee-protective law of any jurisdiction that may apply. Notwithstanding the
foregoing, Employer does not release Executive from any claims involving knowing
misrepresentation, fraud, theft, intentional wrongdoing, intentional breach of
fiduciary duty, and/or intentional misappropriation of Employer’s property.
     2. Effective as of September 16, 2005, Executive does hereby resign from
his position as a member of the Board of Directors of Employer and from all
positions that he holds or has ever held with Employer and any other member of
the Affiliated Group (as defined in the Employment Agreement) and with any other
entity with respect to which Employer has requested Executive to perform
services.
     3. In consideration of this Agreement, Employer shall pay to Executive the
following amounts:
     (a) Within five business days following the date on which this Agreement
becomes irrevocable, (i) a lump sum severance payment in cash of US$540,000,
plus all accrued but unpaid salary of Executive through September 16, 2005, if
any, and (ii) a lump sum payment

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in cash of US$200,000 in respect of Executive’s releases, waivers and covenants
contained in this Agreement.
     (b) If the Closing, as such term is defined in that certain Master
Agreement, dated as of August 10, 2005, by and among Annuity Reassurance,
Annuity and Life Reassurance America, Inc., Prudential Select Life Insurance
Company of America and Wilton Reinsurance Bermuda Limited (as it may be amended
from time to time) (the “Master Agreement”), occurs, a lump sum in cash of
US$1,160,000 (the “Closing Payment”) within five business days following the
date of the Closing. Executive acknowledges and agrees that the Closing Payment
shall only be payable by Employer if the Closing actually occurs; provided,
however, that if (i) a Competing Acquisition Proposal (as that term is defined
in the Master Agreement) is formally proposed to Employer’s Board of Directors
on or before February 28, 2006 and the Master Agreement has not otherwise been
terminated at the time such proposal is presented to the Board, (ii) the Board
elects to terminate the Master Agreement so that Employer can pursue that
Competing Acquisition Proposal in lieu of the transactions contemplated by the
Master Agreement and (iii) the final closing of such Competing Acquisition
Proposal occurs, then Employer shall pay the Closing Payment to Executive within
five business days following the date of the closing of such Competing
Acquisition Proposal. Employer represents that it is not, as of the date of this
Agreement, pursuing a Competing Acquisition Proposal.
     4. As of the date of this Agreement, all restricted stock held by Executive
shall immediately vest, and all stock options held by Executive shall become
immediately exercisable and shall remain exercisable until the earlier of
(a) fifth anniversary of the date of this Agreement or (b) the end of the
otherwise applicable term of such stock options.
     5. Except as specifically set forth in this Agreement, it is expressly
understood that Employer does not have, and will not have, any obligation to
provide Executive at any time in the future with any payments, benefits or
considerations. It is further understood that, notwithstanding any other
provision of this Agreement, Employer may withhold from any amounts payable
under this Agreement any foreign, federal, state and local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
     6. (a) Neither Executive nor any person, organization or other entity on
Executive’s behalf, will file, charge, claim, sue or cause or permit to be
filed, charged or claimed, any civil action, suit or legal proceeding for
personal relief (including any action for damages, injunctive, declaratory,
monetary or other relief and any application or claim before any Bermuda
employment tribunal) against the Employer Releasees involving any matter
occurring at any time in the past up to and including the date of this Agreement
or involving any continuing effects of any acts or practices which may have
arisen or occurred prior to the date of this Agreement. If Executive or any such
person, organization, or other entity should bring a claim described in the
previous sentence, such party will not accept any personal relief in any such
action. This Section 6 shall not operate to waive any rights that may not
legally be waived, nor shall it preclude Executive from bringing an action to
challenge this Agreement. Executive affirms that, as of this date, he has not
taken or initiated any action encompassed by this Section 6, including
instituting any proceedings before any Bermuda employment tribunal. Executive
acknowledges that

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Employer is entering into this Agreement in specific reliance upon the
representations, warranties and undertakings made by Executive in this Agreement
and that, without prejudice to any other remedy Employer may have under this
Agreement or otherwise, to the extent permitted by law, Employer shall be
entitled to the immediate repayment of all amounts paid to Executive under
Section 3 of this Agreement should any of Executive’s representations,
warranties or undertakings in this Section 6 be breached.
     (b) Neither Employer nor any person, organization or other entity on
Employer’s behalf, will file, charge, claim, sue or cause or permit to be filed,
charged or claimed, any civil action, suit or legal proceeding for relief
(including any action for damages, injunctive, declaratory, monetary or other
relief and any application or claim before any Bermuda employment tribunal)
against Executive involving any matter occurring at any time in the past up to
and including the date of this Agreement or involving any continuing effects of
any acts or practices which may have arisen or occurred prior to the date of
this Agreement. If Employer or any such person, organization, or other entity
should bring a claim described in the previous sentence, Employer will not
accept any relief in any such action. This Section 6 shall not operate to waive
any rights that may not legally be waived, nor shall it preclude Employer from
bringing an action to challenge this Agreement or for any claims involving
Executive’s knowing misrepresentation, fraud, theft, intentional wrongdoing,
intentional breach of fiduciary duty, and/or intentional misappropriation of
Employer’s property. Employer affirms that, as of this date, neither it nor any
person, organization or other entity on the Employer’s behalf has taken or
initiated any action encompassed by this Section 6, including instituting any
proceedings before any Bermuda employment tribunal. Employer acknowledges that
Employee is entering into this Agreement in specific reliance upon the
representations, warranties and undertakings made by Employer in this Agreement.
     7. In further consideration of the agreements of Employer as set forth
herein:
     (a) Executive shall continue to be bound by the terms of each of the
covenants contained in Section 9 of the Employment Agreement. Executive
expressly acknowledges that damages alone may be an inadequate remedy for any
breach or violation of this Section 7(a) and that Employer, in addition to all
other remedies, shall be entitled as a matter of right to equitable relief,
including injunctions and specific performance, in any court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage, in addition to, and not in lieu of, such
other remedies as may be available to Employer for such breach, including the
recovery of money damages.
     (b) Executive shall cooperate fully with Employer and its counsel with
respect to any matter (including any litigation, arbitration, investigation, or
governmental proceeding) relating to matters with which Executive was involved
during the term of his employment with Employer, including full disclosure of
all relevant information and truthfully testifying on Employer’s behalf in
connection with any such proceeding or investigation. Executive will render such
cooperation in a timely manner and at such times and places as may be mutually
agreeable to the parties. Executive agrees that he will promptly notify Employer
if he is contacted for an interview or if he receives a subpoena in any matter
relating in any way to

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matters with which he was involved during his employment with Employer. Employer
shall, to the extent permitted by applicable law, pay Executive the sum of
$2,500 for each day on which Executive provides at least two hours of
substantive service to Employer in fulfillment of his obligations under this
Section 7(b), including reasonable travel time directly related to the
performance of such services.
     8. This Agreement will be governed by and construed according to the laws
of the State of New York.
     9. In case any one or more of the provisions contained of this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect the
other provisions of this Agreement, which shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. No waiver by
either party of any breach of this Agreement shall be a waiver of any preceding
or succeeding breach. No waiver by either party of any right under this
Agreement shall be construed as a waiver of any other right.
     10. Executive recognizes that his employment relationship with Employer is
hereby permanently and irrevocably severed and that Employer has no obligation,
contractual or otherwise, to hire, rehire or re-employ him in the future.
     11. This Agreement is not and shall not be construed to be an admission of
any violation of any United States federal, state or local statute or
regulation, any statute or regulation of the Island of Bermuda, or of any duty
(contractual or otherwise) owed by either party to the other, and this Agreement
is made voluntarily to provide an amicable conclusion of Executive’s employment
relationship with Employer.
     12. Executive has not communicated or disclosed, and shall not hereafter
communicate or disclose, the terms of this Agreement to any persons with the
exception of members of his immediate family, his attorneys, and his accountant
or tax advisor, each of whom shall be informed of this confidentiality
obligation and shall be bound by its terms. Neither party shall disparage in any
way to any third party the professional or personal reputation or character of
the other, including, in the case of Employer, any member of the Affiliated
Group, or its or their affiliated corporations or entities, or any of their
officers, directors, employees, agents or representatives.
     13. Executive hereby certifies that he has read the terms of this
Agreement, that he has been informed by Employer through this document that he
should discuss this Agreement with an attorney of his own choice and that he has
had an opportunity to do so, and that he understands the terms and effects of
this Agreement. Executive further certifies that he has the intention of
releasing all claims recited herein in exchange for the consideration described
herein, which he acknowledges as adequate and satisfactory to him. Neither
Employer nor any of its agents, representatives or attorneys has made any
representations to Executive concerning the terms or effects of this Agreement
other than those contained herein.

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     14. Executive acknowledges that he has returned to Employer all documents
and other property of Employer in his possession, under his control or to which
he may have access, other than the Master Agreement referenced in Section 3(b)
above. Such property includes, but is not limited to, computers, records, files,
memoranda, reports, customer lists, drawings, plans, documents, keys, equipment,
credit cards, compact disks and other portable media and the like that Executive
has used, prepared or come into contact with during the course of his employment
with Employer. Notwithstanding anything to the contrary set forth in this
Agreement, Executive shall be permitted to maintain the three computers provided
to him by Employer during the course of his employment and all related
peripheral equipment currently in the Executive’s possession; provided, however,
that Executive shall, within three business days following the date of this
Agreement, make such equipment available to a designated representative of the
Employer for a period not to exceed ten business days so that Employer may
duplicate or destroy all electronic files, records, emails, or other media
related to Employer contained on such equipment. Executive hereby represents and
warrants that he has not, since August 29, 2005, deleted or destroyed any
electronic files, records, emails or other media contained on such equipment,
and agrees that he shall not, from the date of this Agreement through the date
on which such equipment is made available to the representative of Employer,
delete or destroy any electronic files, records, emails or other media contained
on such equipment.
     15. The parties to this Agreement irrevocably hereby submit to the
exclusive jurisdiction and venue of the United States federal courts or the
courts of the State of New York in New York City in any action or proceeding
brought with respect to or in connection with this Agreement. Each party hereby
waives any objection based on forum non conveniens and waives any objection to
venue of any action instituted hereunder in such courts.
     16. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof. The Employment Agreement is hereby
terminated and has no continuing force or effect other than Section 9 of the
Employment Agreement, which shall continue. In the event of conflict between
this Agreement and Section 9 of the Employment Agreement, the provisions of this
Agreement shall prevail.
     17. Executive acknowledges that he has been informed that he has the right
to consider this Agreement for a period of at least 21 days prior to entering
into this Agreement. Executive further acknowledges that he has the right to
revoke this Agreement within 7 days of its execution by giving written notice of
such revocation by hand delivery or fax to Holdings, Attention: Chairman of the
Board, within the 7 day period. Notwithstanding the foregoing, Employer shall
have no obligation to make any payment described in paragraph 3 or provide any
benefit described in the Agreement until the Agreement becomes final and
irrevocable. Executive acknowledges that, in the event he revokes the Agreement,
the Agreement is null and void, and Executive shall not be entitled to receive
any of the payments or benefits described herein.
[Signature page follows]

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     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed the foregoing Agreement as of the date first written above.

              WITNESS:   /s/ Andrea A. Clark
 
      /s/ John F. Burke
 
John F. Burke           ANNUITY AND LIFE RE (HOLDINGS), LTD.   WITNESS:   /s/
John Paul Loughran
 
  By:   /s/ John W. Lockwood
 
        Name:   John W. Lockwood
 
        Title:   Chief Financial Officer and Secretary
 
          ANNUITY AND LIFE REASSURANCE, LTD.   WITNESS:   /s/ John Paul Loughran
 
  By:   /s/ John W. Lockwood
 
        Name:   John W. Lockwood
 
        Title:   Chief Financial Officer and Secretary
 

[Signature page to Separation of Employment Agreement and General Release]