Exhibit 2.10
NOVATION AND AMENDMENT AGREEMENT
THIS NOVATION AGREEMENT is made as of December 31, 2002 (the
"Novation Date") among Annuity and Life Reassurance, Ltd ("ALRe"), XL Life Ltd
("XL"), and Empire General Life Assurance Corporation ("Ceding Company").
WHEREAS, ALRe and Ceding Company are parties to the reinsurance
agreements (the "Subject Agreements") set forth in Schedule A hereto; and
WHEREAS, as of December 31, 2002, the parties to this Novation
Agreement have agreed to novate the Subject Agreements by substituting XL for
ALRe as reinsurer thereunder, such that XL will assume all of ALRe's interests,
rights, duties, obligations, and liabilities under the Subject Agreements and
that ALRe shall be released and discharged from any further liability or
obligations whatsoever thereunder; and
WHEREAS, Ceding Company wishes to consent and agree to such
novation.
NOW, THEREFORE, in consideration of the foregoing and of the
following mutual terms, conditions, covenants, and agreements, the parties agree
that on the Novation Date, but effective as to each Subject Agreement on the
inception date thereof, XL is hereby substituted as the Reinsurer under each of
the Subject Agreements in place and instead of ALRe. XL and Ceding Company
hereby ratify and confirm that the Subject Agreements shall be treated as always
having been agreements solely between them. In implementation and not in
limitation of the foregoing, the parties further agree as follows:
1. From and after the Novation Date, but effective as to each Subject
Agreement on the inception date thereof, XL hereby assumes all of
ALRe's interests, rights, duties, obligations, and liabilities under
the Subject Agreements, and XL shall be bound by all terms and
conditions of the Subject Agreements.
2. Performance and/or breach prior to the Novation Date by ALRe shall
after the Novation Date be treated for all purposes as having been
performance or breach by XL.
3. Effective as of the Novation Date, Ceding Company hereby releases
and discharges ALRe from and against any and all duties,
obligations, and/or liabilities whatsoever, express or implied,
under or in connection with the Subject Agreements and shall look
solely to XL for performance thereof.
4. From and after the Novation Date, the Ceding Company shall have no
further duties, obligations, and/or liabilities whatsoever, express
or implied, to ALRe under or in connection with the Subject
Agreements, but any such duties, obligations, and/or liabilities
theretofore existing shall continue as duties, obligations, and/or
liabilities of the Ceding Company to XL.
5. Notwithstanding anything contained in this Novation Agreement or in
the Subject Agreements, the Ceding Company shall not have the right
to cede any new business, new issues, future issuances or further
new reinsurance policies under the Subject Agreements after the
Novation Date except for conversions, new issues, issuances or
reinsurance policies pursuant to the Ceding Company's contractual
obligations contained in the policies and contracts reinsured by
ALRe under the Subject Agreements. This exclusion shall include,
without limitation, policies with an effective date after the
Novation Date, non-mandatory renewals of policies in effect prior to
the Novation Date and non-
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mandatory changes to policies in effect prior to the Novation Date
that increase the insurance provided thereunder.
6. Each party agrees to do all things as may be necessary to give full
effect to this Novation Agreement.
7. This Novation Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
8. This Novation Agreement shall be subject to the arbitration
provisions of the Subject Agreements and shall be governed by and
construed in accordance with the laws applicable to the Subject
Agreements.
9. The assets of the reserve trusts provided for in Subject Agreements
shall be transferred as set forth in the letter agreement among
ALRe, XLFA, the Ceding Company and Mellon Bank, as trustee attached
hereto as Exhibit A.
10. This Novation Agreement may be executed in counterparts.
11. This Novation Agreement will become effective when it has been
executed in Bermuda by XL after having been executed by ALRe and the
Ceding Company.
12. [Intentionally omitted.]
13. Effective immediately prior to the Novation Date, each of the
Subject Agreements is hereby amended as follows:
(a) A new paragraph is inserted as a third paragraph of Section 4
as follows:
"CEDING COMPANY may, by notice given to ANNUITY & LIFE RE on
or prior to March 1, 2003, recapture all risks ceded hereunder
and under the other Subject Agreements (as defined in the
Novation and Amendment Agreement, dated as of December 31,
2002, among the parties hereto and XL Life Ltd.) and terminate
this Agreement and the other Subject Agreements as to both new
business and then existing reinsurance effective as of January
1, 2003 (the "Recapture Date"). Promptly after the notice,
ANNUITY & LIFE RE shall pay CEDING COMPANY an amount equal to
the Recapture Fee plus unearned premiums net of unearned
allowances on the business reinsured under this Agreement,
less any claim payments made by ANNUITY & LIFE RE to CEDING
COMPANY after the Recapture Date. Upon receipt of or
simultaneously with such payment, CEDING COMPANY will return
to ANNUITY & LIFE RE any letters of credit held by it
hereunder, will join in instructing any trustee to pay the
balance in any trust agreement then held hereunder to or upon
the direction of ANNUITY & LIFE RE, and will, as of the
Recapture Date, release and discharge ANNUITY & LIFE RE from
any and all duties, obligations, and/or liabilities
whatsoever, express or implied, under or in connection with
this Agreement. For purposes of this Section, the "Recapture
Fee" for this Agreement and the other Subject Agreements shall
be an amount equal to $4 million."
(b) Each of the last paragraph of Section 27(d) and the last
paragraph of Section 28(e), as previously amended, is deleted in its
entirety and the following sentences are substituted in the place
thereof:
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"CEDING COMPANY agrees to return to ANNUITY LIFE & RE any
amounts withdrawn which are in excess of the actual amounts
required for i, ii, iii, and v above, or in the case of iv,
such amounts that are in excess of the amounts ultimately
determined to be due under this Agreement. ANNUITY & LIFE RE
is obligated hereunder to maintain either letters of credit
complying with regulatory requirements, including requirements
for reserve credit, applicable to CEDING COMPANY ("Qualifying
Letters of Credit") or trust funds complying with such
requirements ("Qualifying Trust Funds") or a combination
thereof in an amount (the "Required Security") equal to 102%
of the amount, as of the most recent quarter end, of the
deduction for reinsurance ceded from CEDING COMPANY's
liabilities for policies ceded under this Agreement,
including, without limitation, amounts for policy reserves,
reserves for claims and losses incurred (including losses
incurred but not reported), loss adjustment expenses and
unearned premiums. If at any time a letter of credit delivered
to CEDING COMPANY hereunder ceases to be a Qualifying Letter
of Credit, ANNUITY & LIFE RE shall replace it with a
Qualifying Letter of Credit or Qualifying Trust Funds. If
CEDING COMPANY draws down such amounts pursuant to item iii
above, then CEDING COMPANY (x) will hold such amounts without
segregation in a notional account, (y) will credit interest on
the balance in such account daily at an interest rate per
annum equal to the Applicable Rate, adding the interest to the
principal balance of the notional account, and (z) will pay
over such interest to ANNUITY & LIFE RE only to the extent
after giving effect thereto the balance in the notional
account is not less than the then Required Security. For
purposes of this Section, the term "Applicable Rate" shall
mean the prime rate determined for each month on the first
business day of such month, except that if, at the time CEDING
COMPANY draws down such amounts pursuant to item iii above,
ANNUITY & LIFE RE has failed to deliver and maintain
Qualifying Letters of Credit in the requisite face amount or,
in the case of Letters of Credit that are to expire within
five (5) business days, replacement Qualifying Letters of
Credit in the requisite amount, then the Applicable Rate shall
be the targeted Federal Funds Rate as announced from time to
time by the Board of Governors of the Federal Reserve System.
If ANNUITY & LIFE RE thereafter cures such failure to deliver
or maintain Letters of Credit or replacement Letters of Credit
by delivery of Qualifying Letters of Credit or replacement
Qualifying Letters of Credit in the requisite amount, CEDING
COMPANY shall, against such delivery, pay ANNUITY & LIFE RE an
amount equal to the lesser of (x) the Required Security and
(y) the face amount of the Qualifying Letters or Credit or
replacement Qualifying Letters of Credit."
14. The novation will not occur unless and until the Ceding Company
shall have received a letter of credit (the "Letter of Credit") in
the amount of $44,000,000.00 in substantially the form of Exhibit B
hereto issued by the banks listed in Exhibit B and XL shall have
received in Bermuda (including by facsimile transmission) a receipt
for the Letter of Credit in the form of Exhibit C hereto, provided
that if these conditions to the occurrence of the novation are
satisfied, the Novation Date shall be December 31, 2002.
IN WITNESS WHEREOF the parties have executed this Novation Agreement
as of December 31, 2002.
ANNUITY AND LIFE REASSURANCE, LTD.
By: /s/ R Xxxxx By: /s/ Xxx Xxxxxx
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Title: SVP & CU Title: VP
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Date: 12/31/2002 Date: 12/31/02
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EMPIRE GENERAL LIFE ASSURANCE COMPANY
By: /s/ [Signature Illegible] By: /s/ [Signature Illegible]
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Title: Title:
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Date: Date:
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XL LIFE LTD
By: /s/ Xxxx Xxxxxxxx By: /s/ [Signature Illegible]
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Title: Secretary Title: Vice President
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Date: 31 DEC 2002 Date: 31 DEC 2002
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Schedule A
SUBJECT AGREEMENTS
1. Automatic and Facultative Yearly Renewable Term Reinsurance Agreement
effective January 1, 2000 between Empire General Life Assurance Company
and Annuity & Life Reassurance, Ltd., covering level term policies.
2. Amendment effective July 1, 2000 to the Yearly Renewable Term Reinsurance
Agreement between Empire General Life Assurance Company and Annuity & Life
Reassurance, Ltd.
3. Amendment effective August 1, 2000 to the Yearly Renewable Term
Reinsurance Agreement between Empire General Life Assurance Company and
Annuity & Life Reassurance, Ltd.
4. Automatic and Facultative Yearly Renewable Term Reinsurance Agreement
effective October 1, 2000 between Empire General Life Assurance Company
and Annuity & Life Reassurance, Ltd., covering level term policies.
5. Amendment effective February 1, 2001 to the October 1, 2000 Yearly
Renewable Term Reinsurance Agreement between Empire General Life Assurance
Company and Annuity & Life Reassurance, Ltd.
6. Amendment effective March 12, 2001 to the October 1, 2000 Yearly Renewable
Term Reinsurance Agreement between Empire General Life Assurance Company
and Annuity & Life Reassurance, Ltd.
7. Amendment effective June 4, 2001 to the October 1, 2000 Yearly Renewable
Term Reinsurance Agreement between Empire General Life Assurance Company
and Annuity & Life Reassurance, Ltd.
8. Amendment effective September 17, 2001 to the January 1, 2000 Yearly
Renewable Term Reinsurance Agreement between Empire General Life Assurance
Corporation and Annuity & Life Reassurance, Ltd.
9. Amendment effective September 17, 2001 to the October 1, 2000 Yearly
Renewable Term Reinsurance Agreement between Empire General Life Assurance
Corporation and Annuity & Life Reassurance, Ltd.
10. Amendment effective November 5, 2001 to the October 1, 2000 Yearly
Renewable Term Reinsurance Agreement between Empire General Life Assurance
Corporation and Annuity & Life Reassurance, Ltd.
Schedule A
11. Amendment effective July 1, 2002 to the October 1, 2000 Yearly Renewable
Term Reinsurance Agreement between Empire General Life Assurance
Corporation and Annuity & Life Reassurance, Ltd.
