Exhibit 10.1
EXECUTION COPY
AMENDMENT NO. 1
Reference is made to the Subscription Agreement dated as of October 24,
2001 (the "Agreement") by and between Arch Capital Group Ltd., a company
organized under the laws of Bermuda (the "Company"), and Warburg Pincus Private
Equity VIII, L.P., Warburg Pincus International Partners, L.P., Warburg Pincus
Netherlands International Partners I, C.V., Warburg Pincus Netherlands
International Partners II, C.V. (the "Original Warburg Signatories"), and HFCP
IV (Bermuda), L.P. (the "Original H&F Signatory"). Capitalized terms used
without definition herein have the meanings given to them in the Agreement.
This amendment ("Amendment") to the Agreement is made as of November 20,
2001, among the Original Warburg Signatories, Warburg, the Original H&F
Signatory, H&F, the Management Purchasers, Trident, GE and Farallon.
WHEREAS, the Original Warburg Signatories have assigned their rights and
obligations under the Subscription Agreement with respect to the purchase of a
portion of the Securities thereunder to the Warburg entities listed in Schedule
1 hereto (such Warburg assignees, together with Warburg Pincus Netherlands
International Partners I, C.V. and Warburg Pincus Netherlands International
Partners II, C.V., being referred to herein as "Warburg");
WHEREAS, the Original H&F Signatory has assigned its rights and obligations
under the Subscription Agreement with respect to the purchase of a portion of
the Securities thereunder to the H&F entities listed in Schedule 2 hereto (such
H&F assignees, together with the Original H&F Signatory, being referred to
herein as "H & F");
WHEREAS, the Company and the purchasers named therein (the "Management
Purchasers") have entered into a Management Subscription Agreement, dated as of
October 24, 2001 (the "Management Subscription Agreement"), pursuant to the
terms of which, among other things, the Company shall issue and sell to the
Management Purchasers, and the Management Purchasers shall acquire from the
Company, certain Securities;
WHEREAS, the Company, the Original Warburg Signatories, the Original H&F
Signatory and Trident have entered into a letter agreement, dated as of November
8, 2001 (the "Trident Assignment Agreement") pursuant to the terms of which,
among other things, the Original Warburg Signatories assigned to Trident their
right, and Trident assumed from the Original Warburg Signatories their
obligation, under the Subscription Agreement to purchase certain Securities;
WHEREAS, the Company, the Original Warburg Signatories and the Original H&F
Signatory have entered into letter agreements, dated as of November 20, 2001,
with Or-
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bital Holdings, Ltd. and Insurance Private Equity Investors, L.L.C.
(collectively, the "GE Assignment Agreement"), pursuant to the terms of which,
among other things, the Original Warburg Signatories assigned to GE their right,
and GE assumed from the Original Warburg Signatories their obligation, under the
Subscription Agreement to purchase certain Securities;
WHEREAS, the Company, the Original Warburg Signatories, the Original H&F
Signatory and Farallon have entered into a letter agreement, dated as of
November 20, 2001 (the "Farallon Assignment Agreement"), pursuant to the terms
of which, among other things, the Original H&F Signatory assigned to Farallon
its right, and Farallon assumed from the Original H&F Signatory its obligation,
under the Subscription Agreement to purchase certain Securities;
WHEREAS, the parties hereto desire to acknowledge and reflect certain
amendments to the Subscription Agreement and certain Exhibits thereto.
For good and valid consideration, the receipt of which is hereby
acknowledged, the Company and each of the Purchasers agree as follows:
A. AMENDMENTS TO SUBSCRIPTION AGREEMENT
1. The legend set forth in Section D.1.(d) of the Agreement is amended and
restated as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
OFFERED OR SOLD EXCEPT (A) IN COMPLIANCE WITH THE PROVISIONS OF A
CERTAIN SUBSCRIPTION AGREEMENT AND A CERTAIN SHAREHOLDERS AGREEMENT AND
(B) PURSUANT TO (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE
(B)(2) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF
WACHTELL, LIPTON, ROSEN & KATZ, OR SUCH OTHER COUNSEL AS IS REASONABLY
SATISFACTORY TO ARCH CAPITAL GROUP LTD., TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
2. The representations and warranties made by the Company in the Agreement
shall be deemed made also as of the Closing Date (except that representations
and warranties made as of another date shall be true and accurate as of such
other date).
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3. The definitions of "Estimated Per Share Price" and "Per Share Price" in
Schedule A are amended to substitute "as of the close of business on the third
business day preceding the Closing Date" for "as of the business day immediately
preceding the Closing Date". It is understood that for purposes of the Mark to
Market Procedures, and any adjustments based on those procedures, the close of
business on the third business day preceding the Closing Date should be used
(including, without limitation, for purposes of Section B.1(a) and B.1(c)(iii)
of the Agreement) rather than the day prior to the Closing Date, or the Closing
Date.
4. (a) The parties hereto acknowledge and agree that the Company has not
liquidated its investment portfolio prior to Closing in accordance with the
first sentence of Section D.4(e). From and after Closing, and prior to the time
of the audit adjustment contemplated by Section B.1 (the "Audit Adjustment"),
the Company will sell the portion of its investment portfolio not theretofore
sold which is listed in Schedule 3 hereto. With respect to such sales from and
after Closing and prior to the audit adjustment, in calculating the Per Share
Price, the actual prices realized upon the sale of such securities shall be used
in the Mark to Market Procedures, in lieu of the estimated fair value of such
securities as of the close of business on the third business day immediately
preceding the Closing Date.
(b) The parties hereto acknowledge that for purposes of calculating the
Estimated Per Share Price, the Mark to Market Procedures were performed using
closing sales prices instead of closing bid prices and that to adjust for such
variance a "Bid/Ask Spread Adjustment" was included in the Mark to Market
Procedures as set forth in Schedule 4(A) hereto. Such adjustment is hereby
deemed to modify the Mark to Market Procedures set forth in Schedule A to the
Agreement. For purposes of the Audit Adjustment, and subject to clause (a) of
this Section 4, the Mark to Market Procedures shall also use closing sales
prices (instead of closing bid prices) and such "Bid/Ask Spread Adjustment"
shall be applied, on the same percentage basis, by the Pricing Service in
performing the Audit Adjustment under Section B.1(a), it being understood that
the Purchasers have not accepted the closing sales prices underlying in Schedule
4(A) as binding, and the Pricing Service shall, among other things, verify such
prices in the Audit Adjustment.
(c) The parties acknowledge the Schedule 4(B) hereto sets forth the number
of Preference Shares and Class A Warrants to be issued to each Purchaser at
Closing based on the Estimated Per Share Purchase Price.
5. The Company acknowledges that it will arrange for the listing of the
Common Shares issuable upon conversion or exercise of the Preference Shares and
Warrants on the Nasdaq Stock Market, to the extent not so listed (it being
understood that, prior to the Requisite Shareholder Approval, the Company shall
not be obligated to list more Common Shares than it is then permitted to issue
under applicable Nasdaq rules).
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6. The parties hereto acknowledge that (a) in the event that Section E.3
becomes applicable, and the Purchasers are entitled to preference shares and
warrants of Newco bearing "identical rights and privileges", such securities
shall not include the voting limitations imposed under Sections (f)(3)(B) or (C)
of the Certificate for Preference Shares pending Requisite Shareholder Approval
or Requisite Regulatory Approval to the extent such approvals are not required
for the issuance or acquisition of Newco securities and (b) from and after the
Closing the reference to "original signatories" in Section E.6 shall mean
Warburg and H&F as defined herein.
7. Schedule A of the Agreement is amended to add the following:
"Farallon" shall mean Farallon Capital Partners, L.P., Farallon Capital
Institutional Partners II, L.P., Farallon Capital Institutional Partners III,
L.P., and RR Capital Partners, L.P. collectively, with each individually being a
"Farallon Purchaser."
"GE" shall mean Orbital Holdings, Ltd. and Insurance Private Equity
Investors, L.L.C., collectively, with each individually being a "GE Purchaser."
"Requisite Regulatory Approval" has the meaning given to such term in the
Certificate.
"Requisite Shareholder Approval" has the meaning given to such term in the
Certificate.
"Trident" shall mean Trident II, L.P., Marsh & McLennan Capital
Professionals Fund, L.P., and Marsh & McLennan Employee's Securities Company,
L.P., collectively, with each individually a "Trident Purchaser."
8. The parties agree that (a) effective as of the Closing, the only Class A
Warrants outstanding will be held by The Trident Partnership, L.P. and Taracay
Investors and the only Class B Warrants outstanding will be held by Robert
Clements (or members of his family or trusts established for his or his family's
benefit) and (b) there is no adjustment under section 3.1 of the Class A
Warrants of the Company or under section 4.1 of the Class B Warrants of the
Company in connection with the grants set forth on Schedule 5 hereto, or the
issuance of the Preference Shares, the Warrants, or the Common Shares issuable
upon conversion or exercise thereof, under the Subscription Agreement or the
Management Subscription Agreements.
9. The definition of Non-Core Assets is amended to add a clause (f): "(f)
all commitments to Innovative Coverage Concepts LLC."
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10. The Company shall, as promptly as practicable, adopt a policy and
establish procedures designed to ensure that the Company and its subsidiaries
shall not act in violation of the Foreign Corrupt Practices Act of 1977, as
amended (15 U.S.C. Section 78dd-1, et seq.), as if it were applicable to the
Company.
11. Upon execution hereof, each of Trident, GE and Farallon shall become
"Purchasers" under the Subscription Agreement, with such rights and obligations
as may be set forth therein, subject in each case to the terms of the GE
Assignment Agreement, the Trident Assignment Agreement or the Farallon
Assignment Agreement, as may be applicable.
B. AMENDMENTS TO EXHIBITS TO SUBSCRIPTION AGREEMENT
1. The form of Certificate attached as Exhibit I to the Subscription
Agreement will be replaced by the form attached hereto.
2. The form of Warrant attached as Exhibit II to the Subscription Agreement
will be replaced by the form attached hereto.
3. The form of Bye-law amendment attached as Exhibit III to the
Subscription Agreement will be replaced by the form attached hereto.
4. The form of Shareholders Agreement attached as Exhibit IV to the
Subscription Agreement will be replaced by the form attached hereto.
C. DISCLOSURE SCHEDULE
Item 5 of the Disclosure Schedule to the Agreement is replaced with
Schedule 5 hereto.
D. ACKNOWLEDGEMENTS BY ASSIGNEES
1. Trident acknowledges that from and after the Closing, references to
"Warburg" and "H&F" in the Trident Assignment Agreement shall mean Warburg and
H&F as defined herein, in lieu of the Original Warburg Signatories and the
Original H&F Signatory, respectively.
2. GE acknowledges that from and after the Closing, references to "Warburg"
and "H&F" in the GE Assignment Agreement shall mean Warburg and H&F as defined
herein, in lieu of the Original Warburg Signatories and the Original H&F
Signatory, respectively.
3. Farallon acknowledges that from and after the Closing, references to
"Warburg" and "H&F" in the Farallon Assignment Agreement shall mean Warburg and
H&F
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as defined herein, in lieu of the Original Warburg Signatories and the Original
H&F Signatory, respectively.
4. The Management Purchasers acknowledge that from and after the Closing,
references to "Warburg" and "H&F" in the Management Subscription Agreement shall
mean Warburg and H&F as defined herein, in lieu of the Original Warburg
Signatories and the Original H&F Signatories, respectively.
E. MISCELLANEOUS
1. The validity and effects of this Amendment shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
2. This Amendment may be executed in any number of counterparts, each of
which shall be considered an original and all of which together shall be deemed
to be one and the same instrument.
[Signature pages follow]
IN WITNESS WHEREOF, each Party has executed this Amendment as of the date
first above-written.
WARBURG PINCUS PRIVATE
EQUITY VIII, L.P.,
WARBURG PINCUS INTERNATIONAL
PARTNERS, L.P.,
WARBURG PINCUS NETHERLANDS
INTERNATIONAL PARTNERS I, C.V.,
WARBURG PINCUS NETHERLANDS
INTERNATIONAL PARTNERS II, C.V.,
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ Kewsong Lee
--------------------------------
Name: Kewsong Lee
Title: Partner
WARBURG PINCUS (BERMUDA) PRIVATE EQUITY VIII, L.P.
By: Warburg Pincus (Bermuda)
Private Equity Ltd.,
its General Partner
By: /s/ Kewsong Lee
--------------------------------
Name: Kewsong Lee
Title: Partner
WARBURG PINCUS (BERMUDA) INTERNATIONAL PARTNERS, L.P.
By: Warburg Pincus (Bermuda)
International Ltd.,
its General Partner
By: /s/ Kewsong Lee
------------------------------------
Name: Kewsong Lee
Title: Partner
HFCP IV (BERMUDA), L.P.,
By: H&F Investors IV (Bermuda), L.P.
By: H&F Corporate Investors IV (Bermuda) Ltd.,
its General Partner
By: /s/ David R. Tunnell
--------------------------------
Name: David R. Tunnell
Title: Authorized Signatory
H&F INTERNATIONAL PARTNERS
IV-A (BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda), Ltd.,
its General Partner,
By: /s/ David R. Tunnell
------------------------------------
Name: David R. Tunnell
Title: Authorized Signatory
h&f international partners
iv-B (Bermuda), l.p.
By: H&F Investors IV (Bermuda), L.P.
By: H&F Corporation Investors IV (Bermuda),
Ltd.,
its General Partner,
By: /s/ David R. Tunnell
--------------------------------
Name: David R. Tunnell
Title: Authorized Signatory
H&F EXECUTIVE FUND IV
(BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda), Ltd.,
its General Partner
By: /s/ David R. Tunnell
-------------------------------------
Name: David R. Tunnell
Title: Authorized Signatory
FARALLON CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Monica R. Landry
------------------------------------
Name: Monica R. Landry
Title: Managing Member
Notice Information for Farallon Capital
Partners, L.P.:
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Attention: Mark Wehrly and Sarah Aitcheson
Telephone: (415) 421-2132
Facsimile: (415) 421-2133
FARALLON CAPITAL INSTITUTIONAL
PARTNERS II, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Monica R. Landry
------------------------------------
Name: Monica R. Landry
Title: Managing Member
Notice Information for Farallon Capital
Institutional Partners II, L.P.:
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Attention: Mark Wehrly and Sarah Aitcheson
Telephone: (415) 421-2132
Facsimile: (415) 421-2133
FARALLON CAPITAL INSTITUTIONAL
PARTNERS III, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Monica R. Landry
------------------------------------
Name: Monica R. Landry
Title: Managing Member
Notice Information for Farallon Capital
Institutional Partners III, L.P.:
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Attention: Mark Wehrly and Sarah Aitcheson
Telephone: (415) 421-2132
Facsimile: (415) 421-2133
RR CAPITAL PARTNERS, L.P.
By: Farallon Partners, L.L.C.,
its General Partner
By: /s/ Monica R. Landry
------------------------------------
Name: Monica R. Landry
Title: Managing Member
Notice Information for RR Capital
Partners, L.P.:
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza
Suite 1325
San Francisco, CA 94111
Attention: Mark Wehrly and Sarah Aitcheson
Telephone: (415) 421-2132
Facsimile: (415) 421-2133
TRIDENT II, L.P.
By: MMC Capital, Inc.,
as Manager
By: /s/ David J. Wermuth
------------------------------------
Name: David J. Wermuth
Title: Principal
Notice Information for Trident II, L.P.:
c/o Maples and Calder Ugland House
South Church Street
George Town Grand Cayman
Cayman Islands, British West Indies
Attention: Charles Jennings
Facsimile: (345) 949-8080
and
c/o MMC Capital, Inc.
20 Horseneck Lane
Greenwich, CT 06830
Attention: David Wermuth
Facsimile: (203) 862-2925
MARSH & MCLENNAN CAPITAL
PROFESSIONALS FUND, L.P.
By: MMC Capital, Inc.,
as Manager
By: /s/ David J. Wermuth
------------------------------------
Name: David J. Wermuth
Title: Principal
Notice Information for Marsh & McLennan Capital
Professionals Fund, L.P.:
c/o Maples and Calder Ugland House
South Church Street
George Town Grand Cayman
Cayman Islands, British West Indies
Attention: Charles Jennings
Facsimile: (345) 949-8080
and
c/o MMC Capital, Inc.
20 Horseneck Lane
Greenwich, CT 06830
Attention: David Wermuth
Facsimile: (203) 862-2925
MARSH & MCLENNAN EMPLOYEES'
SECURITIES COMPANY, L.P.
By: MMC Capital, Inc.,
as Manager
By: /s/ David J. Wermuth
------------------------------------
Name: David J. Wermuth
Title: Principal
Notice Information for Marsh & McLennan
Employees' Securities Company, L.P.:
c/o Maples and Calder Ugland House
South Church Street
George Town Grand Cayman
Cayman Islands, British West Indies
Attention: Charles Jennings
Facsimile: (345) 949-8080
and
c/o MMC Capital, Inc.
20 Horseneck Lane
Greenwich, CT 06830
Attention: David Wermuth
Facsimile: (203) 862-2925
INSURANCE PRIVATE EQUITY
INVESTORS, L.L.C.
By: GE Asset Management Incorporated,
its Manager
By: /s/ Patrick McNeela
------------------------------------
Name: Patrick McNeela
Title: Vice President
Notice Information for Insurance Private
Equity Investors, L.L.C.:
c/o GE Asset Management Incorporated
3003 Summer Street
Stamford, CT 06905
Attention: Michael M. Pastore, Esq.
ORBITAL HOLDINGS, LTD.
By: /s/ Lorraine Hliboki
-------------------------------------------
Name: Lorraine Hliboki
Title: Attorney-in-fact
Notice Information for Orbital
Holdings, Ltd.:
c/o GE Capital
120 Longridge Rd.
Stamford, CT 06927
SOUND VIEW PARTNERS LP
By: Robert Clements,
its General Partner
By: /s/ Robert Clements
------------------------------------
Name: Robert Clements
Title: General Partner
Notice Information for Sound View Partners LP:
c/o Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Robert Clements
Facsimile: (203) 625-8366
OTTER CAPITAL LLC
By: John Pasquesi,
its Managing Member
By: /s/ John Pasquesi
------------------------------------
Name: John Pasquesi
Title: Managing Member
Notice Information for Otter Capital LLC:
One Maritime Plaza, 12th Floor
San Francisco, CA 94111
Attention: John Pasquesi
Facsimile: (415) 788-0176
PETER A. APPEL
By: /s/ Peter A. Appel
---------------------------------------------
Name: Peter A. Appel
Notice Information for Peter A. Appel:
c/o Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Peter A. Appel
Facsimile: (203) 862-4460
PAUL B. INGREY
By: /s/ Paul B. Ingrey
---------------------------------------------
Name: Paul B. Ingrey
Notice Information for Paul B. Ingrey:
c/o Arch Reinsurance Ltd.
Craig Appin House
8 Wesley Street
Hamilton HM 11
Bermuda
Attention: Paul B. Ingrey
Facsimile: (441) 296-8241
DWIGHT R. EVANS
By: /s/ Dwight R. Evans
---------------------------------------------
Name: Dwight R. Evans
Notice Information for Dwight R. Evans:
8 Kent Place
Westfield, NJ 07090
Attention: Dwight R. Evans
MARC GRANDISSON
By: /s/ Marc Grandisson
---------------------------------------------
Name: Marc Grandisson
Notice Information for Marc Grandisson:
c/o Arch Reinsurance Ltd.
Craig Appin House
8 Wesley Street
Hamilton HM 11
Bermuda
Attention: Marc Grandisson
Facsimile: (441) 296-8241
For purposes of Section A.8. only:
TARACAY INVESTORS
By: Robert Clements,
Managing Partner
By: /s/ Robert Clements
------------------------------------
Name: Robert Clements
Notice Information for Taracay Investors:
c/o Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Robert Clements
Facsimile: (203) 625-8366
For purposes of Section A.8. only:
THE TRIDENT PARTNERSHIP, L.P.
By: Trident Corp.,
its General Partner
By: /s/ Martine Purssell
------------------------------------
Name: Martine Purssell
Title: Assistant Secretary
Notice Information for The Trident Partnership, L.P.:
c/o Trident Corp., General Partner of The Trident
Partnership, L.P.
Victoria Hall, 5th Floor
11 Victoria Street
Hamilton HM 11
Bermuda
Attention: Martine Purssell
Facsimile: (441) 292-3793
For purposes of Section A.8 only:
MARILYN CLEMENTS
/s/ Marilyn Clements
----------------------------------------------------
For purposes of Section A.8 only:
JEFFREY D. CLEMENTS
/s/ Jeffrey D. Clements
----------------------------------------------------
For purposes of Section A.8 only:
JOHN CLEMENTS
/s/ John Clements
----------------------------------------------------
For purposes of Section A.8 only:
BEN T. CLEMENTS
/s/ Ben T. Clements
----------------------------------------------------
For purposes of Section A.8 only:
PAULA CLEMENTS SAGER
/s/ Paula Clements Sager
----------------------------------------------------
For purposes of Section A.8 only:
TRUST ESTABLISHED UNDER INDENTURE OF MARILYN CLEMENTS
By: /s/ Robert Clements
---------------------------------------------,
as trustee
Notice Information for Marilyn Clements,
Jeffrey D. Clements, John Clements, Ben T. Clements,
Paula Clements Sager and Trust
Established Under Indenture of Marilyn Clements:
c/o Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Robert Clements
Facsimile: (203) 625-8366
SCHEDULE 1
Warburg Pincus (Bermuda) Private Equity VIII, L.P.
Warburg Pincus (Bermuda) International Partners, L.P.
SCHEDULE 2
H&F International Partners IV - A (Bermuda), L.P.
H&F International Partners IV -B (Bermuda), L.P.
H&F Executive Fund IV (Bermuda), L.P.