Exhibit
10.12


 


MODIFICATION
AGREEMENT


 


This
Modification Agreement (the “Agreement”) dated as of January 1, 2000, is made
by and between ACE Guaranty Re Inc. (formerly Capital Reinsurance Company), a
Maryland domiciled insurance company (“AGRE”) and its direct parent company,
ACE Financial Services Inc. (formerly Capital Re Corporation), a Delaware
domiciled insurance holding company (“ACE Financial”).


 


WHEREAS, AGRE and ACE Financial entered into a Service Agreement as of
January 1, 1995 (the “Service Agreement”), a copy of which is attached hereto;


 


WHEREAS, AGRE maintains its own offices and staff of
professional insurance executives and administrative and clerical personnel who
are experienced in the management of insurance companies;


 


WHEREAS,
ACE Financial requires certain support services in order to conduct its
business and AGRE desires to provide such services;


 


WHEREAS, AGRE and ACE Financial desire to amend the
Service Agreement as of January 1, 2000 so as to increase the monthly fee
payable thereunder from $5,000 to 20,833.33 (equivalent to $250,000 annually);


 


NOW, THEREFORE, in consideration of the mutual
promises contained herein and for other good and valuable consideration the
receipt of which is hereby acknowledged, AGRE and ACE Financial hereby agree as
follows:


 


1.                                       Paragraph 6 of the Service Agreement shall be
deleted and replaced in its entirety by the following:


 


6.                                       In consideration of the services provided by
ACE Guaranty Re Inc. pursuant to this Agreement, ACE Financial Services Inc.
shall pay to ACE Guaranty Re Inc. a monthly fee of $ 20,833.33 (equivalent to
$250,000 annually) no later than the first day of each month during the term
hereof. The components of the monthly fee are as follows:


 


Accounting and Finance Services — $ 10,833.33

Legal Services — $7,000

Administrative Support — $3,000


 


The monthly fee is ACE Guaranty Re Inc.’s cost of
providing the services pursuant to this Agreement. The monthly fee for any
month not wholly within the term of this Agreement shall be pro-rated accordingly.


 


2.                                       Except
as provided in paragraph 1 of this Agreement, the terms and provisions of the
Service Agreement shall not be amended.


 

















 


IN WITNESS WHEREOF, the undersigned duly
authorized officers of ACE Guaranty Re Inc. and ACE Financial Services Inc.
have executed this Agreement as of January 1, 2000.


 


 


	
  ACE GUARANTY RE INC.

  	
  ACE FINANCIAL SERVICES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Geraldine Alfino Egler

  	
   

  	
  By:

  	
  /s/ Lisa Mumford

  	
   

  
	
  Name:  Geraldine Alfino Egler

  	
  Name:  Lisa Mumford

  
	
  Title:  Senior Vice President,

  Secretary and General Counsel

  	
  Title:  Senior Vice President,

  Chief Financial Officer and

  Treasurer

  
						



 

















 


SERVICE
AGREEMENT


 


This
Service Agreement (the “Agreement”) is made as of the first day of January
1995, between Capital Reinsurance Company, a Maryland domiciled insurance
company (“Capital Re”), and Capital Re Corporation, a Delaware domiciled
insurance holding company (the “Holding Company”).


 


WHEREAS,
Capital Re is a reinsurer licensed under the New York Insurance Law; and


 


WHEREAS,
Capital Re maintains its own offices and staff of professional insurance
executives and administrative and clerical personnel who are experienced in the
management of insurance operations;


 


WHEREAS,
the Holding Company requires certain support services in order to conduct its business
and Capital Re desires to provide such services.


 


NOW,
THEREFORE, in consideration of the mutual benefits to be derived, Capital Re
and the Holding Company do hereby agree as follows:


 


1.                                       Capital Re will make available such services,
including legal, data processing, accounting, tax and financial planning
services to the Holding Company, as are needed and requested by the Holding
Company.  Under no circumstances shall
any member of Capital Re’s staff be granted any authority pursuant to this
Agreement to make investment or business decisions on behalf of the Holding
Company or otherwise make any legally binding commitments on behalf of the
Holding Company.


 


2.                                       Capital Re’s staff members who provide such
services to the Holding Company will remain for, all purposes, the employees of
Capital Re and will be instructed to provide the services to the Holding
Company with the same degree of care and diligence as they would exercise in
the performance of the same or similar services to Capital Re.


 


3.                                       Capital Re shall compensate its staff members
who provide such services to the Holding Company on the same basis as they are
customarily compensated for the performance of their regular duties to Capital
Re.  The Holding Company shall make no
direct payment of any kind to, or compensate in any manner, the staff members
of Capital Re whose services it uses.


 


4.                                       The Holding Company shall remain the sole
owner of all records, documents and other work products developed, utilized or
maintained for the Holding Company by Capital Re’s staff.


 


5.                                       Each party shall have the right to conduct an
audit of the relevant books, records and accounts of the other party upon
giving reasonable notice of its intent to conduct such an audit. In the event
of such audit, the party being audited shall give to the party requesting the
audit reasonable cooperation and access to all books, records and accounts
necessary to the audit.


 

















 


6.                                       In consideration of the services provided by
Capital Re pursuant to this Agreement, the Holding Company shall pay to Capital
Re a monthly fee of $5,000 no later than the first day of each month during the
term hereof. The components of the monthly fee are as follows:


 


Accounting and Finance Services - $2,000

Legal Services - $1,500

Administrative Support - $1,500


 


The monthly fee is Capital Re’s cost of providing the services pursuant
to this Agreement. The monthly fee for any month not wholly within the term of
this Agreement shall be pro-rated accordingly.


 


7.                                       Should an irreconcilable difference of opinion
between Capital Re and the Holding Company arise as to the interpretation of
any matter respecting this Agreement, such difference shall be submitted to
arbitration as the sole remedy available to both parties. Such arbitration
shall be in the accordance with the rules of the American Arbitration
Association, and the arbitration shall take place in New York City.


 


8.                                       This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Maryland.


 


 


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first day of January, 1995.


 


 


	
  CAPITAL
  REINSURANCE COMPANY

  	
  CAPITAL
  RE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Lisa Mumford

  	
   

  	
  By:

  	
    /s/ Howard S. Yaruss

  	
   

  
	
  Name:  Lisa Mumford

  	
  Name:  Howard S. Yaruss

  
	
  Title:  Vice President

  	
  Title:  Vice President