Exhibit 10.1
REORGANIZATION AGREEMENT
ALTUS HOLDINGS, LTD.
Dated as of March 23, 2001
TABLE OF CONTENTS
PAGE
1. Definitions.........................................................2
2. Purchase and Sale of Common Stock...................................9
3. Warrants; Options; Etc..............................................9
4. Closing.............................................................9
5. [Intentionally Omitted.]...........................................10
6. Representations and Warranties of the Company and the Selling
Shareholders....................................................10
6.1 Corporate Existence and Power................................10
6.2 Authorization, Execution, Enforceability.....................10
6.3 Capitalization of the Company................................11
6.4 Subsidiaries; Other Interests................................12
6.5 No Contravention, Conflict, Breach, Etc......................12
6.6 Consents.....................................................12
6.7 No Existing Violation, Default, Etc..........................13
6.8 Licenses and Permits.........................................13
6.9 Title to Properties..........................................13
6.10 Taxes........................................................14
6.11 Litigation...................................................14
6.12 Labor Matters................................................14
6.13 Contracts....................................................14
6.14 Finder's Fees................................................15
6.15 Financial Statements.........................................16
6.16 Employee Benefits............................................16
6.17 Undisclosed Liabilities......................................18
6.18 No Material Change...........................................18
6.19 Insurance Matters............................................19
6.20 Liabilities and Reserves.....................................21
6.21 Institutional Selling Shareholder Representations and
Warranties................................................22
6.22 Management Selling Shareholder Representations and
Warranties................................................22
6.23 All Selling Shareholder Representations and Warranties.......23
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PAGE
7. Representations and Warranties of ACGL.............................23
7.1 Organization, Good Standing, Power, Authority, Etc...........23
7.2 Consents.....................................................24
7.3 Finder's Fees................................................24
8. Covenants..........................................................24
8.1 Business in the Ordinary Course..............................24
8.2 Certain Actions..............................................25
8.3 Accounting Changes...........................................27
8.4 Capitalization, Options, Dividends and Payments..............27
8.5 Encumbrance of Assets........................................27
8.6 Litigation During Interim Period.............................27
8.7 Indemnification; Insurance...................................28
8.8 Notification of Certain Matters..............................29
8.9 Access to Company............................................29
8.10 No-Shop......................................................29
8.11 Non-Competition and Non-Solicitation.........................30
8.12 Proprietary Rights; Confidentiality..........................31
8.13 Remedies.....................................................32
8.14 Litigation Reimbursement.....................................32
9. Conditions Precedent to ACGL's Obligations.........................33
9.1 Representations and Warranties...............................33
9.2 Compliance with Agreements...................................33
9.3 Resignations.................................................33
9.4 Certificates.................................................33
9.5 Litigation...................................................34
9.6 Material Adverse Effect......................................34
9.7 Third Party Consents.........................................34
9.8 Hart-Scott-Rodino Act Filings................................34
9.9 Deliveries...................................................34
9.10 Options; Warrants; Etc.......................................34
9.11 Audit........................................................35
9.12 Best's Rating................................................35
10. Conditions Precedent to the Selling Shareholders' Obligations......35
10.1 Representations and Warranties...............................35
10.2 Compliance with Agreement....................................35
10.3 Third Party Consents.........................................35
10.4 Hart-Scott-Rodino Act Filings................................35
11. Termination........................................................35
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PAGE
11.1 Termination Events...........................................35
11.2 Effect of Termination........................................36
11.3 Shareholders Agreement.......................................36
12. Survival of Representations and Warranties; Remedies...............37
13. [Intentionally Omitted.]...........................................37
14. Tax Matters........................................................38
15. Miscellaneous......................................................38
15.1 Expenses.....................................................38
15.2 Confidentiality..............................................38
15.3 Further Actions and Assurances...............................38
15.4 Counterparts.................................................39
15.5 Contents of Agreement; Parties in Interest, Etc..............39
15.6 New York Law to Govern; Venue................................39
15.7 Section Headings and Gender..................................39
15.8 Schedules and Exhibits.......................................39
15.9 Notices......................................................40
15.10 Antitrust Matters............................................41
15.11 Specific Performance.........................................42
15.12 Modification and Waiver......................................42
15.13 Invalid Provisions...........................................42
15.14 Third Party Beneficiaries....................................42
15.15 Construction and Interpretation..............................42
15.16 Trident Guarantee............................................42
EXHIBITS
Exhibit A/B - List of Selling Shareholders and the Number of Shares Owned by
Each Selling Shareholder; List of Outstanding Options and
Warrants to Purchase Ordinary Shares
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REORGANIZATION AGREEMENT
This REORGANIZATION AGREEMENT is made and entered into as of this
23rd day of March 2001 by and among Altus Holdings, Ltd., a company organized
under the laws of the Cayman Islands (the "COMPANY"); The Trident Partnership,
L.P., a Cayman Islands limited partnership ("TRIDENT"); TRYCO II, Ltd., a
Bermuda company ("TRYCO"); Marsh & McLennan Risk Capital Holdings, Ltd., a
Delaware corporation ("MARSH"); Glenn L. Ballew ("BALLEW"), an individual
currently residing in Cincinnati, Ohio; David G. May ("MAY"), an individual
currently residing in Darien, Connecticut; and Arch Capital Group Ltd., a
Bermuda limited company ("ACGL").
RECITALS:
WHEREAS, the authorized Capital Stock of the Company consists of
200,000,000 Ordinary Shares (as defined below) divided into Class A Non-Voting
Ordinary Shares (the "CLASS A SHARES") and Class B Voting Ordinary Shares (the
"CLASS B SHARES," and together with the Class A Shares, the "ORDINARY SHARES"),
each having a par value of $.01 per share; the Class B Shares are further
divided into Class B, Series 1 Voting Ordinary Shares (the "CLASS B-1 SHARES"),
Class B, Series 2 Voting Ordinary Shares (the "CLASS B-2 SHARES") and Class B,
Series 3 Voting Ordinary Shares (the "CLASS B-3 SHARES"); 67,654,711 Class A
Shares and 1,002,000 Class B Shares are issued and outstanding as of the date
hereof (such Ordinary Shares being held by the Selling Shareholders in the
amounts set forth on EXHIBIT A/B hereto);
WHEREAS, certain Subsidiaries of the Company have issued to the
holders of the Class B Shares of the Company voting shares entitling such
holders to the same pro rata votes in such Subsidiaries as the holders of the
Class B Shares have in the Company (the "SUBSIDIARY VOTING SHARES");
WHEREAS, pursuant to this Agreement (i) all warrants, options and
direct or indirect rights to acquire Ordinary Shares of the Company will be
cancelled or, as to options, such other treatment as determined by ACGL at its
sole discretion subject to applicable law, (ii) ACGL will acquire all of the
outstanding Ordinary Shares of the Company held by the Selling Shareholders and
(iii) ACGL will acquire all of the outstanding Subsidiary Voting Shares held by
the Selling Shareholders;
WHEREAS, each Selling Shareholder owns the outstanding Ordinary
Shares of the Company and the outstanding Subsidiary Voting Shares of the
Company's Subsidiaries in the individual amounts set forth on EXHIBIT A/B
hereto, and desires to sell all of such Ordinary Shares of the Company and such
Subsidiary Voting Shares of the Company's Subsidiaries to ACGL on the terms and
conditions set forth herein; and
WHEREAS, subject to the terms and conditions set forth herein, each
party hereto desires to consummate the transactions described in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises, agreements
and covenants set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement and the Schedules
attached hereto, the following terms shall have the meaning specified or
referred to below unless the context requires otherwise:
"ACGL" has the meaning set forth in the introduction to this
Agreement.
"ACGL SHARES" means the common shares, par value $0.01 per share, of
ACGL.
"ADJUSTED ESTIMATED CLOSING EQUITY VALUE" means $55.0 million
adjusted, if applicable, as follows:
(1) if the Estimated Closing Equity Value is less than $46.0
million, decreased by the sum of:
(x) the excess of (i) $46.0 million over (ii) the Estimated
Closing Equity Value PLUS
(y) the excess, if any, of (i) $9.0 million over (ii) 20% of
the Estimated Closing Equity Value; and
(2) if the Estimated Closing Equity Value is greater than $46.0
million, increased by the excess of (i) the Estimated Closing Equity Value
over (ii) $46.0 million.
"AFFILIATE" means, with respect to any Person (the "SUBJECT
PERSON"), (i) any other Person (a "CONTROLLING PERSON") that directly, or
indirectly through one or more intermediaries, Controls the Subject Person or
(ii) any other Person that is Controlled by or is under common Control with a
Controlling Person; PROVIDED, HOWEVER, that (x) ACGL and its Subsidiaries shall
not be deemed Affiliates of the Company or any of its Subsidiaries and (y) each
of the Company's other shareholders and its Affiliates (other than ACGL) shall
be deemed Affiliates of the Company and its Subsidiaries (it being understood
that, in the case of an individual shareholder, such shareholder's parent,
spouse, issue, estate of such shareholder or parent, spouse or issue or trust
for the benefit of such shareholder or parent, spouse or issue shall be deemed
to be an Affiliate of such shareholder). "CONTROL" (including, with correlative
meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH"), as
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used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or interests, by
contract or otherwise.
"AGREEMENT" means this Reorganization Agreement.
"AGREEMENTS" has the meaning set forth in Section 6.13.
"ALT INSURANCE" means Alternative Insurance Company Limited, a
company incorporated under the laws of Bermuda.
"ALT RE" means Alternative Re Limited, a company incorporated under
the laws of Bermuda.
"ALT RE HOLDINGS" means Alternative Re Holdings Limited, a company
incorporated under the laws of Bermuda.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"BREACH" means, with respect to a representation, warranty,
covenant, obligation or other provision of this Agreement, if there is, or has
been, any inaccuracy in any such representation or warranty at the time it was
made, or any failure to perform or comply with any such covenant, obligation or
other provisions.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day
on which (i) commercial banks in the City of New York are authorized or required
by law to close or (ii) the New York Stock Exchange is not open for trading.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, partnership interests or equivalents (however designated and whether
voting or non-voting) of such Person's capital stock, whether outstanding on the
date hereof or hereafter issued.
"CLASS A SHARES" has the meaning set forth in the recitals to this
Agreement.
"CLASS B SHARES" has the meaning set forth in the recitals to this
Agreement.
"CLASS B-1 SHARES" has the meaning set forth in the recitals to this
Agreement.
"CLASS B-2 SHARES" has the meaning set forth in the recitals to this
Agreement.
"CLASS B-3 SHARES" has the meaning set forth in the recitals to this
Agreement.
"CLOSING" has the meaning set forth in Section 4.
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"CLOSING DATE" has the meaning set forth in Section 4.
"COBRA" has the meaning set forth in Section 6.16.
"COMPANY" has the meaning set forth in the preamble to this
Agreement.
"COMPANY AUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 6.15.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in Section
6.15(b).
"COMPANY UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth
in Section 6.15(b).
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section
8.12.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments issued
by such Person, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such Person under any
Financing Lease, (v) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (vi) Disqualified Capital Stock
of such Person, (vii) Preferred Stock of any Subsidiary of such Person, (viii)
all Debt of others secured by a Lien on any asset of such Person, whether or not
such Debt is otherwise an obligation of such Person, and (ix) all Debt of others
Guaranteed by such Person.
"DECEMBER 31, 2000 BALANCE SHEET" means the Company's consolidated
balance sheet as of December 31, 2000, constituting part of the Company Audited
Financial Statements for the year ended December 31, 2000.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured within the stated time period or waived, become an Event of
Default.
"DISCLOSURE LETTER" means the letter dated the date herewith
delivered by the Company and the Selling Shareholders to ACGL.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, or requires the payment of any dividends.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA GROUP" means the Company and its Subsidiaries and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Company or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"ESTIMATED CLOSING EQUITY VALUE" means (i) the shareholders' equity
of the Company as of December 31, 2000 as set forth on the December 31, 2000
Balance Sheet MINUS (ii) $1,985,449.
"FAFC" means First American Financial Corporation, a Missouri
corporation and an indirect wholly owned subsidiary of the Company.
"FAIC" means First American Insurance Company, a Missouri
corporation and a wholly owned subsidiary of FAFC, considered together with its
Subsidiaries.
"FINANCING LEASE" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"GAAP" means, at any particular time, United States generally
accepted accounting principles as in effect at such time.
"GOVERNMENTAL ENTITY" means any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, including any insurance regulatory authority or agency.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keepwell, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part). The term "GUARANTEE" used as a
verb has a corresponding meaning.
"HSR ACT" has the meaning set forth in Section 15.10.
"INDEMNIFIED PARTIES" and "INDEMNIFIED PARTY" have the meanings set
forth in Section 8.7.
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"INSTITUTIONAL SELLING SHAREHOLDERS" means Marsh and TRYCO. For the
avoidance of doubt, "Institutional Selling Shareholders" does not include
Trident.
"INSURANCE ACTS" means all applicable insurance laws and the
applicable rules and regulations thereunder.
"INSURANCE DEPARTMENTS" means the Department of Insurance of the
State of Missouri and the Insurance Department of Bermuda.
"INSURANCE LICENSE" means a Permit from any Insurance Department or
any other department of insurance of any other jurisdiction.
"INSURANCE SUBSIDIARIES" means FAIC, Alt Re and Alt Insurance.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, advance, time deposit or otherwise.
"IRS" has the meaning set forth in Section 6.16.
"LEGAL PROCEEDING" has the meaning set forth in Section 8.12.
"LIEN" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, voting trust agreement, assignment by way of security,
restriction on voting or transfer, agreement to sell or convey, option, claim,
title imperfection, encroachment or other survey defect, pledge, restriction,
security interest or adverse claim of any kind, whether arising by contract or
under law or otherwise (including any Financing Lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the UCC or comparable law of any jurisdiction in respect of any
of the foregoing).
"MANAGEMENT SELLING SHAREHOLDERS" means Ballew and May.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 6.1.
"MULTIEMPLOYER PLAN" means at any time a multiemployer plan within
the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"OFFICERS' CERTIFICATE" means a certificate executed on behalf of
the Company by its Chief Executive Officer or President and by its Chief
Financial Officer, its Treasurer or
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any other officer acceptable to ACGL; PROVIDED, however, that the Officers'
Certificate with respect to the compliance with a condition precedent to the
Closing Date shall include (i) a statement that the signers, in their capacities
as such an officer, have read such condition and any definitions or other
provisions contained in this Agreement relating thereto, (ii) a statement that
in the opinion of the signers, in their capacities as such an officer, they have
made or have caused to be made such examination or investigation as is necessary
to enable them to express an informed opinion as to whether or not such
condition has been complied with and (iii) a statement as to whether, in the
opinion of the signers, in their capacities as such an officer, such condition
has been complied with.
"ORDINARY SHARES" has the meaning set forth in the recitals to this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITS" means all domestic and foreign licenses, permits,
consents, franchises, orders, authorizations, clearances, certificates, and
approvals, including from Governmental Entities.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"PLAN" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at the time a member of such ERISA Group for employees of any Person which
was at the time a member of the ERISA Group.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"PURCHASED PERCENTAGE" means the sum of the percentage ownership in
the Company of each Selling Shareholder as set forth on EXHIBIT A/B opposite the
name of such Selling Shareholder under the "% Outstanding (B)" column. In
calculating such percentage for each Selling Shareholder, (i) the numerator
shall be the number of Ordinary Shares owned by such Selling Shareholder as of
the date hereof and (ii) the denominator shall be the total number of Ordinary
Shares outstanding as of the date hereof.
"PURCHASED SHARES" has the meaning set forth in Section 2.1.
"REGISTRAR OF COMPANIES" has the meaning set forth in Section 9.4.
"REINSURANCE ARRANGEMENTS" has the meaning set forth in Section
6.19(e).
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"RELATED PERSON" means any director, officer or employee of the
Company or any of its Subsidiaries who is also an equity or debt holder of the
Company or any of its Subsidiaries.
"REPRESENTATIVES" has the meaning set forth in Section 8.10.
"RETURNS" has the meaning set forth in Section 6.10.
"SELLING SHAREHOLDERS" means the Institutional Selling Shareholders
and the Management Selling Shareholders.
"SHAREHOLDERS AGREEMENT" has the meaning set forth in Section 3.
"STATUTORY ACCOUNTING PRINCIPLES" means the accounting practices
permitted or prescribed by the Department of Insurance of the State of Missouri.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
or other entity of which more than 50% of the Capital Stock or other ownership
interests having ordinary voting power to elect more than 50% of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, has a greater than 50% equity interest.
"SUBSIDIARY VOTING SHARES" has the meaning set forth in the recitals
of this Agreement.
"TAXES" means (i) any and all federal, state, provincial, local and
foreign income, profits, estimated, alternative minimum, franchise, sales, value
added, use, employment, payroll, occupation, real property, personal property,
excise, gross receipts, license, customs, duties, capital stock, windfall
profit, withholding, social security (or similar), unemployment, disability,
registration, and other taxes, assessments, imposts, fees, charges or duties of
any kind whatsoever, (ii) any interest, additions to tax and penalties with
respect to any item described in clause (i) hereof and (iii) any transferee,
successor, joint and several or contractual liability (including liability as an
indemnitor, guarantor, surety or in a similar capacity, or liability pursuant to
U.S. Treasury Regulation Section 1.1502-6 (or any comparable state, local or
foreign provision)) in respect of any item described in clause (i) or (ii)
hereof.
"THREATENED" means, with respect to any Person, that such Person has
received any written demand, statement or other notice with respect to a
proceeding, claim, dispute or other matter.
"TRANSACTION DOCUMENTS" means this Agreement.
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"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
"WARRANTS" means the warrants to purchase Class A Shares.
2. PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions
of this Agreement, ACGL agrees to pay and deliver to the Selling Shareholders,
on the Closing Date, the purchase price (the "PURCHASE PRICE") in an aggregate
amount equal to the product of (x) the Purchased Percentage MULTIPLIED BY (y)
the Adjusted Estimated Closing Equity Value, and each of the Selling
Shareholders agrees to sell and deliver to ACGL, on the Closing Date, the number
of Ordinary Shares and Subsidiary Voting Shares set forth opposite such Selling
Shareholder's name on EXHIBIT A/B attached hereto (in the aggregate, the
"PURCHASED SHARES"). Each Institutional Selling Shareholder shall be paid its
proportionate share of the Purchase Price by wire transfer of immediately
available funds to an account designated by it in writing at least two Business
Days prior to the Closing Date. Each Management Selling Shareholder shall be
paid his proportionate share of the Purchase Price in ACGL Shares valued at the
average of the daily closing sale prices of the ACGL Shares for the 20-trading
day period ending on the trading day prior to the Closing Date. Such ACGL Shares
shall be subject to the same transfer, vesting and other restrictions to which
the Purchased Shares of the Management Selling Shareholders are subject.
3. WARRANTS; OPTIONS; ETC. The Company and each other party to this
Agreement will take (on its or his own behalf) all necessary actions so that
effective at or prior to the Closing Date (a) any and all securities of the
Company directly or indirectly exercisable or exchangeable for or convertible
into Ordinary Shares (including all warrants and stock options listed on EXHIBIT
A/B hereto) will be permanently cancelled and retired and (b) the Company's
stock option plan and all shareholders or other agreements relating directly or
indirectly to the Capital Stock of the Company, including the Amended and
Restated Shareholders Agreement dated as of July 13, 1999 by and among the
Company, TRYCO, Marsh, ACGL and David May (the "SHAREHOLDERS AGREEMENT"), will
be terminated in their entirety and have no further force and effect whatsoever;
PROVIDED that, options to purchase Ordinary Shares held by employees of the
Company may be treated in such other manner as ACGL may determine in its sole
discretion subject to applicable law.
4. CLOSING. Subject to the terms and conditions of this Agreement, the
closing hereunder shall take place in New York City at the offices of Cahill
Gordon & Reindel, on the second Business Day after each of the conditions set
forth in Sections 9 and 10 shall have been satisfied or waived, or at such other
time and place as shall be mutually agreed upon by ACGL, the Company and the
Selling Shareholders (the "CLOSING DATE").
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Upon satisfaction or waiver of all such conditions:
(a) The Selling Shareholders shall deliver to ACGL the certificates
representing the Purchased Shares along with any executed stock powers
deemed necessary by the parties hereto in order to effectuate the transfer
of the Purchased Shares.
(b) ACGL shall deliver to each Institutional Selling Shareholder its
portion of the Purchase Price by wire transfer of immediately available
funds to the account specified by such Institutional Selling Shareholder.
(c) ACGL shall deliver to each Management Selling Shareholder a
certificate for the ACGL Shares representing his portion of the Purchase
Price, registered in the name of such Management Selling Shareholder and
having appropriate legends as to transfer, vesting and any other
restrictions substantially the same as those restrictions in effect with
respect to the Ordinary Shares and Subsidiary Voting Shares being sold by
the Management Selling Shareholders hereunder.
(d) Each of the Selling Shareholders shall deliver to the Company
the certificates representing the Warrants held by it as set forth on
EXHIBIT A/B hereto.
Upon occurrence of the events described in clauses (a) - (d) above,
the closing hereunder will be deemed accomplished.
5. [Intentionally Omitted.]
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS. The Company and each of the Selling Shareholders represent and
warrant, jointly and severally, to ACGL as follows (except as set forth in the
corresponding section of the Disclosure Letter and except for the
representations and warranties contained in Section 6.22 (which shall be made
only by the Management Selling Shareholders) and Section 6.23 (which shall be
made only by the Selling Shareholders):
6.1 CORPORATE EXISTENCE AND POWER. (a) The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and has all
organizational power and authority, and, except as could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect (as
hereinafter defined), all Permits required to own, lease or operate its
respective properties and carry on its respective business as now conducted.
(b) The Company and each of its Subsidiaries is duly qualified to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership, leasing or
operation of property requires such qualification, other than any failure to be
so qualified or in good standing as could not, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the assets,
liabili-
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ties, business, results of operations, financial condition or Permits of the
Company and its Subsidiaries, considered as a whole (each, a "MATERIAL ADVERSE
EFFECT").
6.2 AUTHORIZATION, EXECUTION, ENFORCEABILITY. The Company and each
of its Subsidiaries has the corporate power and authority to execute and
deliver, and to perform its obligations under, each of the Transaction Documents
to which it is or is to be a party. Subject to receipt of regulatory approval
from each Insurance Department, the Company and each of its Subsidiaries has
taken all action required by law or organizational documents required to be
taken by it to authorize the execution, delivery and performance by it of each
Transaction Document to which it is or is to be a party. Subject to receipt of
regulatory approval from each Insurance Department, each of the Transaction
Documents is, or upon execution and delivery will be, a valid and binding
obligation of the Company and each of the Subsidiaries (to the extent each is a
party thereto), enforceable in accordance with their respective terms, except to
the extent limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by general principles of
equity. True and complete copies of the certificate of incorporation and
by-laws, memorandum of association and articles of association or partnership
agreement (or other equivalent organizational documents), as the case may be, of
the Company and each of its Subsidiaries have been provided by the Company to
ACGL.
6.3 CAPITALIZATION OF THE COMPANY. (a) The authorized Capital
Stock of the Company consists of 200,000,000 Ordinary Shares which are divided
into Class A Shares and Class B Shares, each having a par value of $.01 per
share; the Class B Shares are further divided into Class B-1 Shares, Class B-2
Shares and Class B-3 Shares. All outstanding shares of Capital Stock have been
duly authorized, are validly issued, fully paid and nonassessable and have been
issued in compliance with applicable foreign, U.S. federal and state securities
laws.
(b) There are no (i) securities or obligations of the Company
convertible into or exchangeable for any Ordinary Shares, (ii) warrants, options
or other rights to purchase or acquire from the Company any such Ordinary Shares
or any such convertible or exchangeable securities or obligations or (iii)
obligations of the Company to issue such Ordinary Shares, any such convertible
or exchangeable securities or obligations or any such warrants, rights or
options. No Person has any preemptive or similar rights with respect to any
Ordinary Shares or any rights to require registration of any securities of the
Company.
(c) SECTION 6.3(C) of the Disclosure Letter sets forth a complete
list of all of the outstanding Debt of the Company or any of its Subsidiaries as
of the date hereof, together with the names of the holders thereof, the
principal amount, interest rate, issue date, stated maturity date and any other
material terms.
(d) Set forth as EXHIBIT A/B hereto is a complete list of all of
the registered shareholders of the Company as of the date hereof, together with
the names of such share-
-11-
holders and the number of Ordinary Shares (and the percentage ownership
represented by such number of Ordinary Shares) so owned by each such shareholder
on an actual basis (under the "% Outstanding (B)" column). and after giving
effect to the exercise of all outstanding options, warrants and other rights to
purchase Ordinary Shares and the conversion or exchange of all securities
convertible or exchangeable into Ordinary Shares (whether or not then
exercisable, exchangeable or convertible and whether or not "in the money")
(under the "% Fully Diluted (C)" column).
(e) SECTION 6.3(E) of the Disclosure Letter sets forth the
capitalization of the Company at the date hereof after giving pro forma effect
to the acquisition of Shares as contemplated by this Agreement.
6.4 SUBSIDIARIES; OTHER INTERESTS. (a) SECTION 6.4 of the
Disclosure Letter sets forth a true, complete and correct list of each
Subsidiary of the Company. Each such Subsidiary is wholly owned by the Company.
Section 6.4 of the Disclosure Letter sets forth the country or state(s) in which
the Company's Subsidiaries are domiciled (both by incorporation and as a
"commercial domiciliary" under applicable law) and the states in which they are
licensed to conduct an insurance business, which are the only jurisdictions in
which the Company's Subsidiaries are required to be so licensed, except where
such failure to be so licensed could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect. All of the outstanding Capital
Stock of the Company's Subsidiaries has been duly authorized and validly issued
and is fully paid and nonassessable and owned by the Company, directly, free and
clear of all Liens (other than such transfer restrictions as may exist under
foreign, U.S. federal and state securities laws) and there are no warrants,
options or other rights granted to or in favor of any third party (whether
acting in an individual, fiduciary or other capacity) other than the Company to
acquire any such Capital Stock, any additional Capital Stock or any other
securities of the Company's Subsidiaries.
(b) Except for interests in the Subsidiaries, neither the Company
nor any of its Subsidiaries, directly or indirectly, holds, or has any
contractual commitment to make, any Investment in any Person, except for
Investments made in the ordinary course of its business and in accordance with
the Company's applicable investment policies in effect on the date such
investment was made.
6.5 NO CONTRAVENTION, CONFLICT, BREACH, ETC. The execution,
delivery and performance of the Transaction Documents and the consummation of
the transactions contemplated therein will not (i) conflict with, or result in a
breach or violation of, any provision of the charter, memorandum of association,
by-laws, articles of association, bye-laws or other organizational documents of
the Company or any of its Subsidiaries, (ii) upon receipt of regulatory approval
from the Insurance Departments, result in risk of loss of, or limitation on, any
Insurance License or other Permits held by the Company or any of its
Subsidiaries, or the right of the Company or of any of its Subsidiaries to
conduct business in any jurisdiction as currently conducted, or (iii) conflict
with or result in a breach or violation of any of the terms
-12-
and provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon any assets or properties of the Company or any of
its Subsidiaries under, any statute, rule, regulation, order or decree of any
Governmental Entity or any of its properties, assets or operations, or any
agreement or instrument evidencing Debt or any lease, Permit or other agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or to which any of their
respective properties, assets or operations are subject, except such as could
not (with respect to clause (ii) or (iii)), singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.6 CONSENTS. Except for filings under the HSR Act and regulatory
approval from the Insurance Departments (which approval is required to be
obtained pursuant to Sections 9.7 and 10.3), no consent, approval,
authorization, order, registration, filing or qualification of or with any (i)
Governmental Entity or (ii) other third party (whether acting in an individual,
fiduciary or other capacity) is necessary for the execution, delivery or
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby, except where such failure to obtain such
consent, approval, authorization, order, registration, filing or qualification,
could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.7 NO EXISTING VIOLATION, DEFAULT, ETC. (a) Neither the Company
nor any of its Subsidiaries is in violation of (i) its charter, memorandum of
association, by-laws, articles of association, bye-laws or other organizational
documents, (ii) any applicable law, ordinance, administrative or governmental
rule or regulation or (iii) any order, decree or judgment of any court or
governmental agency or body having jurisdiction over the Company or any of its
Subsidiaries other than such as could not (with respect to clauses (ii) or
(iii)), singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) No event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default exists
under any indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any lease, permit, license or other agreement or instrument to
which the Company or any of its Subsidiaries is party or by which the Company or
any of its Subsidiaries is bound or to which any of their respective properties,
assets or operations are subject other than such as could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.8 LICENSES AND PERMITS. The Company and its Subsidiaries have
all Permits from appropriate Governmental Authorities (including all Insurance
Licenses) as are necessary to own, lease or operate their properties as
currently owned, leased or operated and to conduct their businesses as currently
conducted, except any such Permit the failure of which to have could not, singly
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
All such Permits are valid and in full force and effect. The Company and its
Subsidiaries are in compliance in all respects with their respective obligations
under such
-13-
Permits, with such exceptions as could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. To the best knowledge
of such Person, no event has occurred that allows, or after notice or lapse of
time would allow, revocation or termination of such Permits and no insurance
regulatory agency or body has issued any order or decree impairing, restricting
or prohibiting the payment of dividends by any of them to their respective
parent companies or shareholders.
6.9 TITLE TO PROPERTIES. The Company and its Subsidiaries each
have sufficient title to all properties (real and personal) owned by the Company
and its Subsidiaries or reflected in their financial statements which are
necessary for the conduct of the business of the Company and its Subsidiaries as
currently conducted, free and clear of any Lien that may interfere with the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and (in the case of the Selling Shareholders, to their best knowledge) all
properties held under lease by the Company or any of its Subsidiaries are held
under valid, subsisting and enforceable leases.
6.10 TAXES. (a) All returns, reports, declarations, statements and
other documents required to be filed with respect to Taxes ("RETURNS") on behalf
of the Company and its Subsidiaries have been duly filed on a timely basis with
the appropriate governmental agencies in all jurisdictions in which such Returns
are required to be filed; (b) all such Returns were correct and complete in all
material respects; (c) all Taxes shown on such Returns as being due have been
fully paid; (d) all Taxes of the Company and its Subsidiaries attributable to
any taxable period (or portion thereof) ending on or prior to the date hereof
have been timely paid or, if not yet due and payable, have been specifically
accrued as of any relevant balance sheet date; (e) no issues have been raised
(and are currently pending) by the Internal Revenue Service or any other taxing
authority in writing with respect to any operations of the Company and its
Subsidiaries and no examination of the Company and its Subsidiaries is currently
in progress nor, to the best knowledge of the Company and the Selling
Shareholders, threatened, and no deficiencies have been asserted or assessed
against the Company and its Subsidiaries by any taxing authority and no such
deficiency has been proposed or threatened; (f) no waivers of statutes of
limitation with respect to such Returns have been given by or requested from the
Company and its Subsidiaries or the Selling Shareholders; and (g) there are no
liens for Taxes (other than for current Taxes not yet due and payable) on the
assets. The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes or other governmental charges have been
established in accordance with GAAP (or, in the case of FAIC, in accordance with
Statutory Accounting Principles).
6.11 LITIGATION. There are no pending or, to the best knowledge of
such Person, threatened actions, suits, proceedings, arbitrations or
investigations against or affecting the Company or any of its Subsidiaries or
any of their respective properties, assets or operations or with respect to
which the Company or any of its Subsidiaries is responsible by way of indemnity
or otherwise, that question the validity of any of the Transaction Documents, or
that could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Ef-
-14-
fect or would have an adverse effect on the ability of the Company or any of its
Subsidiaries to perform its obligations under this Agreement or any of the other
Transaction Documents to which they are party; and no Selling Shareholder is
aware of any basis for any such action, suit, proceeding or investigation.
6.12 LABOR MATTERS. No labor disturbance by the employees of the
Company or any of its Subsidiaries exists or, to the best knowledge of such
Person, is threatened. Neither the Company nor any of its Subsidiaries is party
to any collective bargaining or other union contract. No Selling Shareholder is
aware of the existence of any effort to unionize employees of either the Company
or any of its Subsidiaries.
6.13 CONTRACTS. (a) Neither the Company nor any of its Subsidiaries
nor any other party is in breach of or default under any contract to which the
Company or any of its Subsidiaries are parties or bound other than such breach
or default as could not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries is party to
any written stockholder agreement, employment agreement, advisors' agreement,
consulting agreement or any similar agreement or, to the best knowledge of such
Person, oral similar agreements.
(c) Neither the Company nor any of its Subsidiaries is a party to
or bound by (i) any agreement or arrangement relating to Debt (it being
understood that if any such agreement or arrangement exists, SECTION 6.13(B) of
the Disclosure Letter shall set forth the outstanding principal amount, interest
rate, maturity and all other material terms of such Debt); (ii) any agency,
dealer, sales representative, marketing or other similar agreement entered other
than those entered into in the ordinary course of business; (iii) any
reinsurance treaty or any facultative reinsurance contract (in each case
applicable to insurance in force and where there are existing unearned premium
or case reserves); (iv) any material agreement containing "change in control" or
similar provisions relating to change in control of the Company or any of its
Subsidiaries; (v) any powers of attorney, binding authorities or managing
general agencies or other agencies that have the power to bind on behalf of the
Company or any of its Subsidiaries other than those made in the ordinary course
of business; (vi) any material third party collection agreements; or (vii) any
agreements (other than insurance policies, leases or other similar agreements
issued or made by the Company or any of its Subsidiaries in the ordinary course
of its business) pursuant to which the Company or any of its Subsidiaries is
obligated to indemnify any other Person.
(d) No agreement, contract or other document will require
increased payments (in either amount or frequency) or changed terms as a result
of the transactions contemplated by the Transaction Documents other than such as
could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
The Company has heretofore furnished, or made available, to ACGL
complete and correct copies of the contracts, agreements and instruments listed
on SECTION 6.13 of the
-15-
Disclosure Letter, each as amended or modified to the date hereof (including any
waivers with respect thereto, the "AGREEMENTS").
SECTION 6.13 of the Disclosure Letter further contains a list of all
insureds the gross written premiums of which (together with the gross written
premiums derived from any of its Affiliates) represented more than (or are
expected to represent more than) 5% of the Company's consolidated gross written
premiums in fiscal year 2000.
6.14 FINDER'S FEES. No broker, finder or other party is entitled to
receive from the Company or any of its Subsidiaries any brokerage or finder's
fee or any other fee, commission or payment as a result of the transactions
contemplated by the Transaction Documents.
6.15 FINANCIAL STATEMENTS. (a) The audited consolidated financial
statements and related schedules and notes for the Company, FAFC, Alt Re
Holdings and Alt Re for the years ended December 31, 1999 and 2000 and the
audited financial statements and related schedules and notes for Alt Insurance
for the years ended December 31, 1999 and 2000 were (or will be, as the case may
be) prepared in accordance with GAAP consistently applied throughout the periods
involved and fairly present (or will fairly present, as the case may be) the
financial condition, results of operations, cash flows and changes in
shareholders' equity of the company and its Subsidiaries at the dates and for
the periods presented. The audited statutory financial statements and related
schedules and notes for FAIC for the years ended December 31, 1999 and 2000,
were, or will be, as the case may be, prepared in accordance with the Statutory
Accounting Principles and fairly present (or will fairly present, as the case
may be) the financial condition, results of operations, cash flows and changes
in capital and surplus of FAIC at the dates and for the periods presented. (The
audited financial statements of the Company and its Subsidiaries described in
the preceding two sentences are hereinafter collectively referred to as the
"COMPANY AUDITED FINANCIAL STATEMENTS.")
(b) The unaudited quarterly consolidated financial statements and
the related notes for the quarterly periods subsequent to December 31, 1999 for
the Company, FAFC, Alt Re Holdings and Alt Re and the unaudited quarterly
financial statements and the related notes for the periods subsequent to
December 31, 1999 for Alt Insurance present fairly the financial condition,
results of operations and cash flows of the Company and the Company's
Subsidiaries at the dates and for the period to which they relate, subject to
year-end audit adjustments (consisting only of normal recurring accruals), have
been prepared in accordance with GAAP applied on a consistent basis (except as
otherwise stated therein and except that they do not contain full footnote
disclosures in accordance with GAAP) and have been prepared on a basis
substantially consistent with that of the Audited Financial Statements referred
to above except as otherwise stated therein. The unaudited statutory financial
statements and related schedules and notes for FAIC for the quarterly periods
subsequent to December 31, 1999, were prepared in accordance with Statutory
Accounting Principles and fairly present the financial condition, results of
operations, cash flows and changes in capital and
-16-
surplus of FAIC at the dates and for the periods presented. (The unaudited
financial statements of the Company and its Subsidiaries described in the
preceding two sentences are hereinafter referred to as the "COMPANY UNAUDITED
FINANCIAL STATEMENTS," and together with the Company Audited Financial
Statements are hereinafter collectively referred to as the "COMPANY FINANCIAL
STATEMENTS.")
6.16 EMPLOYEE BENEFITS. (a) There are no Benefit Arrangements or
stock bonus, stock option, restricted stock, stock appreciation right, stock
purchase, bonus, incentive, deferred compensation, severance, or vacation plans,
employment or consulting agreement, covering employees maintained or contributed
to by any member of the ERISA Group.
(b) The Company and its Subsidiaries, and each of the Benefit
Arrangements are in compliance in all material respects with the applicable
provisions of ERISA, the Internal Revenue Code and other applicable laws in
connection with the Benefit Arrangements.
(c) Any Benefit Arrangements intended to qualify under Section 401
of the Internal Revenue Code have been determined by the Internal Revenue
Service ("IRS") to be so qualified, or a timely application for such
determination has been or will be filed with the IRS, and no event has occurred
and no condition exists with respect to the form or operation of such Benefit
Arrangements that would reasonably be expected to cause the loss of such
qualification or the imposition of any material liability, penalty or tax under
ERISA or the Internal Revenue Code.
(d) Except as could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect, there are (i) no investigations
pending by any governmental entity (including the PBGC) involving the Benefit
Arrangements, and (ii) no pending or, to the best knowledge of such Person,
threatened claims (other than routine claims for benefits), suits or proceedings
against any Benefit Arrangement, or against any fiduciary of any Benefit
Arrangement with respect to the operation of such plan or asserting any rights
or claims to benefits under such arrangement, nor, to the best of the Company's
knowledge, are there any facts that would give rise to any material liability.
(e) None of the members of the ERISA Group, or any employee of the
foregoing, or any trustee, administrator, other fiduciary or any other "party in
interest" or "disqualified person" with respect to the Benefit Arrangements, has
engaged in a "prohibited transaction" (as such term is defined in Section 4975
of the Internal Revenue Code or Section 406 of ERISA) that could result in a
material tax or penalty on the Company or its Subsidiaries under Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA.
(f) With respect to any Plan, except as could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect: (i) all
contributions required to be made by the Company or any of its Subsidiaries
under Section 302 of ERISA and Section 412 of the Code have been timely made,
(ii) there has been no application for or waiver
-17-
of the minimum funding standards imposed by Section 412 of the Code, (iii) no
such plan has incurred an "accumulated funding deficiency" within the meaning of
Section 412(a) of the Code as of the end of the most recently completed plan
year, and (iv) no Plan subject to Title IV of ERISA has been terminated.
(g) No member of the ERISA Group has incurred, or is reasonably
likely to incur material liability under Title IV of ERISA.
(h) No member of the ERISA Group has material liability (including
any contingent liability under Section 4204 of ERISA) with respect to any
Multiemployer Plan.
(i) With respect to each of the Benefit Arrangements, true,
correct and complete copies of the following documents have been made available
to ACGL: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions relating to the
Benefit Arrangements, (iii) the most recent Forms 5500, if applicable, (iv) the
most recent IRS determination letter, if applicable, and (v) the most recent
actuarial report or valuation with respect to each Plan subject to Title IV of
ERISA.
(j) None of the Benefit Arrangements maintained by any member of
the ERISA Group provide for material continuing benefits or coverage for any
participant or any beneficiary of a participant following termination of
employment, except as may be required under Section 4980B of the Internal
Revenue Code and Part 6 of Subtitle B of Title I of ERISA ("COBRA"), or except
at the expense of the participant or the participant's beneficiary. All members
of the ERISA Group which maintain a "group health plan" within the meaning of
Section 5000(b)(1) of the Internal Revenue Code have complied in all material
respects with the "COBRA" notice and continuation requirements.
(k) The consummation of the transactions contemplated by this
Agreement will not result in a material increase in the amount of compensation
or benefits or accelerate the vesting or timing of a material payment of any
benefits or compensation payable to or in respect of any employee of the Company
or its Subsidiaries.
(l) The consummation of the transactions contemplated by this
Agreement will not result in or satisfy a condition to the payment of
compensation that would, in combination with any other payment, result in an
"excess parachute payment" within the meaning of Section 280G(b) of the Internal
Revenue Code.
(m) The Company and its Subsidiaries do not maintain or contribute
to any material plan, program, policy, arrangement or agreement with respect to
employees (or former employees) employed outside the United States.
6.17 UNDISCLOSED LIABILITIES. Except as fully reserved against in
the Financial Statements, the Company and its Subsidiaries have no liabilities
(including tax liabilities),
-18-
absolute or contingent, except as for liabilities incurred since September 30,
2000 in the ordinary course consistent with past practice and except as are not
material.
ACGL acknowledges that no representation or warranty is being made
under this Section 6.17 or otherwise in this Agreement with respect to any
matters covered by Section 6.19 or Section 6.20, which Sections are the sole and
exclusive representations and warranties contained in this Agreement with
respect to insurance matters and insurance liabilities and reserves.
6.18 NO MATERIAL CHANGE. Since December 31, 1999, (i) neither the
Company nor any of its Subsidiaries has relinquished or incurred any material
liability or obligation (indirect, direct or contingent), or entered into any
oral or written material agreement or other transaction, that is not in the
ordinary course of business and consistent with past practice; (ii) neither the
Company nor any of its Subsidiaries has sustained any material loss or
interference with its respective businesses or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance);
(iii) there has been no change in the Debt of the Company or any of its
Subsidiaries, no change in the Capital Stock of the Company (except as
contemplated hereby), and no dividend or distribution of any kind (including
stock dividends, recapitalizations or other transactions) declared, paid or made
by the Company on any class of its Capital Stock; (iv) the Company has not
permitted or allowed any of its or its Subsidiaries' assets to be subjected to
any Liens; (v) the Company has not transferred or otherwise disposed of any of
its or its Subsidiaries' assets, except in the ordinary course of business and
consistent with past practice; (vi) the Company has not made any single capital
expenditure or commitment for a capital expenditure relating to its or its
Subsidiaries' assets in excess of $75,000; (vii) there has not been any material
change in any method of accounting or accounting practice or policy (including
any reserving method, practice or policy) by the Company or any of its
Subsidiaries; (viii) other than to the extent permitted by clause (i), (ii) or
(iii) of Section 8.2(e), there has not been, to the extent payable directly or
indirectly by the Company or any of its Subsidiaries, any (A) employment,
deferred compensation, severance, retirement or other similar agreement entered
into with any director, officer or employee (or any amendment to any such
existing agreement), (B) grant of any severance or termination pay to any
director, officer or employee, (C) change in compensation or other benefits
payable to any Related Person or change in compensation or other benefits
payable to any director, officer or employee or (D) loans or advances to any
directors, officers or employees except for ordinary travel and business
expenses in the ordinary course of business and advances of salary (not
exceeding one month's pay); (ix) there has been no material damage, theft or
casualty loss by the Company or any of its Subsidiaries; (x) there has not been
any change by the Company or any of its Subsidiaries in underwriting practices
or standards; (xi) there has not been (A) any entering into of any facultative
reinsurance contract, other than in the ordinary course of business and
consistent with past practice, or (B) any commutation of any facultative
reinsurance contract, or (C) any entering into or any commutation of any
reinsurance treaty, by the Company or any of its Subsidiaries other than
renewals in the ordinary course of business consistent with past practice; (xii)
there has not been any insurance transaction by the
-19-
Company or any of its Subsidiaries other than in the ordinary course of business
and consistent with past practice; (xiii) there has not been any material change
by the Company or any of its Subsidiaries in the compensation structure of, or
benefits available to, any agent or with respect to agents generally; and (xiv)
there has been no event or circumstance causing a Material Adverse Effect, nor
any development that would, singly or in the aggregate, result in a Material
Adverse Effect.
6.19 INSURANCE MATTERS. (a) The Company and its Subsidiaries are
each in compliance in all material respects with the requirements of all
Insurance Acts and have filed all reports, documents or other information
required to be filed thereunder, except where such failure could not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect; and
neither the Company nor any of its Subsidiaries has received any notification
from any insurance regulatory authority, commission or other insurance
regulatory body in the United States or elsewhere to the effect that the Company
or any of its Subsidiaries is not so in compliance with the Insurance Acts.
(b) Neither the Company nor any of its Subsidiaries has made any
change in its insurance reserving practices, either on a gross or net of
reinsurance basis, since December 31, 1999, that could, singly or in the
aggregate, reasonably be expected to have (i) a Material Adverse Effect or (ii)
a material adverse effect on the ability of any of the Insurance Subsidiaries to
pay dividends or the amount thereof.
(c) All insurance policies issued by the Insurance Subsidiaries,
as now in force, are, to the extent required under applicable law, in a form
acceptable to applicable regulatory authorities or have been filed and not
objected to by such authorities within the period provided for objection, except
where such failure could not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect. All premium rates, rating plans and policy
forms established or used by the Insurance Subsidiaries that are required to be
filed with or approved by insurance regulatory authorities have been so filed or
approved, the premiums charged conform in all respects to the premiums so filed
or approved and comply in all respects with the insurance laws applicable
thereto, except where such failure could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect and no such premiums
are subject to any review or investigation by any insurance regulatory
authority.
(d) No loss experience has developed, within any individual lines
of business or on an aggregate basis for all lines, that would require or make
it appropriate for the Company or any of its Subsidiaries to alter or modify its
reserving methodology or assumptions since December 31, 1999 in any material
respect.
(e) All reinsurance treaties, contracts, agreements and
arrangements ("REINSURANCE ARRANGEMENTS") to which the Company or any of its
Subsidiaries is a party are in full force and effect, other than those that, by
their terms, have expired by their terms or otherwise terminated. To the best
knowledge of such Person, each of the Reinsurance Arrange-
-20-
ments is valid and binding in accordance with its terms on the insurance company
party thereto. All amounts reflected on the Balance Sheet by the Company or any
of its Subsidiaries, as reinsurance ceded or recoverable, pursuant to any
Reinsurance Arrangement are reflected in accordance with Statutory Accounting
Principles. Neither the Company nor any of its Subsidiaries is in material
default as to any Reinsurance Arrangement and, except as reflected in the
Balance Sheet, there is no reason to believe that the financial condition of any
such other party is impaired to the extent that a default thereunder may
reasonably be anticipated; PROVIDED that this representation and warranty, as
made by the Institutional Selling Shareholders, is made to their best knowledge.
None of the Reinsurance Arrangements contains any provision providing that the
other party thereto may terminate such Reinsurance Arrangement solely by reason
of the transactions contemplated by the Transaction Documents.
(f) The only consents, approvals, authorizations and orders of
Governmental Entities required under the Insurance Acts for the consummation of
the transactions contemplated by this Agreement or the Transaction Documents are
those listed on SECTION 6.19 of the Disclosure Letter.
(g) All filings required under any Insurance Act to have been made
with state insurance regulatory authorities relating to operations on and after
December 31, 1999 by the Company and its Subsidiaries have been duly and timely
made, and when filed were in compliance with the requirements of each such
Insurance Act.
(h) No Insurance Department has taken, or stated (orally or in
writing) that it intends to take or that it may take, any action to seize
control of the Company or any of its Subsidiaries through rehabilitation,
liquidation or otherwise, and no Insurance Department has otherwise precluded,
or stated (orally or in writing) that it intends to preclude or may preclude,
FAIC from writing premiums.
(i) The frequency and severity of claims within the individual
lines of business of the Company and its Subsidiaries since December 31, 1999,
are consistent with those reported for comparable periods prior to January 1,
2000.
6.20 LIABILITIES AND RESERVES. (a) Except for instances where the
failure of any of the following statements to be true could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the
reserves carried on the statutory financial statements of each Insurance
Subsidiary for future insurance policy benefits, losses, claims and similar
purposes were, as of the respective dates of such financial statements, in
compliance with the requirements for reserves established by the insurance
departments of the jurisdiction of domicile of such Insurance Subsidiary and
each other jurisdiction where it is regulated, were determined in accordance
with Statutory Accounting Principles and with generally accepted actuarial
standards, assumptions and principles consistently applied and were fairly
stated in accordance with sound actuarial and statutory accounting principles;
(ii) such reserves were, in the reasonable judgment of the Company, adequate in
the aggregate to cover
-21-
the total amount of all reasonably anticipated liabilities of the Company and
each Insurance Subsidiary under all outstanding insurance, reinsurance and other
applicable agreements as of the respective dates of such financial statements;
and (iii) the statutory surplus of each Insurance Subsidiary as determined under
applicable laws are in an amount at least equal to the minimum amounts required
by applicable laws or regulations.
(b) Except for regular periodic assessments in the ordinary course
of business or assessments based on developments which are publicly known within
the insurance and reinsurance industry, to the best knowledge of the Company and
its Subsidiaries, no claim or assessment is pending or threatened against any
Subsidiary which is peculiar or unique to such Subsidiary by any state insurance
guaranty associations in connection with such association's fund relating to
insolvent insurers which if determined adversely, could, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect with respect
to the Company.
6.21 INSTITUTIONAL SELLING SHAREHOLDER REPRESENTATIONS AND
Warranties. Each Institutional Selling Shareholder as to itself and Trident as
to itself only hereby makes the following representations and warranties:
(a) Such Person is a validly existing partnership or company,
respectively, organized pursuant to, and in good standing under, the laws
of the jurisdiction of its organization. Such Person has full power and
authority to carry on its business as now conducted and to own or lease
its properties and assets.
(b) All corporate and other actions required to be taken by such
Person to authorize the execution, delivery and performance of this
Agreement have been duly and properly taken. No consent, approval or
authorization of, or filing of any certificate, notice, application,
report or other document with, any governmental or regulatory authority is
required on the part of such Person in connection with the valid execution
and delivery of this Agreement, or the transfer of the Purchased Shares,
or the consummation of any other transaction contemplated hereby, except
for those obtained on or before the Closing Date.
(c) The execution and delivery of this Agreement, performance
hereunder and the consummation of the transactions contemplated hereby are
not prohibited by, do not violate or conflict with any provision of, and
do not result in a default (or, to the best knowledge of such Person, an
event which with notice or lapse or time, or both, would become a default)
under or a breach of:
(i) such Person's organizational documents;
(ii) in the case of Trident, Trident's Certificate of
Organization and Partnership Agreement;
-22-
(iii) any material contract, agreement or other instrument to
which such Person is a party;
(iv) any regulation, order, decree or judgment of any court
or governmental or regulatory agency applicable to such Person; or
(v) any law or regulation applicable to such Person;
excluding from the foregoing clauses violations, defaults or breaches which,
singly or in the aggregate, have not resulted or could not reasonably be
expected to result in a Material Adverse Effect on Trident or the Selling
Shareholders.
6.22 MANAGEMENT SELLING SHAREHOLDER REPRESENTATIONS AND WARRANTIES.
Each Management Selling Shareholder represents and warrants as follows:
Each of the Management Selling Shareholders is capable of evaluating
the merits and risks of his investment in the ACGL Shares to be issued as part
of the Purchase Price, and has the capacity to protect his own interests in
making his investment in such ACGL Shares. Each of the Management Selling
Shareholders (i) understands that such ACGL Shares have not been registered
under the Securities Act, or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, (ii) is acquiring such ACGL Shares solely for
his own account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
ACGL and has had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding such ACGL Shares,
(v) is able to bear the economic risk and lack of liquidity inherent in holding
such ACGL Shares and (vi) understands that certificate(s) representing such ACGL
Shares will contain legends relating to transfer, vesting and other
restrictions.
6.23 ALL SELLING SHAREHOLDER REPRESENTATIONS AND WARRANTIES. Each
Selling Shareholder as to itself and Trident as to itself only makes the
following representations and warranties:
(a) Such Person has the full legal right, capacity and power to
execute and deliver this Agreement, to perform its or his obligations
hereunder, and to consummate the transactions contemplated hereby.
(b) This Agreement has been, and the documents to be delivered at
the Closing Date will be, duly executed and delivered by such Person and
are or would be the lawful, valid and legally binding obligations of such
Person, enforceable against such Person in accordance with their
respective terms and conditions, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general principles of equity.
-23-
(c) Each such Person is the record and beneficial owner of the
Purchased Shares being sold by such Person and at the Closing Date will
have the absolute right, power and capacity to sell, assign, transfer and
deliver such Purchased Shares to ACGL free and clear of any liens,
encumbrances, pledges, security interests, participation interests,
restrictive agreements, transfer restrictions or claims of any nature
whatsoever created by such Selling Shareholder and, upon delivery and
payment for the Purchased Shares pursuant hereto, ACGL will acquire valid
title to the Purchased Shares, free and clear of all such liens and
encumbrances.
7. REPRESENTATIONS AND WARRANTIES OF ACGL. ACGL represents and
warrants to the Company and each of the Selling Shareholders that:
7.1 ORGANIZATION, GOOD STANDING, POWER, AUTHORITY, ETC. ACGL is a
corporation duly formed and registered, validly existing and in good standing
under the laws of Bermuda and has the corporate power and authority to own,
lease and operate its properties and to conduct its business as currently owned,
leased and conducted.
ACGL has the corporate power and authority to execute and deliver,
and to perform its obligations under, this Agreement and each Transaction
Document to which it is (or is to be) a party, and to perform its obligations
under this Agreement and each such Transaction Document. ACGL has taken all
action required by law, its charter or partnership agreement or otherwise
required to be taken by it to authorize the execution, delivery and performance
of this Agreement and each Transaction Document to which it is (or is to be) a
party and the consummation of the transactions contemplated to be performed by
it hereunder and thereunder.
This Agreement is, and each Transaction Document to which ACGL is,
or is to be, a party will be, a valid and binding agreement of ACGL, enforceable
in accordance with its terms, except to the extent limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general principles of equity.
7.2 CONSENTS. Except for filings under the HSR Act and regulatory
approvals from the Insurance Departments (which approval is required to be
obtained pursuant to Sections 9.7 and 10.3), no consent, approval,
authorization, order, registration, filing or qualification of or with any (i)
Governmental Entity or (ii) other third party (whether acting in an individual,
fiduciary or other capacity) is necessary for the execution, delivery or
performance by ACGL of the Transaction Documents and the consummation by ACGL of
the transactions contemplated thereby. The only consents, approvals,
authorizations and orders of Governmental Entities required under the Insurance
Acts for the consummation by ACGL of the transactions contemplated by this
Agreement are those listed on SECTION 7.2 of the Disclosure Letter.
-24-
7.3 FINDER'S FEES. No broker, finder or other party is entitled to
receive from ACGL or its Subsidiaries any brokerage or finder's fee or any other
fee, commission or payment as a result of the transactions contemplated by this
Agreement.
8. COVENANTS. Except as otherwise approved in writing by ACGL, (i) the
Company will comply with the following covenants and (ii) the Selling
Shareholders and Trident as to themselves will comply with the covenants set
forth in Sections 8.8 through 8.14 and, as to the Company and the Subsidiaries,
will use their reasonable best efforts to cause the Company and the Subsidiaries
to comply with the following covenants and will not take any action inconsistent
with such compliance by the Company and the Subsidiaries, in the case of
Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.8, 8.9 and 8.10, prior to the Closing,
and in the case of Sections 8.7, 8.11, 8.12, 8.13 and 8.14, prior to and after
the Closing until the expiration of the specified periods:
8.1 BUSINESS IN THE ORDINARY COURSE. The Company will, and will
cause each of the Subsidiaries to, conduct its operations only in the ordinary
course of business consistent with past practice and will use its reasonable
best efforts, and will cause each of the Subsidiaries to use its reasonable best
efforts, to preserve intact the business organization of the Company and each of
the Subsidiaries, to keep available the services of its and their present
officers and employees, and to preserve the good will of those having business
relationships with it. The Company shall (i) maintain the assets that are
material to the business of the Company and its Subsidiaries, taken as a whole,
in the ordinary course of business and in all material respects in as favorable
a condition as the same are in on the date hereof, except for normal wear and
tear; (ii) reapply for necessary licenses in the ordinary course of business;
(iii) deliver or cause to be delivered to ACGL, promptly after receipt of the
same, copies of all written notices of any material violation of or material
non-compliance with any law issued by any governmental authority with respect to
the Company's business or any of its material assets and received by the Company
or any of its Subsidiaries after the date of this Agreement and known to an
executive officer of the Company; (iv) deliver or cause to be delivered to ACGL,
promptly after receipt or delivery, as applicable, copies of all written notices
of material violation of or material defaults under any material contract
received by the Company or by any Subsidiary or delivered by the Company or by
any Subsidiary after the date of this Agreement and known to an executive
officer of the Company; and (v) use commercially reasonable best efforts to
obtain the renewal or extension of any lease on any Leased Real Property that is
scheduled to expire prior to Closing. Each of the Company and its Subsidiaries
shall operate its respective businesses in material compliance with all
applicable laws, ordinances, rules or regulations or orders, including, without
limitation Environmental Laws, and all Permits.
-25-
8.2 CERTAIN ACTIONS. The Company will not, and will not permit any
of the Subsidiaries to:
(a) Enter into any contract, agreement, undertaking or commitment
(other than any reinsurance agreement entered into in the ordinary course
of business consistent with past practice) which would have been required
to be set forth on SECTION 6.13 of the Disclosure Letter if in effect on
the date hereof, or enter into any contract which requires the consent or
approval of any third party to consummate the transactions contemplated by
this Agreement;
(b) Accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of business
consistent with past practice;
(c) Delay or accelerate payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would have been paid in the ordinary course of business
consistent with past practice;
(d) Make, or agree to make, any distribution of assets to the
stockholders of the Company or any of their Affiliates (other than the
Company), or enter into, or agree to enter into, any agreement or
transaction with the stockholders (other than the Company or a
Subsidiary), any Affiliate of the stockholders or any member of the
immediate family of any stockholder or any Affiliate of the stockholders
(other than the Company or a Subsidiary);
(e) Except for (i) increases in salary, wages and benefits of
non-executive officers or employees of the Company or the Subsidiaries in
the ordinary course of business consistent with past practice, (ii)
increases in salary, wages and benefits granted to officers and employees
of the Company or the Subsidiaries in conjunction with new hires,
promotions or other changes in job status in the ordinary course of
business consistent with past practice, or (iii) increases in salary,
wages and benefits to employees of the Company pursuant to collective
bargaining agreements entered into in the ordinary course of business
consistent with past practice, (A) increase the compensation or fringe
benefits payable or to become payable to its directors, officers or
employees (whether from the Company or any of the Subsidiaries), (B) pay
any benefit not required by any existing plan or arrangement, (C) grant
any severance or termination pay, (D) enter into any employment or
severance agreement with, any director, officer or other employee of the
Company or any of the Subsidiaries, or (E) establish, adopt, enter into,
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy
or arrangement for the benefit or welfare of any di-
-26-
rectors, officers or current or former employees, except in each case to
the extent required by applicable law or regulation;
(f) Acquire, sell, lease, mortgage, encumber or dispose of any
assets (other than inventory) or securities with a value, individually or
in the aggregate, in excess of $10,000, or enter into any commitment to do
any of the foregoing or enter into any material commitment or transaction
outside the ordinary course of business consistent with past practice
other than transactions between the Company and its Subsidiaries or
between Subsidiaries;
(g) (i) Incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except in the ordinary course of
business consistent with past practice, or (iii) make any loans, advances
or capital contributions to, or investments in, any other person except in
the ordinary course of business consistent with past practice and except
for loans, advances, capital contributions or investments between the
Company and its Subsidiaries or between Subsidiaries;
(h) Modify, amend or terminate any material contract or waive,
release or assign any rights or claims thereunder, except in the ordinary
course of business and consistent with past practice;
(i) Make any material Tax election or change or revoke any material
Tax election already made, adopt, request or consent to any new material
Tax accounting method, change any material Tax accounting method unless
required by applicable law, enter into any material closing agreement,
settle any material Tax claim or assessment or consent to any material Tax
claim or assessment or any waiver of the statute of limitations for any
such claim or assessment;
(j) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of the Subsidiaries (other than under
this Agreement);
(k) Pay, discharge or satisfy, or fail to pay, discharge or satisfy,
any claim, liability or obligation (contingent or otherwise), other than
in the ordinary course of business and consistent with past practice;
(l) Cancel any debts owed to or claims held by the Company
(including the settlement of any claims or litigation) other than in the
ordinary course of business consistent with past practice;
-27-
(m) Enter into an agreement, contract, commitment or arrangement to
do any of the foregoing, or to authorize, recommend, propose or announce
an intention to do any of the foregoing.
8.3 ACCOUNTING CHANGES. Neither the Company nor its Subsidiaries
shall make any change in its accounting procedures and practices from those in
existence at December 31, 1999, other than any change necessitated by changes,
if any, in GAAP.
8.4 CAPITALIZATION, OPTIONS, DIVIDENDS AND PAYMENTS. No change
shall be made in the memorandum of association, articles of incorporation,
articles of association, bye-laws or by-laws (or other similar organizational
documents) of the Company or any Subsidiary. Neither the Company nor its
Subsidiaries shall issue or reclassify or alter any shares of its outstanding or
unissued capital stock or other securities. Neither the Company nor its
Subsidiaries shall grant options, warrants or other rights of any kind to
purchase any of its securities, or agree to issue any shares of its Capital
Stock or any other securities, or purchase, redeem or otherwise acquire for
consideration any shares of its Capital Stock or any other securities. The
Selling Shareholders shall not sell or transfer any of the Purchased Shares.
8.5 ENCUMBRANCE OF ASSETS. No Liens on any of the properties or
assets of the Company or its Subsidiaries shall be made other than (i) pursuant
to an existing contract, or (ii) by operation of law.
8.6 LITIGATION DURING INTERIM PERIOD. The Company will promptly
advise ACGL in writing of the commencement or threat against the Company or its
Subsidiaries of any proceeding or Tax audit of which the Company or its
Subsidiaries becomes aware when the amount claimed is in any individual claim,
litigation, proceeding or Tax audit in excess of $10,000.
8.7 INDEMNIFICATION; INSURANCE. (a) To the fullest extent
permitted by law, from and after the Closing Date, all rights to indemnification
as of the date hereof in favor of the directors of the Company with respect to
their activities as such prior to the Closing Date, as provided in its articles
of associations in effect on the date thereof, or otherwise in effect on the
date hereof, shall survive the Closing and shall continue in full force and
effect for a period of not less than five years from the Closing Date. ACGL
shall cause the Company to honor all such existing rights of indemnification.
(b) To the extent, if any, not provided by an existing right of
indemnification or other agreement or policy, after the Closing Date, the
Company shall, to the fullest extent permitted by applicable law, indemnify and
hold harmless, each person who was prior to the Closing Date or is at the
Closing Date a director of the Company (collectively, the "INDEMNIFIED PARTIES")
against all costs and expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any claim, action, suit, proceeding or investigation
(whether arising before or after the Closing Date), whether civil,
administrative or investigative, arising out of or pertaining to
-28-
any action or omission in their capacity as a director of the Company, in each
case occurring before the Closing Date (including the transactions contemplated
by this Agreement). In the event of any such costs, expenses, judgments, fines,
losses, claims, damages, liabilities or settlement amounts (whether or not
arising before the Closing Date), (x) the Company shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel shall
be reasonably satisfactory to ACGL and the Company, promptly after statements
therefor are received, and otherwise advance to the Indemnified Parties upon
request reimbursement of documented expenses reasonably incurred, in either
case, to the extent not prohibited by the applicable law and (y) ACGL and the
Company shall cooperate in the defense of any such matter. In the event any
Indemnified Party is required to bring any action to enforce rights or to
collect moneys due under this Agreement and is successful in such action, the
Company shall reimburse such Indemnified Party for all of its expenses in
bringing and pursuing such action.
(c) For a period of five (5) years after the Closing Date, ACGL
shall cause the Company to, and the Company shall, maintain in effect the
directors' liability insurance policies maintained by the Company; PROVIDED that
ACGL and/or the Company may substitute therefor policies of at least the same
coverage containing terms and conditions which are substantially equivalent with
respect to matters occurring prior to the Closing Date. If the existing
directors' liability insurance expires or is canceled during such period, ACGL
and the Company shall use their commercially reasonable efforts to obtain
substantially similar liability insurance with respect to matters occurring at
or prior to the Closing Date to the extent such liability insurance can be
maintained annually at a cost to the Company not greater than two times the
annual aggregate premiums currently paid by the Company for such insurance;
PROVIDED that if the annual premiums of such insurance coverage exceed such
amount, ACGL and the Company shall maintain or obtain a policy with the best
coverage available, in the reasonable judgment of the Board of Directors of
ACGL, for a cost not exceeding such amount.
(d) This Section 8.7 is intended to benefit (and shall be
enforceable by) the Indemnified Parties and their respective heirs, executors
and personal representatives.
8.8 NOTIFICATION OF CERTAIN MATTERS. The Company and the Selling
Shareholders shall promptly disclose to ACGL in writing any material variances
from their representations and warranties contained in this Agreement, including
the Schedules hereto, and any failure to comply with or satisfy any covenant or
agreement to be complied with or satisfied by them hereunder. From the date
hereof until the Closing Date, ACGL shall promptly disclose to the Company and
the Selling Shareholders in writing any material variances from its
representations and warranties contained in this Agreement and any failure to
comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder.
8.9 ACCESS TO COMPANY. The Selling Shareholders shall cause the
Company and the Subsidiaries to afford to the officers and authorized
representatives of ACGL
-29-
and to its counsel and accountants such reasonable access during normal business
hours, and upon reasonable advance notice, to its properties, offices,
equipment, files, agreements, books and records and auditors and their work
papers as may be necessary in order that ACGL may have full opportunity to make
such reasonable investigations, at its expense, as it shall desire to make of
the affairs of the Company and the Subsidiaries in connection with the
Transactions contemplated by this Agreement; PROVIDED that such access does not
unreasonably interfere with the normal operations of the Company and the
Subsidiaries. All information furnished to ACGL and its representatives under
this Section 8.9 prior to Closing Date shall be kept confidential by such
persons unless otherwise publicly available or required to be disclosed by
applicable law or judicial or administrative process. If any such information is
required to be disclosed, ACGL will notify the Company and the Selling
Shareholders thereof. From and after the Closing Date, ACGL shall, and shall
cause the Company to, provide the Selling Shareholders and its agents with
reasonable access (for the purpose of examining and copying), during normal
business hours, and upon reasonable advance notice, to the books and records of
the Company and its Subsidiaries with respect to periods prior to the Closing
Date in connection with any matter relating to Taxes, governmental inquiries or
litigation, whether or not relating to or arising out of this Agreement or the
transactions contemplated hereby; PROVIDED that such access does not
unreasonably interfere with the normal operations of ACGL, the Company or the
Subsidiaries.
8.10 NO-SHOP. Without the prior written consent of ACGL, neither
the Company nor the Company's officers, directors, employees, advisors, agents,
representatives, affiliates, security holders, or anyone acting on behalf of the
Company or such persons (collectively, the "REPRESENTATIVES"), shall, directly
or indirectly, encourage, solicit, initiate or engage in discussions or
negotiations with, or provide any information to, any person (other than ACGL
and its representatives) concerning any merger, consolidation, liquidation,
dissolution, sale of assets, purchase or sale of shares of Capital Stock,
issuance of debt securities or similar transaction involving the Company. The
Company and the Representatives shall immediately terminate all discussions and
negotiations with any person (other than ACGL or its representatives) concerning
any such transaction and shall promptly communicate to ACGL any inquiries or
communications concerning any such transaction which the Company or the
Representatives may receive or of which the Company or the Representatives may
become aware. The Company shall notify all of their Representatives of the
requirements of this paragraph and ensure compliance therewith by the
Representatives. The term "person" as used herein shall be interpreted broadly
and shall include, without limitation, any individual, corporation, partnership,
limited liability company, trust, estate, business trust, incorporated or
unincorporated association, joint venture, joint stock company, government (or
an agency or political subdivision thereof) or other entity of any kind.
-30-
8.11 NON-COMPETITION AND NON-SOLICITATION. Each Selling Shareholder
and Trident agrees as follows:
(a) Such Person shall not, until the third anniversary of the
Closing Date, directly or indirectly through controlled affiliates
(including, without limitation, any funds managed by such Person),
provide, or own an equity interest (except as a less than 5.0% equity
holder) in any Person that provides, collateral protection insurance
and/or GAP insurance relating to automobile physical damage business as
offered by the Company or any of its Subsidiaries as of the date hereof or
property and casualty insurance programs characterized by uniformity of
the type of insureds or class or line of business which are managed by
managing general agencies or managing general underwriters (where 15% or
less of the risk is retained by the insurer on such programs) or captive
insurance services of the types offered by the Company or any of its
Subsidiaries as of the date hereof in the United States or for United
States companies or employers if, in either case more than 35% of such
Person's revenues or net income (in the most recent twelve month period
before such acquisition) is derived from the provision of such collateral
protection, GAP insurance, program business and/or captive insurance
services; it being understood that this provision shall not preclude (x)
the provision of, or owning interests in, managing general agencies,
brokers and other insurance distribution companies or (y) investments
listed in SECTION 8.11 of the Disclosure Letter.
(b) Until the third anniversary of the Closing Date, such Person
shall not directly or indirectly through affiliates or otherwise:
(i) encourage or solicit any officer or employee of the
Company or any of its Subsidiaries to leave the employ of any such
entity (it being understood that this provision shall not prohibit
general solicitations of employment in periodicals of general
circulation);
(ii) interfere with or otherwise disrupt (A) the relationships
between the Company or any of its Subsidiaries, on the one hand, and
any client or customer of the Company or any of its Subsidiaries, on
the other hand, including any insured party, or (B) the supply to
the Company or any of its Subsidiaries of any services by any
supplier or agent or broker who during the period of twenty-four
(24) months immediately preceding the Closing Date shall have
supplied services to the Company or any of its Subsidiaries, nor
will such Selling Shareholder interfere with the terms on which such
supply or agency or brokering services during such period as
aforesaid have been made or provided or cause any such supplier,
agent or broker to discontinue its relationship with the Company or
any of its Subsidiaries; provided that this provision shall not
prohibit such Person from soliciting clients, customers, suppliers,
agents or brokers in the normal course of its business so long as
such Person does not,
-31-
directly or through affiliates, target clients of the Company or any
of its Subsidiaries; and
(iii) entice or solicit away from the Company or any of its
Subsidiaries the business of any person, firm or company who during
the period of twenty-four (24) months preceding the date here of was
a client of the Company or any of its Subsidiaries; provided that
this provision shall not prohibit such Person from soliciting
clients in the normal course of its business so long as such Person
does not, directly or through affiliates, target clients of the
Company or any of its Subsidiaries.
(c) As used in this Section 8.11, "CLIENT" shall include any third
party with whom the Company or any of its Subsidiaries was during the said
period in negotiation in respect of the provision of services by the
Company or any of its Subsidiaries or to whom the Company or any of its
Subsidiaries had (during the said period) made or been requested to make
an offer to provide such services.
(d) While the restrictions set forth in this Section 8.11 are
considered by all parties to be reasonable in all the circumstances it is
recognized that restrictions of the nature in question may fail for
reasons unforeseen and accordingly it is hereby declared and agreed that
if any of such restrictions shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection of the
interests of the Company and its Subsidiaries but would be valid if part
of the wording thereof were deleted and/or the periods (if any) thereof
reduced and/or the area dealt with thereby reduced in scope then said
restrictions shall apply with such modifications as may be necessary to
make them valid and effective.
(e) Nothing contained in this Section 8.11 shall limit in any manner
any additional obligations to which such Person may be bound pursuant to
any other agreement or any applicable law, rule or regulation.
8.12 PROPRIETARY RIGHTS; CONFIDENTIALITY. Each Selling Shareholder
and Trident recognizes and acknowledges that, by reason of or in connection with
such Person's investment in the Company, such Person may have acquired
information of a proprietary, confidential, or secret nature regarding the
Company and its businesses and operations, and those of its Subsidiaries,
including but not limited to, information concerning trade secrets, know-how,
software, data processing systems, inventions, designs, processes, formulae,
notations, improvements, financial information, business plans, prospects,
referral sources, lists of suppliers and customers and other information with
respect to the affairs, business, clients, customers, agents or other business
relationships of the Company and its Subsidiaries (the "CONFIDENTIAL
Information") (it being understood that information in the public domain is not
confidential). Such Person shall hold in a fiduciary capacity for the benefit of
the Company all Confidential Information relating to the Company or any of its
Subsidiaries and their respec-
-32-
tive businesses, which shall have been obtained by such Person by reason of or
in connection with its investment in the Company. Such Person agrees not to
disclose the Confidential Information, or any part thereof, to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, the provisions of this Section 8.12 shall not
apply to Confidential Information which (i) becomes or is generally available to
the public (other than by acts of such Person or such Person's representatives);
(ii) becomes known to such Person on a non-confidential basis from a source
other than the Company, PROVIDED that such source is not bound by a
confidentiality agreement with or other obligation of secrecy to the Company or
any of its Subsidiaries; (iii) is proved to have been independently developed;
or (iv) such Person is required to disclose in a judicial, administrative or
governmental proceeding (any such proceeding, a "LEGAL PROCEEDING"). In the
event such Person is required to disclose Confidential Information in a Legal
Proceeding, such Person shall provide the Company with prompt notice of such
request so that the Company may timely seek an appropriate protective order or
waive compliance with this Section 8.12.
8.13 REMEDIES. Each Selling Shareholder and Trident acknowledges
that the Company will suffer irreparable injury, not readily susceptible of
valuation in monetary damages, if such Person breaches such Person's obligations
under Section 8.11 or 8.12. Accordingly, each Selling Shareholder and Trident
agrees that the Company and/or AGCL will be entitled, in addition to any other
available remedies, to obtain injunctive relief against any breach or
prospective breach by such Person of such Person's obligations under Section
8.11 or 8.12 in any Federal or state court sitting in the State of New York, or,
at the election of the Company and/or AGCL, as the case may be, in any other
jurisdiction in which such Person maintains such Person's principal place of
business. Each Selling Shareholder and Trident hereby submits to the exclusive
jurisdiction of all those courts, regardless of where such Person may be
resident, for the purposes of any actions or proceedings instituted by the
Company and/or ACGL to obtain that injunctive relief, and such Person agrees
that process in any or all of those actions or proceedings may be served by
registered mail, addressed to the last address of such Person known to the
Company, or in any other manner authorized by law.
8.14 LITIGATION REIMBURSEMENT. The Institutional Selling
Shareholders, in proportion to their relative ownership interest in the Company
as of the date hereof, shall reimburse (on a current basis) the Company for 50%
of all claims and out-of-pocket legal fees and expenses actually paid by the
Company or any of its Subsidiaries (i.e., net of insurance, reinsurance and
indemnity payments and tax benefits actually received by the Company or any of
its Subsidiaries in respect of such matters) in respect of the matters referred
to in Section 6.11(1) through (4) of the Disclosure Letter, to the extent in
excess of reserves reflected on the December 31, 2000 Balance Sheet in respect
of such matters; PROVIDED that (x) this obligation shall terminate at the later
of (i) the second anniversary of the Closing Date and (ii) the date on which all
of Trident's portfolio companies have been liquidated or otherwise disposed of
and (y) the Institutional Selling Shareholders shall not be liable for more than
$1.0 million in the aggregate under this Section 8.14. ACGL acknowledges that
TRYCO will be able to satisfy its obligations under this Section 8.14 only out
of proceeds available from Tri-
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dent. To the extent any payment from TRYCO to the Company pursuant to this
Section 8.14 is not made when due, simple interest on such owed amount shall
accrue at a rate of 8% per annum until such payment is made.
9. CONDITIONS PRECEDENT TO ACGL'S OBLIGATIONS. All obligations of ACGL
under this Agreement are subject to the fulfillment, prior to or at the Closing
Date, of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and the Selling Shareholders contained in this
Agreement shall be true and correct in all respects if specifically qualified by
materiality and if not so qualified shall be true and correct in all material
respects at and as of the Closing Date as though such representations and
warranties were made at and as of such time (except to the extent that they are
stated therein to be true as of some other date). Each of the Company and the
Selling Shareholders shall have delivered to ACGL a certificate (with respect to
its or his own representations and warranties) dated the Closing Date to such
effect.
9.2 COMPLIANCE WITH AGREEMENTS. The Company, the Selling
Shareholders and Trident shall have performed or complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by it or them, as applicable, prior to or at the
Closing Date. The Selling Shareholders, Trident and the Company shall have
delivered to ACGL an Officers' Certificate (as to its or his own compliance)
dated the Closing Date to such effect.
9.3 RESIGNATIONS. To the extent requested by ACGL, (i) each
director of the Company or any of its Subsidiaries shall have (i) executed and
delivered to ACGL resignation letters in form and substance satisfactory to ACGL
and/or (ii) the Selling Shareholders shall have voted, together and consistent
with ACGL, for the election of replacement director or directors on the board of
directors of the Company and/or its Subsidiaries.
9.4 CERTIFICATES. The Company shall have furnished to ACGL (a) at
least ten (10) days prior to the Closing Date, copies, certified by the
Registrar of Companies of the country of incorporation or Secretary of State of
the state of incorporation, as applicable, as of a date not more than thirty
(30) days prior to the Closing Date, of each of the memorandum of association,
articles of incorporation or comparable organizational documents of the Company
and its Subsidiaries, and all amendments thereto, (b) copies, certified by the
Registrar of Companies of the country of incorporation or Secretary of the
Company, as applicable, as of the Closing Date, of the articles of association,
bye-laws, by-laws or comparable organizational documents of the Company and of
its Subsidiaries, (c) certificates of good standing issued with respect to each
of the Company and the Subsidiary, as the case may be, by the appropriate
governmental officials of the states where qualified to do business (except
where the failure to have such certificates of good standing could not, singly
or in the aggregate, reasonably be expected to have a Material Adverse Effect),
as of a date not more than ten (10)
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days prior to the Closing Date, accompanied by bring-down certificates dated as
of the Closing Date, (d) a certificate of the Secretary of the Company and its
Subsidiaries relating to the incumbency and corporate proceedings in connection
with the consummation of the transactions contemplated by this Agreement, and
the absence of changes in the Company's and its Subsidiaries' memorandum of
association or articles of incorporation and articles of association, bye-laws,
by-laws or comparable documents, and (e) the corporate minute books of the
Company and each Subsidiary.
9.5 LITIGATION. There shall be no pending action or proceeding
commenced against the Company, its Subsidiaries or any Selling Shareholder that
may have the effect of preventing or making illegal the transactions
contemplated by this Agreement and no such action or proceeding shall have been
Threatened.
9.6 MATERIAL ADVERSE EFFECT. Since the date hereof, no event has
occurred which has had a Material Adverse Effect.
9.7 THIRD PARTY CONSENTS. ACGL shall have received satisfactory
evidence of the receipt by the Company of the consents set forth on SECTION 9.7
of the Disclosure Letter hereto which constitute the only consents, approvals,
authorizations and orders of Governmental Entities required under the Insurance
Acts for the consummation of the transactions contemplated by this Agreement or
the Transaction Documents.
9.8 HART-SCOTT-RODINO ACT FILINGS. The applicable waiting period
(including any extension thereof by reason of a request for additional
information), if any, under the HSR Act, shall have expired or been terminated.
9.9 DELIVERIES. Each Selling Shareholder shall have delivered to
ACGL the certificates for the Ordinary Shares (or appropriate affidavits of loss
with indemnity acceptable to ACGL) owned by such Selling Shareholder. The
certificates for the Ordinary Shares shall be duly endorsed or accompanied by
separate executed stock powers attached.
9.10 OPTIONS; WARRANTS; ETC. ACGL shall have received evidence
satisfactory to it that, except as to options to purchase Ordinary Shares which
will be converted into options to purchase ACGL Shares at ACGL's sole
discretion: (a) all direct or indirect rights to acquire Capital Stock of the
Company (including without limitation the Warrants listed on EXHIBIT A/B hereto)
shall have been cancelled and have no further force and effect and (b) the
Company's stock option plan and all shareholders or other agreement relating
directly or indirectly to the Capital Stock of the Company, including the
Shareholders Agreement, shall have been terminated in their entirety and have no
further force and effect.
9.11 AUDIT. Deloitte & Touche shall have completed its audit of
the Company's GAAP financial statements as of December 31, 2000.
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9.12 BEST'S RATING. FAIC shall have a rating from A.M. Best Company
of at least "A-," and no downgrade or announcement or other action by A.M. Best
indicating a potential downgrade in such rating shall have occurred or other
indication from A.M. Best shall have been made.
10. CONDITIONS PRECEDENT TO THE SELLING SHAREHOLDERS' OBLIGATIONS. All
obligations of the Selling Shareholders under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES. ACGL's representations and
warranties contained in this Agreement shall be true and correct in all material
respects at and as of the time of Closing as though such representations and
warranties were made at and as of such time. ACGL shall have delivered to the
Selling Shareholders a certificate dated the Closing Date and signed by its
President or a Vice President to such effect.
10.2 COMPLIANCE WITH AGREEMENT. ACGL shall have performed and
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing. ACGL shall have delivered to the Selling Shareholders a certificate
dated the Closing Date and signed by its President or a Vice President to such
effect.
10.3 THIRD PARTY CONSENTS. The Selling Shareholders shall have
received satisfactory evidence of the receipt by the Company of the consents set
forth on SECTION 10.3 of the Disclosure Letter hereto which constitute the only
consents, approvals, authorizations and orders of Governmental Entities required
under the Insurance Acts for the consummation of the transactions contemplated
by this Agreement or the Transaction Documents.
10.4 HART-SCOTT-RODINO ACT FILINGS. The applicable waiting period
(including any extension thereof by reason of a request for additional
information), if any, under the HSR Act shall have expired or been terminated.
11. TERMINATION.
11.1 TERMINATION EVENTS. This Agreement may, by written notice
given prior to or at the Closing, be terminated:
(i) by ACGL (if ACGL itself is not then in material Breach of any of
its representations, warranties, covenants or obligations contained in
this Agreement), if a material Breach of any of the representations,
warranties, covenants or obligations of any Selling Shareholder or the
Company set forth in this Agreement has been committed by any Selling
Shareholder or the Company, which Breach would give rise to a failure of a
condition set forth in Section 9.1 or 9.2 hereof, and such Breach has not
been (1) waived by ACGL, or (2) cured by the Company or such Selling
Shareholder,
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as the case may be, within ten (10) days after receipt of written notice
thereof to the Selling Shareholders from ACGL;
(ii) by the Institutional Selling Shareholders (if such
Institutional Selling Shareholders are not then in material Breach of any
of their representations, warranties, covenants or obligations contained
in this Agreement), if a material Breach of any of the representations,
warranties, covenants or obligations of ACGL set forth in this Agreement
has been committed by ACGL, which Breach would give rise to a failure of a
condition set forth in Section 10.1 or 10.2 hereof, and such Breach has
not been (1) waived by the Institutional Selling Shareholders, or (2)
cured by ACGL within ten (10) days after receipt of written notice thereof
from the Institutional Selling Shareholders;
(iii) by mutual written consent of ACGL and the Institutional
Selling Shareholders;
(iv) by either ACGL or the Institutional Selling Shareholders if the
closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before September 30, 2001, or such later date
as the parties may mutually agree upon in writing (it being agreed that a
failure of a representation or warranty contained in Section 6 hereof to
be true where such failure was not caused by the Institutional Selling
Shareholders shall not be deemed a failure by the Institutional Selling
Shareholders to comply with their obligations hereunder for purposes of
the foregoing).
11.2 EFFECT OF TERMINATION. In the event that this Agreement is
terminated pursuant to this Section 11, all further obligations of the parties
under this Agreement or otherwise relating to this Agreement shall be terminated
without further liability of any party to the others; PROVIDED that nothing
herein shall relieve any party from liability for its Breach of any covenant,
obligation or agreement (excluding any representations or warranty) contained in
this Agreement.
11.3 SHAREHOLDERS AGREEMENT. In the event this Agreement is
terminated pursuant to this Section 11 by ACGL (other than for a material breach
by any Selling Shareholder or the Company of such Person's obligations
hereunder), this Agreement shall be deemed to have constituted an "offer notice"
for purposes of Section 3.3(a) of the Shareholders Agreement, and the Selling
Shareholders shall have the right, for a period of up to 120 days (or any longer
time period necessary to comply with governmental regulations) after the date of
such notice, to sell all but not less than all of their Ordinary Shares on terms
not more favorable than those (including, without limitation, as to form of
consideration), and for a price equal to or higher than that, set forth in this
Agreement without providing any additional notice pursuant to Section 3.3 of the
Shareholders Agreement. In the event of such termination described in the first
sentence of this Section 11.3, the parties acknowledge that nothing
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herein shall amend the terms of the Shareholders Agreement and that all rights
and obligations thereunder shall remain in full force and effect, including,
without limitation, all drag along rights and tag along rights under Section 6.1
and Section 6.4, respectively, of such Shareholders Agreement.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES. (a) The
representations and warranties made by any party hereto in this Agreement or
pursuant hereto shall not survive the Closing except (i) in the case of the
Institutional Selling Shareholders, representations and warranties in Section
6.2, 6.3, 6.21(b) and 6.23 and (ii) in the case of the Management Selling
Shareholders, the representations and warranties in Section 6.22 and 6.23, each
of which shall survive indefinitely.
(b) ACGL acknowledges that after the Closing Date it shall have no
rights or remedies against any Institutional Selling Shareholder or any officer,
agent or advisor of any Institutional Selling Shareholder (including any such
person in his capacity as a director of the Company or any of its Subsidiaries)
under or relating to this Agreement or the Company or any of its Subsidiaries
(including rights or remedies under applicable law), other than as set forth in
Sections 8.11, 8.12, 8.13, 8.14, 14, 15.3 and 15.16 and with respect to breaches
of such Institutional Selling Shareholder's representations or warranties that
survive the Closing as provided in Section 12(a). Each Institutional Selling
Shareholder acknowledges that after the Closing Date it shall have no rights or
remedies against ACGL or any of its Subsidiaries or any officer, agent or
advisor of ACGL or any of its Subsidiaries (including any such person in his
capacity as a director of the Company or any of its Subsidiaries) under or
relating to this Agreement or the Company or any of its Subsidiaries (including
rights or remedies under applicable law), other than as set forth in Sections
8.7, 8.9, 14(a) and 15.3.
(c) ACGL acknowledges that after the Closing Date it shall have no
rights or remedies against any Management Selling Shareholder under or relating
to this Agreement (including rights or remedies under applicable law), other
than as set forth in Sections 8.11, 8.12, 8.13, 14 and 15.3 and with respect to
breaches of such Management Selling Shareholder's representations or warranties
that survive the Closing as provided in Section 12(a). Each Management Selling
Shareholder acknowledges that after the Closing Date it shall have no rights or
remedies against ACGL or any of its Subsidiaries or any officer, agent or
advisor of ACGL or any of its Subsidiaries (including any such person in his
capacity as a director of the Company or any of its Subsidiaries) under or
relating to this Agreement (including rights or remedies under applicable law),
other than as set forth in Sections 8.7, 8.9, 14(a) and 15.3.
13. [Intentionally Omitted.]
14. TAX MATTERS. (a) After the Closing Date, the Company, ACGL and the
Selling Shareholders shall make available to the others, as reasonably
requested, all information, records or documents relating to Tax liabilities or
potential Tax liabilities of the Company or its Subsidiaries for all periods
prior to or including the Closing Date. The requesting party shall
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reimburse the requested parties for their reasonable costs incurred in complying
with the foregoing provision.
(b) The Selling Shareholders shall be responsible for and shall
pay (a) all sales, use, real estate transfer and other similar taxes (and any
interest, penalties and other additions to such taxes and/or any related costs
or expenses) and (b) all governmental charges, if any, upon the transactions
contemplated hereby.
15. MISCELLANEOUS.
15.1 EXPENSES. The aggregate amount of all Expenses shall be paid
at the Closing by the parties hereto on a pro rata basis, based on the amount of
Ordinary Shares owned by each of them on the date hereof as a percentage of all
Ordinary Shares outstanding on the date hereof. The parties agree that if
payment is due to ACGL by operation of the foregoing, ACGL may make payment of
the Purchase Price on a net basis to adjust for such payment.
"EXPENSES" means all reasonable and invoiced or otherwise documented
fees and expenses incurred by the parties hereto at or prior to the Closing in
connection with the negotiation of this Agreement, the performance of their
respective obligations under this Agreement and the consummation of the
transactions contemplated by this Agreement, INCLUDING, without limitation, (i)
attorneys' fees and expenses, (ii) accountants' fees and expenses except as
excluded by clause (y) below and (iii) all retention and other
compensation-related costs incurred by the Company in connection with the
transactions contemplated by this Agreement (including, without limitation, any
stay bonuses payable to May and bonuses payable to management) as set forth in
Section 6.18 of the Disclosure Letter, but EXCLUDING (x) the cost of obtaining
the insurance required under Section 8.7(c) and (y) accountants' fees and
expenses in respect of the audit for the year ended December 31, 2000 in excess
of the amount accrued on the December 31, 2000 Balance Sheet for such fees and
expenses.
15.2 CONFIDENTIALITY. Except as required by law or pursuant to the
rules of any stock exchange (including the Nasdaq National Market System),
neither the Company, nor any Selling Shareholder nor any Representative of any
of them shall disclose to any person or entity (other than appropriate
regulatory agencies) the nature of the transactions contemplated hereby or any
other facts regarding such transactions, including the status thereof. The
Company and each Selling Shareholder shall notify all of their Representatives
of the requirements of this Section 15.2 and ensure the compliance therewith by
the Representatives.
15.3 FURTHER ACTIONS AND ASSURANCES. ACGL, the Selling Shareholders
and the Company will execute and deliver any and all documents, and will cause
any and all other action to be taken, either before or after Closing, which may
be necessary or proper to effect or evidence the provisions of this Agreement
and the transactions contemplated hereby. The Company and the Selling
Shareholders will fully cooperate with ACGL in connection with the filing of
ACGL's Form A with the Insurance Department.
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15.4 COUNTERPARTS. This Agreement may be executed in several
counterparts each of which is an original and all of which taken together shall
constitute a single instrument.
15.5 CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This
Agreement sets forth the entire understanding of the parties. Any previous
agreements or understandings between the parties regarding the subject matter
hereof, and any amendments thereto, are merged into and superseded by this
Agreement. Neither this Agreement nor any rights, interests, or obligations
hereunder may be assigned by any party without the prior written consent of all
other parties hereto; PROVIDED, HOWEVER, that ACGL may assign its rights,
interests and obligations hereunder to any wholly-owned subsidiary of ACGL as
long as ACGL remains fully liable for its obligations hereunder.
15.6 NEW YORK LAW TO GOVERN; VENUE. This Agreement and all matters
relating to the interpretation, construction, validity and enforcement of this
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New York without giving effect to any choice or conflict of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of laws of any jurisdiction other
than the State of New York. The parties hereto agree to submit to the personal
and exclusive jurisdiction of the state and federal courts serving New York, New
York with respect to the enforcement or interpretation of this Agreement or the
parties' obligations hereunder. Each party hereto irrevocably consents to the
service of any and all process in any action or proceeding by the mailing of
copies of such process by registered or certified mail to such party hereto to
serve legal process in any other manner permitted by law. Each party hereto
irrevocably waives, to the full extent permitted by law, any objection which it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
15.7 SECTION HEADINGS AND GENDER. The section headings herein have
been inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine pronoun
herein when referring to any party has been for convenience only and shall be
deemed to refer to the particular party intended regardless of the actual gender
of such party.
15.8 SCHEDULES AND EXHIBITS. All Schedules and Exhibits referred to
in this Agreement are intended to be and are hereby specifically made a part of
this Agreement.
15.9 NOTICES. All notices, requests and other communications which
are required or permitted hereunder shall be sufficient if given in writing and
delivered personally or by registered or certified mail, postage prepaid, or by
facsimile transmission (with a copy simultaneously sent by registered or
certified mail, postage prepaid), as follows (or to such other address as shall
be set forth in a notice given in the same manner):
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If to the Company prior to Closing:
Altus Holdings, Ltd.
Zephyr House
Mary Street
George Town, Grand Cayman
Cayman Islands
Fax: (345) 949-1048
Attention: Board of Directors
If to Trident or TRYCO:
Victoria Hall
11 Victoria Street
Hamilton, Bermuda
Tel: (441) 292-8370
Fax: (441) 292-3793
Attention: Martine Purssell
Copies to:
MMC Capital, Inc.
20 Horseneck Lane
Greenwich, Connecticut 06830
Tel: (203) 862-2924
Fax: (203) 862-2925
Attention: David Wermuth
If to Marsh:
Marsh & McLennan Risk Capital Holdings Ltd.
1166 Avenue of the Americas
New York, New York 10036
Tel: (212) 345-5512
Fax: (212) 345-4263
Attention: Mark Dallara
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Copies to:
MMC Capital, Inc.
20 Horseneck Lane
Greenwich, Connecticut 06830
Tel: (203) 862-2924
Fax: (203) 862-2925
Attention: David Wermuth
If to May or Ballew, to him at:
c/o Altus Holdings, Ltd.
Zephyr House
Mary Street
George Town, Grand Cayman
Cayman Islands
Fax: (345) 949-1048
If to ACGL or the Company after Closing:
Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, Connecticut 06830
Tel: (203) 862-4300
Fax: (203) 861-7240
Attention: Peter A. Appel
Copies to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Facsimile: (212) 269-5420
Attention: Robert Usadi, Esq.
15.10 ANTITRUST MATTERS. ACGL, the Company and the Selling
Shareholders will cause to be filed, and will cooperate with each other in
connection with, all filings required to be made by the parties under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"), or any
successor law, regulations and rules promulgated pursuant to the HSR Act or any
successor law, and shall observe the applicable waiting period (including any
extensions thereof by reason of a request for additional information). ACGL, the
Company and the Institutional Selling Shareholders will coordinate all filings
made pursuant to the HSR Act so as to present the filings to the Federal Trade
Commission and the Department of
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Justice at the time selected by the mutual agreement of the Institutional
Selling Shareholders and ACGL and to avoid substantial errors or inconsistencies
between the two in the description of the transaction. The Company shall pay all
fees payable to the Federal Trade Commission in connection with the filings
required to be made pursuant to the HSR Act.
15.11 SPECIFIC PERFORMANCE. Each of the parties acknowledges and
agrees that the other parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each party agrees that
the other parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state hereof having jurisdiction over the
parties and the matter (subject to Section 15.6) without the requirement of
posting a bond or other security therefor, in addition to any other remedy to
which they may be entitled, at law or in equity.
15.12 MODIFICATION AND WAIVER. Any of the terms or conditions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. This Agreement may be modified or amended at
any time by a written instrument executed ACGL, the Company and the
Institutional Selling Shareholders; PROVIDED that no modification or amendment
shall disproportionately and adversely affect the Management Selling
Shareholders without their written consent. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof nor shall such waiver constitute a continuing waiver.
15.13 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
15.14 THIRD PARTY BENEFICIARIES. Except as otherwise expressly set
forth herein, no individual or entity shall be a third party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
15.15 CONSTRUCTION AND INTERPRETATION. This Agreement has been
negotiated by the undersigned and their respective legal counsel, and legal or
equitable principles that might require the construction of this Agreement, or
any provision of this Agreement, against the party drafting this Agreement will
not apply in any construction or interpretation of this Agreement.
15.16 TRIDENT GUARANTEE. Trident hereby guarantees, as principal,
all of the obligations of Tryco in this Agreement.
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IN WITNESS WHEREOF, this Agreement has been executed as of the day
and year first above written.
ALTUS HOLDINGS, LTD.
By: /s/ John Clements
---------------------------------------
Name: John Clements
Title: Director
THE TRIDENT PARTNERSHIP, L.P.
By: Trident Corp., as general partner
By: /s/ Martine Purcell
---------------------------------------
Name: Martine Purcell
Title: Assistant Secretary
TRYCO II, LTD.
By: /s/ Martine Purcell
---------------------------------------
Name: Martine Purcell
Title: Assistant Secretary
MARSH & MCLENNAN RISK CAPITAL HOLDINGS, LTD.
By: /s/ Mark J. Dallara
---------------------------------------
Name: Mark J. Dallara
Title: Assistant Secretary
GLENN L. BALLEW
/s/ Glenn L. Ballew
---------------------------------------
DAVID G. MAY
/s/ David G. May
---------------------------------------
ARCH CAPITAL GROUP LTD.
By: /s/ Peter A. Appel
---------------------------------------
Name: Peter A. Appel
Title: President & Chief Executive
Officer