Execution Version
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SECURITIES PURCHASE AGREEMENT
BY AND AMONG
SCOTTISH RE GROUP LIMITED,
MASSMUTUAL CAPITAL PARTNERS LLC,
AND
SRGL ACQUISITION, LLC
DATED AS OF NOVEMBER 26, 2006
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS...................................................................2
SECTION 1.1. Definitions...........................................2
ARTICLE II
ISSUANCE AND PURCHASE OF CONVERTIBLE SHARES...................................9
SECTION 2.1. Special Meeting.......................................9
SECTION 2.2. Closing..............................................11
SECTION 2.3. Purchase of Convertible Shares.......................11
SECTION 2.4. Deliveries...........................................11
SECTION 2.5. Restricted Stock, Restricted Stock Units
and Stock Options....................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SRGL.......................................12
SECTION 3.1. Organization, Standing and Corporate Power...........12
SECTION 3.2. Ordinary Capital Structure; Issuance of Shares.......12
SECTION 3.3. Subsidiaries.........................................14
SECTION 3.4. Authority............................................14
SECTION 3.5. Noncontravention; Consents...........................14
SECTION 3.6. SEC Reports; Financial Statements....................15
SECTION 3.7. No Undisclosed Liabilities...........................16
SECTION 3.8. Absence of Certain Changes or Events.................17
SECTION 3.9. Benefit Plans........................................17
SECTION 3.10. Taxes................................................19
SECTION 3.11. Compliance with Applicable Laws......................20
SECTION 3.12. Litigation...........................................22
SECTION 3.13. Reserves.............................................22
SECTION 3.14. Contracts............................................22
SECTION 3.15. Insurance............................................25
SECTION 3.16. Intellectual Property................................25
SECTION 3.17. Insurance Regulatory Matters.........................26
SECTION 3.18. Brokers..............................................26
SECTION 3.19. Board and Member Approval............................27
SECTION 3.20. Takeover Statute.....................................27
SECTION 3.21. Information..........................................27
SECTION 3.22. Properties; Absence of Liens.........................28
SECTION 3.23. Affiliate Transactions...............................28
SECTION 3.24. Opinions of Financial Advisors.......................28
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SECTION 3.25. Broker-Dealer Subsidiaries...........................28
SECTION 3.26. Private Placement....................................29
SECTION 3.27. Acknowledgment Regarding Investors' Purchase
of SRGL Securities...................................29
SECTION 3.28. Convertible Shares Certificate of Designations.......30
SECTION 3.29. Manipulation of Price................................30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS..................................30
SECTION 4.1. Organization, Standing and Corporate Power...........30
SECTION 4.2. Authority............................................31
SECTION 4.3. Noncontravention; Consents...........................31
SECTION 4.4. Litigation...........................................32
SECTION 4.5. Brokers..............................................32
SECTION 4.6. Available Funds......................................32
SECTION 4.7. Information..........................................33
SECTION 4.8. No Public Sale or Distribution.......................33
SECTION 4.9. Accredited Investor Status...........................33
SECTION 4.10. Restricted Securities................................33
SECTION 4.11. Access to Data and Management........................33
SECTION 4.12. Tax Matters..........................................33
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS....................................34
SECTION 5.1. Conduct of Business of SRGL..........................34
SECTION 5.2. Acquisition Proposals................................37
ARTICLE VI
OTHER AGREEMENTS.............................................................41
SECTION 6.1. Access to Information; Confidentiality...............41
SECTION 6.2. Consents, Approvals and Filings......................42
SECTION 6.3. Public Announcements.................................43
SECTION 6.4. Further Assurances...................................43
SECTION 6.5. Notification of Certain Matters......................43
SECTION 6.6. Anti-Takeover Laws...................................43
SECTION 6.7. Shareholder Litigation...............................43
SECTION 6.8. Availability of Ordinary Shares for Conversion.......44
SECTION 6.9. Restrictive Legend...................................44
SECTION 6.10. Listing Matters......................................44
SECTION 6.11. Pledge...............................................45
SECTION 6.12. Register; Transfer Agent Instructions................45
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SECTION 6.13. Director and Officer Liability.......................46
SECTION 6.14. Employee Matters.....................................47
SECTION 6.15. Tax Cooperation......................................48
ARTICLE VII
CONDITIONS PRECEDENT.........................................................49
SECTION 7.1. Conditions to Each Party's Obligations...............49
SECTION 7.2. Conditions to Obligations of Investors...............49
SECTION 7.3. Conditions to Obligations of SRGL....................52
ARTICLE VIII
TERMINATION PRIOR TO CLOSING.................................................53
SECTION 8.1. Termination of Agreement.............................53
SECTION 8.2. Procedure Upon Termination and Consequences..........54
SECTION 8.3. Fees and Expenses....................................55
ARTICLE IX
INDEMNIFICATION..............................................................56
SECTION 9.1. Survival.............................................56
SECTION 9.2. Indemnification by SRGL..............................56
SECTION 9.3. Indemnification by Investors.........................57
SECTION 9.4. Certain Limitations on Indemnification...............57
SECTION 9.5. Third Party Claim Procedures.........................59
SECTION 9.6. Independent Committee................................60
ARTICLE X
GENERAL PROVISIONS...........................................................60
SECTION 10.1. Fees and Expenses....................................60
SECTION 10.2. Notices..............................................60
SECTION 10.3. Interpretation.......................................62
SECTION 10.4. Entire Agreement; No Third Party Beneficiaries;
No Other Representations.............................62
SECTION 10.5. Governing Law........................................63
SECTION 10.6. Assignment...........................................63
SECTION 10.7. Amendments...........................................64
SECTION 10.8. Enforcement..........................................64
SECTION 10.9. Severability.........................................64
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SECTION 10.10. Counterparts.........................................64
SECTION 10.11. Independent Nature of Investors'
Obligations and Rights...............................65
SECTION 10.12. Waiver of Jury Trial.................................65
EXHIBIT A FORM OF CONVERTIBLE SHARES CERTIFICATE OF DESIGNATIONS
EXHIBIT B FORM OF REGISTRATION RIGHTS AND SHAREHOLDERS AGREEMENT
EXHIBIT C FORM OF LEGAL OPINION
EXHIBIT D FORM OF IRREVOCBALE TRANSFER AGENT INSTRUCTIONS
EXHIBIT E FORM OF CERBERUS EQUITY COMMITMENT LETTER
EXHIBIT F FORM OF MASSMUTUAL EQUITY COMMITMENT LETTER
ANNEX I FORM OF VOTING AGREEMENT
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SECURITIES PURCHASE AGREEMENT, dated as of November 26, 2006 (this
"Agreement"), by and among Scottish Re Group Limited, an exempted company
limited by shares organized and existing under the laws of the Cayman Islands
("SRGL"), MassMutual Capital Partners LLC, a Delaware limited liability company
("MassMutual"), SRGL Acquisition, LLC, a Delaware limited liability company
("Cerberus" and together with MassMutual, "Investors").
WHEREAS, SRGL and Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the United States Securities Act of 1933, as amended (the "Securities
Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act;
WHEREAS, the Board of Directors of SRGL has approved, subject to the SRGL
Member Approval, the authorization and issuance of 1,000,000 convertible
cumulative participating preferred shares of SRGL, par value $.01 per share and
liquidation preference of $600 per share (the "Convertible Shares"), which
Convertible Shares shall be convertible into ordinary shares of SRGL, par value
$.01 per share (the "Ordinary Shares"), and which Convertible Shares shall have
such voting powers, preferences and other special rights and the qualifications,
limitations or restrictions as set forth in the Certificate of Designations of
the Convertible Cumulative Participating Preferred Shares, which shall be in the
form attached hereto as Exhibit A (the "Convertible Shares Certificate of
Designations");
WHEREAS, MassMutual wishes to purchase, and SRGL wishes to sell, upon the
terms and conditions stated in this Agreement, 500,000 Convertible Shares for an
aggregate consideration of $300,000,000 (the "MassMutual Consideration");
WHEREAS, Cerberus wishes to purchase, and SRGL wishes to sell, upon the
terms and conditions stated in this Agreement, 500,000 Convertible Shares for an
aggregate consideration of $300,000,000 (the "Cerberus Consideration");
WHEREAS, subsequent to the execution and delivery of this Agreement, the
parties hereto shall execute and deliver a Registration Rights and Shareholders
Agreement, in the form attached hereto as Exhibit B (the "Registration Rights
and Shareholders Agreement"), pursuant to which SRGL will agree to provide
certain (i) registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities Laws with
respect to the Ordinary Shares into which Convertible Shares may be converted,
and (ii) other rights powers, preferences and privileges to the holders of the
Convertible Shares;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Investors' willingness to enter into this
Agreement, the Investors, SRGL and certain Members are entering into a voting
agreement and irrevocable proxy and waiver, dated as of the date hereof, in the
form attached hereto as Annex I (the "Voting Agreement" and together with this
Agreement, the Convertible Shares Certificate of Designations and the
Registration Rights and Shareholders Agreement, the "Transaction Documents"),
pursuant to which such Members have agreed, among other things, to vote all
Ordinary Shares held by them in favor of the approval of the transactions
contemplated by the Transaction Documents and to waive certain preemptive rights
in connection therewith;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
"2004 Incentive Plan" means The Scottish Re Group Limited 2004 Equity
Incentive Compensation Plan and any predecessor equity plan thereto.
"2004 Plan" means SRGL's 2004 Equity Incentive Compensation Plan.
"Acquisition Proposal" shall have the meaning set forth in Section 5.2(g).
"affiliate" of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person. The affiliates of each Investor shall be
deemed to include one or more funds under common management with such Investor
and their respective limited partners and affiliates.
"Aggregate Consideration" means an amount equal to the aggregate of the
MassMutual Consideration and the Cerberus Consideration.
"Agreement" shall have the meaning set forth in the introductory paragraph.
"Alternate Exchange" shall have the meaning set forth in Section 6.10.
"Broker-Dealer Subsidiary" shall have the meaning set forth in Section
3.25(a).
"Business Combination Transaction" shall have the meaning set forth in
Section 5.2(g).
"Cap" shall have the meaning set forth in Section 9.4(a).
"Cerberus" shall have the meaning set forth in the introductory paragraph.
"Cerberus Consideration" shall have the meaning set forth in the recitals.
"Cerberus Disclosure Letter" shall have the meaning set forth in Article
IV.
"Cerberus Equity Commitment Letter" means an Equity Commitment Letter in
the form attached hereto as Exhibit E.
"Change in Recommendation" shall have the meaning set forth in Section
5.2(d).
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"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section 2.2.
"COBRA" shall have the meaning set forth in Section 6.14(d).
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" means the confidentiality agreements entered
into prior to the date hereof by MassMutual or its affiliates and Cerberus or
its affiliates, respectively, with SRGL in connection with the transactions
contemplated hereby.
"Contracts" shall have the meaning set forth in Section 3.14(b).
"Convertible Notes" means the 4.5% Senior Convertible Notes of SRGL.
"Convertible Shares" shall have the meaning set forth in the recitals.
"Convertible Shares Certificate of Designations" shall have the meaning set
forth in the recitals.
"D&O Indemnitees" shall have the meaning set forth in Section 6.13(a).
"Data Room" means the electronic data room created by SRGL and to which
Investors have been given access in connection with the transactions
contemplated by this Agreement, as supplemented by specific written responses
(including documents provided therewith) to corresponding due diligence
inquiries provided to Investors by SRGL and its Representatives, pursuant to the
formal processes established by SRGL and Investors.
"December SAP Statements" shall have the meaning set forth in Section
3.6(c).
"Disclosure Documents" means any written letters, notices or other
information distributed to Members in connection with the issuance of the
Convertible Shares to Investors or the other transactions contemplated by this
Agreement, other than the Disclosure Statement.
"Disclosure Statement" means the letter to Members, notice of meeting,
proxy statement and form of proxy, or the information statement, as the case may
be, required to be distributed to the Members in connection with the issuance of
the Convertible Shares to Investors or other transactions contemplated by this
Agreement, including any schedules or exhibits required to be filed with the SEC
in connection therewith.
"DTC" shall have the meaning set forth in Section 6.12(b).
"Employee" means each individual who immediately prior to the Closing is
employed by SRGL or any Subsidiary of SRGL.
"Employee Benefit Plan" means each "employee benefit plan" (as defined in
Section 3(3) of ERISA), bonus, deferred compensation, bonus, incentive, fringe
benefit, profit sharing, pension or retirement, deferred compensation,
equity-based, severance, medical, life, disability,
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accident, salary continuation, accrued leave, vacation, sick pay, sick leave,
supplemental retirement, unemployment and pension scheme, plan, program,
agreement, arrangement, commitment and/or practice for the benefit of Employees
of SRGL or its Subsidiaries, former employees of SRGL or its Subsidiaries,
and/or their dependants and beneficiaries, regardless of the jurisdiction in
which any such Employees are or such former employees were employed.
"Employment Agreement" has the meaning set forth in Section 3.9(a).
"ERISA" means the United States Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act Report" means each publicly available form, report, schedule,
statement and other document filed with or furnished to the SEC by SRGL pursuant
to the Exchange Act prior to the date hereof (as such documents have since the
time of their filing been amended prior to the date hereof).
"Exclusivity Agreement" shall have the meaning set forth in Section 8.3(b).
"Expenses" shall have the meaning set forth in Section 8.3(b).
"GAAP" shall have the meaning set forth in Section 3.6(b).
"GAAP December Balance Sheets" shall have the meaning set forth in Section
3.6(b).
"Governmental Entity" shall have the meaning set forth in Section 3.5.
"HSR Act" shall have the meaning set forth in Section 3.5.
"Hybrid Capital Units" means the 5.875% Hybrid Capital Units, with a stated
amount of $25 per unit, of SRGL.
"Indemnified Party" shall have the meaning set forth in Section 9.5.
"Indemnifying Party" shall have the meaning set forth in Section 9.5.
"Insurance Regulator" shall have the meaning set forth in Section 3.6(c).
"Insurance Subsidiaries" shall have the meaning set forth in Section
3.17(d).
"Insured MassMutual Party" shall have the meaning set forth in Section
4.12(d).
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"Intellectual Property" means all intellectual property, including without
limitation, patents, patent applications, trademarks, service marks, processes,
formulae, technology, know-how and related improvements, trade names,
copyrights, any copyrightable works (including software, code applications,
databases, website content, documentation and related items), discoveries,
domain names, logos, trade dress and other indicators, methodologies, inventions
and other proprietary items and registrations of or applications for any of the
foregoing.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"Investor Disclosure Letters" shall have the meaning set forth in Article
IV.
"Investor Indemnitees" shall have the meaning set forth in Section 9.2.
"Investor Material Adverse Effect" means with respect to a particular
Investor any event, change, circumstance or effect that individually or in the
aggregate is or is reasonably likely to be materially adverse to the ability of
such Investor to consummate the transactions contemplated by this Agreement or
the Registration Rights and Shareholders Agreement.
"Investors" shall have the meaning set forth in the introductory paragraph.
"Irrevocable Transfer Agent Instructions" shall have the meaning set forth
in Section 6.12(b).
"Knowledge" means the actual knowledge, after reasonable inquiry with
respect to the applicable subject matter of the officers of such person or its
Subsidiaries with functional responsibility for the applicable matter, of (a)
with respect to SRGL, those persons listed in Section 1.1(a) of the SRGL
Disclosure Letter, (b) with respect to Cerberus, those persons listed in Section
1.1(a) of the Cerberus Disclosure Letter, and (c) with respect to MassMutual,
those persons listed in Section 1.1(a) of the MassMutual Disclosure Letter.
"Law" means any constitution, statute, law, code, administrative
interpretation, regulation, rule, injunction, judgment, order, writ, decree,
ordinance, directive judgment, policy, guideline or ruling of any Governmental
Entity, including common law.
"Lease" has the meaning set forth in Section 3.22(b).
"Leased Real Property" shall have the meaning set forth in Section 3.22(a).
"Liens" means any liens, pledges, charges, claims, security interests,
options, mortgages, assignments, hypothecations, preferences, priorities,
deposit arrangements, easements, options, proxies, voting trusts or other
encumbrances of any nature whatsoever (statutory or otherwise).
"Litigation" shall have the meaning set forth in Section 3.12.
"Losses" shall have the meaning set forth in Section 9.2.
"MassMutual" shall have the meaning set forth in the introductory
paragraph.
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"MassMutual Consideration" shall have the meaning set forth in the
recitals.
"MassMutual Disclosure Letter" shall have the meaning set forth in Article
IV.
"MassMutual Equity Commitment Letter" means the equity commitment letter in
the form attached hereto as Exhibit F.
"Members" means the registered members of SRGL, being the holders of
Ordinary Shares.
"NASD" shall have the meaning set forth in Section 3.25(a).
"New York Court" shall have the meaning set forth in Section 10.8.
"Options" means all stock options and other rights to purchase Ordinary
Shares, other than Warrants, heretofore granted under any stock option or
similar plan of SRGL.
"Order" shall have the meaning set forth in Section 3.12.
"Ordinary Shares" shall have the meaning set forth in the recitals.
"Outside Date" shall have the meaning set forth in Section 8.1(c).
"Owned Intellectual Property" shall have the meaning set forth in Section
3.16(a).
"Permits" shall have the meaning set forth in Section 3.11(a).
"Permitted Liens," as to any asset, means (i) Liens for taxes not yet due
and payable, being contested in good faith by current administrative or judicial
proceedings or for which a reserve has been established on SRGL's September 2006
GAAP Statements, in accordance with GAAP, consistently applied, (ii) Liens
arising by operation of law, (iii) Liens that arise solely by virtue of this
Agreement or any Transaction Document and (iv) other Liens that do not or would
not in the aggregate materially detract from or impair the value or materially
interfere with the present or reasonably contemplated use of such asset in the
business of SRGL and its Subsidiaries.
"Perpetual Preferred Shares" means the Non-Cumulative Perpetual Preferred
Shares, with a liquidation preference of $25 per share, of SRGL.
"person" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
"Preferred Shares" means each class or series of preferred shares, $0.01
par value per share, of SRGL.
"Proceeding" has the meaning given in Section 5.1(xiii).
"Quarterly SAP Statements" shall have the meaning set forth in Section
3.6(c).
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"Registration Rights and Shareholders Agreement" shall have the meaning set
forth in the recitals.
"Regulation D" has the meaning set forth in the recitals.
"Reinsurance Agreement" shall have the meaning set forth in Section
3.14(b).
"Reinsurance Recoverables" shall have the meaning set forth in Section
6.16.
"Representatives" shall have the meaning set forth in Section 5.2(a).
"Resigning Director" shall have the meaning set forth in Section 7.2(m).
"Restraint" shall have the meaning set forth in Section 7.1(c).
"Restricted Securities" shall have the meaning set forth in Section 6.9.
"Restricted Shares" means grants under the 2004 Plan comprising restricted
stock units, which have time-based vesting conditions, and performance shares,
which have time-based and performance-based vesting conditions.
"RPII" shall have the meaning set forth in Section 6.15.
"SALIC" means Scottish Annuity & Life Insurance Company (Cayman) Ltd., an
exempted company limited by shares organized and existing under the laws of the
Cayman Islands.
"SAP" shall have the meaning set forth in Section 3.6(c).
"Sarbanes-Oxley Act" shall have the meaning set forth in Section 3.11(b).
"Scheduled Litigation" shall have the meaning set forth in the definition
of "SRGL Material Adverse Effect" in this Section 1.1.
"SEC" has the meaning set forth in the recitals.
"SEC Filings" shall have the meaning set forth in Section 3.6(a).
"Securities Act" has the meaning set forth in the recitals.
"September 2006 GAAP Statements" shall have the meaning set forth in
Section 3.6(b).
"Special Meeting" shall have the meaning set forth in Section 2.1(a).
"Special Purpose Vehicles" means Orkney Re II plc and Ballantyne Re plc.
"SRGL" shall have the meaning set forth in the introductory paragraph.
"SRGL Disclosure Letter" shall have the meaning set forth in Article III.
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"SRGL Indemnitees" shall have the meaning set forth in Section 9.3.
"SRGL Material Adverse Effect" means with respect to SRGL any event,
change, circumstance or effect that individually or in the aggregate is or is
reasonably likely to be materially adverse (A) to the ability of SRGL to perform
its obligations hereunder or under the other Transaction Documents or (B) on the
financial condition, assets, liabilities, properties, business or results of
operations of SRGL and its Subsidiaries and the Special Purpose Vehicles, taken
as a whole, but shall exclude (only in the case of clause (B) above) any such
effect resulting from, relating to or arising out of (i) general economic or
market conditions (including changes in interest rates), so long as such
conditions do not have a materially disproportionate effect on SRGL and its
Subsidiaries and the Special Purpose Vehicles, taken as a whole compared to
other life reinsurance companies; (ii) any change or proposed change in Law or
accounting or actuarial principles required in any jurisdiction, so long as such
change or proposed change does not have a materially disproportionate effect on
SRGL and its Subsidiaries and the Special Purpose Vehicles, taken as a whole
compared to other life reinsurance companies; (iii) (x) any Litigation brought
by Members or other securityholders of SRGL, whether or not brought in the name
of or on behalf of SRGL, pending as of the date of this Agreement and set forth
in Section 1.1(b) of the SRGL Disclosure Letter (the "Scheduled Litigation") or
(y) any Litigation brought by Members or other securityholders of SRGL, whether
or not brought in the name of or on behalf of SRGL, following the date of this
Agreement that alleges substantially similar facts, claims and bases for
liability as the Scheduled Litigation that, only in the case of this clause (y),
individually or in the aggregate would not, without giving effect to the
exception provided in this clause (y), reasonably be expected to result in a
SRGL Material Adverse Effect (for the avoidance of doubt, any Litigation or
amendments to Scheduled Litigation not alleging substantially similar facts,
claims and bases for liability as the Scheduled Litigation shall not be excluded
from the definition of "SRGL Material Adverse Effect" solely by operation of
this clause (iii)); (iv) any occurrence or condition arising out of the
negotiation and execution of this Agreement or under the other Transaction
Documents, the consummation of the transactions contemplated hereby or thereby,
or the public announcement thereof (including any occurrence or condition
arising out of the identity of or facts relating to Investors) or any ratings
action taken by one or more of the national statistic ratings organizations
rating SRGL or any of its Subsidiaries (other than a ratings action with respect
to SALIC that would cause the condition contained in Section 7.2(c) not to be
satisfied); and (v) any decrease in the market value of the equity in SRGL;
provided, however, that this clause (v) shall not exclude any underlying event,
change or circumstance that itself constitutes an SRGL Material Adverse Effect
that may have resulted in or contributed to or is attributable to such decrease
in the market value of the equity of SRGL.
"SRGL Member Approval" shall have the meaning set forth in Section 3.19.
"Standby Commitment Fee" shall have the meaning set forth in Section
8.3(a).
"Subsequent Filings" shall mean any reports, schedules, forms, statements
or other documents (including in each case, exhibits, amendments or supplements
thereto and any other information incorporated by reference therein) filed with
the SEC after the date of this Agreement, but prior to the Closing.
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"Subsidiary" of any person means another person 50% or more of the total
combined voting power of all classes of capital stock or other voting interests
of which, or 50% or more of the equity securities of which, is owned directly or
indirectly by such first person.
"Superior Proposal" shall have the meaning set forth in Section 5.2(g).
"Tax Return" means any return, report, claim, certificate, form, statement,
disclosure, declaration, election, information return, estimate or other
document (including any related or supporting information attached and any
amended materials provided with respect to any of the foregoing) supplied to, or
filed with, a Governmental Entity with respect to Taxes.
"Taxes" shall have the meaning set forth in Section 3.10.
"Third Party" shall have the meaning set forth in Section 5.2(g).
"Third Party Claim" shall have the meaning set forth in Section 9.5.
"Threshold" shall have the meaning set forth in Section 9.4(a).
"Transaction Documents" shall have the meaning set forth in the recitals.
"Treasury Regulations" means the Treasury Regulations promulgated under the
Code.
"Valuation Bank" shall have the meaning set forth in Section 9.4(d).
"Voting Agreement" shall have the meaning set forth in the recitals.
"Warrants" shall have the meaning set forth in Section 3.2(a).
ARTICLE II
ISSUANCE AND PURCHASE OF CONVERTIBLE SHARES
SECTION 2.1. Special Meeting. (a) SRGL, acting through its Board of
Directors, shall, (i) as promptly as practicable following the date hereof, duly
call, give notice of, convene and hold a special meeting of the Members (the
"Special Meeting") for the purpose of considering and taking action with respect
to the transactions contemplated by the Transaction Documents, including (A) any
approval of the issuance and terms of the Convertible Shares and the Ordinary
Shares into which such Convertible Shares may be converted, required pursuant to
the rules of The New York Stock Exchange, (B) approval of amendments to the
Articles of Association of SRGL required to provide an exception from (x) the
limitations on issuance and transfer of shares of SRGL in a manner that would
cause a person to control shares of SRGL equal to or in excess of 10% of any
class of shares, and (y) the voting cutback with respect to any person
controlling shares of SRGL having 10% or more of voting rights, with respect to
Investors, and any other person who, indirectly through or by attribution from
Investors, is treated as controlling the Convertible Shares or any Ordinary
Shares into which the Convertible Shares may be converted, (C) approval of
amendments to the Memorandum of Association of SRGL to increase (x) the number
of authorized Ordinary Shares to a number required for SRGL
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to have a sufficient number of authorized Ordinary Shares unissued and duly
reserved for issuance upon conversion of all of the Convertible Shares
(including any increase in such number of Ordinary Shares resulting from an
indemnity claim by Investor Indemnitees under Article IX or otherwise any
increase in such Ordinary Shares resulting from an adjustment made in accordance
with the Convertible Shares Certificate of Designations), and, (y) if necessary,
the number of authorized Preferred Shares to a number required for issuance of
the Convertible Shares and the designation thereof and (D) approval of all other
amendments to the Articles of Association of SRGL set forth in Section 2.1 of
the SRGL Disclosure Letter or mutually agreed by SRGL and Investors and their
respective counsel to be necessary or desirable in connection with the
transactions contemplated hereby or by the other Transaction Documents, and (ii)
within 30 days following the date of this Agreement (assuming Investors as
promptly as reasonably practicable provide the information reasonably requested
by SRGL for inclusion in the Disclosure Statement), prepare and file with the
SEC under the Exchange Act, a Disclosure Statement in form and substance
reasonably acceptable to Investors and use its best efforts to obtain and
furnish the information required to be included by it in the Disclosure
Statement and, after consultation with Investors, to respond promptly to any
comments made by the SEC with respect to the Disclosure Statement and any
preliminary version thereof and cause the Disclosure Statement to be mailed to
the Members at the earliest practicable time. SRGL shall give Investors and
their counsel a reasonable opportunity to review and comment on the Disclosure
Statement (including any amendments, exhibits and supplements thereto) prior to
its being filed with the SEC or disseminated to the Members. In addition, SRGL
shall provide Investors and their counsel with any comments SRGL or its counsel
may receive from the SEC or its staff with respect to the Disclosure Statement
promptly after receipt of such comments and shall consult with Investors and
their counsel prior to responding to such comments and shall give Investors and
their counsel reasonable opportunity to review and comment on such responses
prior to their being filed with, or submitted to, the SEC. Each of SRGL and
Investors shall promptly correct any information provided by it for use in the
Disclosure Statement, if and to the extent that it shall have become false or
misleading in any material respect prior to the Special Meeting. SRGL shall
cause the Disclosure Statement, as so corrected, to be filed with the SEC and to
be disseminated to the holders of Ordinary Shares, in each case, as and to the
extent required by applicable federal securities Laws.
(b) Each Investor will provide SRGL with the information regarding itself
required under applicable Law to be included in the Disclosure Statement
promptly upon request.
(c) The Board of Directors of SRGL has approved and shall recommend
approval by the Members of the transactions contemplated by the Transaction
Documents, including the approval by the Members of the matters set forth in
Section 2.1(a)(i) to the effect as set forth in Section 3.19, and shall not,
before or after giving notice of the Special Meeting, make a Change in
Recommendation other than pursuant to Section 5.2(d). Except as permitted
pursuant to Section 5.2, the Disclosure Statement shall state that the Board of
Directors of SRGL (i) has unanimously approved the designation, terms,
authorization and issuance of the Convertible Shares and the authorization and
issuance of the Ordinary Shares into which such Convertible Shares may be
converted, in each case, to Investors, (ii) has unanimously determined that the
issuance of the Convertible Shares (and the Ordinary Shares into which such
Convertible Shares may be converted) to Investors is fair to SRGL and in the
best interests of SRGL and its Members and (iii) unanimously recommends that the
Members adopt and approve the
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transactions contemplated by this Agreement and the other Transaction Documents,
as may be applicable, including approval of the matters set forth in Section
2.1(a)(i).
SECTION 2.2. Closing. Subject to the provisions of Article VII, the closing
of the transactions contemplated hereby (the "Closing") shall take place at the
offices of LeBoeuf, Lamb, Greene & MacRae LLP, 125 West 55th Street, New York,
New York, as soon as practicable but in no event later than 10:00 a.m., on the
date that is three business days after the day on which the last of the
conditions set forth in Article VII shall have been satisfied or waived by the
parties, or at such other place, at such other time or on such other date as
Investors and SRGL may mutually agree. The date on which the Closing actually
occurs is herein referred to as the "Closing Date".
SECTION 2.3. Purchase of Convertible Shares. Subject to the satisfaction
(or waiver) of the conditions set forth in Article VII below, at the Closing,
(a) SRGL shall issue and sell to MassMutual and MassMutual shall purchase from
SRGL 500,000 Convertible Shares in exchange for the MassMutual Consideration,
free and clear of all Liens (other than restrictions under applicable federal,
foreign and state securities Laws), and (b) SRGL shall issue and sell to
Cerberus and Cerberus shall purchase from SRGL 500,000 Convertible Shares in
exchange for the Cerberus Consideration, free and clear of all Liens (other than
restrictions under applicable federal, foreign and state securities Laws).
SECTION 2.4. Deliveries. At the Closing, (a) MassMutual shall pay to SRGL
cash in an amount equal to the MassMutual Consideration by wire transfer of
immediately available funds to an account designated by SRGL pursuant to wire
instructions previously provided by SRGL no later than at least two business
days prior to the anticipated Closing Date and shall deliver to SRGL such other
certificates and counterparts to agreements required by it to be delivered
pursuant to Section 7.3 hereof, (b) Cerberus shall pay to SRGL cash in an amount
equal to the Cerberus Consideration by wire transfer of immediately available
funds to an account designated by SRGL pursuant to wire instructions previously
provided by SRGL no later than at least two business days prior to the
anticipated Closing Date and shall deliver to SRGL such other certificates and
counterparts to agreements required by it to be delivered pursuant to Section
7.3 hereof, and (c) SRGL shall deliver to each Investor (i) a certificate or
certificates (in definitive form) duly executed on behalf of SRGL registered in
the name of such Investor (or its designee) representing the number of
Convertible Shares purchased by such Investor from SRGL pursuant to this
Agreement and (ii) such other certificates, opinions, counterparts to
agreements, documents or instruments required by it to be delivered to such
Investor pursuant to Section 7.2 hereof.
SECTION 2.5. Restricted Stock, Restricted Stock Units and Stock Options.
All restricted stock and restricted stock units issued under the 2004 Incentive
Plan shall be fully vested, immediately prior to the Closing. The settlement of
the vested restricted stock units at the Closing shall be in Ordinary Shares.
Immediately prior to the Closing, all stock options issued under the 2004
Incentive Plan shall be fully exercisable and will remain in effect following
the Closing subject to the terms of the 2004 Incentive Plan and the applicable
award agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SRGL
Except as otherwise disclosed in the corresponding section of the
Disclosure Letter delivered by SRGL in connection with the execution and
delivery of this Agreement, regardless of whether such representation or
warranty specifically refers to the SRGL Disclosure Letter (the "SRGL Disclosure
Letter"); provided, that any disclosure contained in any section of such
Disclosure Letter shall qualify each other representation and warranty where it
would be reasonably apparent that it should be an exception to such
representation or warranty or be disclosed in such section of such Disclosure
Letter, it being acknowledged and agreed by Investors that the disclosure of any
matter set forth in the SRGL Disclosure Letter shall expressly not be deemed to
constitute an admission by SRGL or any of its Subsidiaries, or otherwise imply,
that any such matter rises to the level of a SRGL Material Adverse Effect or is
otherwise material for purposes of this Agreement, SRGL hereby represents and
warrants to Investors, as of the date hereof (except where such representation
or warranty is expressly made as of another specific date), as follows:
SECTION 3.1. Organization, Standing and Corporate Power. Except as set
forth in Section 3.1 of the SRGL Disclosure Letter, SRGL and each of its
Subsidiaries and each of the Special Purpose Vehicles is a corporation duly
incorporated (or, if not a corporation, duly organized), validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated
(or, if not a corporation, in which it is organized) and has the requisite power
and authority to own, lease and operate its properties and assets and to carry
on its business as now being conducted. Except as set forth in Section 3.1 of
the SRGL Disclosure Letter, SRGL and each of its Subsidiaries and each of the
Special Purpose Vehicles is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure to be so qualified (individually or
in the aggregate) would not have an SRGL Material Adverse Effect. SRGL has made
available to Investors in the Data Room complete and correct copies of its
Memorandum of Association and Articles of Association and the equivalent
organizational documents of each of its Subsidiaries and each of the Special
Purpose Vehicles, in each case, as amended and in full force and effect as of
the date of this Agreement.
SECTION 3.2. Ordinary Capital Structure; Issuance of Shares. (a) The
authorized share capital of SRGL consists solely of (i) 100,000,000 Ordinary
Shares and (ii) 50,000,000 Preferred Shares. As of the date hereof, 60,554,104
Ordinary Shares, 5,000,000 Perpetual Preferred Shares and 5,750,000 Hybrid
Capital Units are issued and outstanding. In addition, as of the date hereof,
there are (i) Options outstanding which are exercisable for an aggregate of
1,892,519 Ordinary Shares, (ii) 821,187 Restricted Shares outstanding and (iii)
Class A Warrants (the "Warrants") outstanding which are exercisable for an
aggregate of 2,650,000 Ordinary Shares. Except as set forth above, no shares of
capital stock of SRGL are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of SRGL are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive or similar rights.
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(b) Section 3.2(b) of the SRGL Disclosure Letter contains a true and
complete schedule as of the date of this Agreement setting forth (as applicable)
(i) the holder, number, exercise or reference price, number of Ordinary Shares
for which it is exercisable, vesting date and expiration date, in each case of
each outstanding Option and each outstanding Warrant, respectively, (ii) the
holder, number and number of shares for which it would be converted, in the case
of each holder of Restricted Shares and (iii) the aggregate number of shares for
which the Convertible Notes may be converted as of the date of this Agreement.
(c) Except as set forth in Section 3.2(c) of the SRGL Disclosure Letter,
there are no preemptive or similar rights on the part of any holder of any class
of securities of SRGL or any of its Subsidiaries. Other than the Hybrid Capital
Units and the securities listed in Section 3.2(c) of the SRGL Disclosure Letter,
neither SRGL nor any of its Subsidiaries has outstanding any bonds, debentures,
notes or other obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the right to vote)
with the shareholders of SRGL or any such Subsidiary on any matter submitted to
shareholders or a separate class of holders of capital stock. Except as set
forth above and except for the securities listed in Section 3.2(b) or Section
3.2(c) of the SRGL Disclosure Letter, there are not any options, warrants,
restricted stock, restricted stock units, calls, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, contracts, arrangements or
undertakings of any kind to which SRGL or any of its Subsidiaries is a party or
by which any of them is bound (i) obligating SRGL or any of its Subsidiaries to
issue, deliver, sell or transfer or repurchase, redeem or otherwise acquire, or
cause to be issued, delivered, sold or transferred or repurchased, redeemed or
otherwise acquired, any shares of the capital stock of SRGL or any of its
Subsidiaries, any additional shares of capital stock of, or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of, or other equity interest in, SRGL or any of its
Subsidiaries, (ii) obligating SRGL or any of its Subsidiaries to issue, grant,
extend or enter into any such option, warrant, call, right, security,
commitment, contract, arrangement or undertaking, (iii) obligating SRGL or any
of its Subsidiaries pursuant to any right of first offer, right of first
negotiation, right of first refusal, co-sale or similar provisions or (iv)
giving any person the right to receive any economic benefit or right similar to
or derived from the economic benefits and rights accruing to holders of capital
stock of, or other equity interests in, SRGL or any of its Subsidiaries. As of
the date of this Agreement, there are no outstanding contractual obligations of
SRGL or any of its Subsidiaries to sell, repurchase, redeem or otherwise acquire
or to register any shares of capital stock of, or other equity interests in,
SRGL or any of its Subsidiaries. There are no proxies, voting trusts or other
agreements or understandings to which SRGL or any of its Subsidiaries is a party
or is bound with respect to the voting of the capital stock of, or other equity
interests in, SRGL or any of its Subsidiaries. No Ordinary Shares or Preferred
Shares are held by any wholly owned Subsidiary of SRGL.
(d) As of the Closing, there will be 1,000,000 Convertible Shares
authorized of which 1,000,000 shall be issued and outstanding and there will be
590,000,000 Ordinary Shares authorized. The issuance, sale and delivery of the
Convertible Shares in accordance with this Agreement, and the issuance and
delivery of the Ordinary Shares issuable upon conversion of the Convertible
Shares, will be on or prior to the Closing, duly authorized by all necessary
corporate action on the part of SRGL, and all such Ordinary Shares will be duly
reserved for issuance. As of the Closing, a number of Ordinary Shares shall have
been duly authorized and
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reserved for issuance which equals or exceeds 130% of the maximum number of
Ordinary Shares issuable upon conversion of the Convertible Shares. The
Convertible Shares when issued, sold and delivered against payment therefor in
accordance with the provisions of this Agreement, and the Ordinary Shares
issuable upon conversion of the Convertible Shares, when issued upon such
conversion, will be duly and validly issued, fully paid and nonassessable, free
and clear of any Liens (other than restrictions under applicable United States
federal and state, and any foreign, securities Laws) with the holders being
entitled to all rights accorded to a holder of Ordinary Shares under Cayman
Islands law and the organizational documents of SRGL. No person has any
preemptive right or right of first refusal which would be triggered by reason of
the issuance of the Convertible Shares or the Ordinary Shares issuable upon
conversion of the Convertible Shares.
SECTION 3.3. Subsidiaries. Section 3.3 of the SRGL Disclosure Letter lists
each Subsidiary of SRGL and each Special Purpose Vehicle, and in each case, its
capitalization and its jurisdiction of organization. All the outstanding shares
of capital stock of each Subsidiary of SRGL have been validly issued and are
fully paid and nonassessable (and no such shares are subject to preemptive or
similar rights) and, except as set forth in Section 3.3 of the SRGL Disclosure
Letter and except for Scottish Re Life Corporation, of which SRGL indirectly
owns 95% of the outstanding capital stock, are wholly-owned beneficially and as
of record by SRGL, by one or more Subsidiaries of SRGL or by SRGL and one or
more such Subsidiaries, free and clear of all Liens.
SECTION 3.4. Authority. SRGL has the requisite corporate power and
authority to enter into this Agreement and the other Transaction Documents, and,
subject to obtaining the SRGL Member Approval and required regulatory approvals,
as contemplated by this Agreement, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated by this Agreement and
the other Transaction Documents. The execution, delivery and performance of this
Agreement and the other Transaction Documents by SRGL and the consummation by
SRGL of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of SRGL, other than the
SRGL Member Approval. Each of this Agreement and the Voting Agreement has been
and at the Closing, the Registration Rights and Shareholders Agreement and the
Convertible Shares Certificate of Designations will be, duly executed and
delivered by SRGL and, assuming due authorization, execution and delivery of
this Agreement, the Voting Agreement and the Registration Rights and
Shareholders Agreement by Investors, constitute or will constitute, as the case
may be, valid and binding obligations of SRGL, enforceable against SRGL in
accordance with their respective terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. Subject to obtaining the SRGL Member
Approval, SRGL will have at the Closing all requisite corporate power to issue
and sell the Convertible Shares to Investors and to issue the Ordinary Shares
issuable upon conversion of the Convertible Shares.
SECTION 3.5. Noncontravention; Consents. Except as set forth in Section 3.5
of the SRGL Disclosure Letter, the execution and delivery of this Agreement and
the
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other Transaction Documents by SRGL do not, and the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
including, without limitation, the issuance of the Convertible Shares or the
issuance of Ordinary Shares upon conversion of the Convertible Shares will not,
(i) conflict with any of the provisions of the Memorandum of Association and
Articles of Association of SRGL or the comparable organizational documents of
any of its Subsidiaries or any of the Special Purpose Vehicles, (ii) subject to
the matters referred to in the next sentence, conflict with, result in a breach
of or default under (with or without notice or lapse of time, or both), give
rise to a right of termination or acceleration, or result in the creation of any
Lien on any property or asset of SRGL or any of its Subsidiaries under, any
agreement, permit, franchise, license or instrument to which SRGL or any of its
Subsidiaries or any Special Purpose Vehicle is a party or (iii) subject to the
matters referred to in the next sentence, contravene any Law applicable to SRGL
or any of its Subsidiaries or any Special Purpose Vehicle, which, in the case of
clauses (ii) and (iii) above, would have an SRGL Material Adverse Effect. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any court, administrative agency or commission or other governmental or
regulatory authority or agency, political subdivision, instrumentality or any
securities exchange, in any jurisdiction (a "Governmental Entity"), and no
consent, approval or authorization of any third party, is required by or with
respect to SRGL or any of its Subsidiaries or any Special Purpose Vehicle in
connection with the execution, delivery and performance of this Agreement or the
other Transaction Documents or the consummation by SRGL of the transactions
contemplated hereby or thereby, including, without limitation, the issuance of
the Convertible Shares or the issuance of Ordinary Shares upon conversion of the
Convertible Shares except for (a) the filing of premerger notification and
report forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and such other merger filings as are considered
necessary by Investors and SRGL, based on information relating to Investors, (b)
the approvals, filings and notices required under the insurance Laws of the
jurisdictions set forth in Section 3.5 of the SRGL Disclosure Letter, and (c)
such other consents, approvals, authorizations, declarations, filings or notices
as are set forth in Section 3.5 of the SRGL Disclosure Letter.
SECTION 3.6. SEC Reports; Financial Statements. (a) Since December 31,
2003, SRGL has filed all forms, reports, schedules, statements and other
documents (including exhibits thereto) with the SEC relating to periods
commencing on or after such date required to be filed by it pursuant to the
United States federal securities laws and the SEC rules and regulations
promulgated thereunder (such forms, reports, schedules, statements and other
documents, in each case, as amended, supplemented or superceded, together with
any documents filed during such period by SRGL with the SEC on a voluntary basis
on Form 8-K, in each case, together with any other information incorporated
therein, being hereinafter referred to as the "SEC Filings"), and, as of their
respective dates, each of the SEC Filings complied, and each of the Subsequent
Filings will comply, in all material respects with all applicable requirements
of the United States federal securities laws and the rules and regulations
promulgated thereunder, and do not contain, and in the case of any Subsequent
Filings, will not contain, in each case after taking into account all prior SEC
Filings of SRGL at the time of such filing, any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
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(b) SRGL has made available to Investors in the Data Room true and complete
copies of (i) the audited consolidated balance sheets of SRGL and its
Subsidiaries as of December 31, 2003, 2004 and 2005 (collectively, the "GAAP
December Balance Sheets") and, in each case, the related consolidated (if
applicable) statements of income, comprehensive income, shareholders' equity and
cash flows for the years then ended, together with the notes to such financial
statements, (ii) the unaudited consolidated balance sheet of SRGL and its
Subsidiaries as of September 30, 2006 and the related consolidated statements of
income, comprehensive income, shareholders' equity and cash flows for the nine
months then ended, together with the notes to such financial statements
(collectively, the "September 2006 GAAP Statements"), and (iii) the unaudited
balance sheet and related income statement of each of the Special Purpose
Vehicles as of September 30, 2006. Except as set forth in the notes thereto and
except as otherwise permitted by the requirements applicable to the preparation
of Quarterly Reports on Form 10-Q under the Exchange Act, the GAAP December
Balance Sheets and September 2006 GAAP Statements were prepared, and any
financial statements contained in any Subsequent Filing will be prepared, in
accordance with U.S. generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods presented and fairly present, or will
fairly present, as the case may be, in all material respects the consolidated
financial position of SRGL and its consolidated Subsidiaries, as of the dates
thereof and the consolidated (if applicable) results of their respective
operations and cash flows for the periods then ended in conformity with GAAP
(subject, in the case of the September 2006 GAAP Statements, to normal year-end
adjustments).
(c) SRGL has made available to Investors in the Data Room true and complete
copies of the (i) balance sheets of each Insurance Subsidiary as of December 31,
2003, 2004 and 2005 and the related statement of operations and statement of
cash flows for the years then ended (the "December SAP Statements") and (ii)
balance sheets of each Insurance Subsidiary as of March 31, 2006, June 30, 2006
and September 30, 2006 and the related statement of operations and statement of
cash flows for the three months then ended (the "Quarterly SAP Statements"), in
each case to the extent such Insurance Subsidiary (A) was a Subsidiary of SRGL
during such period and (B) is required by applicable Law to prepare such balance
sheets and statements, and in each case as filed with the Governmental Entity
charged with supervision of insurance companies of such subsidiary's
jurisdiction of domicile (the "Insurance Regulator"). Except as set forth in
Section 3.6 of the SRGL Disclosure Letter, the foregoing financial statements
were prepared in conformity with statutory accounting practices prescribed or
permitted by such Insurance Regulator applied on a consistent basis ("SAP") and
present fairly, to the extent required by and in conformity with SAP, except as
set forth in the notes, exhibits or schedules thereto, in all material respects
the statutory financial condition of such Insurance Subsidiary at their
respective dates and the results of operations and cash flows of such Insurance
Subsidiary for each of the periods then ended (subject, in the case of the
Quarterly SAP Statements, to normal year-end adjustments). Except as indicated
therein, all assets that are reflected as admitted assets in the foregoing
financial statements comply in all material respects with all applicable
insurance Laws with respect to admitted assets.
SECTION 3.7. No Undisclosed Liabilities. There are no liabilities or
obligations of SRGL or any of its Subsidiaries or any Special Purpose Vehicle of
any kind, whether accrued, contingent, absolute, determinable, known or unknown
or otherwise, other than (i) liabilities and obligations reflected or disclosed
in the September 2006 GAAP Statements, in
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accordance with GAAP consistently applied, (ii) liabilities or obligations
incurred pursuant to this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, (iii) liabilities or obligations
incurred on or prior to September 30, 2006 that would not be required by GAAP,
consistently applied, to be reflected or disclosed on the September 2006 GAAP
Statements, and (iv) liabilities or obligations incurred in the ordinary course
of business consistent with past practice (after taking into account events
occurring following the second fiscal quarter of 2006) since September 30, 2006
and in an amount not in excess, individually or in the aggregate, of $7,500,000,
other than liabilities and obligations incurred in the ordinary course of
business consistent with past practice (after taking into account events
occurring following the second fiscal quarter of 2006) under Reinsurance
Agreements existing as of the date of this Agreement.
SECTION 3.8. Absence of Certain Changes or Events. Since December 31, 2005,
except as disclosed in the Exchange Act Reports and except as set forth in
Section 3.8 of the SRGL Disclosure Letter, (x) SRGL and its Subsidiaries and the
Special Purpose Vehicles have carried on and operated their respective
businesses in the ordinary course of business consistent with past practices
(after taking into account events occurring following the second fiscal quarter
of 2006) and (y) there has not occurred (i) any event or change having a SRGL
Material Adverse Effect, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of SRGL's outstanding capital stock other than regular dividend payments
and contract adjustment payments on the Perpetual Preferred Shares and the
Hybrid Capital Units, as applicable, (iii) any change in accounting methods,
principles or practices by SRGL or any of its Subsidiaries materially affecting
its assets or liabilities, except insofar as may have been required by Law or
required or permitted by a change in applicable GAAP or SAP, or (iv) other than
as disclosed to Investors in the Data Room, taken any action taken by SRGL or
any of its Subsidiaries through the date hereof that, if taken during the period
from the date hereof through the Closing Date, would constitute a breach of
Section 5.1.
SECTION 3.9. Benefit Plans. (a) Each Employee Benefit Plan and each
employment, consulting, termination and severance contract for active, retired
or former employees or directors of SRGL and its Subsidiaries currently in
effect or pursuant to which SRGL or any of its Subsidiaries has ongoing
obligations (each such contract and agreement, an "Employment Agreement") is
listed in Section 3.9 of the SRGL Disclosure Letter. SRGL has delivered or made
available in the Data Room to Investors and their counsel true and complete
copies of all material documents in connection with each Employee Benefit Plan
and each Employment Agreement, including, where applicable, (i) all Employee
Benefit Plans and Employment Agreements as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan or Employment Agreement not set forth in writing, a written
description thereof; (ii) all current summary plan descriptions, summaries of
material modifications, and material communications; (iii) all current trust
agreements (and all amendments thereto and the latest financial statements
thereof); (iv) the most recent IRS determination letter, if any, obtained with
respect to each Employee Benefit Plan intended to be qualified under Section
401(a) of the Code or exempt under Section 501(a) or 501(c)(9) of the Code; (v)
the annual report on Internal Revenue Service Form 5500 or 990 for each of the
last two years for each Employee Benefit Plan required to file such form; (vi)
the two most recently prepared actuarial valuation reports; (vii) the most
recently prepared financial statements; and
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(viii) all contracts and agreements relating to each Employee Benefit Plan,
including service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, recordkeeping agreements and collective bargaining agreements.
(b) Each Employee Benefit Plan (including any related trust) is in
compliance in all material respects with all applicable Laws and has been
administered and operated in all material respects in accordance with its terms.
(c) Each Employee Benefit Plan of SRGL and its Subsidiaries which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service and,
to the Knowledge of SRGL, no event has occurred and no condition exists which
could reasonably be expected to result in the revocation of any such
determination.
(d) Full payment has been made of all amounts which SRGL and its
Subsidiaries were required under the terms of the Employee Benefit Plans of SRGL
and its Subsidiaries to have paid as contributions to such Employee Benefit
Plans on or prior to the date hereof (excluding any amounts not yet due) and all
amounts not yet due but required to be accrued on SRGL's or any of its
Subsidiaries' financial statements have been properly accrued.
(e) No Employee Benefit Plan of SRGL or its Subsidiaries which is subject
to Part 3 of Subtitle B of Title I of ERISA has incurred any "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA or Section 412
of the Code), whether or not waived and no Employee Benefit Plan has applied for
or obtained a waiver from the Internal Revenue Service.
(f) Neither SRGL nor any of its Subsidiaries or any other "disqualified
person" or "party in interest" (as defined in Section 4975(e)(2) of the Code and
Section 3(14) of ERISA, respectively), has engaged in any transaction in
connection with any Employee Benefit Plan of SRGL that could reasonably be
expected to result in the imposition of a material penalty pursuant to Section
502(i) of ERISA or a material tax pursuant to Section 4975(a) of the Code.
(g) Neither SRGL nor any of its Subsidiaries has maintained any Employee
Benefit Plan (other than an Employee Benefit Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code or a U.K. pension
scheme listed in Section 3.9 of the SRGL Disclosure Letter) which provides
benefits with respect to Employees or former employees following their
termination of service with SRGL (other than as required pursuant to Section 601
of ERISA). Each Employee Benefit Plan of SRGL and its Subsidiaries subject to
the requirements of Section 601 of ERISA has been operated in substantial
compliance therewith, except where the failure to so comply would not have a
SRGL Material Adverse Effect.
(h) No Employee Benefit Plan of SRGL or its Subsidiaries that is subject to
Title IV of ERISA has been terminated or is or has been the subject of
termination proceedings pursuant to Title IV of ERISA and resulted, or would
result, in an obligation by SRGL or its Subsidiaries to make future
contributions to such Employee Benefit Plan. Except as required to
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comply with applicable Law, neither SRGL nor any of its Subsidiaries has any
commitment, or stated any intention, to create, modify or terminate any Employee
Benefit Plan. Neither SRGL nor any of its Subsidiaries has caused any condition
or circumstance that could reasonably be expected to result in a material
increase in benefits under or expense of maintaining any Employee Benefit Plan
for the level of benefits or expense incurred for the most recent fiscal year
ended thereof.
(i) No Employee Benefit Plan of SRGL or its Subsidiaries is a
"multiemployer plan" (as defined in Section 3(37) of ERISA) and SRGL has not
been obligated to contribute to any multiemployer plan.
(j) Except as set forth in Section 3.9(j) of the SRGL Disclosure Letter,
the execution of this Agreement and the consummation of the transactions
contemplated hereby do not and will not constitute a triggering event under any
Benefit Plan, Employment Agreement or otherwise that (either alone or upon the
occurrence of any additional or subsequent event) will or may result in any
payment (whether of severance pay or otherwise), acceleration, vesting or
increase in benefit to any employee or former employee or director of SRGL or
any of its Subsidiaries. Except as set forth in Section3.9(j) of the SRGL
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent event) result in any payment that would constitute an "excess
parachute payment" for purposes of Sections 280G or 4999 of the Code.
(k) SRGL and its Subsidiaries have been and are being operated in all
material respects in compliance with all Laws in any jurisdiction relating to
employees and employment practices, including employment standards, workplace
safety and insurance and occupational health and safety, workers' compensation,
human rights, labor relations or pay equity. Other than routine claims for
benefits, there are no pending or outstanding material written claims or
complaints, assessments, actions, causes of action, claims, complaints, demands,
orders, prosecutions or suits nor, to the Knowledge of SRGL, are there any
threatened or anticipated claims or complaints, against SRGL, any of its
Subsidiaries or any of its directors, officers or agents in relation to any Laws
in any jurisdiction relating to employees, including employment standards, human
rights, labor relations, occupational health and safety, workers' compensation
or pay equity. To the Knowledge of SRGL, nothing has occurred that might lead to
a claim or complaint against SRGL or any of its Subsidiaries, under any such
Laws. There are no outstanding Orders or settlements or pending settlements that
place any obligation upon SRGL or any of its Subsidiaries to do or refrain from
doing any act in respect of their employees.
SECTION 3.10. Taxes. (a) Other than as would not in the aggregate have an
SRGL Material Adverse Effect and, with respect to the Special Purpose Vehicles,
to the Knowledge of SRGL: (i) all Tax Returns required to be filed on or before
the Closing Date (after taking into account all applicable extensions to file)
with respect to SRGL, each of its Subsidiaries and each Special Purpose Vehicle
have been filed; (ii) all Taxes reportable on such returns and reports or
otherwise due and payable by SRGL, any of its Subsidiaries or any Special
Purpose Vehicle have been or will be timely paid except to the extent any such
Taxes are being contested in good-faith by current administrative or judicial
proceedings, or, with respect to any Tax period or portion thereof ending on or
before September 30, 2006, are specifically and adequately reflected or
otherwise disclosed as Tax liabilities in the September 2006 GAAP
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Statements; (iii) all such Tax Returns were true, correct and complete when
filed; (iv) except as set forth in Section 3.10 of the SRGL Disclosure Letter,
no audit or other administrative proceeding or court proceeding in any
jurisdiction exists, has been initiated or has been threatened in writing with
regard to Taxes or Tax Returns of SRGL, any of its Subsidiaries or any Special
Purpose Vehicle; (v) no Liens (other than Permitted Liens) for Taxes exist with
respect to any of the assets or properties of SRGL or any of its Subsidiaries or
any Special Purpose Vehicle; (vi) except as set forth in Section 3.10 of the
SRGL Disclosure Letter, none of SRGL, any of its Subsidiaries or any Special
Purpose Vehicle is party to or bound by any Tax allocation, sharing, indemnity
(entered into in connection with a material transaction with a third party) or
similar agreement; (vii) none of SRGL, any of its Subsidiaries or any Special
Purpose Vehicle has entered into any transaction that has been identified as a
"listed transaction" as defined in Treasury Regulation ss.1.6011-4(b)(2) by the
Internal Revenue Service pursuant to published guidance; (viii) the transactions
contemplated by this Agreement will not trigger any income or gain to SRGL, any
of its Subsidiaries or any Special Purpose Vehicle for federal income tax
purposes under section 355(e) of the Code in respect of a distribution by any
Subsidiary of SRGL occurring prior to the Closing; (ix) no United States
Subsidiary of SRGL is or has been during the five-year period ending on the date
hereof, a "United States real property holding corporation" as defined in
Section 897(c)(2) of the Code; and (x) except as set forth in Section 3.10 of
the SRGL Disclosure Letter, no United States Subsidiary of SRGL has been a
member of an affiliated, combined or unitary group filing a consolidated federal
income Tax return or a consolidated, combined or unitary state Tax return (other
than a group the common parent of which was a Subsidiary of SGRL) or has any
liability for the Taxes of any person (other than an affiliate of the Company)
under Treasury Regulation ss.1.1502-6 (or any similar provision of state, local,
or foreign Law) or as a transferee.
(b) No material deficiencies for any Taxes have been proposed, asserted or
assessed against SRGL or any of its Subsidiaries or, to the knowledge of SRGL,
any Special Purpose Vehicle that are not specifically and adequately reflected
or otherwise disclosed as Tax liabilities in the September 2006 GAAP Statements,
and no requests for waivers of the time to assess any such Taxes have been
granted or are pending.
Notwithstanding any provision of this Agreement to the contrary, none of
SRGL and each of its Subsidiaries makes any representation or warranty with
respect to any matter relating to Taxes or liabilities or obligations relating
to Taxes except to the extent set forth in this Section 3.10.
As used in this Agreement, "Taxes" shall include all income, property,
sales, excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever imposed by any Governmental Entity
(together with any interest or penalty, addition to Tax or additional amount
imposed with respect thereto).
SECTION 3.11. Compliance with Applicable Laws. (a) SRGL and each of its
Subsidiaries and each of the Special Purpose Vehicles has in full force and
effect all material approvals, authorizations, consents, franchises, licenses,
permits and rights required by any Governmental Entity (collectively, "Permits")
necessary for it to own, lease or operate its properties and assets and to carry
on its business as now conducted. SRGL and its Subsidiaries
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and the Special Purpose Vehicles are, and since December 31, 2003, each of them
has been, in compliance in all material respects with all applicable Laws.
(b) Since December 31, 2003, SRGL, its Subsidiaries and the principal
executive officer and the principal financial officer of SRGL have complied in
all material respects with (i) the applicable provisions of the Sarbanes-Oxley
Act of 2002 and the related rules and regulations promulgated under such Act
(the "Sarbanes-Oxley Act"), (ii) the applicable provisions of the Exchange Act,
and (iii) the applicable listing and corporate governance rules and regulations
of The New York Stock Exchange. The principal executive officer and the
principal financial officer of SRGL have made all certifications required by
Sections 302 and 906 of the Sarbanes-Oxley Act with respect to each SEC Filing
filed by SRGL. For purposes of the preceding sentence, "principal executive
officer" and "principal financial officer" shall have the meanings given to such
terms in the Sarbanes-Oxley Act. Except as permitted by the Exchange Act,
including Sections 13(k)(2) and (3), since the enactment of the Sarbanes-Oxley
Act, neither SRGL nor any of its affiliates has directly or indirectly extended
or maintained credit, arranged for the extension of credit, renewed an extension
of credit or materially modified an extension of credit in the form of personal
loans to any executive officer or director (or equivalent thereof) of SRGL or
any of its Subsidiaries. SRGL has delivered or made available to Investors in
the Data Room copies of all certifications, sub-certifications, and minutes of
Board of meetings of the Board of Directors and committees thereof relating to
the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act,
and to the Knowledge of SRGL, no complaints or allegations have been made,
which, if true, would conflict with or otherwise prevent such certifications
from being made.
(c) SRGL has (i) implemented disclosure controls and procedures (as defined
in Rule 13a-15(e) of the Exchange Act) to ensure that material information
relating to SRGL is made known to the management of SRGL by others within SRGL,
and (ii) has disclosed, based on its most recent evaluation, to SRGL's outside
auditors and the audit committee of the Board of Directors of SRGL (A) all
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) that are reasonably likely to adversely affect SRGL's ability to
record, process, summarize and report financial data, and (B) any fraud, whether
or not material, that involves management or other employees who have a
significant role in SRGL's internal controls over financial reporting. A summary
of any of these disclosures made by management to SRGL's outside auditors and
audit committee is set forth in Section 3.11(c) of the SRGL Disclosure Letter.
(d) SRGL has delivered or made available to Investors in the Data Room
copies of any written notifications it has received since December 31, 2003 of a
(i) "reportable condition" or (ii) "material weakness" in SRGL's internal
controls. For purposes of this Agreement, the terms "reportable condition" and
"material weakness" shall have the meanings assigned to them in the Statements
of Auditing Standards No. 60, as in effect on the date hereof. SRGL has
delivered or made available to Investors in the Data Room copies of all
management letters and internal control letters delivered in connection with
Section 404 of the Sarbanes-Oxley Act.
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(e) Since December 31, 2003, to the Knowledge of SRGL, neither SRGL, nor
any of its Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of SRGL or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, SRGL (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
SECTION 3.12. Litigation. Except as disclosed in the Exchange Act Reports
or set forth in Section 3.12 of the SRGL Disclosure Letter, there is no suit,
action, litigation, claim, investigation, inquiry, hearing, petition, grievance,
complaint, controversy, proceeding or arbitration (collectively, "Litigation")
pending or, to the Knowledge of SRGL, threatened in writing against or affecting
SRGL or any of its Subsidiaries or any Special Purpose Vehicle that would have
an SRGL Material Adverse Effect, nor is there any judgment, decree, injunction
ruling, writ or arbitration award or other award (or agreement entered into in
any administrative, judicial or arbitration proceeding with any Governmental
Entity) or order of any Governmental Entity or arbitrator (each, an "Order")
outstanding against SRGL or any of its Subsidiaries or any Special Purpose
Vehicle that would have an SRGL Material Adverse Effect.
SECTION 3.13. Reserves. SRGL has made available to Investors in the Data
Room true and complete copies of all actuarial reports prepared by third party
consultants that are in the possession of SRGL or any of its Subsidiaries
relating to the reserves of any of the Insurance Subsidiaries or Special Purpose
Vehicles as of any date on or after December 31, 2005. The policy reserves of
SRGL and its Insurance Subsidiaries recorded in the December SAP Statements, as
of the date thereof: (a) have been computed in all material respects in
accordance with presently accepted actuarial standards consistently applied and
prepared in accordance with applicable SAP, consistently applied; (b) have been
based on actuarial assumptions that are consistent in all material respects with
applicable contract provisions; (c) have been computed on the basis of
assumptions consistent with those used to compute the corresponding items in
such financial statements; and (d) meet the requirements of applicable insurance
Laws in all material respects. Notwithstanding the forgoing or any other
provision of this Agreement (including Sections 3.6 and 3.7), SRGL is not making
any representations, express or implied, in or pursuant to this Agreement
concerning the adequacy or sufficiency of reserves.
SECTION 3.14. Contracts. (a) Except as listed in Section 3.14(a) of the
SRGL Disclosure Letter (including the index to the Data Room contained therein,
dated as of November 21, 2006) and except for any agreements or contracts filed
as exhibits to the Exchange Act Reports, neither SRGL nor any of its
Subsidiaries is a party to or bound by:
(i) any agreement relating to indebtedness with third parties where the
amount as to which SRGL or any of its Subsidiaries is, or may become, obligated
is in excess of $500,000;
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(ii) any joint venture, partnership, limited liability company or other
similar agreement or arrangement;
(iii) any agreement relating to the acquisition or disposition of any
business or real property (whether by merger, sale of stock, sale of assets,
100% indemnity or assumption reinsurance or otherwise, but excluding ordinary
course investment activities);
(iv) other than intercompany agreements between SRGL and/or its
Subsidiaries, any agreement entered into with (A) any person directly or
indirectly owning, controlling or holding with power to vote, 5% or more of the
outstanding voting securities of SRGL or any of its Subsidiaries, (B) any person
5% or more of the outstanding voting securities of which are directly or
indirectly owned, controlled or held with power to vote by SRGL or any of its
Subsidiaries or (C) any current or former director or officer of SRGL or any of
its Subsidiaries or any "associates" or members of the "immediate family" (as
such terms are respectively defined in Rule 12b-2 and Rule 16a-1 of the Exchange
Act) of any such director or officer;
(v) any agreement that limits or restricts either the type of business in
which SRGL or its Subsidiaries may engage or the manner or locations in which
any of them may so engage in any business (including any covenant not to compete
or, except for confidentiality agreements entered into by SRGL or any of its
Subsidiaries since December 31, 2003, not to solicit employees) or which
contains any standstill or similar provision or could require the disposition of
any assets or line of business of SRGL or its Subsidiaries;
(vi) any agreement containing a right of first refusal, first offer or
first negotiation in respect of assets, businesses or shares of capital stock of
SRGL or any of its Subsidiaries;
(vii) any Employee Benefit Plan;
(viii) any agreement (other than Employee Benefit Plans) with any current
or former employee, director, officer or consultant of SRGL or any of its
Subsidiaries under which SRGL or its subsidiaries may have ongoing or future
payment obligations for services rendered or to be rendered;
(ix) any (A) real property or personal property leases and (B) agreement
providing for the sale or exchange of, or option to sell or exchange, any Leased
Real Property, or for the purchase or exchange of, or option to purchase or
exchange, any real estate.
(x) any agreement (other than reinsurance agreements where Subsidiaries of
SRGL are the reinsurer entered into in the ordinary course of business) that
cannot be canceled upon fewer than 60 days' notice without penalty, premium or
other liability or that provides for continuing indemnification obligations of
SRGL or any of its Subsidiaries, in each case in excess of $500,000 in any
fiscal year;
(xi) any agreement with any Governmental Entity other than in the ordinary
course of business consistent with past practices (after taking into account
events occurring following the second fiscal quarter of 2006);
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(xii) any agreement relating to any interest rate, currency or commodity
derivatives or hedging transaction;
(xiii) any agreement (including keepwell agreements among any Subsidiaries
of SRGL) under which (A) any person has directly or indirectly guaranteed any
liabilities or obligations of SRGL or any of its Subsidiaries or (B) SRGL or any
of its Subsidiaries has directly or indirectly guaranteed liabilities or
obligations of any other person;
(xiv) any agreements with "most-favored nations" pricing or other terms;
(xv) any other agreement (A) the termination or breach of which or the
failure to obtain consent in respect of which is reasonably likely to be
material to SRGL or any of its Subsidiaries, or (B) pursuant to which SRGL or
any of its Subsidiaries is required to pay or is scheduled to receive (assuming
full performance pursuant to the terms thereof) $5,000,000 or more during any
12-month period following the date of this Agreement;
(xvi) any agreement for the purchase of goods, services, equipment or
machinery in excess of $1,000,000;
(xvii) any agreement relating to capital expenditures of SRGL and/or its
Subsidiaries in excess of $500,000 in any fiscal year, or $1,000,000 in the
aggregate;
(xviii) any agreement containing "change of control" provisions triggered
by the execution of this Agreement or the consummation of the transactions
contemplated hereby; or
(xix) any other agreement that SRGL or any of its Subsidiaries has filed or
would be required to describe in any Exchange Act Report, or to file as an
exhibit thereto under Items 401 or 601(b)(10) of Regulation S-K under the
Exchange Act.
(b) The material agreements, commitments, arrangements and plans listed or
required to be listed in Section 3.14(a) of the SRGL Disclosure Letter or the
agreements, commitments, arrangements and plans filed as exhibits to Exchange
Act Reports are referred to herein as the "Contracts". All of the Contracts that
are required to be filed as exhibits to the Exchange Act Reports have been so
filed as exhibits thereto.
(c) Each Contract and each reinsurance or retrocession agreement under
which business is currently ceded or under which new business may be ceded to
which any Insurance Subsidiary is a party (a "Reinsurance Agreement") is a valid
and binding agreement of SRGL or one or more of its Subsidiaries, as the case
may be, and is in full force and effect, and none of SRGL, any of its
Subsidiaries or, to the Knowledge of SRGL, any other party thereto is in default
or breach in any material respect under the terms of, or has provided any
written notice of any intention to terminate, any such Contract or Reinsurance
Agreement and, to the Knowledge of SRGL, no event or circumstance has occurred,
or will occur by reason of the execution of this Agreement or the consummation
of any of the transactions contemplated hereby, that, with notice or lapse of
time or both, would constitute any event of default thereunder or would result
in a termination thereof. True, correct and complete copies of each Contract and
Reinsurance Agreements representing in the aggregate at least 75% of the
in-force business of SRGL and its Subsidiaries (including all modifications and
amendments thereto
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and waivers thereunder) have been made available to Investors in the Data Room
or have been filed as exhibits to the Exchange Act Reports.
SECTION 3.15. Insurance. Section 3.15 of the SRGL Disclosure Letter
contains a true, complete and correct list of all currently in effect and most
recently expired liability, property and casualty, employee liability, directors
and officers liability, surety bonds, key man life insurance and other similar
insurance contracts of SRGL and its Subsidiaries that insure the business,
properties, operations or affairs of SRGL or its Subsidiaries or affect or
relate to the ownership, use or operations of SRGL's or its Subsidiaries' assets
or properties and the amount of coverage, insurance carrier, policy number and
deductible or self-insured retention under each such insurance contract. All
premiums due on all such insurance contracts of SRGL and its Subsidiaries have
been paid, SRGL and its Subsidiaries have complied in all material respects with
the terms and conditions of each such insurance contract, no notice of
termination or cancellation of any such insurance contract has been received and
all such insurance contracts are in full force and effect. Investors have been
provided with a complete and accurate copy of the signed application for new or
renewal insurance currently pending or most recently bound, and no false or
misleading affirmations were made in any such application. Investors have also
been provided with complete and accurate copies of all reservation of rights
letters, carrier coverage position letters, or denial of coverage letters
relating to any currently pending claim. To the Knowledge of SRGL, no event has
occurred that, with notice or the lapse of time or both, would constitute a
breach or default under, or permit termination of, any insurance policy of SRGL,
and there has been no threatened termination or non-renewal of, or material
premium increase with respect to, any insurance policy of SRGL. All Litigation
for which coverage is provided under any of SRGL's insurance policies has been
properly reported to the applicable insurer.
SECTION 3.16. Intellectual Property. (a) Section 3.16(a) of the SRGL
Disclosure Letter sets forth all material Intellectual Property owned by SRGL or
any of its Subsidiaries (the "Owned Intellectual Property"). No person other
than SRGL, its Subsidiaries and the Special Purpose Vehicles owns or has any
other right in or to, or has claimed any ownership or other right in or to, any
Owned Intellectual Property.
(b) Except as set forth in Section 3.16(b) of the SRGL Disclosure Letter,
to the Knowledge of SRGL, the conduct of the business of SRGL and its
Subsidiaries does not infringe upon or misappropriate the Intellectual Property
of any third party. To the Knowledge of SRGL, there are no infringements or
misappropriations of the Owned Intellectual Property by any third party or, to
the Knowledge of SRGL, any infringements or misappropriations by any third party
of any of the material Intellectual Property used by SRGL, any of its
Subsidiaries or any Special Purpose Vehicle that is not Owned Intellectual
Property.
(c) Except as set forth in Section 3.16(c) of the SRGL Disclosure Letter,
there are no material claims pending, or to the Knowledge of SRGL, threatened:
(i) alleging that the business of SRGL, any of its Subsidiaries or any Special
Purpose Vehicle as currently conducted infringes upon or constitutes an
unauthorized use of the Intellectual Property of any third party; (ii) alleging
that the Owned Intellectual Property is being infringed by any third party; or
(iii) challenging the ownership, validity or enforceability of the Owned
Intellectual Property.
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(d) Except as set forth in Section 3.16(d) of the SRGL Disclosure Letter,
SRGL or one of its Subsidiaries has taken all actions reasonably necessary to
ensure protection of the Owned Intellectual Property under applicable Law
(including making and maintaining in full force and effect all necessary
filings, registrations and issuances). Each of SRGL and its Subsidiaries has
taken all actions reasonably necessary to maintain the secrecy of all
confidential Intellectual Property used in the business of SRGL and its
Subsidiaries (including requiring the execution of valid and enforceable
agreements by employees or any other person to whom such confidential
Intellectual Property is made available). To the Knowledge of SRGL, none of SRGL
or its Subsidiaries is using or enforcing any material Owned Intellectual
Property in a manner that would reasonably be expected to result in the
cancellation or unenforceability of such Owned Intellectual Property.
SECTION 3.17. Insurance Regulatory Matters. (a) SRGL has made available to
Investors in the Data Room true and complete copies of all financial
examination, market conduct or other reports of U.S. state insurance departments
with respect to any U.S. Insurance Subsidiary and any equivalent reports of
Insurance Regulators with respect to any non-U.S. Insurance Subsidiaries or
Special Purpose Vehicles, in each case, which have been completed since January
1, 2003. Since January 1, 2003, no violations material to the financial
condition of any Insurance Subsidiary or Special Purpose Vehicle have been
asserted in writing by any Insurance Regulator, other than any violation which
has been cured or otherwise resolved to the satisfaction of such Insurance
Regulator or which is no longer being pursued by such Insurance Regulator
following a response by the relevant Insurance Subsidiary or Special Purpose
Vehicle.
(b) SRGL has delivered or made available to Investors in the Data Room true
and complete copies of all material registrations, filings, notifications and
submissions made since January 1, 2003 by any Insurance Subsidiary or Special
Purpose Vehicle with any Insurance Regulator. All Insurance Subsidiaries and
Special Purpose Vehicles have filed or notified all reports, statements,
documents, registrations, filings, notifications or submissions required to be
filed by them with or notified by them to, as the case may be, any Insurance
Regulator since January 1, 2003, and all such reports, statements, documents,
registrations, filings, notifications or submissions were in all material
respects true, complete and accurate when filed.
(c) None of SRGL, any of its Subsidiaries nor any Special Purpose Vehicle
is in default under or in violation of any Order, stipulation, decree, award or
judgment entered into with or issued by any Insurance Regulator; nor has any of
SRGL, any of its Subsidiaries or any Special Purpose Vehicle received any notice
of any such default or violation that remains uncorrected.
(d) Section 3.17(d) of the SRGL Disclosure Letter sets forth each of the
Subsidiaries of SRGL conducting any insurance or reinsurance business (the
"Insurance Subsidiaries") and lists the jurisdiction of domicile of each
Insurance Subsidiary.
SECTION 3.18. Brokers. No broker, investment banker, financial advisor or
other person, other than Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and Duff
& Phelps, LLC, the fees and expenses of which will be paid by SRGL and which
fees are set forth in Section 3.18 of the SRGL Disclosure Letter, is entitled to
any broker's, finder's, financial
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advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement or the other Transaction Documents based upon
arrangements made by or on behalf of SRGL or any affiliate.
SECTION 3.19. Board and Member Approval. The Board of Directors of SRGL, at
a meeting duly called and held, has taken unanimous action to (a) duly and
validly approve and take all corporate action required to be taken by the Board
of Directors to authorize the issuance of the Convertible Shares and the
Ordinary Shares into which such Convertible Shares may be converted to
Investors, the terms of the Convertible Shares and the consummation of the
transactions contemplated hereby, (b) resolve that the issuance of the
Convertible Shares and the Ordinary Shares into which such Convertible Shares
may be converted to Investors is fair to SRGL and in the best interests of SRGL
and its Members and (c) subject to the other terms and conditions of this
Agreement, resolve to recommend that the Members (i) vote at the Special Meeting
in favor of SRGL entering into the transactions contemplated by the Transaction
Documents, including the issuance of the Convertible Shares and the Ordinary
Shares into which such Convertible Shares may be converted to Investors, the
terms of the Convertible Shares and any related matters and (ii) approve and
adopt the transactions contemplated by the Transaction Documents, including
approval of the matters set forth in Section 2.1(a)(i), and none of the
aforesaid actions by the Board of Directors of SRGL has been amended, rescinded
or modified. The approval of the transactions contemplated hereby and by the
Transaction Documents, including approval of the matters set forth in Section
2.1(a)(i) by the affirmative vote at the Special Meeting of Members representing
at least 66 ?% of the outstanding Ordinary Shares entitled to vote at the
Special Meeting, voting together as a single class (the "SRGL Member Approval"),
is the only approval of the holders of any class or series of the capital stock
or any other securities of SRGL or any of its Subsidiaries required to approve
the transactions contemplated by the Transaction Documents.
SECTION 3.20. Takeover Statute. (a) No state "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
is applicable to the issuance of the Convertible Shares to Investors or the
other transactions contemplated by this Agreement and the other Transaction
Documents.
(b) The Boards of Directors of SRGL and its Subsidiaries have taken all
necessary action to render any potentially applicable anti-takeover or similar
statute, regulation or provision of the Memorandum of Association and Articles
of Association (or other comparable instrument), or other organizational or
constitutive document or governing instrument of SRGL or any of its
Subsidiaries, inapplicable to this Agreement and the other Transaction Documents
and the transactions contemplated by this Agreement and the other Transaction
Documents.
SECTION 3.21. Information. The Disclosure Statement, together with the
documents incorporated by reference therein, as of the date it or any amendment
or supplement thereto is mailed to the Members, and as of the time of the
Special Meeting taken together with any amendments or supplements thereto as of
such date, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made,
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not misleading. The Disclosure Statement and all other Disclosure Documents will
comply as to form in all respects with all applicable Laws.
SECTION 3.22. Properties; Absence of Liens. (a) Neither SRGL nor any of its
Subsidiaries owns any real property. SRGL or one of its Subsidiaries has a good
and valid leasehold interest in each parcel of real property leased by SRGL or
any of its Subsidiaries (the "Leased Real Property"), free and clear of all
Liens except for any Permitted Liens. SRGL or one of its Subsidiaries has the
right to use and occupy the Leased Real Property for the full term of the lease
or sublease relating thereto, except for any failure which would not be material
to SRGL and its Subsidiaries take as a whole.
(b) With respect to the Leased Real Property, (i) each of the agreements by
which SRGL or any of its Subsidiaries has obtained a leasehold interest in such
Leased Real Property (each, a "Lease") is set forth in Section 3.22 of the SRGL
Disclosure Letter and is in full force and effect in accordance with its
respective terms and SRGL or one of its Subsidiaries is the holder of the
lessee's or tenant's interest thereunder, (ii) to the Knowledge of SRGL, there
exists no default under any Lease and no circumstance exists which, with the
giving of notice, the passage of time or both, could result in such a default,
and (iii) there are no leases, subleases, licenses concessions or any other
contracts granting to any person or entity other than SRGL or any of its
Subsidiaries any right to the possession, use, occupancy or enjoyment of any
Leased Real Property or any portion thereof, except which would not have a SRGL
Material Adverse Effect.
SECTION 3.23. Affiliate Transactions. Between the date of SRGL's proxy
statement for its 2006 annual meeting of Members filed with the SEC and the date
of this Agreement, no event has occurred that would be required to be reported
by SRGL pursuant to Item 404 of Regulation S-K under the Exchange Act.
SECTION 3.24. Opinions of Financial Advisors. SRGL has received written
opinions from Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and Duff & Phelps,
LLC, each dated the date of this Agreement, and each to the effect that as of
the date hereof, the MassMutual Consideration and the Cerebus Consideration,
taken in the aggregate, to be received by SRGL pursuant to this Agreement, is
fair, from a financial point of view, to SRGL. True and complete signed copies
of such opinions have been delivered to Investors.
SECTION 3.25. Broker-Dealer Subsidiaries. (a) Neither SRGL nor any of its
Subsidiaries is a securities broker or dealer, as defined in the Exchange Act,
other than the Subsidiary of SRGL listed in Section 3.25(a) of the SRGL
Disclosure Letter, which is organized and resident under the Laws of the U.S. or
a state thereof (the "Broker-Dealer Subsidiary"). The Broker-Dealer Subsidiary
is a member in good standing of the National Association of Securities Dealers
Inc. (the "NASD") or other U.S. broker-dealer self-regulating associations (and,
if so, a listing of each such association). No other Subsidiary of SRGL is
required by the nature of its activities to be registered as a broker-dealer
under the Exchange Act or under the Laws of any state or other jurisdiction or
to be a member in good standing of the NASD or other broker-dealer
self-regulating associations under any other applicable Laws.
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(b) The Broker-Dealer Subsidiary is duly registered and licensed as a
broker-dealer under the Exchange Act and under any state, federal or foreign
broker-dealer or similar Laws pursuant to which the Broker-Dealer Subsidiary is
required to be registered. As of the date of this Agreement, neither the
Broker-Dealer Subsidiary, nor any of its officers, directors or employees, has
been convicted of any crime or has been the subject of any disciplinary
proceedings or Orders of any Governmental Entity, and, to the Knowledge of SRGL,
no such disciplinary proceeding or Order is pending or threatened.
SECTION 3.26. Private Placement. Neither SRGL nor any person acting on
SRGL's behalf has sold or offered to sell or solicited any offer to buy the
Convertible Shares by means of any form of general solicitation or advertising
within the meaning of Rule 502 under the Securities Act. Neither SRGL nor any
person acting on behalf of SRGL has, directly or indirectly, at any time within
the past six months, made any offer or sale of any security or solicitation of
any offer to buy any security of SRGL under circumstances that would (i)
eliminate the availability of the exemption from registration under Regulation D
in connection with the offer and sale by SRGL of the Convertible Shares as
contemplated hereby or (ii) cause the offering of the Convertible Shares and the
Ordinary Shares into which the Convertible Shares may be converted pursuant to
this Agreement to be integrated with prior offerings by SRGL for purposes of any
applicable Law or Member approval requirements, including, without limitation,
under the rules and regulations of the New York Stock Exchange. None of SRGL or
its Subsidiaries or any person acting on their behalf will take any action or
steps referred to in the preceding sentence that would require the registration
of any of the Convertible Shares and the Ordinary Shares into which the
Convertible Shares may be converted under the Securities Act or cause the
offering to be integrated with the other offerings for purposes of any
applicable Law or Member approval requirements. Neither SRGL nor any of its
Subsidiaries is an "investment company" as defined in the Investment Company
Act, or is registered or required to be registered thereunder. SRGL is not a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980. No consent, license,
permit, waiver approval or authorization of, or designation, declaration,
registration or filing with, the SEC or any state securities regulatory
authority is required in connection with the offer, sale, issuance or delivery
of the Convertible Shares and the Ordinary Shares into which the Convertible
Shares may be converted, other than the possible filing of a Form D with the
SEC. Assuming the accuracy of the representations and warranties made by
Investors in this Agreement, the offer and issuance by SRGL of the Convertible
Shares is exempt from registration under the Securities Act.
SECTION 3.27. Acknowledgment Regarding Investors' Purchase of SRGL
Securities. SRGL acknowledges and agrees that Investors are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby. SRGL
further acknowledges that Investors are not acting as financial advisors or
fiduciaries of SRGL (or in any similar capacity) with respect to this Agreement
and the other Transaction Documents and the transactions contemplated hereby and
thereby and any advice given by Investors or any of their respective
representatives or agents in connection with this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to Investors' purchase of the Convertible Shares. SRGL further
represents to Investors that SRGL's decision to enter into this Agreement and
the other Transaction Documents has been based solely on the
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independent evaluation of the transactions contemplated hereby and thereby by
SRGL and its representatives.
SECTION 3.28. Convertible Shares Certificate of Designations. The
Convertible Shares Certificate of Designations will, at the Closing, have been
duly authorized by SRGL. Upon the issuance and delivery of the Convertible
Shares in accordance with this Agreement, the Convertible Shares will be
convertible at the option of the holder thereof into Ordinary Shares in
accordance with the terms of this Agreement and the Convertible Shares
Certificate of Designations.
SECTION 3.29. Manipulation of Price. SRGL has not, and to its Knowledge no
person acting on its behalf has, in violation of applicable securities Laws, (i)
taken, directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of SRGL, (ii) sold,
bid for, purchased, or paid any compensation for soliciting purchases of, any of
the Convertible Shares or Ordinary Shares into which such Convertible Shares may
be converted, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of SRGL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Except as otherwise disclosed in this Agreement or the corresponding
section of the Disclosure Letter delivered by such Investor in connection with
the execution and delivery of this Agreement, regardless of whether such
representation or warranty specifically refers to the applicable Investor
Disclosure Letter (the "MassMutual Disclosure Letter" and the "Cerberus
Disclosure Letter" respectively and together, the "Investor Disclosure
Letters"); provided, that any disclosure contained in any section of such
Disclosure Letter shall qualify each other representation and warranty where it
would be reasonably apparent that it should be an exception to such
representation or warranty or be disclosed in such section of such Disclosure
Letter, it being acknowledged and agreed by SRGL that the disclosure of any
matter set forth in the Investor Disclosure Letters shall expressly not be
deemed to constitute an admission by either Investor or any of its Subsidiaries,
or otherwise imply, that any such matter rises to the level of an Investor
Material Adverse Effect or is otherwise material for purposes of this Agreement.
Each Investor, severally, but not jointly, represents and warrants to SRGL as of
the date hereof (except where such representation or warranty is expressly made
as of another specific date), as follows:
SECTION 4.1. Organization, Standing and Corporate Power. Such Investor is a
corporation duly incorporated (or, if not a corporation, duly organized),
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated (or, if not a corporation, in which it is organized)
and has the requisite power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted. Such
Investor is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified (individually or in the
aggregate) would not have an Investor Material Adverse Effect on such Investor.
Such
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Investor has made available to SRGL complete and correct copies of its formation
documents, as amended and in full force and effect as of the date of this
Agreement.
SECTION 4.2. Authority. Such Investor has the requisite company power and
authority to enter into this Agreement and the other Transaction Documents to
which it is a party and, subject to the receipt of the SRGL Member Approval, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated by this Agreement and the other Transaction Documents
to which it is a party. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party by such
Investor and the consummation by such Investor of the transactions contemplated
by this Agreement and the other Transaction Documents to which it is a party
have been duly authorized by all necessary corporate action on the part of such
Investor. No action by the members, shareholders or limited partners of such
Investor is necessary to authorize the execution and delivery by such Investor
of this Agreement and the other Transaction Documents to which it is a party and
the consummation by such Investor of the transactions contemplated hereby and
thereby. Each of this Agreement and the Voting Agreement has been and at the
Closing, the Registration Rights and Shareholders Agreement will be, duly
executed and delivered by such Investor and, assuming due authorization,
execution and delivery of this Agreement and the other Transaction Documents by
SRGL and the other Investor, if a party thereto, constitute or will constitute,
as the case may be, valid and binding obligations of such Investor, enforceable
against such Investor in accordance with their respective terms except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
SECTION 4.3. Noncontravention; Consents. The execution and delivery of this
Agreement and the other Transaction Documents to which it is a party by such
Investor do not, and the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents to which it is a party will not,
(i) conflict with any of the provisions of the governing documents of such
Investor or the governing documents of any of its Subsidiaries, (ii) subject to
the matters referred to in the next sentence, conflict with, result in a breach
of or default under (with or without notice or lapse of time, or both) give rise
to a right of termination or acceleration under, or result in the creation of
any Lien on any property or asset of such Investor or any of its Subsidiaries
under, any agreement, permit, franchise, license or instrument to which such
Investor or any of its Subsidiaries is a party or (iii) subject to the matters
referred to in the next sentence, contravene any Law applicable to such Investor
or any of its Subsidiaries, which, in the case of clauses (ii) and (iii) above,
would have an Investor Material Adverse Effect on such Investor. No consent,
approval or authorization of, or declaration or filing with, or notice to, any
Governmental Entity, and no consent, approval or authorization of any third
party is required by or with respect to such Investor or any of its Subsidiaries
in connection with the execution, delivery and performance of this Agreement and
the other Transaction Documents to which it is a party by such Investor or the
consummation by such Investor of any of the transactions contemplated hereby and
thereby, except for (a) the filing of premerger notification and report forms
under the HSR Act and such other merger filings as are considered necessary by
Investors and SRGL, based on information relating to Investors, which filings
are set forth in Section 4.3 of the Investor Disclosure Letter of such Investor,
(b) the approvals, filings and
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notices required under the insurance Laws of the jurisdictions set forth in
Section 4.3 of the Investor Disclosure Letter of such Investor, and (c) such
other consents, approvals, authorizations, declarations, filings or notices as
are set forth in Section 4.3 of the Investor Disclosure Letter of such Investor.
SECTION 4.4. Litigation. There is no Litigation pending or, to the
Knowledge of such Investor, threatened against or affecting such Investor or any
affiliate of such Investor that (i) seeks to restrain or enjoin the consummation
of any of the transactions contemplated by this Agreement or (ii) would have an
Investor Material Adverse Effect on such Investor. Neither such Investor nor any
of its affiliates nor, to the Knowledge of such Investor, any officer, director
or employee of such Investor or any of its affiliates has been permanently or
temporarily enjoined or barred by any Order of any Governmental Entity from
engaging in or continuing any conduct or practice in connection with the
business conducted by SRGL or any of its Subsidiaries that could reasonably be
expected to have a material adverse effect on the ability of such Investor to
consummate any of the transactions contemplated by this Agreement.
SECTION 4.5. Brokers. No broker, investment banker, financial advisor or
other person, other than Citigroup, Inc. and Morgan Stanley Incorporated, the
fees and expenses of which will be paid by Investors or their respective
affiliates, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement or the other Transaction Documents to which it is a party based
upon arrangements made by or on behalf of such Investor or any affiliate.
SECTION 4.6. Available Funds. (a) Only MassMutual represents and warrants
that the MassMutual Equity Commitment Letter has been delivered to SRGL, is in
full force and effect, and is a valid and binding obligation of the signatory
thereto enforceable in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. SRGL acknowledges the
limitations on the obligations of Massachusetts Mutual Life Insurance Company
contained in the MassMutual Equity Commitment Letter.
(b) Only Cerberus represents and warrants that the Cerberus Equity
Commitment Letter has been delivered to SRGL, is in full force and effect, and
is a valid and binding obligation of the signatory thereto enforceable in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. SRGL acknowledges the limitations on the
obligations of Cerberus Capital Management, L.P. contained in the Cerberus
Equity Commitment Letter.
(c) Such Investor will have no later than the business day prior to the
anticipated Closing Date sufficient funds available to pay the MassMutual
Consideration (in the case of MassMutual) or the Cerberus Consideration (in the
case of Cerberus) on the terms and
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conditions contemplated by this Agreement, to consummate the other transactions
contemplated by this Agreement and to pay all associated costs and expenses
required to be paid by such Investor.
SECTION 4.7. Information. None of the information supplied or to be
supplied by or on behalf of such Investor in writing specifically for inclusion
or incorporation by reference in the Disclosure Statement or any other
Disclosure Documents will, at the respective times filed with the SEC and, in
addition, in the case of the Disclosure Statement, at the date it or any
amendment or supplement thereto is mailed to the Members, and at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.8. No Public Sale or Distribution. Such Investor (a) is acquiring
the Convertible Shares and (b) upon conversion of the Convertible Shares will
acquire the Ordinary Shares issuable upon conversion of the Convertible Shares,
for its own account for investment purposes only and not with a view towards, or
for resale in connection with, the public sale or distribution thereof;
provided, however, that by making the representation and warranty herein, such
Investor does not agree to hold any of such Convertible Shares or Ordinary
Shares for any minimum or other specific term and reserves the right to dispose
of such Convertible Shares or Ordinary Shares, in accordance with the
Convertible Shares Certificate of Designations, at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act.
SECTION 4.9. Accredited Investor Status. Such Investor is an "accredited
investor" (as that term is defined in Rule 501(a) of Regulation D).
SECTION 4.10. Restricted Securities. Such Investor acknowledges that the
Convertible Shares to be purchased by such Investor must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available.
SECTION 4.11. Access to Data and Management. Such Investor has had an
opportunity to discuss SRGL's business, management and financial affairs with
SRGL's management and had access to the data provided in the Data Room.
SECTION 4.12. Tax Matters. (a) Such Investor does not own (i) directly or
(ii) to the actual knowledge of the individual(s) listed with respect to such
Investor in Section 4.12(a) of the Investor Disclosure Letter of such Investor,
indirectly or pursuant to the attribution or constructive ownership rules of
section 958 of the Code (as applied for purposes of section 954(d)(3) of the
Code), in the aggregate, more than 50 percent of the total voting power or total
value of all classes of stock of SRGL.
(b) Only Cerberus represents and warrants that there are no persons that
are listed as ceding companies on the list of all treaties and cedents of SRGL
and its Subsidiaries provided to Cerberus by Laura Kelly on November 21, 2006
that are direct investors in any
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Cerberus Fund that is a foreign corporation or foreign partnership (within the
meaning of section 958 (a)(2) of the Code) and that will acquire Convertible
Shares pursuant to this Agreement.
(c) Only Cerberus represents and warrants that the list of entities in
which Cerberus (together, in some cases, with other affiliated funds) holds a
10% or greater interest, provided to SRGL by Julie Goosman on November 21, 2006,
is a true and accurate list of such entities as of September 1, 2006 and will be
updated prior to the Closing.
(d) Only MassMutual represents and warrants that the aggregate gross
premium paid or otherwise received by the Insurance Subsidiaries of SRGL
relating to any policy of insurance or reinsurance issued by any such Insurance
Subsidiary that (i) directly insures MassMutual or any person related to
MassMutual within the meaning of section 954(d)(3) of the Code (an "Insured
MassMutual Party") or, (ii) to the actual knowledge of the individual(s) listed
in Section 4.12(a) of the MassMutual Disclosure Letter, indirectly insures any
Insured MassMutual Party, in the aggregate, did not exceed $150 million during
the period beginning January 1, 2006 and ending on the date hereof. To the
actual knowledge of the individual(s) listed in Section 4.12(a) of the
MassMutual Disclosure Letter, Section 4.12(d) of the MassMutual Disclosure
Letter (which will be provided by MassMutual to SRGL within two days of the date
hereof) lists all the insurance or reinsurance contracts described in clause (i)
or (ii) of the preceding sentence.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1. Conduct of Business of SRGL. During the period from the date
of this Agreement and continuing until the Closing Date, SRGL agrees as to
itself and each of its Subsidiaries that (except (i) as permitted or required by
Section 5.1(b) or any other provision of this Agreement, (ii) as set forth in
Section 5.1 of the SRGL Disclosure Letter, (iii) as required by any applicable
Law, (iv) as required by a Governmental Entity of competent jurisdiction or (v)
with the prior written consent of Investors) (a) SRGL shall, and shall cause
each of its Subsidiaries to, conduct its business in the ordinary course,
consistent with past practice, and shall use its commercially reasonable efforts
(1) to preserve intact its business organization and goodwill and relationships
with cedents, producers, Governmental Entities, rating agencies, financing
counterparties, bond insurers and financial guarantors, customers, suppliers,
distributors, creditors, lessors, employees and others having business dealings
with it, (2) to keep available the services of its current officers and key
employees on terms and conditions substantially comparable to those currently in
effect, and (3) to maintain its current rights and franchises, subject to the
terms of this Agreement, and (b) SRGL will not and will cause each of its
Subsidiaries and each of the Special Purpose Vehicles not to:
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(i) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of SRGL's
outstanding Ordinary Shares (which shall not limit payments in respect of
regular dividend payments and contract adjustment payments on the Perpetual
Preferred Shares and the Hybrid Capital Units), (B) split, combine or
reclassify, except with respect to the Hybrid Capital Units, any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock or (C) purchase, redeem or otherwise acquire any
shares of outstanding capital stock of SRGL or any of its Subsidiaries or any
rights, warrants, commitments, subscriptions or options to acquire any such
shares;
(ii) authorize for issuance, issue, sell, grant, pledge or otherwise
encumber any shares of its capital stock, options, warrants, commitments,
subscriptions or any other securities or rights of any kind to acquire any
capital stock, except to SRGL or its wholly-owned Subsidiaries or reprice any
options or warrants with respect to any shares of its capital stock;
(iii) amend or propose to amend its memorandum of association, articles of
association or other comparable organizational documents;
(iv) amalgamate or consolidate with or acquire any corporation,
partnership, joint venture, association or other business organization or
division thereof, or substantially all of the assets of any of the foregoing;
(v) (A) other than pursuant to any agreement with Investors or their
affiliates, incur any indebtedness for borrowed money or guarantee or otherwise
become responsible for any such indebtedness of another person, in each case in
excess of $1,000,000, (B) make any loans, advances or capital contributions to,
or investments in, any other person, other than to SRGL or to any direct or
indirect wholly-owned Subsidiary of SRGL and loans and advances to agents and
employees in the ordinary course of business consistent with past practice
(after taking into account events occurring following the second fiscal quarter
of 2006), other than pursuant to Reinsurance Agreements entered into in the
ordinary course of business consistent with past practice (after taking into
account events occurring following the second fiscal quarter of 2006) and other
than as to such matters related to the investment portfolio of SRGL or any of
its Subsidiaries in the ordinary course of business consistent with past
practice (after taking into account events occurring following the second fiscal
quarter of 2006), (C) waive or forgive any indebtedness in excess of $1,000,000
or other material obligation of any other person owed to SRGL or any of its
Subsidiaries or waive any material right available to SRGL or any of its
Subsidiaries, (D) assume, guarantee, endorse or otherwise become responsible for
the obligations of any other person, except in the ordinary course of business
consistent with past practice (after taking into account events occurring
following the second fiscal quarter of 2006), or (E) permit to occur a material
uncured default or event of default under any of its credit facilities entered
into on or after the date hereof;
(vi) (A) surrender any right to claim a material Tax refund or credit,
offset or other material reduction in Tax liability or (B) settle any Tax audit,
file an amended Tax Return, make or amend any Tax election, consent to any
extension of the limitations period applicable to any Tax claim or assessment
except, in the case of any act described in clause (B) for acts taken that will
not materially reduce the value of the Convertible Shares or the value of the
business of
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SRGL and its Subsidiaries; provided that, notwithstanding any other provision of
this Agreement, in connection with any United States federal income Tax audit of
SRGL or any of its Subsidiaries, a representative designated by Investors shall
be entitled to receive copies of all correspondence and documents relating to
such audit or any proposed adjustment resulting therefrom; to review and comment
on all correspondence and documents submitted by SRGL in connection with such
audit or proposed adjustment; to receive updates regarding the conduct of the
audit, including prompt reports of any substantive meeting or conversation with
any representative of the Internal Revenue Service, and to have the right, upon
request of Investors' representative, to have a single legal or Tax accounting
advisor attend, as an observer, any substantive meetings with representatives of
the Internal Revenue Service that Investors reasonably believe external advisors
would normally attend; and, SRGL shall not enter into any settlement, file any
amended Tax return in connection with such audit or admit any fault or liability
without the express written prior consent of the representative designated by
Investors, which consent shall not be unreasonably withheld;
(vii) make any material change in accounting methods, principles or
practices used by SRGL or any of its Subsidiaries, except insofar as may be
required by applicable Law or by a change in applicable GAAP or SAP;
(viii) make any capital expenditures in excess of $1,000,000 in the
aggregate;
(ix) sell or dispose of any of its assets or properties, other than sales
or dispositions in the ordinary course of business consistent with past
practices (after taking into account events occurring following the second
fiscal quarter of 2006), and in an amount not greater than $1,000,000, or sales
or dispositions required by any Contract in effect on the date of this
Agreement;
(x) (A) amend, terminate or assign any Contract other than in the ordinary
course of business consistent with past practice, (B) waive any benefit of, or
agree to modify in any respect, or fail to enforce, or consent to any matter
with respect to which consent is required under, any confidentiality, standstill
or similar agreement to which SRGL or any of its Subsidiaries is a party, or (C)
enter into any new agreement, arrangement or understanding that, if in existence
on the date hereof, would constitute, or be deemed to constitute, a Contract;
(xi) grant any increase in the compensation or benefits of any Employees
except (A) in the ordinary course of business consistent with past practice, (B)
for the retention agreements set forth in Section 5.1 of the SRGL Disclosure
Letter, (C) for such actions as are permitted or required by an existing
agreement, including any Employee Benefit Plan, or (D) for purposes of updating
or complying with Section 409A of the Code, the Pension Plan Protection Act or
other legislation or regulation;
(xii) establish or announce any intention to amend (except to the extent
required by applicable Law) or establish any Employee Benefit Plan or enter into
any Employment Agreement;
(xiii) other than in the ordinary course of business consistent with past
practice, commence, settle or compromise any material Litigation (each, a
"Proceeding") or enter into any
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consent decree, injunction or similar restraint or form of equitable relief in
settlement of any material Proceeding, except for any such settlements that are
within the insured limits of insurance policies with respect to such claims;
(xiv) fail to file with the SEC any annual report on Form 10-K or quarterly
report on Form 10-Q prior to or within ten days after the filing deadline
established by the SEC in General Instruction A. of the applicable Form as such
deadline may be extended in accordance with Rule 12b-25 under the Exchange Act
as currently in effect;
(xv) terminate, cancel, amend or modify, or fail to maintain or renew any
insurance policies maintained by it covering SRGL or its Subsidiaries or their
respective properties which is not replaced by a comparable amount of insurance
coverage;
(xvi) adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of SRGL or any of its
Subsidiaries;
(xvii) take any actions or omit to take any actions that would or would be
reasonably likely to (A) result in any of the conditions to the consummation of
the transaction contemplated hereby set forth in Article VII not being
satisfied, or (B) materially impair the ability of SRGL or Investors to
consummate the transaction contemplated hereby in accordance with the terms
hereof or materially delay such consummation;
(xviii) abandon, dedicate to the public, convey title to or grant licenses
under (other than in the ordinary course of business consistent with past
practice) any Owned Intellectual Property owned by SRGL or any of its
Subsidiaries;
(xix) terminate the employment of the Employees listed in Section
5.1(b)(xix) of the SRGL Disclosure Letter or replace any such Employees or their
successors, whether due to termination of such Employee's employment by SRGL or
its Subsidiaries or otherwise, unless such replacement is reasonably
satisfactory to Investors;
(xx) enter into, amend, modify or supplement any Reinsurance Agreement; or
(xxi) agree to take any of the foregoing actions.
SECTION 5.2. Acquisition Proposals. (a) From the date of this Agreement
until the Closing Date or, if earlier, the termination of this Agreement in
accordance with its terms, SRGL shall not (whether directly or indirectly
through affiliates, advisors, agents or other intermediaries), and SRGL shall
direct its and its Subsidiaries' respective officers, directors, affiliates,
employees, members, partners, shareholders, advisors, representatives or other
agents retained by or otherwise acting on behalf of SRGL or its Subsidiaries and
affiliates (collectively, "Representatives") not to, directly or indirectly, (i)
solicit, initiate, accept, seek, encourage, induce or facilitate (including by
way of furnishing non-public information) any inquiries or the making or
submission of any proposal that constitutes or could reasonably be expected to
lead to an Acquisition Proposal, or cooperate in any way with any inquiry,
proposal or offer from any other person relating to, that has the purpose of, or
that constitutes or could reasonably be expected to lead to an Acquisition
Proposal, (ii) continue or participate or engage in discussions or negotiations
with, or disclose any information or data relating to SRGL or its Subsidiaries
or
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afford access to the properties, books or records of SRGL or its Subsidiaries
to, or otherwise cooperate with, any person that has made an Acquisition
Proposal or to any person that has disclosed to SRGL that it is considering
making an Acquisition Proposal, (iii) accept an Acquisition Proposal or enter
into any agreement or agreement in principle or letter of intent, providing for
or relating to an Acquisition Proposal or enter into any agreement or agreement
in principle or letter of intent requiring SRGL to abandon, terminate or fail to
consummate the transactions contemplated hereby, or (iv) grant any waiver or
release under any standstill, confidentiality or similar agreement entered into
by SRGL, its Subsidiaries or any of their respective representatives.
Notwithstanding any Change in Recommendation, Investors shall have the option,
exercisable within five business days after such Change in Recommendation, to
cause the Board of Directors of SRGL to submit this Agreement to the Members for
the purpose of approving the transactions contemplated by the Transaction
Documents including approval of the matters set forth in Section 2.1(a)(i) and
giving the SRGL Member Approval. If Investors exercise such option, Investors
shall not be entitled to terminate this Agreement pursuant to Section 8.1(h). If
Investors fail to exercise such option, SRGL may terminate this Agreement
pursuant to and in accordance with Section 8.1(i). SRGL shall (1) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any persons or their representatives conducted prior to the
date of this Agreement with respect to any Acquisition Proposal and will request
the prompt return or destruction of any confidential information previously
furnished to such persons in connection therewith, and (2) promptly inform its
representatives of the obligations undertaken in this Section 5.2. Without
limiting the foregoing, any violation of the restrictions set forth in this
Section 5.2 by any Representative of SRGL or any of its Subsidiaries, whether or
not such person is purporting to act on behalf of SRGL or any of its
Subsidiaries, shall be deemed to be a breach of this Section 5.2 by SRGL.
(b) Notwithstanding the foregoing, prior to the receipt of the SRGL Member
Approval, SRGL may, in response to a bona fide written Acquisition Proposal that
was unsolicited and did not otherwise result from a breach of Section 5.2(a),
and subject to compliance with Section 5.2(d) and (e):
(x) furnish information with respect to SRGL and its Subsidiaries to the
person making such Acquisition Proposal and its representatives pursuant to and
in accordance with a confidentiality agreement containing terms and conditions
no less restrictive than those contained in the Confidentiality Agreements,
provided that such confidentiality agreement shall not contain any provisions
that would prevent SRGL from complying with its obligation to provide the
required disclosure to Investors pursuant to Section 5.2(c), and provided
further that all such information provided to such person has previously been
provided to Investors or is provided to Investors prior to or concurrently with
the time it is provided to such person; and
(y) participate in discussions or negotiations with such person and its
representatives regarding such Acquisition Proposal;
provided, in each case, that the Board of Directors of SRGL determines in good
faith, by resolution duly adopted after consultation with its outside legal
counsel and a financial advisor of nationally recognized reputation, that (i)
the failure to furnish such information or participate in such discussions or
negotiations would breach its fiduciary duties to SRGL and/or the Members
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under applicable Law, and (ii) such Acquisition Proposal constitutes or would
reasonably be expected to lead to a Superior Proposal.
(c) As promptly as practicable after the receipt by SRGL of any Acquisition
Proposal or any inquiry with respect to, or that could reasonably be expected to
lead to, any Acquisition Proposal, and in any case within 24 hours after the
receipt thereof, SRGL shall provide oral and written notice to Investors of (i)
such Acquisition Proposal or inquiry, (ii) the identity of the person making any
such Acquisition Proposal or inquiry, and (iii) the material terms and
conditions of any such Acquisition Proposal or inquiry (including, any
amendments or modifications thereto). SRGL shall keep Investors fully informed
on a current basis of the status of any such Acquisition Proposal, including,
any changes to the terms and conditions thereof, and promptly provide Investors
with copies of all written correspondence or other communications and other
written materials, and summaries of all oral correspondence or other
communications, sent or provided to or by SRGL and its representatives in
connection with any Acquisition Proposal.
(d) Neither the Board of Directors of SRGL nor any committee thereof shall,
directly or indirectly, (i) withdraw, modify or change its recommendation with
respect to the transactions contemplated by the Transaction Documents, including
the issuance of the Convertible Shares to Investors (a "Change in
Recommendation") or (ii) approve any letter of intent, memorandum of
understanding, merger agreement or other agreement, arrangement or understanding
relating to, or that may reasonably be expected to lead to, any Acquisition
Proposal. Notwithstanding the foregoing, at any time prior to the SRGL Member
Approval, the Board of Directors of SRGL may, in response to a Superior
Proposal, effect a Change in Recommendation, provided that the Board of
Directors of SRGL determines in good faith, by resolution duly adopted after
consultation with its outside legal counsel and a financial advisor of
nationally recognized reputation, that the failure to do so would breach its
fiduciary duties to the Members under applicable Law (taking into consideration
any proposal by Investors to amend the terms of this Agreement), and provided,
further, that the Board of Directors of SRGL may not effect such a Change in
Recommendation unless (A) the Board of Directors of SRGL shall have first
provided prior written notice to Investors that it is prepared to effect a
Change in Recommendation in response to a Superior Proposal at least three
business days prior to taking such action, which notice shall attach the most
current version of any written agreement relating to the transaction that
constitutes such Superior Proposal, and (B) Investors do not make, within three
business days after the receipt of such notice, a proposal that the Board of
Directors determines in good faith, after consultation with a financial advisor
of nationally recognized reputation, is at least as favorable to the Members as
such Superior Proposal; provided that within such three business day period,
none of SRGL, its Subsidiaries or any of their respective representatives shall
take or propose to take any of the actions restricted or otherwise contemplated
by Section 5.2(a) or disclose the substance or terms of any discussions or
negotiations conducted among Investors and SRGL and their respective
representatives during such three business day period. SRGL agrees that, during
the three business day period prior to its effecting a Change in Recommendation,
SRGL and its representatives shall negotiate in good faith with Investors and
their respective representatives regarding any revisions to the terms of the
transaction contemplated by this Agreement proposed by Investors.
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(e) SRGL agrees that it will deliver to Investors a new written notice of
an Acquisition Proposal with respect to each Acquisition Proposal that has been
materially revised or modified prior to taking any action to recommend or
agreeing to recommend such Acquisition Proposal to the Members and that a new
three business day period shall commence for purposes of this Section 5.2 with
respect to each such materially revised or modified Acquisition Proposal from
the time Investors receive the written notice of the Acquisition Proposal with
respect thereto.
(f) Nothing contained in this Section 5.2 shall prohibit SRGL or its Board
of Directors from complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act in respect of any Acquisition Proposal or making any disclosure
required by applicable Law or any disclosure to the Members if the Board of
Directors determines in good faith, by resolution duly adopted after
consultation with its outside counsel, that the failure to make such disclosure
would breach its fiduciary duties to the Members or SRGL under applicable Law,
provided, however that neither the Board of Directors of SRGL nor any committee
thereof shall, except as expressly permitted by Section 5.2(d), effect a Change
in Recommendation or approve or recommend, or publicly propose to approve or
recommend, an Acquisition Proposal.
(g) For purposes of this Agreement:
"Acquisition Proposal" means any proposal or offer or any indication of
interest in making a proposal or offer in respect of a (i) merger, scheme of
arrangement, share exchange, reorganization, tender or exchange offer,
consolidation or other business combination involving SRGL or any of its
Subsidiaries, (ii) an acquisition of 9.9% or more of the then-outstanding equity
securities or other capital stock of SRGL or any of its Subsidiaries, (iii) an
acquisition of equity securities, or of debt securities or other securities
convertible into or exchangeable for equity securities of SRGL or any of its
Subsidiaries, which would, after giving effect to such conversion or exchange,
constitute more than 9.9% of the outstanding equity securities or other capital
stock of SRGL and its Subsidiaries, (iv) the issuance of debt securities having
a principal amount of more that $75 million individually or in the aggregate,
except as permitted pursuant to Section 5.1 during the term of this Agreement,
(v) a sale, transfer, conveyance, lease or disposal of all or any significant
portion of the assets of SRGL and its Subsidiaries in one transaction or a
series of related transactions, (vi) a liquidation or dissolution of SRGL and
its Subsidiaries or the adoption of a plan of liquidation or dissolution by SRGL
and its Subsidiaries, (vii) an agreement, understanding or other arrangement
providing for the occurrence of individuals who at the beginning of such period
constituted the Board of Directors or other governing body of SRGL (together
with any new directors whose election to such Board of Directors or whose
nomination for election by the Members was approved by a vote of a majority of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved), ceasing for any reason to constitute a majority of such Board of
Directors then in office or (viii) any other transaction in lieu of, or which
would intend to impede or prevent, the transactions contemplated by the
Transaction Documents.
"Superior Proposal" means any bona fide written proposal or offer and not
subject to any financing contingency made by a Third Party in respect of an
Acquisition Proposal, which if and to the extent such proposal is for (x) an
acquisition of voting equity securities of SRGL, is for the acquisition of no
less than 100% of the total outstanding voting equity securities of SRGL
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(on a fully diluted and as converted basis) or (y) an issuance of equity or debt
securities or other securities convertible into or exchangeable or exercisable
for voting equity securities of SRGL or any of its Subsidiaries, is for an
issuance of no more than 68.75% of the total outstanding voting equity
securities of SRGL or any of its Subsidiaries (on a fully diluted and as
converted basis) after giving effect to such transaction and will provide SRGL
and/or its Subsidiaries with proceeds of at least $600,000,000, and in any event
containing terms and conditions that the Board of Directors determines in good
faith, by resolution duly adopted after consultation with its outside counsel
and a financial advisor of nationally recognized reputation, would result in a
transaction that (A) if consummated, would be more favorable to the Members than
the transactions contemplated by this Agreement, including the issuance of the
Convertible Shares to Investors, taking into account all of the terms and
conditions of such proposal and of this Agreement (including any proposal by
Investors to amend the terms of this Agreement), and (B) is reasonably capable
of being consummated on the terms so proposed, without significant incremental
delay or cost, taking into account all financial, regulatory, legal and other
aspects of such proposal.
ARTICLE VI
OTHER AGREEMENTS
SECTION 6.1. Access to Information; Confidentiality. SRGL and its
Subsidiaries shall afford to Investors and to the respective officers,
directors, employees, affiliates, financing sources and authorized advisors,
representatives and other agents of Investors reasonable access during the
period prior to the Closing Date to all of its properties, facilities, books,
contracts, commitments, records, data, systems, personnel, consultants
(including actuarial consultants), auditors and advisors and, during such
period, SRGL and its Subsidiaries shall furnish to Investors and to their
respective officers, directors, employees, affiliates financing sources and
authorized advisors representatives and other agents such information concerning
its business, properties, financial condition, operations and personnel as
Investors may from time to time reasonably request, other than any such
properties, books, contracts, commitments, records and information that (a) are
subject to an attorney-client or other legal privilege which SRGL and its legal
counsel reasonably believe will be impaired by such disclosure or (b) are
subject to an obligation of confidentiality, provided that SRGL will use
commercially reasonable efforts to have any such obligation of confidentiality
waived if Investors so request. In addition, notwithstanding the foregoing, in
fulfilling its obligations under this Section 6.1, neither SRGL nor any of its
Subsidiaries shall be required to (i) violate any applicable Law or (ii) furnish
or otherwise make available to Investors customer-specific data or competitively
sensitive information relating to areas of their business in which Investors or
their respective affiliates compete against SRGL or any of its Subsidiaries.
Furthermore, Investors shall not, without the prior written consent of SRGL,
which consent shall not be unreasonably withheld, conditioned or delayed,
contact or communicate with any vendor, customer, Employee or other business
partner of SRGL with respect to or in connection with the transactions
contemplated hereby. Investors agree that their access to such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operations of SRGL and its Subsidiaries.
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All requests for access or information pursuant to this Section 6.1 shall
be directed to such person or persons as SRGL shall designate. Without limiting
the terms thereof, the Confidentiality Agreements shall govern the obligations
of the respective Investors party thereto and their respective officers,
directors, employees, affiliates, financing sources and authorized advisors,
representatives and other agents with respect to all information of any type
furnished or made available to them pursuant to this Section 6.1.
SECTION 6.2. Consents, Approvals and Filings. (a) The parties will each use
their commercially reasonable efforts, and will cooperate fully with each other
(i) to comply as promptly as practicable with all requirements of Governmental
Entities applicable to the transactions contemplated by this Agreement and the
other Transaction Documents, (ii) to obtain as promptly as practicable all
necessary permits, Orders or other consents, approvals or authorizations of
Governmental Entities and consents or waivers of all third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents, and (iii) otherwise to take, or
cause to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements that may be imposed on such party and its
Subsidiaries with respect to the transactions contemplated by this Agreement and
the other Transaction Documents, including the issuance of the Convertible
Shares to Investors and to consummate the transactions contemplated by the
Transaction Documents as promptly as practicable. In connection therewith, the
parties will make and cause their respective affiliates to make all legally
required filings as promptly as practicable in order to facilitate prompt
consummation of the transactions contemplated by this Agreement, and will
provide and will cause their respective affiliates to provide such information
and communications to Governmental Entities as such Governmental Entities may
request. Each of the parties shall provide to the other parties copies of all
applications or other communications to Governmental Entities in connection with
this Agreement in advance of the filing or submission thereof.
(b) Without limiting the generality of the foregoing, as promptly as
practicable, but in any event within 30 days after the date hereof, each party
shall use commercially reasonable efforts to file with all applicable
Governmental Entities any requests for approval of the transactions contemplated
by this Agreement required to be obtained by such party, and all such requests
shall include all required exhibits. A reasonable time prior to furnishing any
written materials to any Governmental Entity in connection with the transactions
contemplated by this Agreement, the party making such filing shall furnish the
other parties with a copy thereof, and such other parties shall have a
reasonable opportunity to provide comments thereon. Each party shall give to the
other parties prompt written notice if it receives any notice or other
communication from any Governmental Entity in connection with the transactions
contemplated by this Agreement, and, in the case of any such notice or
communication which is in writing, shall promptly furnish such other parties
with a copy thereof. If any Insurance Regulator requires that a hearing be held
in connection with any such approval, the applicable Investor shall use its
commercially reasonable efforts to arrange for such hearing to be held promptly
after the notice that such hearing is required has been received by such
Investor. Each Investor shall give to SRGL and the other Investor reasonable
prior written notice of the time and place when any meetings or other
conferences may be held by it with any Insurance Regulator in connection with
the transactions contemplated by this Agreement, and SRGL and such other
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Investor shall each have the right to have a representative or representatives
attend or otherwise participate in any such meeting or conference.
SECTION 6.3. Public Announcements. Investors and SRGL, and their respective
affiliates, will consult with each other before issuing, and provide each other
the opportunity to review and comment upon, any press release or other public
statement with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement without
the advance approval of the other parties following such consultation (such
approval not to be unreasonably withheld or delayed), except as may be required
by applicable Law or by any Governmental Entity.
SECTION 6.4. Further Assurances. SRGL agrees to execute and deliver, and
cause each of its Subsidiaries to execute and deliver, and each Investor agrees
to execute and deliver, such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement or the other Transaction Documents.
SECTION 6.5. Notification of Certain Matters. SRGL shall give prompt notice
to Investors to the extent that it acquires actual knowledge of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be reasonably likely to cause any representation or warranty of SRGL
contained in this Agreement to be untrue or inaccurate as of the date hereof or
as of the Closing Date and (ii) any failure of SRGL to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder. Each Investor shall give prompt notice to SRGL and the other Investor
to the extent that it acquires actual knowledge of (A) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
reasonably likely to cause any representation or warranty of such Investor
contained in this Agreement to be untrue or inaccurate as of the date hereof or
as of the Closing Date and (B) any failure of such Investor to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. Notwithstanding the foregoing, the delivery of any notice pursuant
to this Section 6.5 shall not affect the representations, warranties or
agreements of the parties, the conditions to the performance by the parties
hereunder, or limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 6.6. Anti-Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or shall become applicable to the transactions contemplated by the
Transaction Documents, Investors, SRGL and their respective Boards of Directors
shall use all reasonable efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by the Transaction
Documents may be consummated as promptly as practicable on the terms
contemplated hereby and shall otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
SECTION 6.7. Shareholder Litigation. SRGL shall give Investors the
opportunity to participate in the defense or settlement of any shareholder
Litigation against SRGL and/or its directors relating to the transactions
contemplated by this Agreement.
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SECTION 6.8. Availability of Ordinary Shares for Conversion. Following the
Closing, SRGL will not issue or agree to issue any Ordinary Shares or options,
rights or warrants to purchase Ordinary Shares or securities convertible into or
exchangeable for Ordinary Shares or take any other action if, after giving
effect thereto, the number of Ordinary Shares remaining unissued and duly
reserved for issuance upon conversion of the Convertible Shares shall be
insufficient to permit conversion of all the then outstanding Convertible Shares
after giving effect to any adjustment in the number of Ordinary Shares into
which such Convertible Shares are convertible as a result of such action. SRGL
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, after the Closing Date, 130% of the maximum number
of Ordinary Shares issuable upon conversion of the Convertible Shares.
SECTION 6.9. Restrictive Legend. Each certificate representing (a) the
Convertible Shares, (b) the Ordinary Shares issued upon conversion of the
Convertible Shares, or (c) any other securities issued in respect of the
Convertible Shares or the Ordinary Shares issued upon conversion of the
Convertible Shares, upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event (collectively, the "Restricted
Securities"), shall (unless otherwise permitted or unless the securities
evidenced by such certificate shall have been registered under the Securities
Act or sold pursuant to Rule 144 or Regulation A thereunder) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION FROM SUCH
REGISTRATION UNDER SAID ACT.
Upon request of a holder of such a certificate, SRGL shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if, with such request, SRGL shall have
received the opinion referred to in Section 6.10 to the effect that any transfer
by such holder of the securities evidenced by such certificate will not violate
the Securities Act and applicable state securities Laws.
SECTION 6.10. Listing Matters. SRGL shall promptly following the Closing
secure the listing of all of the Ordinary Shares issuable upon conversion of the
Convertible Shares upon each national securities exchange and automated
quotation system, if any, upon which the Ordinary Shares are then listed
(subject to official notice of issuance) and shall maintain such listing of all
such Ordinary Shares from time to time issuable under the terms of the
Transaction Documents for so long as the Ordinary Shares are so listed on The
New York Stock Exchange; provided, however, if the Ordinary Shares are delisted
or suspended from The New York Stock Exchange, SRGL shall use its reasonable
best efforts to promptly secure the listing of all of the Ordinary Shares
issuable upon conversion of the Convertible Shares on The NASDAQ National Market
System, The NASDAQ SmallCap Market or the American Stock Exchange and if SRGL
does not meet the eligibility requirements thereof, the Over the Counter
Bulletin Boards (an "Alternate Exchange"). SRGL shall use its reasonable best
efforts to maintain the Ordinary Shares' authorization for quotation on The New
York Stock Exchange or
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an Alternate Exchange. Neither SRGL nor any of its Subsidiaries shall take any
action that would be reasonably expected to result in the delisting or
suspension of the Ordinary Shares on The New York Stock Exchange and shall take
all action reasonably necessary to maintain the listing of the Ordinary Shares
(including the Ordinary Shares issuable upon conversion of the Convertible
Shares) on The New York Stock Exchange or an Alternate Exchange, as the case may
be including without limitation, exhausting all available remedies, appeal
reviews and other similar mechanisms and procedures provided for under the rules
and regulations of The New York Stock Exchange or such Alternate Exchange, as
applicable, to permit the continued listing of the Ordinary Shares (including
the Ordinary Shares issuable upon conversion of the Convertible Shares) on The
New York Stock Exchange or such Alternate Exchange, as applicable. SRGL shall
pay all fees and expenses in connection with satisfying its obligations under
this Section 6.10.
SECTION 6.11. Pledge. SRGL acknowledges and agrees that the Convertible
Shares and the Ordinary Shares issuable upon conversion of the Convertible
Shares may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by such
securities. The pledge of Convertible Shares or the Ordinary Shares issuable
upon conversion of the Convertible Shares shall not be deemed to be a transfer,
sale or assignment of such securities hereunder, and no Investor effecting a
pledge of such securities shall be required to provide SRGL with any notice
thereof or otherwise make any delivery to SRGL pursuant to this Agreement or any
other Transaction Document, unless otherwise required by applicable Law. SRGL
hereby agrees to execute and deliver such documentation as a pledgee of the
Convertible Shares or the Ordinary Shares issuable upon conversion of the
Convertible Shares may reasonably request in connection with a pledge of the
such securities to such pledgee by an Investor.
SECTION 6.12. Register; Transfer Agent Instructions.
(a) Register. SRGL shall maintain at its principal executive offices (or
such other office or agency of SRGL as it may designate by notice to each holder
of Convertible Shares), a register for the Convertible Shares, in which SRGL
shall record the name and address of the person in whose name the Convertible
Shares have been issued (including the name and address of each transferee), the
principal amount of Convertible Shares held by such person, and the number of
Ordinary Shares issuable upon conversion of the Convertible Shares held by such
person. SRGL shall keep the register open and available at all times during
business hours for inspection of any Investor or its legal representatives.
(b) Transfer Agent Instructions. SRGL shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust
Company ("DTC"), registered in the name of each Investor or its respective
nominee(s) or transferee(s), for the Convertible Shares issued at the Closing or
pursuant to or upon conversion of the Convertible Shares or transfer thereof in
such amounts as specified from time to time by each Investor to SRGL upon
conversion or transfer of the Convertible Shares in the form of Exhibit D
attached hereto (the "Irrevocable Transfer Agent Instructions"). SRGL warrants
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 6.12(b), and stop transfer instructions to give
effect to Section 6.9 hereof, will be given by SRGL to its transfer agent, and
that the
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Convertible Shares shall otherwise be freely transferable on the books
and records of SRGL as and to the extent provided in this Agreement and the
other Transaction Documents, subject to applicable Law. If an Investor effects a
sale, assignment or transfer of the Convertible Shares or Ordinary Shares
issuable upon conversion of the Convertible Shares, SRGL shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Investor to effect such
sale, assignment or transfer. In the event that such sale, assignment or
transfer involves the Convertible Shares or Ordinary Shares issuable upon
conversion of the Convertible Shares sold, assigned or transferred pursuant to
an effective registration statement or pursuant to Rule 144 under the Securities
Act, the transfer agent shall issue such securities to Investor, assignee or
transferee, as the case may be, without any restrictive legend. SRGL
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to an Investor. Accordingly, SRGL acknowledges that the remedy
at Law for a breach of its obligations under this Section 6.12(b) will be
inadequate and agrees, in the event of a breach or threatened breach by SRGL of
the provisions of this Section 6.12(b), that an Investor shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
SECTION 6.13. Director and Officer Liability. (a) Investors shall not cause
SRGL to fail to honor all rights to indemnification and exculpation from
liability for acts and omissions occurring at or prior to the Closing and rights
to advancements of expenses relating thereto now existing in favor of the
current or former directors, officers, employees or agents of SRGL and its
Subsidiaries (the "D&O Indemnitees") as provided in the memorandum of
association or articles of association (or similar constitutive documents) of
SRGL or its Subsidiary, as the case may be, or in any indemnification agreement
set forth in Section 6.13 of the SRGL Disclosure Letter and all such rights
shall survive the consummation of the transactions contemplated hereby and by
the Transaction Documents and shall not be amended, repealed or otherwise
modified in any manner that would materially and adversely affect the rights
thereunder of any such D&O Indemnitees, unless an alteration or modification of
such documents is required by applicable Law or the D&O Indemnitee affected
thereby otherwise consents in writing thereto.
(b) Investors shall either (i) for six years after the Closing, not cause
SRGL to fail to provide officers' and directors' liability insurance in respect
of acts or omissions occurring at or prior to the Closing covering each such
person covered at or prior to the Closing by SRGL's officers' and directors'
liability insurance policy maintained by SRGL and in effect as of the date
hereof on terms with respect to coverage and amount, in the aggregate, no less
favorable than those of the policy in effect on the date hereof and described in
Section 6.13 of the SRGL Disclosure Letter; provided that in no event shall SRGL
be required to expend more than 200% of the amount of the premium expended by
SRGL and its Subsidiaries in the one-year period ending on October 31, 2006, to
maintain such insurance coverage immediately prior to the Closing, or (ii) not
cause SRGL to fail to obtain at the Closing "tail" insurance policies with a
claims period of at least six years from the Closing with respect to directors'
and officers' liability insurance at least as favorable, in the aggregate, as
SRGL's existing policies for claims arising from acts or omissions that occurred
at or prior to the Closing.
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(c) This Section 6.13 shall survive the consummation of the transactions
contemplated hereby and by the Transaction Documents and is intended to be for
the benefit of, and shall be enforceable by, the D&O Indemnitees referred to
herein, their heirs and personal representatives and shall be binding on SRGL
and its successors and assigns.
(d) If Investors or SRGL or any of their successors or assigns (i)
consolidates with, amalgamates into or engages in any other business combination
transaction with any other person and is not the continuing or surviving
corporation or entity of such consolidation, amalgamation or other transaction
or (ii) transfers or conveys all or substantially all of their properties and
assets to any person, then, and in each case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Investors or SRGL,
as the case may be, shall assume the obligations set forth in this Section 6.13,
and none of the actions described in clause (i) or (ii) of this sentence shall
be taken until such provision is made.
(e) The obligations of Investors and SRGL under this Section 6.13 shall not
be terminated or modified in any such manner as to adversely affect any D&O
Indemnitee to whom this Section 6.13 applies without the consent of such
affected D&O Indemnitee.
SECTION 6.14. Employee Matters.
(a) Employee Compensation. For the calendar years 2007 and 2008, Investors
shall not cause SRGL or any of its Subsidiaries to fail to provide to each
Employee while in the employ of SRGL or its affiliates base compensation and the
annual bonus opportunity, each of which is no less favorable than that which was
provided to such employee by SRGL or its Subsidiary immediately prior to the
Closing Date.
(b) SRGL Benefit Plans. For the calendar year 2007, Investors shall not
cause SRGL or any of its Subsidiaries to fail to provide to each Employee while
in the employ of SRGL or its affiliates with employee benefit plans and
programs, including, without limitation, retirement, savings and other pension
plans; health, severance, insurance, disability and other employee welfare
plans, vacation and other similar plans, which are no less favorable in the
aggregate than the employee benefit plans and programs provided to Employees as
of the Closing Date and disclosed in Section 6.14 of the SRGL Disclosure Letter.
(c) Vacations. Investors shall not cause SRGL or any of its Subsidiaries to
fail to continue a vacation program for the benefit of the Employees through at
least the end of the calendar year in which the Closing occurs that its at least
as favorable as the SRGL vacation program in effect immediately prior to the
Closing Date. Investors shall not cause SRGL or any of its Subsidiaries to fail
to recognize and provide all accrued but unused vacation of each Employee as of
the Closing Date.
(d) COBRA. Investors shall not cause SRGL or any of its Subsidiaries to
fail to provide continuation health care coverage under Section 4980B of the
Code and Title I, Subtitle B, Part 6 of ERISA ("COBRA") to all Employees and
their qualified beneficiaries, regardless of when a "qualifying event" (as
defined in COBRA) occurs, in accordance with the
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continuation health care coverage requirements of COBRA and state and locals
laws of similar import.
(e) WARN. SRGL shall be responsible for all liabilities under the United
States Worker Adjustment and Retraining Notification Act and similar rules,
statutes and ordinances in any jurisdiction relating to the Employees and which
are resulting from the Closing or from Investors' or SRGL's actions following
the Closing and Investors shall not cause SRGL to fail to honor any of its
obligations with respect thereto.
(f) Severance Benefits. Investors shall not cause SRGL or any of its
Subsidiaries to fail to provide to any Employee whose employment is terminated
for any reason other than for cause within twelve (12) months after the Closing
Date a severance benefit package equal to the severance benefit package that
would be provided under the severance plan for SRGL or any of its Subsidiaries
or any other contractual obligations as in effect for such employee on the day
immediately following the Closing Date and disclosed in Section 6.14 of the SRGL
Disclosure Letter.
(g) Supplemental Payments. From and after the Closing Date, Investors shall
not cause SRGL or any of its Subsidiaries to fail to honor, pay, perform and
satisfy any and all liabilities, obligations and responsibilities to or in
respect of each Employee, former Employee or director of SRGL or any of its
Subsidiaries under the terms of each employment or service agreement, retention
plan, transaction bonus plan and each other arrangement between SRGL or any such
Subsidiary and any such Employee, former Employee or director, in each case, as
in effect or existing immediately prior to the Closing Date and disclosed in
Section 6.14 of the SRGL Disclosure Letter.
SECTION 6.15. Tax Cooperation. During the period beginning on the date
hereof and ending on the Closing Date, Investors and SRGL shall cooperate and
use commercially reasonable efforts to (i) determine the amount of related
person insurance income ("RPII") as defined in Code Section 953(c)(2) that may
result from the purchase of the Convertible Shares by Investors with respect to
each foreign Insurance Subsidiary of SRGL and (ii) take such actions as may be
appropriate to reduce the anticipated amount of RPII that may be realized by
each foreign Insurance Subsidiary of SRGL in the tax year beginning January 1,
2007 in a manner that is reasonably acceptable to each of SRGL and each
Investor.
SECTION 6.16. Reinsurance Recoverables. To the extent SRGL has not already
done so prior to the date of this Agreement, SRGL shall deliver to the
applicable retrocessionaires invoices in respect of all reinsurance recoverables
of SRGL and its Subsidiaries set forth in Section 6.16 of the SRGL Disclosure
Letter (the "Reinsurance Recoverables") no later than February 28, 2007, each
such invoice to be in such detail and contain such information as reasonably
required by the applicable retrocessionaire.
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ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the issuance and sale to, and purchase
by, Investors of the Convertible Shares, and the other actions to be taken at
the Closing are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Governmental Approvals. All filings required to be made prior to the
Closing Date with, and all consents, approvals, permits and authorizations
required to be obtained prior thereto from, Governmental Entities in connection
with the consummation of the transactions contemplated by the Transaction
Documents by SRGL and Investors, including, as set forth in Section 3.5 of the
SRGL Disclosure Letter and Section 4.3 of each of the Investor Disclosure
Letters, shall have been made or obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the transactions contemplated by the Transaction Documents under the HSR Act
shall have been terminated or shall have otherwise expired, any investigation
opened by means of a second request for additional information or otherwise
shall have been terminated or closed and no action shall have been instituted by
the Department of Justice or the Federal Trade Commission challenging or seeking
to enjoin the consummation of the transactions contemplated by the Transaction
Documents, which action shall not have been withdrawn or terminated and all
approvals, if any, required to be obtained under any foreign antitrust,
competition or similar Laws, in each case in connection with the consummation of
the transactions contemplated by the Transaction Documents, shall have been
obtained.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court of
competent jurisdiction and no statute, rule or regulation of any Governmental
Entity (each, a "Restraint") preventing the consummation of any of the
transactions contemplated by the Transaction Documents shall be in effect.
(d) Member Approval. The SRGL Member Approval shall have been obtained.
(e) Disclosure Statement. No orders suspending the use of the Disclosure
Statement shall have been issued and no proceeding for that purpose shall have
been initiated by the SEC.
SECTION 7.2. Conditions to Obligations of Investors. The obligations of
each Investor to consummate the purchase of the Convertible Shares to be
purchased by it and the other actions to be taken at the Closing are further
subject to the satisfaction, or waiver by such Investor, on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of
SRGL set forth in this Agreement (i) that are not qualified as to materiality or
an SRGL Material Adverse Effect shall be true and correct in all material
respects as of the date hereof and as of the
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Closing Date as though made on and as of the Closing Date (other than those
representations and warranties that speak as of a specified date, which shall be
true and correct in all material respects as of such date), and (ii) that are
qualified as to materiality or an SRGL Material Adverse Effect shall be true and
correct in all respects (without giving effect to such materiality or SRGL
Material Adverse Effect qualifications contained in such representations and
warranties) as of the date hereof and as of the Closing Date as though made on
and as of the Closing Date (other than those representations and warranties that
speak as of a specified date, which shall be true and correct in all respects as
of such date without giving effect to such materiality or SRGL Material Adverse
Effect qualifications) except to the extent, in the aggregate, breaches of such
representations and warranties described in this clause (ii) do not have an SRGL
Material Adverse Effect, provided that the representations and warranties of
SRGL set forth in the first sentence of Section 3.1 and Sections 3.2 and 3.4
shall be true and correct in all respects as of the date hereof and as of the
Closing Date as though made on and as of the Closing Date (other than those
representations and warranties that speak as of a specified date, which shall be
true and correct in all respects as of such date); and Investors shall have
received a certificate signed on behalf of SRGL by the chief executive officer
or chief financial officer of SRGL to the effect set forth in this paragraph.
(b) Performance of Obligations of SRGL. SRGL shall have performed or
complied with in all material respects all obligations, agreements and covenants
required to be performed or complied with by it under this Agreement on or prior
to the Closing Date, and Investors shall have received a certificate signed on
behalf of SRGL by the chief executive officer or chief financial officer of SRGL
to such effect.
(c) Ratings. SALIC's insurance financial strength rating shall be at least
"CCC" (by Standard and Poor's and Fitch), "Caa2" (by Moody's) and "C" (by A.M.
Best).
(d) No Litigation. There shall be no pending or threatened Litigation by
any Governmental Entity that has a reasonable likelihood of success, (i) seeking
to restrain or prohibit the issuance of the Convertible Shares or the
consummation of any of the transactions contemplated by this Agreement, or
challenging the acquisition by Investors of any Convertible Shares or Ordinary
Shares, or seeking to obtain from SRGL or either Investor any damages that are
material in relation to SRGL and its Subsidiaries taken as a whole, (ii) seeking
to prohibit or limit the ownership or operation by SRGL, either Investor or any
of their respective Subsidiaries of any material portion of the business or
assets of SRGL, or to compel SRGL, either Investor or any of their respective
Subsidiaries to dispose of or hold separate any material portion of the business
or assets of SRGL or any of its Subsidiaries, as a result of the transactions
contemplated hereby, (iii) seeking to impose limitations on the ability of
either Investor to acquire or hold, or exercise full rights of ownership of, any
Convertible Shares or Ordinary Shares, including the right to vote the
Convertible Shares purchased by it or the Ordinary Shares received by it upon
conversion of such Convertible Shares on all matters properly presented to the
Members, or (iv) seeking to prohibit either Investor or any of its Subsidiaries
from effectively controlling in any material respect the business or operations
of SRGL and its Subsidiaries.
(e) No Material Adverse Effect. Since the date of this Agreement, there
shall not have been any state of facts, event, change, effect, development,
condition or occurrence (or, with respect to facts, events, changes, effects,
developments, conditions, or occurrences existing
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prior to the date hereof, any worsening thereof) that, individually and in the
aggregate, has had or would have a SRGL Material Adverse Effect.
(f) Governmental Consents, Approvals and Authorizations. All filings,
consents, approvals, permits or authorizations with or from any Governmental
Entity obtained pursuant to Section 7.1(a) shall contain or impose no material
conditions or obligations on SRGL, either Investor or any of their respective
affiliates that are materially burdensome to either Investor's conduct of its
business following the Closing or would have an SRGL Material Adverse Effect.
(g) Third-Party Consents. SRGL shall have received all necessary
third-party consents listed on Section 7.2(g) of the SRGL Disclosure Letter, and
none of the non-Governmental Entity third-party consents received by SRGL shall
contain or impose any material conditions or obligations on SRGL, either
Investor or any of their respective affiliates that are materially burdensome to
either Investor's conduct of its business following the Closing or would have an
SRGL Material Adverse Effect.
(h) Transaction Documents. SRGL shall have executed and delivered to such
Investor counterparts of the Registration Rights and Shareholders Agreement and
the Convertible Shares Certificate of Designations.
(i) Restraints. No Restraint that would reasonably be expected to result,
directly or indirectly, in any of the effects referred to in clauses (i) through
(iv) of Section 7.2(d) shall be in effect.
(j) Convertible Notes. SRGL shall have redeemed all of the Convertible
Notes, with no remaining liabilities or obligations in respect thereof due to
the holders of the Convertible Notes.
(k) Legal Opinion. Such Investor shall received a legal opinion of counsel
to SRGL substantially in the form attached hereto as Exhibit C.
(l) Transfer Agent Instructions. SRGL shall have delivered to such Investor
a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit D
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by SRGL's transfer agent.
(m) Boards of Directors. Such Investor shall have received evidence that
all members of the Board of Directors of SRGL (other than the chief executive
officer and Jeffrey Hughes) (each a "Resigning Director") and each member of the
Boards of Directors of each of the Subsidiaries of SRGL who is a Resigning
Director shall have resigned and the replacement members designated by Investors
shall have been appointed to each such Board of Directors, in each case
effective immediately following the Closing.
(n) Secretary's Certificate. SRGL shall have delivered to such Investor a
certificate executed by the Secretary or an Assistant Secretary of SRGL and
dated as of the Closing Date, in form and substance reasonably acceptable to
such Investor, attaching copies of and certifying as to (i) the resolutions
adopted by SRGL's Board of Directors authorizing the
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consummation of the transactions contemplated by the Transaction Documents, (ii)
the Memorandum of Association of SRGL and (iii) the Articles of Association of
SRGL, each as in effect at the Closing.
(o) Good Standing Certificates. SRGL shall have delivered to such Investor
a certificate evidencing the incorporation and good standing, or the equivalent
thereof, of SRGL and each of its material Subsidiaries, issued by the applicable
Governmental Entity of the jurisdiction of its organization, and a certificate
evidencing foreign qualification as of a date within 10 days of the Closing Date
of SRGL and each such material Subsidiary issued by the applicable Governmental
Entity of each jurisdiction in which it conducts a material amount of business.
(p) Transfer Agent Letter. SRGL shall have delivered to such Investor a
letter from SRGL's transfer agent certifying as to the number of Ordinary Shares
issued and outstanding as of a date within five days of the Closing Date.
(q) Voting Agreement. The Voting Agreement shall not have been amended,
modified or supplemented and shall be in full force and effect, and all parties
thereto (other than Investors) shall have performed or complied with in all
material respects all obligations, agreements and covenants required to be
performed or complied with by them under the Voting Agreement on or prior to the
Closing Date.
(r) Corporate Actions. All necessary corporate actions of SRGL in
connection with the transactions contemplated by the Transaction Documents shall
have been taken, including without limitation, the issuance of share
certificates representing the Convertible Shares to be purchased by Investors
pursuant to this Agreement and the adoption and execution of amendments (and any
necessary filings thereof) to the Memorandum of Association and Articles of
Association of SRGL to permit the authorization and issuance of the Convertible
Shares and the Ordinary Shares reserved for issuance upon conversion of the
Convertible Shares, and all such corporate actions of SRGL, and all documents
and instruments incident thereto, shall be reasonably satisfactory in substance
and form to such Investor, and such Investor shall have received all such
documents and instruments, or copies thereof, certified if requested, as may be
reasonably requested.
SECTION 7.3. Conditions to Obligations of SRGL. The obligations of SRGL to
consummate the sale and issuance of the Convertible Shares to Investors and the
other actions to be taken at the Closing are further subject to the
satisfaction, or waiver by SRGL, on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The representations and warranties of
each Investor set forth in this Agreement (i) that are not qualified as to
materiality or an Investor Material Adverse Effect shall be true and correct in
all material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date (other than those representations and
warranties that speak as of a specified date, which shall be true and correct in
all material respects as of such date), and (ii) that are qualified as to
materiality or an Investor Material Adverse Effect shall be true and correct in
all respects (without giving effect to such materiality or Investor Material
Adverse Effect qualifications contained in such representations
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and warranties) as of the date hereof and as of the Closing Date as though made
on and as of the Closing Date (other than those representations and warranties
that speak as of a specified date, which shall be true and correct in all
respects as of such date without giving effect to such materiality or Investor
Material Adverse Effect qualifications) except to the extent, in the aggregate,
breaches of such representations and warranties described in this clause (ii) do
not have an Investor Material Adverse Effect on such Investor; and SRGL shall
have received a certificate signed on behalf of each Investor by an executive
officer of such Investor to the effect set forth in this paragraph.
(b) Performance of Obligations of Investors. Each Investor shall have
performed or complied with in all material respects all obligations, agreements
and covenants required to be performed or complied with by it under this
Agreement on or prior to the Closing Date, and SRGL shall have received a
certificate signed on behalf of such Investor by an executive officer of such
Investor to such effect.
(c) Registration Rights and Shareholders Agreement. Each of the Investors
shall have executed and delivered to SRGL such Investor's counterpart of the
Registration Rights and Shareholders Agreement.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
SECTION 8.1. Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written consent of SRGL and Investors;
(b) by SRGL or either Investor, if there shall be any Order of any
Governmental Entity which prohibits or restrains any party from consummating the
transactions contemplated hereby, and such Order shall have become final and
nonappealable;
(c) by SRGL or either Investor, if the Closing has not occurred on or prior
to August 26, 2007 (the "Outside Date"); provided, however, that the right to
terminate this Agreement under this Section 8.1(c) shall not be available to a
party if such party has failed to fulfill any obligation under this Agreement
and such failure has been the cause of, or resulted in, the failure of the
Closing to occur on or prior to such date;
(d) by SRGL or either Investor, if at the Special Meeting or any
adjournment thereof the SRGL Member Approval shall not have been obtained;
(e) by either Investor, in the event of any breach by SRGL of any of SRGL's
agreements, representations or warranties contained herein that (i) could
reasonably be expected to result in the failure of a condition set forth in
Section 7.2(a) or 7.2(b) to be satisfied, and (ii) cannot be or has not been
cured by the earlier of (x) the thirtieth calendar day following receipt by SRGL
of written notice from either Investor of such breach and (y) the Outside Date;
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(f) by SRGL, in the event of any breach by either Investor of any of such
Investor's agreements, representations or warranties contained herein that (i)
could reasonably be expected to result in the failure of a condition set forth
in Section 7.3(a) or 7.3(b) to be satisfied and (ii) cannot be or has not been
cured by the earlier of (x) the thirtieth calendar day following receipt by such
Investor of written notice from SRGL of such breach and (y) the Outside Date;
(g) by either Investor, if SRGL or any of its Subsidiaries or their
respective Representatives shall have breached in any respect their respective
non-de minimis obligations under Section 5.2 and such breach cannot be or has
not been cured by the date that is the earlier of (i) five business days
following receipt by SRGL of notice from Investors of such breach, (ii) five
business days following SRGL otherwise obtaining actual knowledge of such
breach, and (iii) the Outside Date; provided, that if such breach results in any
person making an Acquisition Proposal, such breach conclusively will be deemed
to be incapable of cure, and either Investor may terminate this Agreement
pursuant to this clause (g) immediately upon the making of such Acquisition
Proposal, regardless of whether such breach had previously been determined to be
cured. Investors shall provide notice to SRGL within five business days to the
extent they acquire actual knowledge of any non-de minimis breach of Section
5.2;
(h) subject to the penultimate sentence of Section 5.2(d), by either
Investor, if the Board of Directors of SRGL shall (i) fail to authorize, approve
or recommend the transactions contemplated by the Transaction Documents,
including the issuance of the Convertible Shares to Investors, (ii) effect a
Change in Recommendation or, in the case of an Acquisition Proposal made by way
of a tender offer or exchange offer (other than by Investors or affiliates of
Investors), fail to recommend that the Members reject such tender offer or
exchange offer within the ten business day period specified in Section 14e-2(a)
under the Exchange Act, (iii) fail to reconfirm its authorization, approval or
recommendation of the transactions contemplated by the Transaction Documents,
including the issuance of the Convertible Shares to Investors within three
business days after a written request by Investors to do so, or (iv) approve or
recommend any Acquisition Proposal; or
(i) subject to compliance with the last sentence of Section 5.2(d), by
SRGL, if the Board of Directors of SRGL authorizes SRGL, subject to complying
with the terms of this Agreement, to enter into a definitive agreement
concerning a transaction that constitutes a Superior Proposal and SRGL notifies
Investors in writing that it intends to enter into such an agreement; provided
that simultaneously with such termination, Investors have received all fees and
expense reimbursements set forth in Section 8.3 by wire transfer of immediately
available funds.
SECTION 8.2. Procedure Upon Termination and Consequences. Either Investor
or SRGL may terminate this Agreement when permitted pursuant to Section 8.1 by
delivering written notice of such termination to the other parties, and such
termination shall be effective upon delivery of such notice in accordance with
Section 10.2. If this Agreement is terminated as provided herein, (a) Investors
(and their respective agents and representatives) shall return to SRGL all
documents, and other material obtained from SRGL that constitutes confidential
information under such Investor's Confidentiality Agreement, whether obtained
before or after the execution hereof, and (b) such termination shall be the sole
remedy of Investors and SRGL with respect to breaches of any agreement,
representation or warranty
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contained in this Agreement and none of the parties hereto nor any of their
respective trustees, directors, officers or affiliates, as the case may be,
shall have any liability or further obligation to any other party to this
Agreement except with respect to this Section 8.2, Section 8.3, Article X and
the Confidentiality Agreements, including with respect to information that is
subject to the Confidentiality Agreements pursuant to this Agreement, each of
which shall survive the termination of this Agreement. Notwithstanding the
foregoing, none of the parties hereto shall be relieved or released from any
liabilities or damages arising out of its willful breach of this Agreement.
SECTION 8.3. Fees and Expenses. (a) SRGL agrees to pay each Investor the
sum of $15,260,000 (the "Standby Commitment Fee"), if this Agreement is
terminated:
(i) by SRGL pursuant to Section 8.1(i);
(ii) by either Investor pursuant to Section 8.1(g) or (h);
(iii) pursuant Section 8.1(e), provided, that such termination is based on
a material breach of Section 2.1; or
(iv) pursuant to Section 8.1(b), 8.1(c), 8.1(d), or 8.1(e) (other than with
respect to breaches of Section 2.1), provided that within one year after the
date of such termination, SRGL enters into a definitive agreement to consummate,
or consummates, the transactions contemplated by an Acquisition Proposal with
any person who makes an Acquisition Proposal prior to the date of the Special
Meeting (or prior to the termination of this Agreement if no Special Meeting has
occurred by such date).
(b) If SRGL is required to pay Investors a Standby Commitment Fee, such
Standby Commitment Fee shall be payable immediately prior to termination of this
Agreement in the event of termination by SRGL, and promptly, but in no event
more than two business days, after the receipt by SRGL of a notice of
termination from either Investor in the event of termination by either Investor,
in each case by wire transfer of immediately available funds to accounts
designated by each Investor (except that, in the case of termination pursuant to
Section 8.1(b), 8.1(c), 8.1(d), or 8.1(e) (other than with respect to breaches
of Section 2.1) giving rise to the obligation to pay a Standby Commitment Fee
pursuant to Section 8.3(a)(iv), such payment shall be made on the date that SRGL
enters into a definitive agreement to consummate, or consummates, the
transactions contemplated by an Acquisition Proposal. If SRGL is required to pay
Investors a Standby Commitment Fee, SRGL shall, in addition to the Standby
Commitment Fee, reimburse Investors for all of their and their respective
affiliates' out-of-pocket expenses, including fees and expenses of financial
advisors, outside legal counsel, actuaries and accountants, incurred in
connection with the transactions contemplated hereby ("Expenses"). If this
Agreement is otherwise terminated pursuant to Section 8.1(d) or (e), SRGL shall
reimburse Investors for all of their and their respective affiliates' Expenses,
up to a maximum amount of $6,500,000 in the aggregate for both Investors, to the
extent in excess of the retainer of $1,500,000 paid by SRGL to Investors
pursuant to the Exclusivity Agreement, dated as of November 8, 2006, among SRGL
and Investors (the "Exclusivity Agreement"). Any Expenses payable pursuant to
this Section 8.3(b) shall be paid by SRGL within one business day of receipt of
written notice from Investors requesting payment thereof.
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(c) Notwithstanding anything to the contrary in this Agreement, the parties
hereby acknowledge that the agreements contained in this Section 8.3 are an
integral part of the transaction contemplated by this Agreement, and that,
without these agreements, the parties would not enter into this Agreement;
accordingly, if a party that owes any amounts pursuant to this Section 8.3 fails
promptly to pay such amounts due and, in order to obtain such payment, another
party commences a suit that results in a judgment against the delinquent party
for such amounts, the delinquent party shall pay interest on such amounts from
the date payment of such amounts were due to the date of actual payment at the
prime rate of Citibank, N.A. in effect on the date such payment was due,
together with the other party's costs and expenses (including reasonable legal
fees and expenses) in connection with such suit. SRGL acknowledges that it is
obligated to pay Investors any amounts due pursuant to Section 8.3 whether or
not the Members have approved this Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1. Survival. The representations and warranties of the parties
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall survive the Closing for a period
of 18 months following the Closing Date; provided that the representations and
warranties in (a) the first sentence of each of Sections 3.1 and 4.1 and (b)
Sections 3.2, 3.4 and 4.2 shall survive indefinitely, and the representations
and warranties in Sections 3.9, 3.10 and 4.12 shall survive until the expiration
of the applicable statute of limitations. The covenants and agreements of the
parties contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
indefinitely or for any shorter period expressly specified therein.
Notwithstanding the preceding sentences, any breach of representation, warranty,
covenant or agreement in respect of which indemnity may be sought under this
Agreement shall survive the time at which it would otherwise terminate pursuant
to the preceding sentences, if notice of the inaccuracy or breach thereof giving
rise to such right of indemnity shall have been given to the party against whom
such indemnity may be sought prior to such time.
SECTION 9.2. Indemnification by SRGL. From and after the Closing, SRGL
shall defend, indemnify and hold harmless each Investor, its affiliates, member,
partners, directors, shareholders and their respective officers, directors,
employees, agents, advisers and representatives (collectively, the "Investor
Indemnitees") from and against, and pay or reimburse the Investor Indemnitees
for, (x) any and all damage, loss, liability, Taxes and expense (including
reasonable expenses of investigation, enforcement and collection and reasonable
attorneys' and accountants' fees and expenses in connection with any Litigation
and any incidental or indirect damages, losses, liabilities or expenses, and
diminution in value, including, without limitation, resulting from reasonably
foreseeable lost profits), whether or not involving a third party claim, but
excluding consequential damages other than out-of-pocket or diminution in value
damages resulting from the payment of consequential damages to a third party
(collectively, and together with the amount described in clause (y) below,
"Losses"), resulting from or arising out of (a) any inaccuracy in or breach of
any representation or warranty when made or deemed made by SRGL in or pursuant
to this Agreement, or (b) any failure of SRGL to perform any covenant or
agreement under this Agreement, or (y) the amount of the aggregate
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Reinsurance Recoverables not collected in cash by SRGL or its Subsidiaries or
offset against other amounts owed by SRGL or its Subsidiaries to the applicable
Retrocessionaires either on, prior to or following the date hereof, but in any
event, on or prior to February 28, 2008 and properly reflected in accordance
with GAAP, consistently applied, to the then current consolidated balance sheet
of SRGL and its Subsidiaries, in excess of an aggregate of $18,800,000;
provided, however, that with respect to any claim based upon a breach or
inaccuracy of the representations and warranties set forth in Section 3.10, SRGL
shall only indemnify the Investor Indemnitees for Taxes imposed on SRGL or its
subsidiaries that are attributable to a tax period or portions thereof ending on
or before Closing.
SECTION 9.3. Indemnification by Investors. From and after the Closing, each
Investor, severally but not jointly, shall defend, indemnify and hold harmless
SRGL and its officers, directors, employees, agents, advisers and
representatives (collectively, the "SRGL Indemnitees") from and against, and pay
or reimburse the SRGL Indemnitees for, any and all Losses resulting from or
arising out of (a) any inaccuracy in or breach of any representation or warranty
made or deemed made by such Investor in or pursuant to this Agreement or (b) any
failure of such Investor to perform any covenant or agreement under this
Agreement. SRGL acknowledges, on behalf of the SRGL Indemnitees, that an SRGL
Indemnitee may assert a claim for indemnification pursuant to this Section 9.3
solely against that Investor in breach of the representation, warranty or
covenant giving rise to such claim, and not against the other Investor unless
such other Investor is also in breach of a representation, warranty or covenant
giving rise to such claim.
SECTION 9.4. Certain Limitations on Indemnification. (a) After the Closing,
except with respect to Losses (x) arising out of inaccuracies in or breaches of
the representations and warranties contained in the first sentence of Section
3.1 and Sections 3.2 and 3.4, (y) arising out of fraud, bad faith, intentional
misrepresentation or intentional omission by SRGL, SRGL shall not be required to
indemnify Investor Indemnitees for Losses under Section 9.2(x)(a), or (z)
indemnified pursuant to Section 9.2(y), (i) until the aggregate amount of all
such Losses exceeds 1% (or 2% only in the case of Losses arising out of
inaccuracies in or breaches of the representations and warranties contained in
Section 3.10) of the Aggregate Consideration (the "Threshold"), in which event
SRGL shall be responsible for all Losses from the first dollar of such Losses,
whether or not in excess of the Threshold or (ii) for Losses in the aggregate in
excess of $100,000,000 (or $125,000,000 only in the case of Losses arising out
of inaccuracies in or breaches of the representations and warranties contained
in Section 3.10 and attributable or related to, or discovered in any currently
notified or pending audit or Proceeding of any Governmental Entity, as the same
may be expanded in scope following the date of this Agreement) (the "Cap").
(b) After the Closing, except with respect to Losses arising out of (x)
inaccuracies in or breaches of the representations and warranties contained in
the first sentence of Section 4.1 and Section 4.2, or (y) fraud, bad faith,
intentional misrepresentation or intentional omission by Investors, neither
Investor shall be required to indemnify SRGL Indemnitees for Losses under
Section 9.3(a), (i) until the aggregate amount of all such Losses exceeds the
Threshold, in which event such Investor shall be responsible for all Losses,
whether or not in excess of the Threshold from the first dollar of such Losses,
or (ii) for Losses in excess of $50,000,000 per Investor.
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(c) Any indemnification payment due to the Investor Indemnitees pursuant to
this Article IX shall be satisfied (i) in the case of any out-of-pocket fees or
expenses (including the cost of enforcing their rights under this Article IX),
by cash reimbursement thereof, and (ii) in the case of all other Losses, solely
by adjustment of the number of Ordinary Shares into which the Convertible Shares
are convertible in the manner set forth in the Convertible Shares Certificate of
Designations. For the avoidance of doubt, (x) the number of Ordinary Shares into
which the Convertible Shares are convertible by all holders thereof shall be
adjusted as a result of clause (ii) of this Section 9.4(c), but only the
Investor Indemnitees, and not other holders of the Convertible Shares, shall be
eligible to make a claim for indemnification pursuant to this Article IX, and
(y) the Investor Indemnitees' rights under this Article IX shall not be
diminished by the sale, transfer or assignment by Investors of the Convertible
Shares to any other person.
(d) Losses of an Investor Indemnitee resulting from a diminution in value
of an Investor's investment in SRGL shall be determined by an independent
investment banking firm of national reputation agreed upon by SRGL and Investors
(the "Valuation Bank"). The Valuation Bank shall determine such diminution in
value based on changes in the valuation of SRGL using the valuation assumptions
and models used by Investors at the time of their decision to purchase the
Convertible Shares, which Investors shall provide to the Valuation Bank in
connection with such determination. The fees and expenses of the Valuation Bank
shall be paid by SRGL.
(e) For purposes of determining the amount of Losses to be indemnified
pursuant to this Article IX (but not for purposes of determining whether an
inaccuracy in or breach of any representation or warranty has occurred), any
inaccuracy in or breach of any representation or warranty (other than the
representation and warranty contained in Section 3.8) shall be determined
without regard to any materiality, "SRGL Material Adverse Effect," "Investor
Material Adverse Effect" or similar qualification contained in or otherwise
applicable to such representation or warranty.
(f) The rights and remedies of any party in respect of any inaccuracy or
breach of any representation, warranty, covenant or agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
or circumstances upon which any claim of any such inaccuracy or breach is based
may also be the subject matter of any other representation, warranty, covenant
or agreement as to which there is no inaccuracy or breach. The representations,
warranties and covenants of SRGL and Investors' rights to indemnification with
respect thereto shall not be affected or deemed waived by reason of any
investigation made by or on behalf of Investors (including by any of their
respective advisors, consultants or representatives) or by reason of the fact
that Investors or any of such advisors, consultants or representatives knew or
should have known that any such representation or warranty is, was or might be
inaccurate.
(g) Except as provided in Section 8.3 and Section 10.7, the indemnity
provided for in this Article IX shall be the sole and exclusive remedy of
Investor Indemnitees or SRGL Indemnitees, as the case may be, after the Closing
for any inaccuracy of any representation or warranty of SRGL or Investors,
respectively, herein or any other breach of this Agreement, provided that
nothing herein shall limit in any way any such party's remedies in respect of
fraud, bad faith, intentional misrepresentation or omission or intentional
misconduct
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by the other party in connection with the transactions contemplated hereby. For
the avoidance of doubt, this Article IX shall not limit any remedies of any
party for any breach of this Agreement by any other party in the event that
there is not a Closing.
(h) No party to this Agreement (or any of its affiliates) shall, in any
event, be liable or otherwise responsible to any other party (or any of its
affiliates) for any punitive damages of such other party (or any of its
affiliates) arising out of or relating to this Agreement or the performance or
breach hereof, other than any such damages arising in connection with a Third
Party Claim.
(i) Any indemnification payments made pursuant to this Agreement shall be
treated for Tax purposes as an adjustment to the MassMutual Consideration or the
Cerberus Consideration, as applicable.
(j) To the extent that any Losses for which indemnification is sought from
SRGL pursuant to this Article IX result from actions or the failure to take
action by SRGL or any of its Subsidiaries that Investors or either of them
caused SRGL or such Subsidiary to take or fail to take, directly or indirectly,
SRGL shall not be required to provide any indemnity for such Losses.
SECTION 9.5. Third Party Claim Procedures. In the case of any Litigation
asserted by a third party (a "Third Party Claim") against a party entitled to
indemnification under this Agreement (an "Indemnified Party"), notice shall be
given by the Indemnified Party to the party required to provide indemnification
(the "Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of such Third Party Claim, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party and so long as the
Indemnifying Party acknowledges in writing its obligation to indemnify the
Indemnified Party for Losses related to such Third Party Claim) to assume the
defense of such Third Party Claim, provided that (a) counsel for the
Indemnifying Party who shall conduct the defense of such Third Party Claim shall
be reasonably satisfactory to the Indemnified Party, and the Indemnified Party
may participate in such defense at such Indemnified Party's expense, and (b) the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation under this
Agreement except to the extent that such failure results in a lack of actual
notice to the Indemnifying Party and such Indemnifying Party is materially
prejudiced as a result of such failure to give notice. If the Indemnifying Party
does not promptly assume the defense of such Third Party Claim following notice
thereof, the Indemnified Party shall be entitled to assume and control such
defense and to settle or agree to pay in full such Third Party Claim without the
consent of the Indemnifying Party without prejudice to the ability of the
Indemnified Party to enforce its claim for indemnification against the
Indemnifying Party hereunder. Except with the prior written consent of the
Indemnified Party, no Indemnifying Party, in the defense of any such Third Party
Claim, shall consent to entry of any judgment or enter into any settlement that
(i) provides for injunctive or other nonmonetary relief affecting the
Indemnified Party, (ii) does not include as an unconditional term thereof the
giving by each claimant or plaintiff to such Indemnified Party of an irrevocable
release from all liability with respect to such Third Party Claim, or (iii)
would restrict such Indemnified Party's ability to conduct its business in the
ordinary course or would otherwise have a materially adverse impact on the
business of the Indemnified Party. If the
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Indemnified Party in good faith determines that the conduct of the defense or
any proposed settlement of any Third Party Claim would reasonably be expected to
affect adversely the Indemnified Party's Tax liability or the ability of SRGL or
any of its Subsidiaries to conduct its business, or that the Indemnified Party
may have available to it one or more defenses or counterclaims that are
inconsistent with one or more of those that may be available to the Indemnifying
Party in respect of such Third Party Claim, the Indemnified Party shall have the
right at all times to take over and control the defense, settlement, negotiation
or Litigation relating to any such Third Party Claim at the sole cost of the
Indemnifying Party, provided that if the Indemnified Party does so take over and
control, the Indemnified Party shall not settle such Third Party Claim without
the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld, conditioned or delayed. In any event, SRGL and Investors
shall cooperate in the defense of any Third Party Claim subject to this Article
IX and the records of each shall be reasonably available to the other with
respect to such defense.
SECTION 9.6. Independent Committee. All actions of SRGL with respect to a
claim for indemnification pursuant to this Article IX, whether by Investor
Indemnitees or SRGL Indemnitees, including negotiation or settlement with
Investors or Investor Indemnitees, decisions regarding the making or defending
of indemnification claims and the hiring of legal counsel and other advisors
with respect thereto, and agreement as to the identity of the Valuation Bank
pursuant to Section 9.4(d), shall be taken by a committee of the Board of
Directors of SRGL consisting solely of "independent directors" pursuant to the
rules of The New York Stock Exchange who are not specifically designated by
Investors pursuant to Sections 10(a)-(e) of the Registration Rights and
Shareholders Agreement.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. Fees and Expenses. Except as otherwise provided in Section
8.3, if the transactions contemplated by the Transaction Documents are not
consummated, each party hereto shall pay its own Expenses. If the transactions
contemplated by the Transaction Documents are consummated, SRGL shall pay (a)
the Expenses of - Investors (other than fees and expenses for investment banking
services in connection with this Agreement and the transactions contemplated
hereby), up to a maximum amount of $6,500,000 in the aggregate for both
Investors, to the extent in excess of the retainer of $1,500,000 paid by SRGL to
Investors pursuant to the Exclusivity Agreement, and (b) the Investors' fees and
expenses for investment banking services in connection with this - Agreement and
the transactions contemplated hereby, up to a maximum amount of the greater of
$12,000,000, and the aggregate amount of fees and expenses for investment
banking services in connection with this Agreement and the transactions
contemplated hereby paid by SRGL and its affiliates to Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc. and Duff & Phelps, LLC, in either case in the aggregate
for both Investors.
SECTION 10.2. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, by facsimile (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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(a) if to MassMutual, to
MassMutual Financial Group
1295 State Street
Springfield, MA 01111
Fax: (413) 744-6350
Attention: Larry N. Port
and
Babson Capital Management LLC
1500 Main Street, Suite 22
Springfield, MA 01111
Fax: (413) 226-2064
Attention: Rodney J. Dillman, Esq.
with copies to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Fax: (212) 909-6836
Attention: Nicholas F. Potter, Esq.
and
Ropes & Gray LLP
45 Rockefeller Plaza
New York, NY 10111
Fax: (212) 841-5725
Attention: Othon A. Prounis, Esq.
(b) if to Cerberus, to
SRGL Acquisition, LLC
c/o Cerberus Capital Management, L.P.
299 Park Avenue
New York, NY 10171
Fax: (212) 891-1540
Attention: Christopher Brody
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with copies to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Fax: (212) 909-6836
Attention: Nicholas F. Potter, Esq.
and
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Fax: (212) 593-5955
Attention: Marc Weingarten, Esq.
(c) if to SRGL, to
Scottish Re Group Limited
Crown House, Second Floor
4 Par-la-Ville Road
Hamilton, HM 08, Bermuda
Fax: (441) 295-7576
Attention: Paul Goldean
with a copy to:
LeBoeuf, Lamb, Greene & MacRae LLP
125 West 55th Street
New York, NY 10019
Fax: (212) 424-8500
Attention: Stephen G. Rooney, Esq.
SECTION 10.3. Interpretation. When a reference is made in this Agreement to
a Section, Exhibit, or Schedule, such reference shall be to a Section of, or an
Exhibit, or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". Whenever the singular is used herein, the same shall include the
plural, and whenever the plural is used herein, the same shall include the
singular, where appropriate.
SECTION 10.4. Entire Agreement; No Third Party Beneficiaries; No Other
Representations. This Agreement (including the SRGL Disclosure Letter, the
MassMutual
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Disclosure Letter, the Cerberus Disclosure Letter and all Exhibits hereto),
together with the other Transaction Documents and the Confidentiality
Agreements, supersedes all prior agreements and understandings among the parties
with respect to such subject matter and supersedes any letters, memoranda or
other documents or communications, whether oral, written or electronic,
submitted or made by (i) Investors or their respective agents or representatives
to SRGL or any of their respective agents or representatives, or (ii) SRGL,
Goldman, Sachs & Co., Bear, Stearns & Co. Inc., or their respective agents or
representatives to Investors or any of their agents or representatives, in
connection with the bidding process which occurred prior to the execution of
this Agreement or otherwise in connection with the negotiation and execution of
this Agreement. No communications by or on behalf of SRGL, including responses
to any questions or inquiries, whether orally, in writing or electronically, and
no information provided in any data room or any copies of any information from
any data room provided to Investors or any other information shall be deemed to
constitute a representation, warranty or an agreement of SRGL or be part of this
Agreement. Except for the provisions of Article IX (which shall be for the
benefit of the Investor Indemnitees and the SRGL Indemnitees) and Section 6.13
(which shall be for the benefit of the D&O Indemnitees), this Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. Investors acknowledge that neither SRGL nor any affiliate
nor any officer, director, employee, representative, agent or advisor of any of
them makes or has made any representation or warranty, express or implied, or
any other inducement or promise to Investors except as specifically made in this
Agreement.
SECTION 10.5. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York, without giving
effect to its principles or rules of conflict of laws to the extent such
principles or rules are not mandatorily applicable by statute and would require
or permit the application of the laws of another jurisdiction, except that the
Laws of the Cayman Islands shall apply to the extent required in connection with
the meeting of Members and the issuance of the Convertible Shares, and to the
fiduciary duties of the board of directors of SRGL in connection with the
transactions contemplated by this Agreement, in each case without giving effect
to its principles or rules of conflict of laws to the extent such principles or
rules are not mandatorily applicable by statute and would require or permit the
application of the laws of another jurisdiction.
SECTION 10.6. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any such assignment that is not
consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns. Notwithstanding
anything to the contrary in this Section 10.6, each Investor may assign, without
the prior written consent of any other parties hereto, (i) all or any portion of
its respective rights, benefits or obligations hereunder to an affiliate and
(ii) any rights under this Agreement to such Investor's financing institutions
and subsequent purchasers of such Investor or substantially all of its assets,
or (iii) any of its respective rights, benefits or obligations hereunder to the
other Investor, provided, that in the case of clause (i) above, no such
assignment shall relieve such Investor of obligations under this Agreement that
have not been performed timely by any such affiliate assignee.
SECTION 10.7. Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by each of the parties hereto or, in the case of a
waiver, by the party waiving compliance; provided, that after the Closing Date,
no amendments to this Agreement, or waivers hereunder, shall be made unless the
amendment or waiver has been approved (i) by SRGL's independent directors, as
determined under the applicable provisions of the Exchange Act and the rules and
regulations of The New York Stock Exchange, or (ii) upon a vote of the Members
as a class (excluding any Ordinary Shares held by Investors).
SECTION 10.8. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to, in addition to any
other remedies at law or otherwise, specific performance of this Agreement or an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state court which in either case is located in the City of
New York (any such federal or state court, a "New York Court"), in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any New York Court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction or
venue by motion or other request for leave from any such New York Court.
SECTION 10.9. Severability. (a) Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable Law, but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable Law in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(b) This Agreement may be amended only by a written instrument signed by
each of the parties.
(c) 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 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.
SECTION 10.10. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
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SECTION 10.11. Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Investor pursuant hereto
or thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor confirms that it has independently
participated in the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors. SRGL acknowledges that each Investor has
independently participated in the negotiation of the transaction contemplated
hereby and did not act as a group. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose.
SECTION 10.12. Waiver of Jury Trial. Each of the parties hereby expressly
waives any right to trial by jury in any dispute, whether sounding in contract,
tort or otherwise, between or among any of the parties arising out of or related
to the transactions contemplated by this Agreement, or any other instrument or
document executed or delivered in connection herewith. Any party may file an
original counterpart or a copy of this Agreement with any court as written
evidence of the consent of the parties to the waiver of their right to trial by
jury.
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IN WITNESS WHEREOF, SRGL, MassMutual and Cerberus have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
SCOTTISH RE GROUP LIMITED
By /s/ Paul Goldean
------------------------------------
Name: Paul Goldean
MASSMUTUAL CAPITAL PARTNERS LLC
By /s/ Larry Port
--------------------------------
Name: Larry Port
Title: Managing Director
SRGL ACQUISITION, LLC
By Cerberus Capital Management, L.P.,
as Managing Member
By /s/ Mark A. Neporent
--------------------------------
Name: Mark A. Neporent
Title: Chief Operating Officer
and Managing Director
EXHIBIT D
[FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS]
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
Reference is made to the Securities Purchase Agreement, dated as of
November 26, 2006 (the "Purchase Agreement"), by and among Scottish Re Group
Limited, an exempted company limited by shares organized and existing under the
laws of the Cayman Islands (the "Company"), MassMutual Capital Partners LLC, a
Delaware limited liability company ("MassMutual"), and SRGL Acquisition, LLC, a
Delaware limited liability company ("Cerberus" and together with MassMutual, the
"Investors"), pursuant to which the Company is issuing to the Investors shares
of its 7.25% Convertible Cumulative Participating Preferred Shares, par value
$0.01 per share (the "Preferred Shares"), which Preferred Shares are convertible
into ordinary shares of the Company, par value $0.01 per share (the "Ordinary
Shares").
This letter shall serve as our irrevocable authorization and direction to
you, as Transfer Agent of the Company:
(i) to issue, countersign, register and deliver on [__________], 2007 to
the Investors or their assignees or transferees, share certificates representing
an aggregate of 1,000,000 Preferred Shares newly issued by the Company. Such
share certificates shall be registered in the names and amounts indicated on
Schedule I hereto;
(ii) subject to and in compliance with applicable law, to issue,
countersign, register and deliver share certificates in respect of Ordinary
Shares (the "Conversion Shares") of the Company upon conversion of the Preferred
Shares to or upon the order of an Investor or its assignees or transferees from
time to time upon surrender to you of a properly executed Conversion Notice in
the form attached hereto as Exhibit A (a "Conversion Notice") which has been
acknowledged by the Company as indicated by the signature of a duly authorized
officer of the Company thereon; and
(iii) to issue share certificates in respect of Preferred Shares or
Ordinary Shares upon transfer or resale thereof.
You acknowledge and agree that so long as you have previously received (a)
written confirmation from the General Counsel of the Company (or its outside
legal counsel) that either (i) a registration statement covering resales of the
Preferred Shares or Conversion Shares has been declared effective by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"), or (ii) that sales of the Preferred Shares or the
Conversion Shares may be made in
conformity with Rule 144 under the 1933 Act, and (b) if applicable, a copy of
such registration statement, then, within two business days after your receipt
of a notice of transfer or Conversion Notice, you shall issue the share
certificates in respect of the Preferred Shares or the Conversion Shares, as
applicable, and such share certificates shall not bear any legend restricting
transfer of the Preferred Shares or the Conversion Shares thereby, as the case
may be, and should not be subject to any stop-transfer restriction; provided,
however, that if such Preferred Shares or Conversion Shares are not registered
for resale under the 1933 Act or able to be sold under Rule 144, then the share
certificates for such Preferred Shares or Conversion Shares shall bear the
following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
EXEMPTION FROM SUCH REGISTRATION UNDER SAID ACT."
A form of written confirmation from the General Counsel of the Company or
the Company's outside legal counsel that a registration statement covering
resales of the Preferred Shares and the Conversion Shares has been declared
effective by the SEC under the 1933 Act is attached hereto as Exhibit B.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (___) --------.
Please be advised that the Investors are relying upon this letter as an
inducement to enter into and consummate the transactions contemplated by the
Purchase Agreement and, accordingly, each Investor and its assignees and
transferees are third party beneficiaries to these instructions.
[Intentionally left blank]
2
IN WITNESS WHEREOF, the undersigned has duly executed this Irrevocable
Transfer Agent Instructions on behalf of the Company as of this [__] day of
[_________], 2007.
Scottish Re Group Limited
By: _____________________________
Name:
Title:
THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this ___ day of [__] 2007
[TRANSFER AGENT]
By:
----
Name:
----
Title:
--
3
Schedule I
MassMutual 500,000 Preferred Shares
Cerberus 500,000 Preferred Shares
4
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the 7.25%
Convertible Cumulative Participating Preferred Shares)
The undersigned hereby irrevocably elects to convert (the "Conversion")
_______ 7.25% Convertible Cumulative Participating Preferred Shares (the
"Preferred Shares"), represented by share certificate No(s). ___ (the "Preferred
Share Certificates") into ordinary shares, par value $0.01 per share (the
"Ordinary Shares"), of Scottish Re Group Limited (the "Company") according to
the conditions of the Certificate of Designations describing the terms of the
Preferred Shares (the "Certificate of Designations"), as of the date written
below. No fee will be charged to the Holder for any conversion. A copy of each
Preferred Share Certificate is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the Ordinary Shares issuable to the undersigned upon conversion
of the Preferred Shares shall be made pursuant to registration of the Ordinary
Shares under the Securities Act of 1933, as amended (the "Securities Act") or
pursuant to an exemption from registration under the Securities Act.
The Company is not required to issue Ordinary Shares until the original
Preferred Share Certificate(s) (or evidence of loss, theft or destruction
thereof) to be converted are received by the Company or its Transfer Agent. The
Company shall issue Ordinary Shares and deliver Ordinary Share Certificates to
an overnight courier not later than two business days following receipt of the
original Preferred Share Certificate(s) to be converted.
Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in or pursuant to the Certificate of Designations.
Date of Conversion: __________________________________________
Applicable Conversion Amount: __________________________________
5
Number of 7.25% Convertible
Cumulative Participating Preferred Shares to be Converted:
__________________________
Number of Ordinary Shares to be Issued: __________________
Signature: ______________________________________________________
Name: ___________________________________________________________
Address:(1) _____________________________________________________
Fax No.: ________________________________________________________
- -------------------------
(1) Address where Ordinary Shares and any other payments or certificates
shall be sent by the Company.
6
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby directs
[Insert Name of Transfer Agent] to issue the above indicated number of Ordinary
Shares in accordance with the Transfer Agent Instructions dated [ __], 2007 from
the Company and acknowledged and agreed to by [Insert Name of Transfer Agent].
[ ]
By:_________________________________
Name:
Title:
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Exhibit B
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
Ladies and Gentleman,
We are counsel to Scottish Re Group Limited, an exempted company limited by
shares organized and existing under the laws of the Cayman Islands (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement, dated as of November 26, 2006 (the "Purchase
Agreement"), by and among the Company, MassMutual Capital Partners LLC, a
Delaware limited liability company ("MassMutual"), and SRGL Acquisition, LLC, a
Delaware limited liability company (together with MassMutual, the "Investors"),
pursuant to which the Company is issuing to the Investors shares of its 7.25%
Convertible Cumulative Participating Preferred Shares, par value $0.01 per share
(the "Preferred Shares"), which Preferred Shares are convertible into ordinary
shares of the Company, par value $0.01 per share (the "Ordinary Shares").
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights and Shareholders Agreement, dated as of [__________] (the
"Registration Rights Agreement"), pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the Preferred Shares and the Ordinary
Shares issuable upon conversion of the Preferred Shares under the Securities Act
of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on [____________], the
Company filed a Registration Statement (File No. [___________](the "Registration
Statement) with the Securities and Exchange Commission (the "SEC") relating to
the resale of the Regsitrable Securities, which names the Investors or their
assignees or transferees as selling stockholders thereunder.
In connection with the forgoing, we advise you that [a member of the SEC's
staff has advised us that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [enter time of
effectiveness] on [enter date of effectiveness]] [the Registration Statement
became effective upon filing on [enter date of effectiveness]] and we have no
knowledge that any stop order suspending its effectiveness has been issued or
that any proceedings for that purpose are pending before, or threatened by, the
SEC and accordingly, the Registrable Securities are available for resale under
the 1933 Act pursuant to the Registration Statement.
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Very truly yours,
[Company Counsel]
By:
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