Exhibit
10.40


 


EXECUTION COPY


 


AMENDED AND RESTATED TERMINATION AGREEMENT


 


This Amended and Restated
Termination Agreement (this “Agreement”)
is entered into by and between ACE Bermuda Insurance Ltd. (the “Ceding Company”) and ACE Capital Re
International Ltd. (the “Retrocessionaire”),
is effective at 12:01 A.M. Eastern Standard Time on January 1, 2002 (the “Termination Effective Date”) and supercedes
and replaces in its entirety the Termination Agreement entered into by the
Ceding Company and Retrocessionaire.


 


WITNESSETH:


 


WHEREAS, the parties have
entered into a Retrocessional Memorandum dated November 10, 1999 and designated
ACE 1999-002, a copy of which is attached hereto as Exhibit A (the “Retrocessional Memorandum”), which is
governed by and subject to the terms and conditions of a  Facultative Agreement dated as of January
1, 1998 (the “Facultative Agreement”);


 


WHEREAS, pursuant to the
Retrocessional Memorandum, the Retrocessionaire assumed 100% of (i) the
liabilities of the Ceding Company under (A) a Reinsurance Agreement dated as of
August 27, 1999 among the Ceding Company, Christian Mutual Life Insurance
Company (“Christian Mutual”) and
Penn Mutual Life Insurance Company (“Penn
Mutual”) and (B) a Coinsurance Agreement dated as of August 27, 1999
among the Ceding Company, Christian Mutual and Penn Mutual (collectively, the “Original Reinsurance Agreements”) net of
(ii) the indemnification payments collected by the Ceding Company pursuant to
(A) an Indemnification Agreement between the Ceding Company and Christian
Mutual dated as of August 27, 1999, (B) a Guaranty and Indemnity Agreement
between the Ceding Company and Central United Life Insurance Company (“Central United”) dated as of August 27,
1999 and (C) the Guaranty and Indemnity Agreement between the Ceding Company
and Connecticut Reassurance Corporation (“Connecticut
Reassurance”) dated as of August 27, 1999 (collectively, the “Indemnity Agreements”); and


 


WHEREAS, the parties desire
to terminate the Retrocessional Memorandum on a cut-off basis as of the
Termination Effective Date in accordance with the terms, and subject to the
conditions, set forth herein.


 


NOW, THEREFORE, for and in
consideration of the premises herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:


 


1.                    As of the Termination Effective Date, the
Retrocessional Memorandum is terminated on a cut-off basis, meaning that (A)
the Reinsurer shall have no liability for any amounts paid by the Ceding
Company on or after the Termination Effective Date in respect of the Original
Reinsurance Agreements to Penn Mutual or the trust account established pursuant
to the Reinsurance Agreement (the  “Trust Account”), and (B) the Company shall
have no liability to make premium payments under the Retrocessional Memorandum
in respect of periods commencing on or after the Termination Effective Date.


 


2.                    The parties agree that the Retrocessionaire
shall remain liable for Out of Pocket Expenses (as defined in the
Retrocessional Memorandum) incurred by the Ceding Company prior to October 1,
2002 (the “Expense Cut-Off Date”)
and the Retrocessionaire shall be released and discharged of liability for any
Out of Pocket Expenses incurred by the Ceding Company on and after the Expense
Cut-Off Date.


 


3.                    The parties acknowledge and agree that (A) no
amounts have been paid by the Ceding Company in respect of the Original
Reinsurance Agreements to Penn Mutual or the Trust Account prior to the
Termination Effective Date (except in respect of the initial grant to the Trust
Account, as to which the


 


Termination Agreement

between ACE Bermuda and ACRI


 


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Retrocessionaire
has no liability), (B) Out of Pocket Expenses in the amount of $2,805,338 (the
“Retrocessionaire Out of Pocket Amount”)
were incurred by the Ceding Company prior to the Expense Cut-Off Date, and the
Retrocessionaire has reimbursed the Ceding Company for all such Out of Pocket
Expenses, and (C) $190,000 in premiums payable under the Retrocessional
Memorandum in respect of periods ended prior to the Termination Effective Date
remain unpaid.


 


4.                    The Ceding Company hereby irrevocably and
unconditionally releases and discharges the Retrocessionaire from and against all
liability or claim of whatsoever nature (whether present, future or contingent)
and whether known or unknown, arising out of or in any way in connection with
or relating to the Retrocessional Memorandum, and from any demands, claims or
liabilities whatsoever relating thereto, it being the intention of the Ceding
Company that this Agreement shall operate as a full and final settlement of the
Retrocessionaire’s present and future liability to the Ceding Company under or
in relation to the Retrocessional Memorandum.


 


5.                    The Retrocessionaire hereby irrevocably and
unconditionally releases and discharges the Ceding Company from and against all
liability or claim of whatsoever nature (whether present, future or contingent)
and whether known or unknown, arising out of or in any way in connection with
or relating to the Retrocessional Memorandum, and from any demands, claims or
liabilities whatsoever relating thereto, it being the intention of the
Retrocessionaire that this Agreement shall operate as a full and final
settlement of the Ceding Company’s present and future liability to the
Retrocessionaire under or in relation to the Retrocessional Memorandum.


 


6.                    Capitalized terms used herein without
definition have the respective
meanings ascribed thereto in the Retrocessional Memorandum.


 


7.                    This Agreement may not be modified or
amended, or any of its provisions waived, except by an instrument in writing that is signed by the
parties hereto.


 


8.                    Any dispute, controversy or claim arising out
of or relating to this Agreement shall be subject to arbitration in accordance with the provisions of the Facultative
Agreement.


 


9.                    This Agreement shall be governed by and
construed in accordance with the internal laws of the state of New York, without regard to its conflict of laws
doctrine.


 


10.              This Agreement may be executed and delivered
in counterparts each of which, when so executed and delivered, shall constitute an original, and all of such
counterparts shall together constitute one and the same instrument.


 


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IN WITNESS WHEREOF, this
Agreement has been executed as of the Termination Effective Date by the
following individuals duly authorized to act on behalf of the parties:


 


 


	
  ACE Capital Re
  International Ltd.

  
	
   

  
	
   

  
	
  By: 

  	
  /s/ Robbin Conner

  	
   

  
	
   

  	
  Name: 

  	
  

  	
  Robbin Conner

  
	
   

  	
  Title: 

  	
  Chief Operating Officer

  
	
   

  	
   

  	
  ACE Capital Re
  International Ltd.

  
	
   

  
	
  ACE Bermuda Insurance Ltd.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
						



 


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Exhibit
A


 


[Retrocessional Memorandum]


 


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RETROCESSIONAL
MEMORANDUM

for a

CESSION OF REINSURED RISK

under the


FACULTATIVE
RETROCESSIONAL AGREEMENT

between

ACE BERMUDA INSURANCE LTD., 

AS RETROCEDENT

and

ACE
CAPITAL RE LIMITED,

AS RETROCESSIONAIRE


 


	
  RETROCESSIONAL

  MEMORANDUM NO.:

  	
  ACE 1999-002

  
	
   

  	
   

  
	
  TERM:

  	
  Coterminous with the
  Reinsurance Agreements unless the Retrocedent is released from its
  obligations under the Reinsurance Agreements pursuant to Clause 2.9 thereof
  in which, event the Term hereof shall terminate as of the date of such
  release.

  
	
   

  	
   

  
	
  ORIGINAL REINSURED:

  	
  Penn Mutual Life Insurance
  Company, a Pennsylvania mutual life insurance corporation

  
	
   

  	
   

  
	
  COVERED BUSINESS:

  	
  A.                The Reinsurance Agreement entered into
  between the Retrocedent and Christian Mutual Lift Insurance Company (“Christian Mutual”), a New Hampshire stock
  life insurance company (the Retrocedent and Christian Mutual as referred to
  collectively as the “Reinsurers”)
  and the Original Reinsured dated as of August 27, 1999 wherein the Reinsurers
  jointly and severally reinsure a 95% quota share of the Original Reinsured’s
  retained liabilities on a defined block of disability insurance policies (the
  “Reinsurance Agreement”).  A copy of the Reinsurance Agreement is
  attached hereto as Exhibit 1.

  
	
   

  	
   

  
	
   

  	
  AND

  
	
   

  	
   

  
	
   

  	
  B.                  The Coinsurance Agreement entered into
  between the Reinsurer’s and the Original Reinsured dated as of August 27,
  1999 wherein the Reinsurers jointly and severally reinsure a 5% quota share
  of the Original Reinsured’s retained liabilities on the same defined block of
  disability policies as reinsured under the Reinsurance Agreement (the “Coinsurance Agreement”).  A copy of the Coinsurance Agreement is
  attached hereto as Exhibit 2.

  
	
   

  	
   

  
	
   

  	
  The Reinsurance Agreement
  and Coinsurance Agreement are collectively referred to herein as the “Reinsurance Agreements”.

  
	
   

  	
   

  
	
  TYPE OF RETROCESSION:

  	
  Quota Share.

  



 


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  QUOTA SHARE

  PERCENTAGE:

  	
  100%.

  
	
   

  	
   

  
	
  RETROCESSIONAIRE’S

  LIABILITY:

  	
  

  The Retrocessionaire shall be liable for the Quota Share Percentage of the
  Retrocedent’s joint and several liability under the Reinsurance Agreements plus
  Out-of-Pocket Expenses minus the indemnification payments collected by
  the Retrocedent pursuant to: (i) the Indemnification Agreement entered into
  between the Retrocedent and Christian Mutual dated as of August 27, 1999, a
  copy of which is attached hereto as  Exhibit
  3 (the “Indemnification Agreement”),
  and (ii) the Guaranty and Indemnity Agreement entered into between the
  Retrocedent and Central United Life Insurance Company dated as of August 27,
  1999, a copy of which is attached hereto as Exhibit 4,  and (iii) the Guaranty and Indemnity
  Agreement entered into between the Retrocedent and Connecticut Reassurance Corporation
  dated as of August 27, 1999, a copy of which is attached hereto as Exhibit 5
  (the Indemnification Agreement and the Guaranty and Indemnity Agreements
  described in (i), (ii), and (iii) above are collectively the “Guarantees”).

  
	
   

  	
   

  
	
  ADDITIONAL

  REIMBURSEMENT

  OBLIGATION:

  	
  

  

  The Retrocessionaire shell reimburse the Retrocedent, as an advance against
  payment of losses, for  the
  Quota.  Share Percentage of (i) any
  amounts deposited by the Retrocedent to the Trust Account to maintain the
  same at the Required Trust Balance as defined in and required by the
  Reinsurance Agreement minus (ii) any amounts collected by the
  Retrocedent under the Gurantees to indemnify the Retrocedent for  such payments to the Trust
  Account.  As used herein the “Trust
  Account” means the custodial and depository accounts which are established
  and maintained by the Reinsurers (as grantor), the Original Reinsured (as
  beneficiary) and Fleet Bank N.A. or any successor (as trustee) pursuant to
  Trust Agreement, attached hereto as Exhibit 6.

  
	
   

  	
   

  
	
  OUT-OF-POCKET

  EXPENSES:

  	
  

  “Out of Pocket Expenses” means reasonable fees and expenses incurred by the
  Retrocedent in connection with the performance of its obligations under the
  Reinsurance Agreements, including, without limitation, (i) reasonable fees and
  expenses incurred by the Retrocedent in connection with arbitration
  proceedings (including, without limitation, amounts paid by the Retrocedent
  pursuant to the decision of an arbitration board), (ii) third party legal
  expenses incurred by the Retrocedent in connection with the drafting of the
  Reinsurance Agreements, (iii) expenses incurred by the Retrocedent in
  enforcing and collecting against the Guarantees, and (iv) expenses incurred
  by the Retrocedent (or its designee) if Christian Mutual defaults under the
  Indemnification Agreement end the Retrocedent exercises a change notice such
  that it becomes the sole Reinsurer under the Reinsurance Agreements, the sole
  grantor under the Trust Agreement, and the administrator under the
  Administrative Agreement attached hereto as Exhibit 7.

  



 


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  LOSS ADJUSTMENT

  EXPENSES:

  	
  Inapplicable.

  
	
   

  	
   

  
	
  PREMIUM:

  	
  The Quota Share Percentage
  of the Premium (as defined in the Indemnification Agreement), The Premium
  shall be paid to the Retrocessionaire within 10 days following receipt by the
  Retrocedent.

  
	
   

  	
   

  
	
  CEDING COMMISSION:

  	
  Nil.

  
	
   

  	
   

  
	
  TAXES:

  	
  Nil.

  
	
   

  	
   

  
	
  REPORTS:

  	
  The Retrocedent shall
  forward to the Retrocessionaire all reports provided to the Retrocedent under
  the Reinsurance Agreements, Trust Agreement, and Guarantees within ten
  business days of receipt thereof.

  
	
   

  	
   

  
	
  GENERAL CONDITIONS:

  	
  Except as provided herein
  and in the Facultative Retrocession Agreement of which this Retrocessional
  Memorandum forms a part, the cession evidenced by this Retrocessional
  Memorandum shall incorporate and follow all the terms and conditions of the
  Reinsurance Agreements.

  



 


The cession evidenced by this Retrocessional Memorandum shall be
subject to all the terms and conditions contained in the Facultative Retrocessional
Agreement dated as of January 1, 1998 between the parties, which the undersigned hereby
acknowledge as being an agreement between arid binding upon the undersigned.


 


	
  SUBMITTED BY:

  	
  ACCEPTED BY:

  
	
   

  	
   

  
	
  ACE BERMUDA INSURANCE LTD.

  	
  ACE CAPITAL RE LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY:

  	
  /s/ Andrew M. Gibbs

  	
   

  	
  BY:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
   

  
	
  NAME:

  	
  ANDREW M. GIBBS

  	
   

  	
  NAME:

  	
  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  
	
  TITLE:

  	
  CFO.

  	
   

  	
  TITLE:

  	
   

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
  Nov 10, 99

  	
   

  	
  DATE:

  	
  Nov 11/1999

  	
   

  



 


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