Exhibit
10.36


 


REINSURANCE
AGREEMENT


 


Effective: January 1, 2001


 


between


 


Westchester Fire Insurance
Company


New York, New York


(the “Company”)


 


and


 


ACE Capital Re Overseas Ltd.

Hamilton, Bermuda

(the “Reinsurer”)


 


Preamble


 


Whereas, the Reinsurer will be assuming
facultative reinsurance from the Company on lines of business for which the
Company is duly licensed under Section 1113 and Section 4102(c) of the
Insurance Laws of the State of New York; and


 


Whereas, by this Agreement, the Company
wishes to cede to the Reinsurer and the Reinsurer is willing to assume
reinsurance on a facultative basis on certain Policies to be underwritten by
the Company, in an amount and limit to be determined on a policy-by-policy
basis; and


 


Whereas, the Reinsurer and the Company
intend to execute and deliver all of the Facultative Certificates in accordance
with terms and conditions of this Agreement.


 


Now Therefore, in consideration of the mutual
covenants hereinafter contained and upon the terms and conditions hereinafter set
forth, the Company and Reinsurer agree as follows:


 


Article I -
Intercompany Facultative Reinsurance


 


1.1  The Company hereby cedes as reinsurance to
the Reinsurer and the Reinsurer hereby accepts as reinsurance from the Company
the share of each Policy that is specified and agreed to by the parties in a
Facultative Certificate (such reinsurance is referred to individually and
collectively herein as “Intercompany Facultative Reinsurance”). The terms of
each Intercompany Facultative Reinsurance (including, without limitation, the
premium, retention and limits thereof) will be determined by the Company and
the Reinsurer on a policy-by-policy basis and evidenced by a duly executed
Facultative Certificate between the Reinsurer and the Company.  In all cases, Company and Reinsurer hereby
acknowledge that a full-time employee or officer of Company will retain final
decision making authority with respect to all reinsurance ceded hereunder.


 


1.2  On each Intercompany Facultative
Reinsurance, the Reinsurer agrees to reimburse the Company for its share of the
following:


 

















 


1.2.1        All
Loss payments made by the Company on the Policy ceded pursuant to such
Intercompany Facultative Reinsurance; and


 


1.2.2        Allocated
Loss Expense with respect to such Policy.


 


1.3  Subject to the terms, conditions and
limitations of this Agreement, the Intercompany Facultative Reinsurance
provided with respect to a Policy ceded hereunder shall be in effect
concurrently with such Policy, unless otherwise provided in the Facultative
Certificate relating to such Policy. To the extent of its interest, the
Reinsurer shall follow the fortunes of the Company in all matters coming within
the scope of this Agreement, which shall be liberally construed.


 


Article II -
Commencement and Termination


 


2.1  This Agreement shall be effective as of the
date hereof and shall remain in effect unless terminated in accordance with
this Article.


 


2.2  Either party to this Agreement may elect to
terminate its participation in this Agreement on thirty (30) days’ prior
written notice to the other party.


 


2.3  Notwithstanding any other provision of this
Agreement, any party may terminate this Agreement immediately upon written
notice to the other party in the event that the other party (i) becomes
insolvent or bankrupt, or admits in writing its inability to pay its debts as
they become due, or makes an assignment for the benefit of creditors, or
applies for or consents to the appointment of a trustee or receiver for the
major part of its property; (ii) becomes the subject of bankruptcy,
reorganization, rearrangements, insolvency or liquidation proceedings, or other
proceedings for relief of creditors and such proceedings are not stayed or
discharged within ninety (90) days after being commenced; (iii) is acquired by
another entity, unless such acquiring entity is wholly owned, directly or
indirectly, by ACE Limited; (iv) fails to obtain or maintain any licenses,
permits or other qualifications that are required by law to fulfill its
obligations under this Agreement and such failure remains uncured after fifteen
(15) days; or (v) commits abandonment, fraud or willful misconduct in
connection with the provision of services under this Agreement.


 


2.4  Termination of this Agreement shall not
relieve either party of its obligations under this Agreement up to the
effective date of termination.  Further,
termination of this Agreement shall not relieve either party of its obligations
with respect to Policies ceded hereunder prior to the effective date of
termination of this Agreement.


 


2.5  Notwithstanding the foregoing, if any law or
regulation of the Federal or State or Local Government of any jurisdiction in
which the Company or Reinsurer is doing business should render the enforcement
of this Agreement, in whole or in part, illegal within a given jurisdiction,
the affected party may, upon written notice to the other party, suspend,
abrogate, or amend this Agreement insofar as it applies to such jurisdiction,
to the extent necessary to comply with such law or regulation.  Such cancellation, suspension, abrogation or
amendment of this Agreement shall in no way affect any other portion thereof.


 


2

















 


Article III - Other
Reinsurance


 


The
Company is permitted, but not required, to purchase facultative and/or treaty
reinsurance on business subject to this Agreement.


 


Article IV -
Definitions


 


The
following terms have the respective meanings set forth below, Other terms are
defined elsewhere in this Agreement.


 


4.1  “Allocated Loss Expense” means expenses
allocable to the investigation, defense, resistance to and/or settlement of
claims and losses, including litigation expenses, interest on judgments and
legal expenses incurred in connection with coverage questions and legal
actions, including declaratory judgment actions, connected thereto, but
excluding the normal office expenses and salary charges of regular employees or
officials of the Company except in the case of claim adjusters or staff
attorneys, and then only when the time spent and any expenses of the adjuster
or staff attorney is definitely allocable to a specific claim.


 


4.2  “Company” means Westchester Fire Insurance
Company, a New York domesticated insurance company.


 


4.3  “Effective Date” means the date this
Agreement took effect as designated in the title on Page 1.


 


4.4  “Facultative Certificate” means the
certificate to be executed and delivered by the Reinsurer and the Company to
evidence each Intercompany Facultative Reinsurance, which certificate shall be
substantially in the form of Exhibit “A” hereto.


 


4.5  “Loss” and “Losses” means the amount paid by
the Company or for which the Company has become liable to pay for any claim,
settlement, award, or judgment under a Policy ceded hereunder, after making
deductions for all recoveries, salvages and subrogations actually collected,
and inuring reinsurance, whether collected or not.


 


4.6  “Policy” and “Policies” mean any policies,
contracts, binders of insurance or reinsurance issued or renewed by the
Company.


 


4.7  “Reinsurer” means ACE Capital Re Overseas
Ltd., a Bermuda insurance company.


 


4.8  “Required Amount” means the market value of
assets the Reinsurer is required to maintain in the Trust Account to satisfy
purposes (a) through (c) in Section 11.8.


 


Article V - Claims and
Loss  Adjustment Expenses


 


5.1  In the event of a Loss which in the
Company’s opinion is likely to give rise to a claim under a Facultative
Certificate, notice thereof shall be given to the Reinsurer.


 


3

















 


5.2  The Company will be the sole judge as to
what constitutes a claim or loss covered under the Policies ceded hereunder and
as to the Company’s liabilities thereunder. The Company shall, at its sole
discretion, adjust, investigate, settle, compromise or defend all claims and
losses. All loss settlements made by the Company shall be binding upon the
Reinsurer, and amounts falling to the share of the Reinsurer shall he payable
by it upon reasonable evidence of the amount paid or to be paid being given by the
Company.


 


5.3  When requested by the Reinsurer, the Company
shall permit the Reinsurer, at the expense of the Reinsurer, to be associated
with the Company in the defense of any claim, loss, or legal proceeding which
involves, or is likely to involve, the Reinsurer.


 


Article VI - Salvage
and Subrogation


 


6.1  The Company hereby agrees to enforce its
rights to salvage or subrogation relating to any loss, a part of which loss was
sustained by the Reinsurer, and to prosecute all claims arising out of such rights.
In the event the Company shall refuse or neglect to enforce its rights to
salvage or subrogation, the Reinsurer is authorized and empowered to bring any
appropriate action in the name of the Company or its policyholder or otherwise
to enforce those rights, and the Company shall cooperate fully with the
Reinsurer in its efforts to enforce those rights.


 


6.2  The Company and the Reinsurer shall share in
the cost and expense of any unsuccessful salvage or subrogation efforts in the
same proportion that the Company and the Reinsurer shared in the loss giving
rise to those salvage or subrogation efforts.


 


6.3  The Reinsurer shall be credited with
subrogation and salvage (i.e., reimbursement obtained or recovery made by the
Company, less the actual cost, excluding salaries of officials and employees of
the Company and sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and settlements
involving reinsurance hereunder.  With
respect to all excess of loss Intercompany Facultative Reinsurance, subrogation
and salvage shall be used to reimburse the Reinsurer for its portion of the
loss before being used to reimburse the Company for its portion of the loss
under its retention. With respect to all proportional Intercompany Facultative
Reinsurance, subrogation and salvage shall be shared between die Company and
the Reinsurer in accordance with their proportionate shares.


 


Article VII - Original Conditions


 


7.1  Except as otherwise provided in a
Facultative Certificate, all Intercompany Facultative Reinsurance under this
Agreement shall be subject to the same rates, terms, conditions and waivers,
and to the same modifications and alterations, as the respective Policies of
the Company.


 


7.2  Nothing herein shall in any manner create
any obligations or establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Agreement.


 


4

















 


Article VIII - Reports
and Remittances


 


Within
thirty (30) days of the last day of each quarter, the Company shall provide the
Reinsurer with such reports as are specified in the Facultative Certificates.


 


Losses
payable under any Intercompany Facultative Reinsurance shall be paid within the
time period specified in the applicable Facultative Certificate.


 


Article IX - Access to
Books and Records


 


9.1  The Company and the Reinsurer and their
respective duly authorized representatives shall, at all reasonable times, each
be permitted access to all books and records of the other pertaining to the
Intercompany Facultative Reinsurance which is issued pursuant to the provisions
of this Agreement.


 


9.2  Reinsurer shall keep, in a manner and form
approved by Company, accurate and complete books of account, records and files,
in either written or electronic form, of all business conducted under and
pursuant to this Agreement (the “Books and Records”).


 


9.3  Reinsurer and Company shall make all of the
Books and Records available to the other for examination and inspection by duly
authorized representatives of Company or Reinsurer, upon reasonable notice, at
any time during ordinary business hours.


 


9.4  Company shall make all of the Books and
Records available for examination and inspection by the Superintendent of
Insurance of the State of New York or his duly authorized representatives, upon
reasonable notice, at any time during ordinary business hours.


 


9.5  The Company and Reinsurer hereby acknowledge
that nothing in this Agreement is intended to change, diminish or in any way
modify its commitments which the Company made to the New York Insurance
Department in connection with its acquisition by ACE Limited, as set forth in
letters dated November 14, 1997, December 5, 1997 and December 23, 1997.


 


Article X - Regulatory
Matters


 


10.1         No
services shall be provided under this Agreement unless the entity or natural
person who performs such services possesses all licenses, permits and other
qualifications that are required by law to perform such services.


 


Article XI - Security


 


11.1         The
Reinsurer may enter into a trust agreement with the Company (the “Trust
Agreement”) and a Qualified United States Financial Institution (the “Trustee”)
in a form acceptable to the Company and establish a trust account (the “Trust
Account”) for the benefit of the Company with respect to the liabilities
assumed by the Reinsurer hereunder. The Trust


 


5

















 


Agreement
shall be in strict compliance with the terms of Regulation 114 promulgated pursuant
to the New York Insurance Laws.


 


11.2         The
Reinsurer agrees to deposit and maintain in said Trust Account assets to be
held in trust by the Trustee for the benefit of the Company as security for the
payment of the Reinsurer’s obligations to the Company under this Agreement, as
specified in Section 11.8 of this Agreement. Such assets shall be maintained in
the Trust Account by the Reinsurer as long as the Reinsurer continues to remain
liable for any Policy ceded hereunder as provided in Section 2.4 of this
Agreement.


 


11.3         The
Reinsurer agrees that the assets so deposited shall consist only of cash
(United States legal tender), certificates of deposit (issued by a United
States Bank and payable in United States legal tender), and investments of the
types permitted by the New York Insurance Law or any combination of the
previously mentioned.


 


11.4         The
Reinsurer, prior to depositing assets with the Trustee, shall execute all
assignments, endorsements in blank, and transfer legal title to the Trustee of
all shares, obligations or any other assets requiring assignments, in order
that the Company, or the Trustee upon direction of the Company, may whenever
necessary negotiate any such assets without consent or signature from the
Reinsurer or any other entity.


 


11.5         The
Reinsurer shall deposit into the Trust Account an amount sufficient to cover
the Reinsurer’s obligations to the Company as set forth in Section 11.8 of this
Agreement.


 


11.6         At the
end of each quarter, the Company shall determine if the Trust Account is
adequately funded with respect to the Company’s liabilities reinsured
hereunder.  If the Company determines
that the Trust Account is not adequately funded, i.e., the Trust Account
contains less than the Required Amount, the Company shall send the Reinsurer a
notice specifying the amount of the inadequacy and the Reinsurer shall deposit
such amount in the Trust Account within thirty (30) days of receipt of such
notice.


 


11.7         All
settlements of account under the Trust Agreement between the Company and the
Reinsurer shall be made in cash or its equivalent.


 


11.8         The
Company and the Reinsurer agree that the assets in the Trust Account may be
withdrawn by the Company at any time, notwithstanding any other provision in
this Agreement, provided such assets are applied and utilized by the Company or
any successor of the Company by operation of law, including, without
limitation, any liquidator, rehabilitator, receiver or conservator of the
Company, without diminution because of the insolvency of the Company or the
Reinsurer, only for the following purposes:


 


(a)           to
reimburse the Company for the Reinsurer’s share of any Losses paid by the
Company with respect to Policies reinsured hereunder, if not otherwise paid by
the Reinsurer;


 


(b)           to
fund an account with the Company in an amount at least equal to the deduction,
for reinsurance retroceded, from the Company’s liabilities with respect to
Policies


 


6

















 


reinsured
hereunder.  Such account shall include,
but not be limited to, amounts for policy reserves, claims and losses incurred
(including losses incurred but not reported), and unearned premium reserves;
and


 


(c)           to pay
any other amount the Company claims are due under this Agreement.


 


11.9         The
Reinsurer shall have the right to seek the Company’s approval to withdraw all
or any part of the assets from the Trust Account and transfer such assets to
the Reinsurer, provided that:


 


(a)           the
Reinsurer shall, at the time of withdrawal, replace the withdrawn assets with
other assets of a type permitted hereunder having a market value equal to the
market value of the assets withdrawn, so as to maintain the Trust Account in
the Required Amount, or


 


(b)           after
such withdrawal and transfer, the market value of the Trust Account is no less
than 102% of the Required Amount.


 


In
the event that the Reinsurer seeks the Company’s approval hereunder, the
Company shall not unreasonably or arbitrarily withhold its approval.


 


11.10       In the
event that the Company withdraws assets from the Trust Account for the purposes
set forth in Section 11.8 (a) or (b) in excess of actual amounts required to
meet the Reinsurer’s obligations to the Company, or in excess of amounts
determined to be due under Section 11.8 (c), the Company will return such excess
to the Reinsurer, plus interest at the prime (or base) rate or interest.  In the event of a dispute arising under this
Article XI, the arbitration panel established pursuant to Article XIII of this
Agreement shall have the right to award interest at a rate that is determined
to be equitable, and may award attorney’s fees, arbitration costs and other
expenses.


 


11.11       At the
option of the Reinsurer, letters of credit meeting the requirements of New York
Insurance Regulation 133 (“Letters of Credit” or, in the singular, “Letter of
Credit”) may be substituted in whole or in part for the Trust Account. Any such
Letter of Credit will be procured from a Qualified United States Financial
Institution, and may be drawn down at any time by the Company, only for the purposes
set forth in Section 11.8 (a), (b) or (c) of this Agreement, without diminution
because of the insolvency of the Company or the Reinsurer. If the Company
receives notification of nonrenewal of a Letter of Credit and if Reinsurer’s
entire obligations under this Agreement remain unliquidated and undischarged
ten (10) days prior to such expiration date, the Company may obtain a cash
deposit equal to such obligations, without diminution because of the insolvency
of the Company or Reinsurer, and deposit such amount in the name of the
Reinsurer in any United States bank or trust company, apart from its general
assets, in trust for such uses and purposes as specified in Section 11.8 of
this Agreement. If the Letter of Credit is drawn down, the provisions of section
11.8 shall apply to the amount so drawn and the Company shall immediately
return to Reinsurer any amounts drawn down on the Letter of Credit that are
subsequently determined not to be due.


 


7

















 


11.12       If
Letters of Credit are substituted in whole or in part for the Trust Account, as
permitted by Section 11.11 of this Agreement, there shall be an adjustment
after receipt of each quarterly report to ensure that the collective security
provided by the Trust Account and any such Letters of Credit is equal to (but
not greater or less man) the Required Amount. 
If such collective security is determined to be less than the Required
Amount, the Reinsurer, shall, within thirty (30) days after receipt of notice
of such excess, secure delivery to the Company of an amendment of the Letter of
Credit or additional Letters of Credit, increasing the amount of credit by the
amount of such deficiency.  If such
collective security is determined to be more than the Required Amount, the
Company shall, within thirty (30) days after receipt of a written request from
the Reinsurer, release such excess credit by consenting to an amendment to the
Letter or Letters of Credit, reducing the amount of credit available by the
amount of such excess credit.


 


11.13       The
issuing bank will have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or the disposition of funds
withdrawn, except to ensure that withdrawals are made only upon the order of properly
authorized representatives of the Company.


 


Article XII -
Insolvency


 


12.1         In the
event of insolvency of the Company, payments under this Intercompany
Facultative Reinsurance shall be made by the Reinsurer immediately upon demand
to the conservator, liquidator, receiver or statutory successor of the Company,
or to such other person as shall be legally responsible or entitled to receive
such payments, on the basis of the liability of the Company under any Policy
ceded hereunder, without diminution because of the insolvency of the Company or
because such conservator, liquidator, receiver or statutory successor has
failed to pay all or a portion of any claims. The foregoing sentence shall not
apply to any Intercompany Facultative Reinsurance the Facultative Certificate
for which specifies another payee in the event of the insolvency of the
Company. In the event of the Company’s insolvency, the conservator, liquidator,
receiver, or statutory successor of the Company shall give the Reinsurer
written notice of the pendency of any claim against the Company involving a
Policy ceded hereunder within a reasonable time after such claim is filed in
the insolvency proceeding, and during the pendency of such claim, the Reinsurer
may investigate such claim and interpose, at its own expense, in the proceeding
where the claim is to be adjudicated any defense or defenses which it may deem
available to the Company or its conservator, liquidator, receiver or Statutory
successor. Subject to court approval, the expense thus incurred by the
Reinsurer shall be chargeable against the 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.


 


Article XIII -
Arbitration


 


13.1         Any
dispute or difference arising with reference to the applicable interpretation
or effect of this Agreement or any Intercompany Facultative Reinsurance, or any
part thereof, shall be referred to a Board of Arbitration (the “Board”) of two
(2) arbitrators and an umpire.


 


8

















 


13.2         The
members of the Board shall be active or retired disinterested officers of
insurance or reinsurance companies. One arbitrator shall be chosen by the party
initiating the arbitration and designated in the letter requesting arbitration.
The other party shall respond, within thirty (30) days, advising of its
arbitrator. The umpire shall thereafter be chosen by the two (2) arbitrators.


 


13.3         In the
event either party fails to designate its arbitrator as indicated above, the
other party is hereby authorized and empowered to name the second arbitrator,
and the party which failed to designate its arbitrator shall be deemed to have
waived its right to designate an arbitrator and shall not be aggrieved
thereby.  The two (2) arbitrators shall
then have thirty (30) days within which to choose an umpire. If they are unable
to do so, the umpire shall be chosen by the manager of the American Arbitration
Association who shall be a person meeting the qualifications set forth above.
Each party shall submit its case to the Board within one (1) month from the
date of the appointment of the umpire, but this period of time may be extended
by unanimous written consent of the Board.


 


13.4         The
sittings of the Board shall take place in New York, New York, unless otherwise
agreed in writing by the parties.  The
Board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business.  The
Board is released from all judicial formalities and may abstain from the strict
rules of law. The written decision of a majority of the Board shall be rendered
within sixty (60) days following the termination of the Board’s hearings,
unless the parties consent to an extension. Such majority decision of the Board
shall be final and binding upon the parties both as to law and fact, and may
not be appealed to any court of any jurisdiction.  Judgment may be entered upon the final decision of the Board in
any court of proper jurisdiction.


 


13.5         Each
party shall bear the fees and expenses of the arbitrator selected by or on its
behalf, and the parties shall bear the fees and expenses of the umpire as
determined by the Board.


 


13.6         The
arbitration section of this Agreement shall survive termination of this
Agreement and be deemed to be an obligation of the parties which is independent
of, and without regard to, the validity of this Agreement.


 


Article XIV -
Severability


 


14.1         In the
event any provision of this Agreement shall be held invalid or unenforceable by
a court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision of this Agreement.


 


Article XV – Offset


 


15.1         The
Company and the Reinsurer may offset any balance(s) or other amount(s) due from
one party to the other under this Agreement or any other reinsurance agreement
heretofore or hereafter entered into between the Company and the Reinsurer,
whether acting as assuming reinsurer or ceding company, provided, however, that
in the event of the insolvency of a party hereto, offsets shall only be allowed
in accordance with the provisions of Section 7427 of the Insurance Law of the
State of New York.


 


9

















 


Article XVI – Miscellaneous


 


16.1         This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.  Neither this Agreement nor any right
hereunder may be assigned by any party without the prior written consent of the
other party affected thereby.


 


16.2         This
Agreement has been made pursuant to, and shall be governed by and construed in
accordance with, the laws of the State of New York without regard to conflicts
of laws doctrine.


 


16.3         This
Agreement (and any written amendments to it) constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
oral or written, relating to the subject matter hereof.


 


16.4         This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original for all purposes and all of which shall be deemed,
collectively, one and the same instrument and agreement.


 


10

















 


IN
WITNESS WHEREOF, this Agreement is hereby executed by duly authorized officers
of the parties hereto as of the date first above written.


 


	
   

  	
  WESTCHESTER
  FIRE INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert E. Omahne

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert
  E. Omahne

  
	
   

  	
   

  	
  Title:

  	
  Atty in Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ACE
  CAPITAL RE OVERSEAS LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rebecca L. Carne

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Rebecca L. Carne

  
	
   

  	
   

  	
  Title:

  	
  Director

  
					



 


11

















 


EXHIBIT
A


 


FACULTATIVE CERTIFICATE


 


EVIDENCING AN


 


INTERCOMPANY FACULTATIVE
REINSURANCE


 


PURSUANT TO


 


REINSURANCE AGREEMENT EFFECTIVE
JANUARY 1, 2001


 


BETWEEN


 


WESTCHESTER FIRE INSURANCE
COMPANY


 


AND


 


ACE CAPITAL RE OVERSEAS LTD.


 


 


	
  Facultative
  Certificate Number:

  
	
   

  
	
  Original
  Insured:

  
	
   

  
	
  Covered
  Policy:

  
	
   

  
	
  Effective
  Date of Reinsurance (if different from Covered Policy):

  
	
   

  
	
  Expiration
  Date of Reinsurance (if different from Covered Policy)

  
	
   

  
	
  Reinsurance
  Premium:

  
	
   

  
	
  Ceding
  Commission:

  
	
   

  
	
  Form
  of Reinsurance (QS or EOL):

  
	
   

  
	
  Reinsurer’s
  Quota Share Percentage (if applicable):

  
	
   

  
	
  Reinsurer’s
  Attachment Point (if applicable):

  
	
   

  
	
  Reinsurer’s
  Limit of Liability (if applicable):

  
	
   

  
	
  Location
  of Risk (if different from Covered Policy):

  



 


12

















 


	
  Deviations
  from coverage provided under Covered Policy:

  
	
   

  
	
  Reports
  and Loss Payments:

  
	
   

  
	
  Other
  Terms:

  



 


The
cession evidenced by this Facultative Certificate shall be subject to all the
terms and conditions contained in the Reinsurance Agreement referenced above.


 


 


	
  Signed
  at New York, New York, on behalf of

  Westchester Fire Insurance Company

  	
   

  	
  Counter-Signed
  at Hamilton, Bermuda, on

  behalf of ACE Capital Re Overseas Ltd.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  Representative

  	
   

  	
  Authorized
  Representative

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  Date:

  
					



 


13

















 


FACULTATIVE CERTIFICATE


 


EVIDENCING AN


 


INTERCOMPANY FACULTATIVE
REINSURANCE


 


PURSUANT TO


 


REINSURANCE AGREEMENT EFFECTIVE
JANUARY 1, 2001


 


BETWEEN


 


WESTCHESTER FIRE INSURANCE
COMPANY (THE “COMPANY”)


 


AND


 


ACE CAPITAL RE OVERSEAS LTD.
(THE “REINSURER”)


 


	
  Facultative
  Certificate Number:

  	
   

  	
  2001-1

  
	
   

  	
   

  	
   

  
	
  Original
  Insured:

  	
   

  	
  Chase
  Manhattan Automotive Finance Corporation

  900 Stewart Avenue

  Garden City, New York 11530

  
	
   

  	
   

  	
   

  
	
  Covered
  Policy:

  	
   

  	
  Residual
  Value Insurance Policy effective as of December 31, 2000 issued by the
  Company to the Original Insured, a copy of which is attached hereto as
  Exhibit A.

  
	
   

  	
   

  	
   

  
	
  Effective Date of Reinsurance (if
  different from Covered Policy):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration Date of Reinsurance (if
  different from Covered Policy)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Reinsurance
  Premium:

  	
   

  	
  $84,000,000,
  payable up front. The premium is net of the Reinsurer’s share of all taxes
  and brokerage.

  
	
   

  	
   

  	
   

  
	
  Ceding
  Commission:

  	
   

  	
  None.

  
	
   

  	
   

  	
   

  
	
  Form
  of Reinsurance (QS or EOL):

  	
   

  	
  Quota
  share. For the avoidance of doubt, the Reinsurer is liable for the
  Reinsurer’s Quota Share Percentage of the Profit Share Amount (if any), as
  well as the Reinsurer’s Quota Share Percentage of Covered Losses (subject, in
  the case of Covered Losses, to the Reinsurer’s Limit of Liability).

  



 

















 


	
  Reinsurer’s
  Quota Share Percentage (if applicable):

  	
   

  	
  75%.

  
	
   

  	
   

  	
   

  
	
  Reinsurer’s
  Attachment Point (if applicable):

  	
   

  	
  Covered
  Losses equal to $280 million.

  
	
   

  	
   

  	
   

  
	
  Reinsurer’s
  Limit of Liability (if applicable):

  	
   

  	
  Covered
  Losses equal to $165 million.

  
	
   

  	
   

  	
   

  
	
  Location
  of Risk (if different from Covered Policy):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Deviations
  from coverage provided under Covered Policy:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Reports
  and Loss Payments:

  	
   

  	
  The
  Company will promptly provide to the Reinsurer copies of all reports received
  pursuant to the terms of the Covered Policy. Covered Losses and Profit Share
  Amounts payable by the Reinsurer hereunder shall be paid to or at the
  direction of the Company no later than the date such amounts are payable by
  the Company to the Original Insured. The Reinsurer shall pay Allocated Loss
  Expenses promptly following receipt of an invoice therefor.

  
	
   

  	
   

  	
   

  
	
  Other
  Terms:

  	
   

  	
  The
  Company shall not amend the Covered Policy without the prior written consent
  of the Reinsurer.

  



 


The
cession evidenced by this Facultative Certificate shall be subject to all the
terms and conditions contained in the Reinsurance Agreement referenced above.


 


	
  Signed
  at New York, New York, on behalf of

  Westchester Fire Insurance Company

  	
   

  	
  Counter-Signed
  at Hamilton, Bermuda, on

  behalf of ACE Capital Re Overseas Ltd.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Robert E. Omahne

  	
   

  	
   

  	
  /s/ Rebecca L. Carne

  	
   

  
	
  Authorized
  Representative

  	
   

  	
  Authorized
  Representative

  
	
   

  	
   

  	
   

  
	
  Date:
  August 27, 2001

  	
   

  	
  Date: Aug 23, 01

  
					



 


2

















 


Exhibit
A


 





ace usa


 


WESTCHESTER FIRE INSURANCE COMPANY


1133 Avenue of the Americas


New York, New York 10036


This Policy is issued by the stock insurance company
listed above (herein “Insurer”).


 


FREE TRADE ZONE


 


NOTICE: THESE POLICY FORMS AND THE APPLICABLE RATES ARE
EXEMPT FROM THE FILING REQUIREMENTS OF THE NEW YORK STATE INSURANCE DEPARTMENT.
HOWEVER, SUCH FORMS AND RATES MUST MEET THE MINIMUM STANDARDS OF THE NEW YORK
INSURANCE LAW AND REGULATIONS.


 


DECLARATIONS


 


	
  Policy
  No.

  	
  CRS D3 407305 3

  
	
   

  	
   

  
	
  Item 1.

  	
  Insured: Chase Manhattan
  Automotive Finance Corporation

  Address: 900 Stewart Avenue, Garden City, New York, 11530

  
	
   

  	
   

  
	
  Item 2.

  	
  Policy Period: From 11:59
  p.m. on December 31, 2000 until the Final Payment Date.

  (Local time at the address shown in Item 1)

  
	
   

  	
   

  
	
  Item 3.

  	
  Limit of Liability: $220
  million in the absolute aggregate excess of $280 million.

  
	
   

  	
   

  
	
  Item 4.

  	
  Policy Premium:
  $121,000,000

  
	
   

  	
   

  
	
  Item 5.

  	
  Endorsements to the
  General Conditions and Limitations Effective at Inception: N/A

  
			



 


 


Execution Copy


 

















 


IN WITNESS WHEREOF, the Insurer has caused this Policy to be
signed by its President and Secretary and countersigned by a duly authorized
representative of the Insurer.


 


	
   

  	
   

  
	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  	
  /s/ George D. Mulligan

  	
   

  
	
   

  	
  President

  	
   

  	
  GEORGE D. MULLIGAN, Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
  POLICY
  ISSUANCE DATE:
  02/05/01

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Robert E. Omahne

  	
   

  
	
   

  	
  AUTHORIZED
  REPRESENTATIVE

  
	
   

  	
  Atty in
  Fact

  



 


2

















 





ace usa


 


RESIDUAL VALUE INSURANCE POLICY


 


In
consideration of the payment of the Premium (as defined below) and in reliance
upon the statements and representations made to Westchester Fire Insurance Company
(the “Insurer”) by Chase Manhattan Automotive Finance Corporation (the
“Insured”) in its Submission (as defined below), and subject to the terms,
conditions, exclusions and limitations contained herein or in any endorsements
added hereto, all of which collectively constitute the “Policy”, the Insurer
and the Insured agree as follows:


 


ARTICLE 1. TERM


 


This
Policy shall be effective as of 11:59 p.m., Eastern Standard Time, on December
31, 2000 (the “Effective Date”) and shall continue in force until the Final
Payment Date (as defined below) (the “Term”).


 


ARTICLE 2. PREMIUM AND
ADDITIONAL PREMIUM


 


The
premium payable to the Insurer hereunder (the “Premium”) is $121 million. The
Premium is gross of all taxes and brokerage commissions. The Premium is payable
on March 5, 2001 (the “Premium Payment Date”). In the event Covered Losses
exceed $435 million, the Insured will pay to the Insurer, on a funds withheld
basis, an additional premium in the amount of $30 million (the “Additional
Premium”). The Additional Premium is net of all taxes and gross of all
brokerage commissions.


 


ARTICLE 3. INSURING
CLAUSE


 


The
Insurer will pay 100% of Covered Losses in excess of the Attachment Point
subject to the Limit of Liability.


 


ARTICLE 4. PROFIT
SHARING


 


In
the event Covered Losses are less than $405 million, the Insurer will pay the
Insured a profit sharing amount equal to the lesser of (i) $125 million or (ii)
$405 million less Covered Losses (the “Profit Sharing Amount”). The Profit
Sharing Amount will be paid in accordance with Article 7 hereof.


 


ARTICLE 5. DEFINITIONS


 


The
following terms shall have the respective meanings ascribed to them below.


 

















 


	
  Actual
  Maturity Date:

  	
   

  	
  With
  respect to a Returned Vehicle, “Actual Maturity Date” means the date the
  Insured receives notification from its authorized agent that it has obtained
  possession of the vehicle on behalf of the Insured. With respect to a
  Purchase Option Vehicle or a Chase Financed Purchase Option Vehicle, “Actual
  Maturity Date” means the date the Insured receives the proceeds from the sale
  of the vehicle.

  
	
   

  	
   

  	
   

  
	
  Amortized
  Value:

  	
   

  	
  At
  any date and with respect to a vehicle that is the subject of a Covered
  Lease, the adjusted lease balance specified in the Insured’s LeMans system
  for such vehicle at such date, which amount equals the Initial Adjusted
  Capitalized Cost less depreciation calculated by the Insured on a monthly
  basis (as specified in the Insured’s LeMans system). The parties acknowledge
  and agree that, with respect to Extended Leases, monthly depreciation will be
  calculated as follows: (i) the Initial Adjusted Capitalized Cost of the
  Potentially Covered Lease minus the amount set forth in the Final Data Base
  with respect to such vehicle under the field entitled “Bor-Res-On-Lease”
  divided by (ii) the original term of the Potentially Covered Lease.

  
	
   

  	
   

  	
   

  
	
  Attachment
  Point:

  	
   

  	
  $280
  million.

  
	
   

  	
   

  	
   

  
	
  Black
  Book Adjustment Amount:

  	
   

  	
  

  The greater of (i) zero or (ii) (A) the difference between (x) the sum of the
  Black Book Values one calendar month after the Sales Date for each Returned
  Vehicle for which a Black Book Value is available multiplied by 0.99 and (y)
  the sum of the Net Realized Values for each Returned Vehicle for which a
  Black Book Value is available multiplied by (B) a fraction, the numerator of
  which is equal to the aggregate Book Cost on all Returned Vehicles and the
  denominator of which is equal to the aggregate Book Cost on all Returned
  Vehicles for which Black Book Values are available.

  
	
   

  	
   

  	
   

  
	
  Black
  Book Value:

  	
   

  	
  With
  respect to a vehicle that is the subject of a Covered Lease, the “average
  wholesale” value established by the Black Book Official Used Car Market
  Guide, Monthly National Edition, for a vehicle of the same make and model as
  such vehicle, without adjustments for options installed by the manufacturer and/or
  the automobile dealer. In the event that Black Book either ceases to exist or
  no longer publishes a Monthly National Edition during the Term, the Insured
  and Insurer shall mutually agree to another recognized nationally published
  used car market guide.

  
	
   

  	
   

  	
   

  
	
  Book
  Cost:

  	
   

  	
  With
  respect to a vehicle that is the subject of a Covered Lease that has an
  Actual Maturity Date which occurs on or after the

  



 


2

















 


	
   

  	
   

  	
  Scheduled
  Maturity Date, “Book Cost” means Amortized Value at the Actual Maturity Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  respect to a vehicle that is the subject of a Covered Lease that has an
  Actual Maturity Date which occurs prior to the Scheduled Maturity Date, “Book
  Cost” means: (i) for a Returned Vehicle, the Amortized Value at the Actual
  Maturity Date less an amount equal to the remaining scheduled lease payments;
  and (ii) for a Purchase Option Vehicle or a Chase Financed Purchase Option
  Vehicle, the Amortized Value at the Actual Maturity Date.

  
	
   

  	
   

  	
   

  
	
  Chase
  Financed Purchase Option Vehicle:

  	
   

  	
  

  A vehicle that is purchased from the Insured pursuant to the purchase option
  provision of the related lease contract by either the lessee or a purchaser
  other than the lessee, where the financing for such purchase is provided by
  the Insured or one of its affiliates. The sale transaction may take place at
  a physical location, via an Internet site, and/or via phone, fax and/or mail.

  
	
   

  	
   

  	
   

  
	
  Covered
  Lease:

  	
   

  	
  Each
  Potentially Covered Lease that has an Actual Maturity Date occurring no
  earlier than 180 days prior to the Scheduled Maturity Date for such
  Potentially Covered Lease and no later than 29 days after the Scheduled
  Maturity Date for such Potentially Covered Lease (or, if such Potentially
  Covered Lease is an Extended Lease, no later than 24 months following the
  Scheduled Maturity Date for such Potentially Covered Lease).

  
	
   

  	
   

  	
   

  
	
  Covered
  Losses:

  	
   

  	
  The
  greater of (i) zero or (ii) (A) the sum of the Book Costs for the Covered
  Leases less (B) the sum of the Net Realized Values for the Covered Leases
  less (C) the Black Book Adjustment Amount less (D) the Sales Expense
  Adjustment Amount; provided, however, that clauses (C) and (D) shall only be
  considered in the calculation of Covered Losses performed as of the Final
  Payment Date.

  
	
   

  	
   

  	
   

  
	
  Disposition
  Fee:

  	
   

  	
  With
  respect to a Covered Lease, the disposition fee listed on the lease contract
  for such Covered Lease, whether or not billed or recovered.

  
	
   

  	
   

  	
   

  
	
  Excess
  Mileage:

  	
   

  	
  With
  respect to a Covered Lease, the billable excess mileage in accordance with
  the lease contract for such Covered Lease, whether or not billed or
  recovered.

  
	
   

  	
   

  	
   

  
	
  Excess
  Wear and Tear:

  	
   

  	
  With
  respect to a Covered Lease, the billable excess wear and tear in accordance
  with the lease contract for such Covered Lease, whether or not billed or recovered.

  



 


3

















 


	
  Extended
  Lease:

  	
   

  	
  A
  Potentially Covered Lease that satisfies the following criteria: (i) the
  Actual Maturity Date is no less than one Month and no greater than 24 Months
  following the Scheduled Maturity Date and (ii) the lease payment during such
  period remains the same as during the original lease period.

  
	
   

  	
   

  	
   

  
	
  Final
  Data Base:

  	
   

  	
  The
  electronic file provided to the Insurer by the Insured on January 17, 2001
  entitled “GALUIN.zip”, composed of records for 207,147 leases.

  
	
   

  	
   

  	
   

  
	
  Gross
  Sales Price:

  	
   

  	
  With
  respect to a Returned Vehicle, a Purchase Option Vehicle or a Chase Financed
  Purchase Option Vehicle, “Gross Sales Price” means the purchase price for
  such vehicle. For purposes of calculating the Gross Sales Price, every
  Returned Vehicle, Purchase Option Vehicle and Chase Financed Purchase Option
  Vehicle shall be sold in a commercially reasonable manner appropriate for
  such form of sale.

  
	
   

  	
   

  	
   

  
	
  Initial
  Adjusted Capitalized Cost:

  	
   

  	
  

  With respect to a vehicle that is the subject of a Covered Lease, the gross
  capitalized cost of such vehicle less any capitalized cost reduction payments
  made by or on behalf of the lessee, as specified in the Insured’s LeMans
  system at the inception of the Covered Lease.

  
	
   

  	
   

  	
   

  
	
  Insured
  Losses:

  	
   

  	
  The
  lesser of (i) Covered Losses in excess of the Attachment Point and (ii) the
  Limit of Liability.

  
	
   

  	
   

  	
   

  
	
  Limit
  of Liability:

  	
   

  	
  The
  Insurer shall not pay more than $220 million of Covered Losses.

  
	
   

  	
   

  	
   

  
	
  Month:

  	
   

  	
  Month
  shall mean a 30-day month.

  
	
   

  	
   

  	
   

  
	
  Net
  Realized Value:

  	
   

  	
  With
  respect to a Purchase Option Vehicle or a Chase Financed Purchase Option
  Vehicle, “Net Realized Value” means the Gross Sales Price for such vehicle.
  With respect to a Returned Vehicle, “Net Realized Value” means the Gross
  Sales Price for such vehicle plus Excess Mileage, Excess Wear and Tear and
  Disposition Fee minus Sales Expenses. With respect to a vehicle that has a
  Sales Date that is more than 90 days after the Actual Maturity Date, “Net
  Realized Value” means the Black Book Value two Months after the Actual
  Maturity Date.

  
	
   

  	
   

  	
   

  
	
  Potentially
  Covered Lease:

  	
   

  	
  Each
  lease transaction included in the Final Data Base that (i) is in force at the
  Effective Date, (ii) has a Scheduled Maturity Date occurring on or after
  January 1, 2001 and (iii) at the Effective Date

  



 


4

















 


	
   

  	
   

  	
  is
  not insured under any other insurance program. Potentially Covered Lease
  shall include the replacement of a vehicle that is the subject of a lease
  that is included in the Final Data Base, provided that such vehicle is
  replaced by a vehicle of the same make of greater or equal value and the
  terms of the existing lease as listed on the Final Data Base remains in force
  (a “Collateral Substitution”). The Insured shall report any Collateral
  Substitution to the Insurer within 30 days following the end of the calendar
  month of such occurrence via a method and in a format that is mutually agreed
  to by the Insurer and the Insured. Potentially Covered Lease shall also
  include the flat cancellation of a lease contract that is the subject of a
  lease transaction included in the Final Data Base and the substitution of
  another lease contract on the same vehicle that is the subject of such lease
  transaction provided that the Residual Value set forth in the new lease
  contract is the same as the Residual Value set forth on the Final Data Base
  for such vehicle (a “Flat Cancelled Lease”). The Insured shall report any
  Flat Cancelled Lease to the Insurer within 30 days following the end of the calendar
  month of such occurrence via a method and in a format that is mutually agreed
  to by the Insurer and the Insured.

  
	
   

  	
   

  	
   

  
	
  Purchase
  Option Vehicle:

  	
   

  	
  A
  vehicle that is purchased from the Insured pursuant to the purchase option
  provision of the related lease contract by either the lessee, a purchaser
  other than the lessee or an automobile dealer. The sale transaction may take
  place at a physical location, via an Internet site and/or via phone, fax
  and/or mail.

  
	
   

  	
   

  	
   

  
	
  Residual
  Value:

  	
   

  	
  With
  respect to a vehicle that is the subject of a Covered Lease, the amount set
  forth in the Final Data Base with respect to such vehicle under the field
  entitled “Bor-Res-On-Lease”.

  
	
   

  	
   

  	
   

  
	
  Returned
  Vehicle:

  	
   

  	
  A
  vehicle that is returned to the Insured by the lessee pursuant to the lessee’s
  exercise of the return option under the lease contract. The Insured may
  subsequently sell such vehicle at an auction that has bidding or fixed priced
  sales, or may sell such vehicle to a purchaser other than the lessee, dealer,
  or employee of the Insured. The sale may take place at a physical location,
  via an Internet site and/or via phone, mail and/or fax.

  
	
   

  	
   

  	
   

  
	
  Sales
  Date:

  	
   

  	
  The
  date the Insured reports the sale of a vehicle that is the subject of a
  Covered Lease on the Insured’s LeMans system.

  
	
   

  	
   

  	
   

  
	
  Sales
  Expense Adjustment Amount:

  	
   

  	
  An
  amount equal to the greater of (i) zero or (ii) “A” minus “B” minus “C”,
  where

  



 


5

















 


	
   

  	
   

  	
  “A”
  equals the sum of the Sales Expenses for all Returned Vehicles

  
	
   

  	
   

  	
  “B”
  equals the sum of all Disposition Fees for all Returned Vehicles, and

  
	
   

  	
   

  	
  “C”
  equals $330 multiplied by the total number of all Returned Vehicles.

  
	
   

  	
   

  	
   

  
	
  Sales
  Expenses:

  	
   

  	
  Auction
  and other third party expenses actually incurred by or on behalf of the
  Insured that are (i) directly related to the sale of a Returned Vehicle and
  (ii) either (A) reasonably classifiable as one of the following categories of
  expenses: reconditioning expenses, transportation expenses, auction expenses
  and appraisal fees or (B) expenses directly related to the sale of a Returned
  Vehicle via the Internet.

  
	
   

  	
   

  	
   

  
	
  Scheduled
  Maturity Date:

  	
   

  	
  With
  respect to a Potentially Covered Lease, the date specified with respect to
  such Potentially Covered Lease in the Final Data Base under the fields
  entitled “BOR-LSE-MAT-CCYY, BOR-LSE-MAT-MM, BOR-LSE-MAT-DD”.

  
	
   

  	
   

  	
   

  
	
  Submission:

  	
   

  	
  The
  following electronic files provided by the Insured to the Insurer either
  directly or through Leadenhall Insurance Brokers: “GALUIN”; “ChaseEWT”;
  “chasefees2”; “ScheduledMaturityEF”; and “ScheduledMaturity 1231”.

  



 


ARTICLE 6. ACCOUNTS
AND REPORTS


 


Within
30 calendar days following the end of each calendar month during the Term, the
Insured will provide the Insurer with an electronic report containing the
information set forth in Exhibit A attached hereto (the “Monthly Loss
Account”).


 


Within
30 days following the end of each calendar quarter during the Term, the Insured
will provide the Insurer with an electronic report containing the information
set forth in Exhibit B attached hereto.


 


The
Insurer acknowledges that the Insured will not be able to comply with the
reporting requirements set forth in this Article 6 or the reporting
requirements with respect to any Flat Cancelled Leases or Collateral
Substitutions for a period of time after the Effective Date, and that such
failure to comply shall not be deemed a breach of the Insured’s obligations
under this Policy. The Insured will use commercially reasonable efforts to
develop the reports required by this Article 6 within 120 days after the
Premium Payment Date. Upon the Insured’s successful development of the reports
necessary to comply with this Article 6, the Insured will provide such reports
to the Insurer retroactive to January 1, 2001 as well as information with
respect to any Flat Cancelled Leases and Collateral Substitutions that have
occurred since January 1, 2001.


 


6

















 


ARTICLE 7.  SETTLEMENTS


 


Any
payment in respect of the Profit Sharing Amount shall be due on the later to
occur of (i) the date that is 60 days following the last Scheduled. Maturity
Date to occur and (ii) the date that is five years and 60 days following the
Premium Payment Date (such later date to occur is referred to as the “Profit
Sharing Payment Date”).


 


Insured
Losses shall be paid on a funds withheld basis with final settlement to be made
on the latest to occur of (i) the date that is 60 days following the last
Scheduled Maturity Date to occur, (ii) the date that is 60 days following the
last revised scheduled maturity date to occur with respect to an Extended Lease
and (iii) the date that is five years and 60 days following the Premium Payment
Date (such latest date to occur is referred to as the “Final Payment Date”).
Notwithstanding the preceding sentence, in the event Insured Losses exceed $155
million, the Insurer will make provisional payments to the Insured in respect
of Insured Losses in excess of $155 million on a quarterly basis within 10 days
following receipt of the Monthly Loss Account for the last month of each
calendar quarter; provided, however, that the Insurer shall offset Insured
Losses in excess of $155 million but less than $185 million against the
Additional Premium on a dollar for dollar basis, and the amounts so offset
(collectively, the “Offset Amount”) shall not be considered provisional
payments hereunder. On the Final Payment Date, the Insurer shall calculate
Insured Losses. In the event the aggregate provisional payments actually paid
to the Insured by the Insurer in respect of Insured Losses are in excess of the
Insured Losses less the Offset Amount (if any), the Insured shall refund to the
Insurer on the Final Payment Date an amount equal to such excess. In the event
the Insured Losses less the Offset Amount (if any) are in excess of the aggregate
provisional payments actually paid to the Insured by the Insurer in respect of
Insured Losses, the Insurer shall pay to the Insured on the Final Payment Date
an amount equal to such excess. In addition and notwithstanding anything to the
contrary contained in Article 2 hereof, in the event Insured Losses are greater
than $155 million but less than $185 million, the Insured shall be entitled to
retain the portion of the Additional Premium not offset by Insured Losses.


 


Notwithstanding
anything to the contrary contained herein, in the event a Profit Sharing Amount
is paid and the Profit Sharing Payment Date precedes the Final Payment Date,
the Insurer shall be entitled to reduce Insured Losses payable on the Final
Payment Date (if any) by an amount equal to the lesser of the Profit Sharing
Amount paid to the Insured and the amount of Insured Losses reported subsequent
to the Profit Sharing Payment Date. Notwithstanding anything to the contrary
contained herein, in the event the Profit Sharing Payment Date precedes the
Final Payment Date and Covered Losses at the Final Payment Date are less than
Covered Losses at the Profit Sharing Payment Date, on the Final Payment Date
the Insurer will recalculate the Profit Sharing Amount based on Covered Losses
at the Final Payment Date and, if the Profit Sharing Amount as so recalculated
exceeds the Profit Sharing Amount paid on the Profit Sharing Payment Date, the
Insurer will pay to the Insured on the Final Payment Date an amount equal to
such excess.


 


7

















 


ARTICLE 8.  ACCESS TO RECORDS


 


The
Insurer and its authorized representatives shall have access to the books and
records of the Insured (including, without limitation, all electronic data)
upon prior reasonable notice and during normal business hours for the sole
purpose of obtaining information concerning this Policy or its subject matter
and the right to make copies thereof (at its own expense), subject to
applicable laws, rules and regulations, including, without limitation,
applicable federal or state privacy laws. For the avoidance of doubt, the
Insurer’s reinsurers and retrocessionaires with respect to this Policy (if any)
shall be considered authorized representatives of the Insurer when accompanying
the Insurer on visits to the Insured for the purposes stated above in this
Article.


 


ARTICLE 9.  REPRESENTATIONS AND COVENANTS OF THE INSURED


 


The
Submission was accurate in all material respects as of the date of delivery.


 


In
consideration of the coverage provided to it under this Policy, the Insured
covenants to the Insurer as follows:


 


During
the Term, the Insured shall not sell, transfer or assign all or substantially
all of the Potentially Covered Leases to other than its affiliates without the
written consent of the Insurer, which consent shall not be unreasonably
withheld. For the avoidance of doubt, this covenant relates to sale, transfer
and assignment of leases, not to sale, transfer or assignment of vehicles. For
the further avoidance of doubt, this covenant does not apply to dealer lease
and/or vehicle repurchases in connection with breaches under Chase dealer
agreements. The Insured will provide prompt written notice to the Insurer of
any sale, transfer or assignment of all or substantially all the Potentially
Covered Leases to any affiliate.


 


During
the Term, the interest rate charged on Chase Financed Purchase Option Vehicles
will be based on the same return on equity and profitability models that Chase
establishes for its used vehicle loans made directly to consumers.


 


During
the Term, the Insured shall maintain a dealer asset remarketing effort and a
consumer asset remarketing effort with respect to Purchase Option Vehicles and
Chase Financed Purchase Option Vehicles, and the Insured’s remarketing practices
with respect to such efforts shall conform to or exceed standard industry
practices, subject, however, to the Insured’s compliance with the terms and
conditions of this Policy.


 


The
Insured shall not change its current methodology or practices with respect to
its LeMans system as it relates to the determination of Initial Adjusted
Capitalized Cost, Amortized Value, Book Cost or depreciation.


 


ARTICLE 10.  COVENANTS OF THE INSURER


 


The
Insurer shall issue an endorsement to this Policy (the “Liability Endorsement”)
increasing the Limit of Liability by $200 million (the “Additional Limit”)
(resulting in a revised Limit of Liability of $420 million) in the event
Leadenhall Insurance Brokers (i)


 


8

















 


place
reinsurance coverage that is reasonably acceptable to the Insurer on the entire
Additional Limit by April 30, 2001 with reinsurers rated at least A IX by AM
Best and (ii) procure reinsurance cut-through endorsements in the form of Annex
I hereto from such reinsurers for the entire Additional Limit (in the
aggregate). In the event the Liability Endorsement is not issued by April 30,
2001 or such later date as the Insured and the Insurer shall agree to in
writing, the Insurer promptly shall refund $6 million of Premium to the Insured
with interest from the Premium Payment Date to the date of refund at an annual
rate equal to 5.5%.


 


ARTICLE 11. GENERAL
PROVISIONS


 


1.             Offset.  The Insured and the Insurer have the right
to offset any balance(s) due from one to the other hereunder.


 


2.             Governing
Law.  This Policy shall be governed by and
interpreted in accordance with the laws of the State of New York, without
regard to its conflict of law principles.


 


3.             Assignment.  This Policy shall be binding upon and inure
to the benefit of the Insurer and the Insured and their respective successors
and assigns. This Policy may not be assigned by either party (other than by the
Insured to an affiliate of the Insured or by the Insurer to an affiliate of the
Insurer that has an AM Best rating of at least A IX at the time of assignment)
without the prior written consent of the other party; provided, if the AM Best
rating of the Insurer falls below A IX during the Term, the Insurer shall use
best efforts to promptly substitute for the Insurer another company within the
ACE Group of Companies whose AM Best rating is equal to or better than A IX
(for the avoidance of doubt, such substitution will be in respect of the
Insurer’s gross exposure under this Policy, including, without limitation, exposure
in respect of the Profit Sharing Amount); provided, further if such assignment
is impractical to effect because of tax, regulatory or accounting issues, the
Insurer will reinsure its gross exposure under this Policy (including, without
limitation, exposure in respect of the Profit Sharing Amount) to a member of
the ACE Group of Companies that has an AM Best rating equal to or better than A
IX or a Standard & Poor’s rating in the AA category or better and procure a
reinsurance cut-through endorsement in the form of Annex I hereto from such
reinsurer in favor of the Insured. In the event a substitution of insurers is
made in accordance with the second sentence of this Section 3 and during the
Term the AM Best rating of the company substituted for the Insurer falls below
A IX, the substituted company shall be obligated to comply with the second
sentence of this Section 3. In the event reinsurance and a reinsurance
cut-through endorsement is effected in accordance with the second sentence of
this Section 3 and the AM Best rating or Standard & Poor’s rating of the
company providing the reinsurance and the reinsurance endorsement falls below A
IX or the AA category, respectively, the Insurer shall be obligated to comply
once again with the second sentence of this Section 3.  The Insurer recognizes that the Insurer’s
compliance with this Section 3 is of a special, unique and extraordinary
character, which gives it peculiar value, the loss of which may not be
reasonably or adequately compensated in damages in any action at law, and that
a breach by the Insurer of


 


9

















 


the provisions of this Section 3 may
cause the Insured irreparable injury and damage. The Insurer agrees that the
Insured shall be entitled to the remedies of specific performance and other
equitable relief to prevent a breach of this Section 3 by the Insurer without
the necessity of proving damages and that the Insured shall not be required to
post bond or any other form of guarantee as a condition of such relief. This
previous sentence shall not, however, be construed as a waiver of any rights
which the Insured may have for damages or otherwise, nor shall it limit in any
way any other remedies which may result from the breach of this Policy.


 


4.             Amendment.  No amendment or modification of this Policy
shall be effective except when made by a written endorsement to this Policy
that is agreed to in writing by the Insured and signed by an authorized
representative of the Insurer.


 


5.             Headings.  The headings used in this Policy are
intended and inserted solely for convenience of reference and shall not effect
the meaning, interpretation, construction or effect of this Policy.


 


6.             Entire
Agreement.  This Policy
constitutes the entire agreement between the parties with respect to the
contents of this Policy, and supersedes all prior agreements, understandings
and negotiations, oral and written, with respect hereto.


 


7.             Waiver.  No waiver of this Policy shall be effective
unless in writing and signed by a duly authorized officer of the party granting
the waiver. The failure of a party to enforce any provision of this Policy
shall not constitute a waiver by such party of such provision. The past waiver
of a provision by a party shall not constitute a course of conduct or waiver in
the future of that same provision.


 


8.             Taxes
and Brokerage.  Except as provided
in the following sentence, any taxes and brokerage payable with respect to this
Policy shall be borne by the Insurer and shall be paid directly by the Insurer
to the applicable taxing authorities. Any taxes payable with respect to the
Additional Premium shall be payable by the Insured to the Insurer, and the
Insurer shall pay such taxes to the applicable taxing authorities.


 


9.             Cancellation.  This Policy may be canceled by the Insurer
for non-payment of the Premium, but shall not be cancelable for any other
reason by either party.


 


10.           Loss
Payee.  The following
entity is named as loss payee under this Policy: Chase Vehicle Exchange, Inc.,
P.O. Box 5230, New Hyde Park, New York, 11742.


 


11.           No
Reliance.  The Insured has
reviewed the terms, conditions and significance of this Policy with its legal
counsel, tax counsel and accountants and is accepting this Policy with full
knowledge of its terms, conditions and significance. In accepting this Policy,
the Insured is not relying upon any representation or warranty by the Insurer
regarding the legal, tax or accounting implications for the Insured in
purchasing the insurance provided by this Policy. It is understood and


 


10

















 


agreed that this Policy is a manuscript
policy that has been negotiated at arm’s length and on equal footing as between
the Insured and Insurer, and that both parties fully understood and agreed to
all the terms and conditions contained in this Policy.


 


12.           Consent
to Jurisdiction; Service of Suit.  It is agreed that, in the event of failure of the Insurer to pay
any amount claimed to be due hereunder, the Insurer, at the request of the
Insured, will submit to the jurisdiction of a court of competent jurisdiction
within the United States.  Nothing in
this condition constitutes or should be understood to constitute a waiver of
the Insurer’s right to commence an action in any court of competent jurisdiction
in the United States, to remove an action to a United States District Court or
to seek a transfer of a case to another court as permitted by the laws of the
United States or of any state in the United States. It is further agreed that
service of process in such suit may be made upon Counsel, Legal Department,
Westchester Fire Insurance Company, or his or her representative, and that in
any suit instituted against the Insurer upon this Policy, the Insurer will
abide by the final decision of such court or of any appellate court in the
event of any appeal.


 


13.           Waiver
of Jury Trial.  THE INSURED AND THE INSURER EACH IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS POLICY AND ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO THE ISSUANCE AND ACCEPTANCE OF THIS POLICY.


 


14.           Currency.  Whenever the word “Dollars” or the “$” sign
appear in this Policy, they shall be construed to mean United States Dollars,
and all payments made hereunder shall be made in United States Dollars.


 


15.           Notices.  All notices under any provision of this
Policy shall be in writing and given by a nationally recognized overnight
courier service or certified mail properly addressed to the appropriate party.  Notices shall be sent to the Insurer and the
Insured at the addresses listed in the Declarations (attention: General
Counsel, in the case of notices sent to the Insurer, and attention; Jeffrey
Levine, in the case of notices sent to the Insured). Notices sent by courier
shall be deemed received and effective one day after such notice is sent.
Notices sent by certified mail shall be deemed received and effective three
days after such notice is sent.


 


11

















 


Exhibit A


 


Monthly Loss Account


 


Number
of Vehicles in each Status Type at month end


Covered
Losses from Effective Date to month end


Aggregate
Residual Value by Status Type and in total


 


The
above information will be summarized by Scheduled Maturity Dates falling within
a calendar month and Status Type (i.e., Active, Not Covered, Returned Vehicle,
Purchase Option Vehicle, Chase Financed Purchase Option Vehicle).


 


12

















 


Exhibit B


 


An
electronic file that includes the following record data for each Potentially
Covered Lease:


 


1.       Vehicle Make


2.       Vehicle Model


3.       Vehicle Year


4.       Number of Months that Lease was
Extended, if any


5.       Lease Start Date


6.       Scheduled Maturity Date


7.       Actual Maturity Date


8.       Lease Term


9.       Sales Date


10.     Residual Value disclosed on the
Final Date Base


11.     Amortized Value


12.     Monthly Lease Payment


13.     Money Factor


14.     Status (Active, Not Covered,
Returned Vehicle, Purchase Option Vehicle, Chase Financed Purchase Option
Vehicle)


15.     Gross Sales Price


16.     For Returned Vehicles only,
total Sales Expenses


17.     For Returned Vehicles only, 99%
of Black Book Value using Sales Date plus One Month


18.     For Returned Vehicles only,
Allowable Mileage


19.     For Returned Vehicles only, the
lease contract charge per excess mile


20.     For Returned Vehicles only,
mileage at the return date


21.     For Returned Vehicles only, the
billable Excess Mileage charge


22.     For Returned Vehicles only, the
billable Excess Wear and Tear charge


23.     Net Realized Value


24.     Covered Loss


25.     Adjusted MSRP as listed in the
Insured’s LeMans system


26.     ALG projected estimate, if
available


 


13

















 


Annex I


 


CUT-THROUGH ENDORSEMENT


 


This
Cut-Through Endorsement is an endorsement to and forms a part of the reinsurance
agreement (the “Reinsurance Agreement”) dated as of [    ]
entered into by and between Westchester Fire Insurance Company (the “Company”)
and [insert name of reinsurer] (the “Reinsurer”) pursuant to which the
Reinsurer has reinsured the Company with respect to the Company’s liability
under a Residual Value Insurance Policy issued by the Company to Chase
Manhattan Automotive Finance Corporation (the “Insured”) with an effective date
of December 31, 2000 (the “Policy”).


 


For
value received, the Reinsurer hereby agrees that, in the event of the
occurrence of the insolvency, receivership, liquidation or reorganization of
the Company and the failure of the Company to pay any amounts payable to the
Insured under the Policy within the time provided in the Policy, (i) the
Reinsurer will immediately become liable to the Insured for the portion of such
amount that is covered under the Reinsurance Agreement (the “Covered Amount”),
(ii) the Reinsurer will have the right and the obligation to make direct payment
of the Covered Amount to the Insured within three business days of receipt by
the Reinsurer of a notice in the form attached hereto as Exhibit A and (iii)
the Insured will have a direct right of action against the Reinsurer for the
payment of the Covered Amount, in each case without diminution because of the
occurrence of any proceeding or circumstance involving the Company, including
the occurrence of the insolvency, receivership, liquidation or reorganization
of the Company, and notwithstanding any payment by the Reinsurer to the Company
or the rejection, disaffirmation, reformation or other action terminating or
modifying the Policy or the Reinsurance Agreement by any liquidator,
rehabilitator, conservator or receiver of the Company or other officer with similar
powers with respect to the Company or by operation of law. The direct payment
of any Covered Amount by the Reinsurer to the Insured pursuant to this
Endorsement will extinguish any obligation on the part of the Reinsurer under
the Reinsurance Agreement or otherwise to make any other payment in respect of
such Covered Amount.


 


This
Endorsement does not cover amounts the Insurer disputes in good faith are owed
under the Policy until such time as such dispute has been fully and finally
resolved.


 


The
undersigned covenant that, while the Policy is in force, without the prior
written consent of the Insured, the Reinsurance Agreement shall not be (i)
assigned, (ii) terminated or (iii) altered or modified in any manner adverse to
the interests of the Insured. The undersigned further covenant that this
Endorsement shall not be altered, modified or terminated while the Policy is in
force without the prior written consent of the Insured.


 


Promptly
following the execution of this Endorsement, the Company shall deliver to the
Insured a copy of the executed Endorsement. The Insured shall be a third party
beneficiary of the Reinsurance Agreement for purposes of enforcing this
Endorsement.


 


Nothing
herein contained shall be held to vary, alter, waive or extend any of the
terms, conditions, provisions, agreements or limitations of the Reinsurance
Agreement other than as above stated. In the event of any conflict between the
provisions of this Endorsement and the Reinsurance Agreement, the provisions of
this Endorsement shall govern.


 


14

















 


IN
WITNESS WHEREOF, the Company and the Reinsurer have each caused this
Endorsement to be signed by duly authorized officers as of the date first above
written.


 


 


	
  WESTCHESTER
  FIRE INSURANCE COMPANY

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  
	
   

  
	
  [REINSURER]

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


15

















 


EXHIBIT A


NOTICE OF CLAIM


 


[insert
date]


[insert
name and address of Reinsurer]


 


Re:
Cut-Through Endorsement to the Reinsurance Agreement between Westchester Fire
Insurance Company (the “Company”) and [insert name of reinsurer] (the
“Reinsurer”) dated as of [insert date] in respect of the Residual Value
Insurance Policy issued by the Company to Chase Manhattan Automotive Finance
Corporation (the “Insured”) with an effective date of December 31, 2000 (the
“Policy”).


 


The
undersigned, a duly authorized officer of the Insured, hereby certifies to the
Reinsurer, with reference to the Policy, that:


 


1.       The
Insured has submitted a claim to the Company in accordance with the terms and
provisions of the Policy.


 


2.       The
Insurer is obligated to and has failed to pay all or a portion of such claim
within the time and in accordance with the provisions of the Policy by reason
of the occurrence of the insolvency, receivership, liquidation or
reorganization of the Company.


 


3.       The
amount of such claim remaining unpaid as of the date of this notice is $
             (the
“Covered Amount”);


 


4.       Attached
hereto is a copy of the claim notice to sent to the Company and the report or
other document on the basis of which the Insured has made the calculation
necessary to determine the claim amount under the Policy.


 


5.       The
Covered Amount is not the subject of dispute between the Company and the Insured.


 


6.       The
Insured hereby assigns to the Reinsurer its right to receive from the Company
an amount equal to the Covered Amount, and the Reinsurer shall be subrogated to
the rights of the Insured under the Policy in relation to such amount. The
Insured shall execute all powers of attorney, consents and other instruments
necessary to effectuate such assignment.


 


7.       Payment
of the Covered Amount should be made by wire transfer directed to:


 


If
you fail to make full payment of amounts due and payable and claimed hereby,
the above instrument of assignment shall be without effect and shall be
cancelled and returned, on the date such payment is due, by you to the Insured.


 


IN
WITNESS WHEREOF, the Insured has executed and delivered this Notice of Claim to
the Reinsurer as of the         day of
                         ,
           .


 


	
  CHASE
  MANHATTAN AUTOMOTIVE FINANCE CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


16