Document:

Exhibit
10.26

 

STOCK PURCHASE AGREEMENT

 

This Stock
Purchase Agreement (this “Agreement”), dated as of April 15, 2004, is
entered into by and between Assured Guaranty Re Overseas Ltd. (formerly known
as ACE Capital Re Overseas Ltd.), an insurance company registered and licensed
under the laws of the Islands of Bermuda (“Seller”), and ACE Bermuda Insurance
Ltd., an insurance company registered and licensed under the laws of the
Islands of Bermuda (“Buyer”).

 

WITNESSETH:

 

WHEREAS,
Seller is the beneficial and record holder of all of the issued and outstanding
shares of capital stock (the “Shares”) of ACE Capital Title Reinsurance
Company, a New York domiciled insurance company (the “Company”); and

 

WHEREAS,
Seller wishes to sell, and Buyer wishes to purchase, the Shares in accordance
with the terms and condition of this Agreement.

 

NOW THEREFORE, in
consideration of the premises set forth above, and subject to the terms and
conditions stated herein, the parties hereto agree as follows:

 

ARTICLE I

SALE AND PURCHASE OF SHARES

 

Section 1.1.                  Sale of Shares; Purchase Price.  Subject to the terms and conditions hereinafter set forth, Seller
hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from
Seller, the Shares at an aggregate purchase price equal to USD39,342,869 (the
“Purchase Price”).

 

Section 1.2.                  Payment of Purchase Price.  Concurrently with the execution of this Agreement, Buyer shall
deliver to Seller a non-negotiable note (in the form attached hereto as Exhibit
A) in an amount equal to the Purchase Price.

 

Section 1.3.                  Delivery of Shares.  Concurrently with the execution of this Agreement but in no event
prior to Seller’s receipt of the Purchase Price, Seller shall deliver to Buyer
all stock certificates representing the Shares.  Such Shares shall be duly endorsed to Buyer or accompanied by
duly executed instruments of transfer in the form attached hereto as Exhibit B.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller
represents and warrants to Buyer as follows:

 

Section 2.1.                  Organization, Standing and
Authority of Seller.  Seller is a company duly organized, validly
existing and in good standing under the laws of the Islands of Bermuda

 

 

and
has all requisite power and authority to execute, deliver and perform this
Agreement and the transactions contemplated hereby.

 

Section 2.2.                  Execution and Delivery.  This Agreement has been duly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller enforceable against Seller
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally or by general
equitable principles (regardless of whether enforcement is considered in a
proceeding in equity or at law).

 

Section 2.3.                  Consents and Approvals.  The execution and delivery by Seller of this Agreement, the
performance by Seller of its obligations hereunder and the consummation by
Seller and the validity of the transactions contemplated hereby do not require
Seller to obtain any consent, approval or action of, or make any filing with or
give any notice to, any corporation, person or firm or any public, governmental
or regulatory body or judicial authority.

 

Section 2.4.                  Noncontravention. 
The execution, delivery and
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) violate the
certificate of incorporation or bylaws of Seller or of the Company or (ii)
violate any applicable law, rule, regulation, judgment, injunction, order or
decree.

 

Section 2.5.                  Capitalization; Title to Shares.  The authorized capital stock of the Company consists of 200,000
shares of common stock, 200,000 shares of which are issued and outstanding and
comprise the Shares.  Seller owns
beneficially and of record, free and clear of any claim, charge, preferential
arrangement, lien or other encumbrance, all of the Shares. Upon payment for the
Shares as herein provided, Buyer will acquire good and marketable title
thereto, free and clear of any claim, option, call, subscription, warrant,
charge, preferential arrangement, lien or other encumbrance.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer
represents and warrants to Seller as follows

 

Section 3.1.                  Organization, Standing and
Authority of Buyer.  Buyer is a company duly organized, validly
existing and in good standing under the laws of the Cayman Islands and has all
requisite power and authority to execute, deliver and perform this Agreement
and the transactions contemplated hereby.

 

Section 3.2                   Execution and Delivery.  This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer, enforceable against it
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
affecting the enforcement of

 

2

 

creditors’
rights generally or by general equitable principles (regardless of whether
enforcement is considered in a proceeding in equity or at law).

 

Section 3.3.                  Consents and Approval.  The execution and delivery by Buyer of this Agreement, the
performance by Buyer of its obligations hereunder and the consummation by Buyer
and the validity of the transactions contemplated hereby do not require Buyer
to obtain any consent, approval or action of, or make any filing with or give
any notice to, any corporation, person or firm or any public, governmental or
regulatory body or judicial authority.

 

Section 3.4.                  Noncontravention. 
The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) violate the certificate of
incorporation or bylaws of Buyer or (ii) violate any applicable law, rule,
regulation, judgment, injunction, order or decree.

 

Section 3.5.                  Investment
Intent.  Buyer is acquiring the Shares
for its own account and not for the purpose of a distribution.  Buyer will refrain from transferring or
otherwise disposing of any of the Shares, or any interest therein, in such
manner as to violate any registration provision of the Securities Act of 1933
or any applicable state “blue sky” laws.

 

ARTICLE IV

MISCELLANEOUS

 

Section 4.1.                  Notices.  Any notice or other communication required or permitted to be
given hereunder shall be deemed given (i) two business days after being sent by
Federal Express or any other recognized overnight courier service providing
delivery confirmation or (ii) five business days after mailing by certified
mail, valid postage prepaid and with return receipt requested, in each case
addressed as follows to the person or entity to be notified:

 

If to Buyer:

 

ACE
Bermuda Insurance Ltd.

The
ACE Building

17
Woodbourne Avenue

Hamilton,
Bermuda HM 08

Attention:  General Counsel

Telephone:
(441) 295-5200

Facsimile:
(441) 295-5221

 

If to Seller:

 

Assured
Guaranty Re Overseas Ltd.

Victoria
Hall

11
Victoria Street

 

3

 

Hamilton HM HX, Bermuda

Attention:
Corporate Secretary

Telephone:
(441) 297-9730

Facsimile:
(441) 297-9704

 

with
a copy to:

 

ACE
Capital Re Inc.

1325
Avenue of the Americas

New
York, NY 10019

Attention:
General Counsel

Telephone:
(212) 974-0100

Facsimile:
(212) 581-3268

 

Either party may, by notice given in
accordance with this Section 4.1 to the other party, designate another
address or person for receipt of notices hereunder.

 

Section 4.2.                  Entire Agreement.  This Agreement (including the Exhibits hereto) contains the
entire agreement between the parties with respect to the purchase of the Shares,
and supersedes all prior agreements, written or oral, with respect thereto.

 

Section 4.3.                  Waivers and Amendment;
Non-Contractual Remedies. Preservation of 
Remedies.  This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance.  No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of
any such right, power or privilege, preclude any further exercise thereof or
the exercise of any other such right, power or privilege. The rights and
remedies provided herein are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.

 

Section 4.4.                  Survival of Representations and
Warranties.  Each of Seller and Buyer has the right to
rely fully upon the representations, warranties, covenants and agreements of
the other party contained in this Agreement. All such representations,
warranties, covenants and agreements shall survive the execution and delivery
hereof and the closing hereunder.

 

Section 4.5.                  Governing Law.  This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without reference to the conflicts of
law rules thereof.

 

Section 4.6.                  Binding Effect; No Assignment.  This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.  Neither this Agreement, nor any right
hereunder, may be assigned by either party without the written consent of the
other party hereto.

 

Section 4.7.                  No Third Party Beneficiaries.  Nothing in this Agreement is intended or

 

4

 

shall
be construed to give any person, other than the parties hereto, any legal or
equitable right, remedy or claim under, or in respect of, this Agreement or any
provision contained herein.

 

Section 4.8.                  Counterparts.  This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.  Each counterpart may
consist of a number of copies hereof, each signed by less than all, but
together signed by all, of the parties hereto.

 

Section 4.9.                  Headings.  The headings in this Agreement are for reference only, and shall
not affect the interpretation of this Agreement.

 

Section 4.10.               Further Assurances.                  Each of Seller and Buyer shall,
at its own cost and expense, execute and do all such deeds, documents, acts and
things as the other party may from time to time reasonably request as may be
necessary to give full effect to this Agreement.

 

Section 4.11.               Books and Records.                   Seller shall transfer to Buyer
all of the books and records of the Company (including without limitation all
legal, underwriting and claims files) and all other data and information
related to the operation and business of the Company and its in-force book of
business as the Buyer shall reasonably request.

 

Section 4.12.  Transitional Services.  Seller will provide to the Company such
accounting services as are reasonably necessary for the Company to prepare its
second quarter 2004 GAAP and statutory financial statements (including all
investment accounting, accounts receivable and payables).  Seller will also prepare and submit on
behalf of the Company all statutory filings required to be made by the Company
on or prior to June 30, 2004 or in respect of the calendar quarter ended
June 30, 2004.

 

 

[The next page is the
signature page.]

 

5

 

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

 

 

	
  ASSURED GUARANTY RE OVERSEAS LTD.

  
	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACE BERMUDA INSURANCE LTD.

  
	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

6

 

EXHIBIT A

 

THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAW.  THE HOLDER HEREOF AGREES FOR THE BENEFIT OF THE MAKER THAT THIS
NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY PERSON.

 

ACE BERMUDA INSURANCE LTD.

 

FOR
VALUE RECEIVED, the undersigned, ACE BERMUDA INSURANCE LTD., hereby promises to
pay ASSURED GUARANTY RE OVERSEAS LTD. on the Maturity Date the sum of [                      ] ($), together
with interest thereon (computed on the basis of a 360-day year of twelve 30-day
months and compounded quarterly) at the rate of 1.5% per annum from the date
hereof.

 

This
Note is made by ACE Bermuda Insurance Ltd. as consideration for the purchase of
100% of the outstanding shares of
capital stock of ACE Capital Title Reinsurance Company pursuant to the
Stock Purchase Agreement, dated as of [           ], 2004, between ACE Bermuda Insurance Ltd. and Assured
Guaranty Re Overseas Ltd.

 

This
Note may be prepaid at any time.  Any
overdue principal of, or interest on, this Note will bear interest, payable on
demand, for each day until paid at a rate per annum equal to 2% per annum plus
the rate otherwise payable hereunder.

 

Payments
of principal hereof and interest hereon shall be made in lawful money of the
United States of America.

 

This
Note shall be governed by and construed in accordance with the laws of the
State of New York, without regard to principles regarding choice of law.

 

As
used herein, “Maturity Date” means
the earlier of (i) June 30, 2004 and (ii) the date of the closing of the
initial public offering of shares of Assured Guaranty Ltd.

 

 

	
   

  	
  ACE BERMUDA INSURANCE LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Date: [Insert date of SPA]

  

 

7

 

EXHIBIT B

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR
VALUE RECEIVED, Assured Guaranty Re Overseas Ltd. hereby sells, assigns and
transfers unto ACE Bermuda Insurance Ltd. 200,000 shares of common stock of ACE
Capital Title Reinsurance Company (the “Company”) standing in our name on the
books of the Company, represented by Certificate Nos. 1 and 2, and Seller
herewith directs that such stock certificates be transferred on the books of
the Company with full power of substitution in the premises.

 

	
  April [              ],
  2004

  	
   

  
	
   

  	
   

  
	
  Assured Guaranty Re
  Overseas Ltd.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

8Exhibit 10.50

 

QUOTA SHARE RETROCESSION AGREEMENT

 

This Quota Share Retrocession
Agreement (this “Agreement”), dated as of April
        , 2004, is made and entered
into by and between ASSURED GUARANTY RE OVERSEAS LTD., formerly known as ACE
CAPITAL RE OVERSEAS LTD. (the “Retrocedent”), an insurance company registered
and licensed under the laws of the Islands of Bermuda, and ACE TEMPEST RE USA,
INC. for and on behalf of ACE AMERICAN INSURANCE COMPANY (the
“Retrocessionaire”), a Pennsylvania insurance company.

 

In consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Retrocedent and the
Retrocessionaire agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1.  Definitions.  For all purposes with regard to this
Agreement, the following terms shall have the following meanings:

 

A.                                   “Allocated
Loss Adjustment Expenses” means expenses paid by the Retrocedent on or after
the Effective Date in connection with (i) the adjustment of claims under the
Reinsurance Agreements, including, without limitation, court costs, interest
upon judgments as it accrues, and allocated investigation, adjustment, and
legal expenses chargeable to the investigation, negotiation, settlement or defense
of a claim or (ii) the protection, perfection or exercise of any subrogation,
salvage or recoupment rights under a Reinsurance Agreement.  For the avoidance of doubt, “Allocated Loss
Adjustment Expenses” does not include salaries paid to employees of the
Retrocedent or other overhead expenses.

 

B.                                     “Collateral
Amount” has the meaning set forth in Section 8.1.

 

C.                                     “Commutation
Amount” means the consideration payable to a ceding company under a Reinsurance
Agreement upon the commutation of such Reinsurance Agreement.

 

D.                                    “Commuted
Reinsurance Agreement” means a Reinsurance Agreement that has been commuted
with the prior written consent of the Retrocessionaire, which consent will not
be unreasonably withheld.  The
Retrocessionaire’s consent in respect of the commutation of a Reinsurance
Agreement will not be unreasonably withheld if the Retrocessionaire believes,
in good faith, that the consideration demanded by the ceding company in respect
of the proposed commutation is excessive.

 

E.                                      “Covered
Losses” means Reinsurance Agreement Losses and Allocated Loss Adjustment
Expenses.

 

 

F.                                      “Deposit
Amount” means, as of any date of determination, an amount equal to (i) the
premiums retained as a deposit by the Retrocedent on the Upfront Premium
Payment Date in accordance with Article 5 hereof plus (ii) amounts previously transferred to the Retrocedent
in accordance with Article 8 hereof minus
(iii) amounts previously appropriated by the Retrocedent in accordance with
Article 8 hereof minus (iv)
amounts previously transferred to the Retrocessionaire in accordance with
Article 8 hereof plus (v)
interest credited in accordance with Article 8 hereof.

 

G.                                     “Effective
Date” means April 1, 2004.

 

H.                                    “Extra Contractual Obligations” means, with
respect to any Reinsurance Agreement, any and all liabilities (whether they
constitute compensatory, consequential, exemplary or punitive damages) not
covered under any provision of such Reinsurance Agreement that arise from the
handling of any claim on business covered thereunder, including without
limitation, liabilities arising due to the failure by the Retrocessionaire
(acting pursuant to the authority granted to it in Article 6 hereof) to settle
within the policy limit, or by reason of alleged or actual negligence or bad
faith of the Retrocessionaire in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against the insured
thereunder or in the preparation or prosecution of an appeal consequent upon
such action.  Notwithstanding the preceding,
Extra Contractual Obligations shall not include such liabilities that arise
from the Retrocedent’s intentional or reckless disregard of its obligations
under this Agreement (including without limitation the Retrocedent’s obligation
under Article 7 to provide copies to the Retrocessionaire of all claims notices
received by the Retrocedent).

 

I.                                         “Novation
Agreement” means an agreement among the Retrocedent, the Retrocessionaire and a
ceding company under a Reinsurance Agreement whereby (i) all of Retrocedent’s right, title, interest and
obligations in, to and under such Reinsurance Agreement are assigned to the
Retrocessionaire, (ii) all of Retrocedent’s obligations under such Reinsurance
Agreement are assumed by the Retrocessionaire and (iii) the Retrocedent is
released by the ceding company of all liability under such Reinsurance
Agreement.

 

J.                                        “Quarterly
Report” has the meaning set forth in Section 7.1.

 

K.                                    “Reinsurance
Agreements” means those reinsurance agreements entered into by the Retrocedent
that are described in Annex A hereto.

 

L.                                      “Reinsurance
Agreement Losses” means amounts paid by
the Retrocedent on or after the Effective Date under the terms of a Reinsurance
Agreement in respect of (i) claims incurred under such Reinsurance Agreement,
including, without limitation, amounts paid in settlement of claims and in
satisfaction of judgments, (ii) loss adjustment expenses of the reinsured that
are ceded to the Retrocedent under such Reinsurance Agreement and (iii) Extra
Contractual Obligations in respect of such Reinsurance Agreement.

 

M.                                 “Retrocession
Term” has the meaning set forth in Article 2.

 

2

 

N.                                    “Upfront
Premium Payment Date” means the
business day immediately following the later of (x) the date upon which the
Retrocedent and Retrocessionaire execute and deliver this Agreement and (y) the
earlier of (i) June 30, 2004 and (ii) the date of the closing of the initial
public offering of shares of Assured Guaranty Ltd.

 

Section 1.2.  Headings.  All captions, headings or titles preceding any Section or Article
in this Agreement are solely for convenience of reference and are not part of
this Agreement and shall not affect its meaning, construction or effect.

 

Section 1.3.  Other Interpretative Provisions.  The following interpretive provisions
apply to this Agreement:  (a) a
reference to any document or agreement shall include such document or agreement
as amended, modified or supplemented from time to time in accordance with its
terms and the terms of this Agreement; (b) the singular includes the plural and
the plural includes the singular; (c) the words “include,” “includes,” and
“including” are not limiting; and (d) the words “herein,” “hereof,”
“hereunder,” and words of like import shall refer to this Agreement as a whole
and not to any particular section or subdivision of this Agreement.

 

ARTICLE 2

 

TERM

 

Section 2.1.  Term.  The term of this Agreement (the “Retrocession Term”) shall
commence at 12:01 a.m., Eastern Standard Time, on the Effective Date and shall
remain in force until such time as the Retrocedent has no further liability
under the Reinsurance Agreements.

 

ARTICLE 3

 

TYPE AND BUSINESS
COVERED

 

Quota share retrocession in
respect of the Reinsurance Agreements.

 

ARTICLE 4

 

COVERAGE

 

The Retrocedent hereby cedes to
the Retrocessionaire, and the Retrocessionaire hereby assumes as reinsurance
from the Retrocedent and agrees to pay Retrocedent, (i) 100% of Covered Losses
paid by the Retrocedent in respect of the Reinsurance Agreements and (ii) 100%
of Commutation Amounts paid by the Retrocedent in respect of Commuted
Reinsurance Agreements.

 

3

 

ARTICLE 5

 

RETROCESSION PREMIUM

 

Section
5.1.  Upfront Premium.  On the Upfront Premium Payment Date, the
Retrocedent will pay to the Retrocessionaire premium in the amount of $           ], of which (i) [$       ] will be paid to the Retrocessionaire
in cash and (ii) [$         ] will be
retained by the Retrocedent as a deposit.

 

Section
5.2.  Periodic Premium.  The Retrocedent will pay to the
Retrocessionaire, in accordance with Article 7 hereof, 100% of the premiums
(less brokerage and ceding commissions) received by the Retrocedent in respect
of the Reinsurance Agreements on or after the Upfront Premium Payment Date.

 

ARTICLE 6

 

CLAIMS MANAGEMENT; SETTLEMENTS;
ADMINISTRATION; RIGHTS OF ASSOCIATION

 

Section 6.1.  Claims Management.  The Retrocessionaire agrees to take any and
all actions necessary or appropriate for the management of claims arising under
the Reinsurance Agreements, including without limitation investigating,
assessing, adjusting, arbitrating, litigating and settling claims, as
appropriate, and shall conduct itself with the utmost good faith in taking such
actions.  The Retrocessionaire is hereby
authorized and directed to undertake all such actions on behalf of the
Retrocedent.

 

Section 6.2.  Claims
Settlements.  The Retrocedent agrees
to abide by the claim settlements of the Retrocessionaire.  The Retrocessionaire shall be the sole judge
of (i) the interpretation of the Reinsurance Agreements, (ii) what shall
constitute a claim under the Reinsurance Agreements and (iii) the Retrocedent’s
liability under the Reinsurance Agreements and the proper amounts for the
Retrocedent to pay thereunder.

 

Section 6.3.  Administration.  The Retrocessionaire agrees to take any and
all actions necessary or appropriate for the administration of the Reinsurance
Agreements, including without limitation determining the amount of collateral
to be posted under such Reinsurance Agreements, and shall conduct itself with
the utmost good faith in taking such actions. 
The Retrocessionaire is hereby authorized and directed to undertake all
such actions on behalf of the Retrocedent.

 

Section 6.4.  Rights of Association.  Subject to the foregoing, the Retrocedent
shall have the right and shall be given the opportunity to, at its own expense,
associate with the Retrocessionaire in the defense of any suit or proceeding
arising out of or connected with any claim under a Reinsurance Agreement.  In such event, the Retrocessionaire and the
Retrocedent shall cooperate in all aspects of the defense of such suit or
proceeding.

 

4

 

ARTICLE 7

 

REPORTS AND REMITTANCES

 

Section 7.1. 
Quarterly Report.  Within
30 days following the end of each calendar quarter during the Retrocession
Term, the Retrocedent will prepare and deliver to the Retrocessionaire a report
(the “Quarterly Report”) containing information relevant to the calculation of
the amount (other than amounts due and owing pursuant to Article 8 hereof) owed
by or to the Retrocessionaire hereunder in respect of such calendar quarter
(which report shall be in such form as the Retrocedent and the Retrocessionaire
shall reasonably agree).

 

Section 7.2. 
Remittances.  Net payments
owed to the Retrocessionaire shall accompany the Quarterly Report.  Net payments owed to the Retrocedent shall
be made within ten (10) business days of delivery of the Quarterly Report;
provided, however, at the option and upon the demand of the Retrocedent, but
solely when the Retrocedent is in receipt of a cash call in excess of $100,000
arising from obligations owed on a single Reinsurance Agreement, the
Retrocedent shall be paid by wire transfer of same day federal funds within two
business days following the date of receipt by the Retrocessionaire of a report
identified as a “Special Loss Accounting,” which shall indicate on its face
that:

 

a)              the net amount then due from the
Retrocessionaire is in excess of $100,000, and

b)             the obligation arises from a single
Reinsurance Agreement and

c)              the Retrocedent’s obligation is due to be
paid by wire transfer within two business days.

 

Amounts paid pursuant to a
Special Loss Accounting shall be credited in the Quarterly Report that follows
the submission of a Special Loss Accounting.

 

Section 7.3. 
Claims Notices, Bordereaux and Other Information Received from Ceding
Companies.  The Retrocedent shall
deliver copies of all notices (including, without limitation, claim notices),
bordereaux, requests for collateral and any and all other information it
receives in respect of the Reinsurance Agreements within 10 business days of
the Retrocedent’s receipt thereof.

 

Section
7.4.  Reserve
Report.  Within 30 days following the
end of each calendar quarter during the Retrocession Term, the Retrocessionaire
will prepare and deliver to the Retrocedent a report containing the
Retrocessionaire’s good faith estimate of the loss reserves to be established
by the Retrocedent in respect of the Reinsurance Agreements ceded hereunder as
of the end of such calendar quarter. 
The Retrocedent shall have no obligation to establish reserves in
accordance with such recommendations.

 

5

 

ARTICLE 8

 

COLLATERAL

 

Section 8.1. 
Quarterly True Up.  No
later than five days prior to the end of each calendar quarter during the
Retrocession Term (such calendar quarter, the “Current Quarter”), the
Retrocedent will provide to the Retrocessionaire a good faith written estimate
of the amount (such amount, the “Collateral Amount”) of collateral that the
Retrocedent will be required to post as of the end of such Current Quarter in
respect of the Reinsurance Agreements and a good faith written estimate of the
Deposit Amount as of the end of such Current Quarter.  If the Collateral Amount as of the end of any Current Quarter
exceeds the Deposit Amount as of the end of such Current Quarter, the
Retrocessionaire will transfer such difference to the Retrocedent no later than
the last business day of such Current Quarter. 
If the Collateral Amount as of the end of any Current Quarter is less
than the Deposit Amount as of the end of such Current Quarter, the Retrocedent
will transfer such difference to the Retrocessionaire no later than the last
business day of such Current Quarter.

 

Section 8.2. 
True Up Following Novation. 
Within five business days of any day (such day, the “Novation Date”)
during the Retrocession Term upon which the Retrocedent, the Retrocessionaire
and a ceding company execute and deliver a Novation Agreement, the Retrocedent
will provide to the Retrocessionaire a written statement of the Collateral
Amount as of the Novation Date and (i) if the Collateral Amount exceeds the
Deposit Amount as of such Novation Date, the Retrocessionaire will promptly
(and in any event within five business days of receipt of such written
statement) transfer such difference to the Retrocedent and (ii) if the
Collateral Amount is less than the Deposit Amount as of such Novation Date, the
Retrocedent will promptly (and in any event within five business days of such
Novation Date) transfer such difference to the Retrocessionaire.

 

Section 8.3.  True
Up Following Retrocessionaire’s Request. 
From time to time during the Retrocession Term, the Retrocessionaire may
request that the Retrocedent provide a written statement of the Collateral
Amount as of any day during the Retrocession Term and, if the Collateral Amount
is less than the Deposit Amount as of such day, the Retrocedent will promptly
(and in any event within five business days of such day) transfer such
difference to the Retrocessionaire.

 

Section 8.4.  Use
of Deposit Amount; Crediting of Interest. 
At any time after the Retrocessionaire fails to pay any Covered Losses
or Commutation Amounts owing to the Retrocedent under this Agreement as and
when due, the Retrocedent may appropriate so much of the Deposit Amount as may
be required to cure such default.  Until
such time as the Deposit Amount has been utilized in such manner or returned to
the Retrocessionaire pursuant to the terms hereof, interest thereon will be
credited to the Retrocessionaire quarterly at rate per annum equal to the
lesser of (i) the prime rate as of the first business day of such calendar
quarter and (ii) the interest rate payable on the first six-month U.S. Treasury
Bill issued during such calendar quarter. 
Upon expiry of the Retrocessionaire’s liability hereunder, the
Retrocedent shall return to the Retrocessionaire the balance of the Deposit
Amount as of such date of expiry.

 

6

 

ARTICLE 9

 

AMENDMENT OF
REINSURANCE AGREEMENTS; NOVATION AGREEMENTS

 

Section 9.1.  Amendment
of Reinsurance Agreements.  Any
amendments, extensions, endorsements or alteration to the Reinsurance
Agreements will be submitted to the Retrocessionaire for advance approval, and
no amendment, extension, endorsement or alteration of any Reinsurance Agreement
will be effective as between the Retrocedent and the Retrocessionaire unless the
Retrocessionaire’s prior written approval has been obtained.

 

Section 9.2.  Novation
Agreements.  The Retrocedent and the
Retrocessionaire will use commercially reasonable efforts to negotiate, execute
and deliver Novation Agreements. 
Other than the consideration set forth in this Agreement, no
consideration will be payable to or by either party hereto in connection with
the execution and delivery of any Novation Agreement.  The Retrocedent and Retrocessionaire shall execute, acknowledge
or verify, and deliver any and all agreements, documents, instruments, reports
or filings, and take any and all other actions, which from time to time may be
reasonably requested by the other party to this Agreement to carry out the
purposes and intent of this Section.  Without
limiting the generality of the preceding sentence, at the request of the
Retrocessionaire in connection with the execution and delivery of a Novation
Agreement, the Retrocedent will deliver a letter (in form and substance
satisfactory to the Retrocessionaire) to the ceding company directing that
future premiums be paid directly to the Retrocessionaire.  Notwithstanding anything to the contrary set
forth herein, the Retrocedent will not execute and deliver a Novation Agreement
without the prior written approval of the Retrocessionaire, which approval will
not be unreasonably withheld.  The
signature of the Retrocessionaire on a Novation Agreement will be deemed prior
written approval of such Novation Agreement by the Retrocessionaire.

 

ARTICLE 10

 

RESERVES

 

The Retrocessionaire
shall maintain reserves with respect to its share of the Reinsurance Agreements
ceded hereunder as are required by applicable law.

 

ARTICLE 11

 

Retrocedent will indemnify and hold the Retrocessionaire harmless
against any damages, claims or causes of action incurred by or asserted against
the Retrocessionaire that arise from the intentional or reckless disregard by
the Retrocedent of its obligations under this Agreement.

 

7

 

ARTICLE 12

 

GENERAL CONDITIONS

 

Section 12.1.  Follow the Fortunes.  This Agreement is based on the original
terms of the Reinsurance Agreements so that the Retrocessionaire’s rights and
obligations vis-à-vis the Retrocedent with respect to the reinsurance provided
under this Agreement shall, subject to the terms of this Agreement, follow the
fortunes of the Retrocedent in all respects under the Reinsurance Agreements.

 

Section 12.2.  No Third Party Rights.  Nothing herein shall be construed to expand
the liability of the Retrocessionaire beyond what is specifically assumed under
this Agreement by creating in any third party any rights hereunder.

 

Section 12.3.  Insolvency.  In the event of the insolvency of the
Retrocedent, this reinsurance shall be payable directly to the Retrocedent, or
its liquidator, receiver, conservator or statutory successor, on the basis of
the liability of the Retrocedent without diminution because of the insolvency
of the Retrocedent or because the liquidator, receiver, conservator or statutory
successor of the Retrocedent has failed to pay all or a portion of any
claim.  It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of the Retrocedent
shall give written notice to the Retrocessionaire of the pendency of a claim
against the Retrocedent with respect to the Reinsurance Agreements within a
reasonable time after such claim is filed in the liquidation, conservation or
rehabilitation proceeding or in the receivership.  During the pendency of such claim, the Retrocessionaire may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to the Retrocedent or its liquidator, receiver, conservator or statutory
successor.  The expense thus incurred by
the Retrocessionaire shall be chargeable, subject to the approval of the court,
against the Retrocedent as part of the expense of conservation or liquidation
to the extent of a pro rata share of the benefit which may accrue to the
Retrocedent solely as a result of the defense undertaken by the
Retrocessionaire.

 

Section 12.4.  Access to Records.  Upon reasonable notice, the Retrocessionaire
or its duly authorized representative shall have access to and the right to
inspect the books and records of the Retrocedent that pertain to this Agreement
or the Reinsurance Agreements.  In
addition, at the request of the Retrocessionaire, the Retrocedent shall use
commercially reasonable efforts to cause the ceding company under a Reinsurance
Agreement to allow the Retrocessionaire or its duly authorized representative
to have access to and the right to inspect the books and records of such party
to the extent such books and records pertain to such Reinsurance Agreement.  At the request of the Retrocessionaire in
respect of any ceding company under a Reinsurance Agreement, the Retrocedent
will appoint the Retrocessionaire as its agent for purposes of gaining access
to the books and records of such ceding company.  At the request of the Retrocessionaire following the execution
and delivery of a Novation Agreement and subject to any applicable
confidentiality restrictions,

 

8

 

the Retrocedent promptly will
transfer to the Retrocessionaire all books and records in the Retrocedent’s
possession relating to the novated Reinsurance Agreement.

 

Section 12.5.  Offset.  The Retrocessionaire or the Retrocedent may offset any balance(s)
due from one party to the other under this Agreement.  The party asserting the right of offset may exercise such right
at any time whether the balance(s) due are on account of premiums or losses or
otherwise.  In the event of the
insolvency of a party hereto, offsets shall only be allowed in accordance with
applicable law.

 

Section 12.6.  Errors and Omissions.  Any inadvertent delay, omission or error
shall not be held to relieve either party hereto from any liability which would
attach to it hereunder if such delay, omission or error had not been made,
provided such delay, omission or error is rectified as soon as possible after
discovery.

 

Section 12.7.  Governing Law.  This Agreement shall be governed by and is
to be construed in accordance with the laws of the State of New York without
giving effect to conflict of law rules thereof.

 

Section 12.8.  Arbitration.  Any
dispute or other matter in question relating to this Agreement that cannot be
resolved by the Retrocedent and the Retrocessionaire arising out of, or
relating to, the formation, interpretation, performance or breach of this
Agreement, whether such dispute arises before or after termination of this
Agreement, will be subject to arbitration. 
Arbitration will be initiated by the delivery of a written notice of demand
for arbitration by one party to the other within a reasonable time after the
dispute has arisen and cannot be otherwise settled by the parties.

Within thirty (30) days of the non-initiating party’s receipt of notice
of arbitration, each party will appoint a disinterested individual as arbitrator
and the two so appointed will then appoint a third arbitrator who will serve as
the umpire.  If either party fails to
appoint an arbitrator within thirty (30) days, the other party may appoint the
second arbitrator.  If the two
arbitrators do not agree on a third arbitrator within fifteen (15) days of the
date on which the second arbitrator was appointed, the parties shall employ the
ARIAS-U.S. Umpire Appointment Procedures to appoint the third arbitrator.  If the ARIAS-U.S. Umpire Appointment Procedures
have been terminated, the parties shall jointly petition the New York office of
the American Arbitration Association to appoint the third arbitrator.  The arbitrators will be present or former
officers of insurance or reinsurance companies or attorneys experienced in
reinsurance matters who do not have a personal or financial interest in the
result of the arbitration and who are not past or current officers, employees
or directors of the Retrocedent, the Retrocessionaire or their respective
affiliates.

 

The arbitration hearings will
be held in New York, New York, or such other place as the parties may mutually
agree.  Within thirty (30) days after
appointment of the third arbitrator, the panel shall meet and determine timely
periods for briefs, discovery procedures and schedules for hearings.  The decision of the panel shall be rendered
within forty-five (45) days following the termination of the hearings.

 

9

 

In making its decision, the panel shall
consider the customs and practices of the reinsurance industry.  The arbitrators will not be obliged to
follow judicial formalities or the rules of evidence except to the extent
required by the laws of the State of New York. 
Insofar as the arbitration panel looks to substantive law, it shall
apply the laws of the State of New York without regard to its conflict of laws
rules.  The decision of any two
arbitrators when rendered in writing shall be final and binding.  The panel is empowered to grant interim
relief as it may deem appropriate. 
Judgment upon the award may be entered in any court having jurisdiction
thereof.  The substantive laws of the
State of New York, without regard to its conflict of laws rules, will govern
any action or suit brought to compel any such arbitration or to enforce any
award rendered pursuant to such arbitration. 
It is agreed that the arbitrators shall not have the jurisdiction to
authorize any punitive, exemplary or consequential damage awards between the
parties hereto.

 

Each party shall bear the expense of its
own arbitrator and shall jointly and equally bear with the other party the cost
of the third arbitrator.  The remaining
costs of the arbitration shall be allocated by the panel.  The panel may, at its discretion, award such
further costs and expenses as it considers appropriate, including but not
limited to attorneys’ fees, to the extent permitted by law.

 

Except as provided above, arbitration will be
based, to the extent applicable, upon ARIAS-U.S. procedures.

 

The procedures specified in this Section will be the sole and exclusive
procedures for the resolution of irreconcilable disputes between the parties
arising out of or relating to this Agreement.

 

This Section shall survive the termination of this Agreement.

 

Section 12.9. 
Service of Suit.  Each
party hereby irrevocably submits to the nonexclusive jurisdiction of any
Federal or State of New York court sitting in the State of New York over any
suit, action or proceeding relating to the enforcement of the parties’
agreement to arbitrate or the enforcement of an arbitral award.  Each party irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in such court and any claim that any suit, action or proceeding brought in such
court has been brought in an inconvenient forum.  Each party agrees that a final judgment, not subject to any
further appeal, in any such suit, action or proceeding brought in such a court
shall be conclusive and binding upon it and will be given effect in its state
or country of domicile, as applicable, to the fullest extent permitted by
applicable law and may be enforced in any Federal or State of New York court
sitting in the State of New York, by a suit upon such judgment, provided that
service of process is effected upon it as specified in this Section or as
otherwise permitted by law.  Nothing
herein shall be deemed to limit or waive a party’s right to remove a suit,
action or proceeding to Federal court.

 

Further, each
party hereby designates the Superintendent of Insurance of the State of New
York, or his successor or successors in office, as the true and lawful attorney
upon whom

 

10

 

may be served any
lawful process in any action, suit or proceeding instituted by or on behalf of
the other party under this Agreement and arising out of this Agreement, and
hereby designates the person named in the “Notice” provision of this Agreement
as the person to whom the Superintendent or such successor is authorized to
mail such process or a true copy thereof.

 

Each party hereby
consents to process being served in any suit, action or proceeding of the
nature referred to above in any Federal or State of New York court sitting in
the State of New York by service of process as set forth above; provided that,
to the extent lawful and possible, written notice of said service shall be
mailed by registered or certified air mail, postage prepaid, return receipt
requested, to the other party at its address specified herein or to any other
address of which such party shall have given notice.  Each party irrevocably waives, to the fullest extent permitted by
law, all claim of error by reason of any such service and agrees that such
service shall be deemed in every respect effective service of process upon such
party in any such suit, action or proceeding and shall, to the fullest extent
permitted by law, be taken and held to be valid and personal service upon and
personal delivery to such party.

 

Service of process
may be affected in any other manner permitted by law. Nothing in this Section
shall limit the right of a party to bring proceedings against the other party
in any court having jurisdiction over such other party and such proceeding for
the purpose of enforcing the parties’ agreement to arbitrate or to enforce an
arbitral award.

 

Section 12.10.  Notice.  As used in this Agreement, notice shall mean any and all notices,
requests, demands or other communications required or permitted to be given
hereunder.  All notices shall be in
writing and shall be (i) delivered personally, (ii) sent by an overnight
delivery service, or (iii) sent by confirmed facsimile transmission, addressed
to the parties at the addresses set forth below.  Any such notice shall be deemed given (i) in the case of personal
delivery, when so delivered personally, (ii) if sent by overnight delivery
service, one day after delivery of such notice to such service, and (iii) if
sent by confirmed facsimile transmission, at the time of transmission.

 

If to the
Retrocedent:

 

Assured
Guaranty Re Overseas Ltd.

Victoria Hall

11 Victoria
Street

PO Box HM 1826

Hamilton,
Bermuda HM HX

Facsimile:  441-292-1563

Attention:
Corporate Secretary

 

with
a copy to:

 

ACE
Capital Re Inc.

 

11

 

1325
Avenue of the Americas

New
York, New York 10019

Telephone:  212-974-0100

Facsimile:   212-581-3268

Attention:  General Counsel

 

If
to the Retrocessionaire:

 

ACE
American Insurance Company

c/o
ACE Tempest Re USA, Inc.

Two
Stamford Plaza

281
Tresser Boulevard

Suite
500

Stamford,
CT 06901-3264

Telephone:
203-328-7001

Facsimile:
203-328-7003

Attention:  Jacques Bonneau

 

The Retrocedent and the
Retrocessionaire shall provide each other with wiring instructions for monies
to be transferred under this Agreement promptly after execution of this
Agreement and at the time of any change in such instructions.

 

Section 12.11.  Assignment.  This Agreement may not be assigned by either party without the
prior written consent of the other party. 
Notwithstanding the foregoing, the Retrocessionaire may assign its
rights under this Agreement to an affiliated entity so long as that entity (i)
has the same or better Standard and Poors (“S&P”) rating as then stated by
S&P for the Retrocessionaire and (ii) assumes all of the obligations of the
Retrocessionaire hereunder pursuant to a written agreement reasonably
satisfactory to the Retrocedent.

 

Section 12.12.  Amendments.  This Agreement may not be modified or amended except by mutual
written consent of the parties.

 

Section 12.13.  Waivers.  The terms of this Agreement may be waived only with the written
consent of the party waiving compliance. No failure or delay in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor will
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.

 

Section 12.14.  Entire Agreement; Rights and Remedies.  This Agreement constitutes the entire
agreement between the parties relating to the subject matter hereof and
supersedes all prior written and oral statements with respect hereto.  The rights and remedies provided herein are
cumulative and are not exclusive or any rights or remedies that any party may
have at law or in equity.

 

12

 

Section 12.15.  Counterparts.  This Agreement may be executed in any number
or counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

Section
12.16.  Severability.  If
any term, provision, covenant or condition of this Agreement, or the
application thereof to any party or circumstances, shall be held to be invalid
or unenforceable (in whole or in part) for any reason, the remaining terms,
provisions, covenants and conditions shall continue in full force and effect as
if this Agreement had been executed with the invalid or unenforceable portion
eliminated, but only if (a) this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter of this Agreement and (b) the deletion of such portion of this
Agreement does not substantially impair the respective benefits or expectations
for the parties to this Agreement.

 

Section
12.17.  Further
Assurances.  Each
party hereto shall, at any time and from time to time after the first date
written above, upon request of any other party hereto, do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, all
such further acts, instruments, assignments and assurances as may be reasonably
required in order to carry out the intent of this Agreement.

 

[The next page is the signature page.]

 

13

 

IN WITNESS WHEREOF, this
Agreement has been signed by a duly authorized officer of each of the parties
as of the date first above written.

 

ASSURED
GUARANTY RE OVERSEAS LTD.

 

	
  By:  

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

ACE AMERICAN INSURANCE
COMPANY

Signed by ACE Tempest Re
USA, Inc.

for and on behalf of ACE
American Insurance Company

 

 

	
  By:  

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

ANNEX A

 

REINSURANCE AGREEMENTS

 

[Insert list of Reinsurance Agreements]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}]]