SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Bermuda 0-26456 N/A
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
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Registrant's telephone number, including area code:
(203) 862-4300
ITEM 5. Other Events.
On November 20, 2001, the entities listed in the table below consummated the previously announced investment in Arch Capital Group Ltd. The table sets forth the purchase prices paid by each of the entities and the numbers of Series A Convertible Preference Shares and Class A Warrants of Arch Capital Group Ltd. purchased by each.
Number of Number of
Total Preference Class A
Purchase Shares Warrants
Price Purchased Purchased
----- --------- ---------
Warburg Pincus (Bermuda) Private Equity VIII, L.P........ $202,500,000.00 9,469,656 1,001,959
Warburg Pincus (Bermuda) International Partners, L.P..... 194,400,000.00 9,090,870 961,881
Warburg Pincus Netherlands International
Partners I, C.V....................................... 4,860,000.00 227,271 24,047
Warburg Pincus Netherlands International
Partners II, C.V...................................... 3,240,000.00 151,514 16,031
HFCP IV (Bermuda), L.P................................... 181,322,595.00 8,479,322 897,175
H&F International Partners IV-A (Bermuda), L.P........... 29,759,927.00 1,391,685 147,251
H&F International Partners IV-B (Bermuda), L.P........... 9,830,812.00 459,725 48,642
H&F Executive Fund IV (Bermuda), L.P..................... 4,086,666.00 191,107 20,221
Insurance Private Equity Investors, L.L.C................ 50,000,000.00 2,338,186 247,397
Orbital Holdings, Ltd.................................... 10,000,000.00 467,637 49,479
Trident II, L.P.......................................... 33,139,159.08 1,549,710 163,971
Marsh & McLennan Employees' Securities Company, L.P......
932,997.10 43,630 4,616
Marsh & McLennan Capital Professionals Fund, L.P......... 927,843.82 43,389 4,591
Farallon Capital Partners, L.P........................... 17,363,741.18 811,993 85,915
Farallon Capital Institutional Partners II, L.P.......... 3,971,025.66 185,700 19,648
Farallon Capital Institutional Partners III, L.P......... 3,156,291.80 147,600 15,617
RR Capital Partners, L.P................................. 508,941.36 23,800 2,518
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Investors' total.................................... $750,000,000.00 35,072,795 3,710,959
=============== ========== =========
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Sound View Partners LP (affiliated with Robert Clements).
$2,000,000.00 93,527 9,896
Otter Capital LLC (affiliated with John M. Pasquesi)..... 7,500,000.00 350,728 37,110
Peter A. Appel........................................... 1,000,000.00 46,763 4,948
Paul B. Ingrey........................................... 2,000,000.00 93,527 9,896
Dwight R. Evans.......................................... 400,000.00 18,705 1,979
Marc Grandisson.......................................... 250,000.00 11,690 1,237
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Management purchasers' total........................ $13,150,000.00 614,940 65,066
-------------- ------- ------
Total.................................. $763,150,000.00 35,687,735 3,776,025
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ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
3.1 Certificate of Designations of Series A Convertible Preference Shares.
3.2 Form of Amended and Restated Bye-law 45 and Bye-law 75.
4.1 Form of Class A Warrant Certificate.
4.2 Shareholders Agreement, dated November 20, 2001, by and among Arch Capital Group Ltd. ("ACGL") and the shareholders party thereto.
10.1 Amendment No. 1, dated November 20, 2001, between ACGL and the parties thereto, to the Subscription Agreement dated October 24, 2001.
10.2 Amendment No. 2, dated January 4, 2002 between ACGL and the parties thereto, to the Subscription Agreement dated October 24, 2001.
10.3 Agreement, dated November 20, 2001, among ACGL, 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. and HFCP IV (Bermuda), L.P. (collectively, the "Original Parties") and Orbital Holdings, Ltd.
10.4 Agreement, dated November 20, 2001, among ACGL, the Original Parties and Insurance Private Equity Investors, L.L.C.
10.5 Agreement, dated November 20, 2001, among ACGL, the Original Parties and 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.
10.6 Restricted Share Agreement, dated November 19, 2001, between ACGL and Robert Clements.
10.7 Retention Agreement, dated January 4, 2002, among ACGL, Arch Capital (U.S.) Inc. and Robert Clements, including Form of Promissory Note.
10.8 Employment Agreement, dated as of October 23, 2001, between ACGL and John M. Pasquesi.
10.9 Employee Share Option Agreement, dated as of October 23, 2001, between ACGL and John M. Pasquesi.
10.10 Share Option Agreement, dated as of October 23, 2001, between ACGL and John M. Pasquesi.
10.11 Share Option Agreement, dated as of October 23, 2001, between ACGL and Peter A. Appel.
10.12 Employment Agreement, dated as of October 23, 2001, among ACGL, Arch Reinsurance Ltd. ("Arch Re Bermuda") and Paul Ingrey.
10.13 Employment Agreement, dated as of October 23, 2001, among ACGL, Arch Re Bermuda and Dwight Evans.
10.14 Employment Agreement, dated as of October 23, 2001, among ACGL, Arch Re Bermuda and Marc Grandisson.
10.15 Employment Agreement, dated as of December 20, 2001, among ACGL, Arch Capital Group (U.S.) Inc. and Constantine Iordanou.
10.16 Share Option Agreement, dated as of January 1, 2002, between ACGL and Constantine Iordanou.
10.17 Restricted Share Agreement, dated as of January 1, 2002, between ACGL and Constantine Iordanou.
10.18 Restricted Share Agreement, dated as of January 1, 2002, between ACGL and Constantine Iordanou.
10.19 Restricted Share Agreement, dated as of October 23, 2001, between ACGL and Robert Clements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned.
ARCH CAPITAL GROUP LTD.
Date: January 4, 2002 By: /s/ Louis T. Petrillo
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Name: Louis T. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
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Exhibit 3.1
Final Schedule to the Bye-laws
of Arch Capital Group Ltd.
CERTIFICATE OF DESIGNATIONS
OF
SERIES A CONVERTIBLE PREFERENCE SHARES
The terms of the authorized Preference Shares (as defined below) of Arch Capital Group Ltd., a company incorporated under the laws of Bermuda (the "Company"), shall be as set forth below in this Schedule to the Bye-laws of the Company (this "Schedule").
(a) Designation. (1) There is hereby created from the authorized and unissued preference shares of the Company a series of convertible preference shares designated as the Company's "Series A Convertible Preference Shares" (the "Preference Shares") as designated by the Board of Directors. Each Preference Share will have a liquidation preference of $21.00 (the "Liquidation Preference").
(2) All Preference Shares purchased, exchanged, converted or otherwise acquired by the Company shall be repurchased and canceled and, upon the taking of any action required by applicable law, shall be restored to the status of authorized but unissued preference shares of the Company, without designation as to series, and may thereafter be reissued.
(b) Currency. All Preference Shares shall be denominated in United States currency, and all payments and distributions thereon or with respect thereto shall be made in United States currency. All references herein to "$" or "dollars" refer to United States currency.
(c) Ranking. The Preference Shares shall, with respect to dividend rights and rights upon liquidation, winding up or dissolution, rank (1) prior to each other class or series of shares of the Company except Parity Shares and (2) on a parity with Parity Shares. For purposes hereof, (A) "Junior Shares" shall mean the Common Shares of the Company, par value $0.01 per share (the "Common Shares") and the shares of any other class or series of equity securities of the Company which,
by the terms of the Bye-laws of the Company or of the instrument by which the Board of Directors shall fix the rights, preferences and limitations thereof, shall not be designated as ranking on a parity with the Preference Shares in respect of dividend rights and rights upon liquidation, winding up or dissolution and (B) "Parity Shares" shall mean the shares of any other class or series of equity securities of the Company which, by the terms of the Bye-laws of the Company or of the instrument by which the Board of Directors shall fix the rights, preferences and limitations thereof, shall, in the event that the dividends thereon are not paid in full, be entitled to share ratably with the Preference Shares, or shall, in the event that the amounts payable thereon on liquidation are not paid in full, be entitled to share ratably with the Preference Shares in any distribution of assets other than by way of dividends in accordance with the sums which would be payable in such distribution if all sums payable were discharged in full.
(d) Dividends. The holders of Preference Shares shall be entitled to receive, from funds legally available therefor, dividends payable when, as and if dividends (including, without limitation, any dividend consisting of stock or other securities or property or rights or warrants to subscribe for securities of the Company or any of its subsidiaries by way of dividend or spin-off) are declared by the Board of Directors with respect to the Common Shares. Dividends shall be payable on each outstanding Preference Share in an amount per Preference Share equal to the amount of such dividends as would be payable with respect to the number of Common Share(s) into which such Preference Share is convertible pursuant to paragraphs (g)(1) and (h). No dividends may be paid or declared on or with respect to the Common Shares prior to the declaration and payment of a dividend on or with respect to the Preference Shares. Dividends shall be non-cumulative.
(e) Liquidation Preference. (1) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company or a reduction or decrease in the Company's shares resulting in a distribution of assets to the holders of any class or series of the Company's shares, each holder of Preference Shares shall be entitled to payment out of the assets of the Company available for distribution of an amount equal to the then effective Liquidation Preference per Preference Share held by such holder, plus all accumulated and unpaid dividends thereon, before any distribution is made on any Junior Shares, including, without limitation, Common Shares. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company or a reduction or decrease in the Company's capital Shares, the amounts payable with respect to Preference Shares and all other Parity Shares are not paid in full, the holders of Preference Shares and the holders of the Parity Shares shall share equally and ratably in any distribution of assets of the Company in proportion to the full liquidation preference and all accumulated and unpaid dividends to which each such holder is entitled.
(2) Neither the voluntary sale, conveyance, exchange or transfer (for cash, shares, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation, merger or amalgamation of the Company with or into any person or the consolidation, merger or amalgamation of any person with or into the Company shall alone be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company, or a reduction or decrease in the capital of the Company, without the adoption of a formal plan of liquidation by the Company.
(f) Voting Rights. Except as required by applicable Bermuda law, the Bye-laws of the Company and as may otherwise be provided herein or in any amendment hereto, the holders of Preference Shares shall not be entitled to any voting rights as shareholders of the Company except as follows:
(1) The affirmative vote of the holders of at least a majority of the outstanding Preference Shares, voting with holders of shares of all other series of preference shares affected in the same way as a single class, in person or by proxy, at a special or annual meeting called for the purpose, or by written consent in lieu of a meeting, shall be required to amend, repeal or change any provisions of this Schedule in any manner which would adversely affect, alter or change the powers, preferences or special rights of the Preference Shares and any such securities affected in the same way; provided, however, that the creation, authorization or issuance of any other class or series of capital shares or the increase or decrease in the amount of authorized shares of any such class or series or of the Preference Shares, or any increase, decrease or change in the par value of any class or series of shares (including the Preference Shares), shall not require the consent of the holders of the Preference Shares and shall not be deemed to affect adversely, alter or change the powers, preferences and special rights of the Preference Shares. With respect to any matter on which the holders are entitled to vote as a separate class, each Preference Share shall be entitled to one vote.
(2) Holders of Preference Shares shall be entitled to notice of any shareholders' meeting. The holders of Preference Shares shall be entitled to vote upon all matters upon which holders of the Common Shares have the right to vote, and shall be entitled to the number of votes equal to the largest whole number of Common Shares into which such Preference Shares could be converted pursuant to the provisions of paragraphs (g)(1) and (h) hereof, at the record date for the determination of the shareholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited, such votes to be counted together with all other shares having general voting powers and not separately as a class.
(3) Notwithstanding the provisions of paragraph (f)(2), the vote of the Preference Shares shall be limited as set forth herein.
(A) Prior to receipt of the Requisite Shareholder Approval, if the votes conferred by the Controlled Shares (as defined in bye-law 45) of any person, including the Preference Shares held by that person, would otherwise represent more than 9.9% of the voting power of all shares entitled to vote generally at an election of Directors, the vote of each Preference Share held by such person shall be reduced by whatever amount is necessary so that after
any such reduction, the votes conferred by the Controlled Shares of such person, including such Preference Shares, shall constitute 9.9% of the total voting power of all shares of the Company entitled to vote generally at any election of Directors.
(B) Prior to the receipt of the Requisite Nasdaq Approval, if the aggregate votes conferred by the Preference Shares then outstanding, together with any Common Shares issued upon conversion of any Preference Shares, or issued upon exercise of any Class A Warrants issued under the Subscription Agreement or the Management Subscription Agreement (including by operation of the anti-dilution adjustments in the Class A Warrants), or issued in cancellation of the Class A Warrants of the Company in connection with the transactions under the Subscription Agreement (together, the "Aggregate Potential Votes") would exceed 19.9% of the total votes entitled to be cast by the Common Shares issued and outstanding on November 19, 2001 (the "Total Base Votes"), then the vote of each Preference Share shall be reduced proportionately (in relation to the total number of Preference Shares then outstanding) so that, after giving effect to such reduction, the Aggregate Potential Votes do not exceed 19.9% of the Total Base Votes (it being understood that if both clause (A) and this clause (B) apply, clause (B) shall be applied first, then clause (A)).
(C) Prior to the receipt of the Requisite Regulatory Approval, if the votes conferred by Common Shares and Preference Shares beneficially owned by a given person would otherwise represent more than 9.9% of the voting power of all shares entitle to vote generally at an election of Directors, the vote of each Preference Share held by such person shall be reduced by whatever amount is necessary so that after any such reduction, the votes conferred by the Common Shares and Preference Shares beneficially owned by such person, shall constitute 9.9% of the total voting power of all shares of the Company entitled to vote generally at any election of Directors.
(D) Until such time as any waiting period with respect to the acquisition of Preference Shares by Orbital Holdings, Ltd. And Insurance Private Equity Investors, L.P. required to expire under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, including any extensions thereof, shall have expired or been terminated, the Preference Shares held by such GE Purchasers shall not have any votes with respect to the election of directors.
(g) Conversion.
(1) Optional Conversion. Each Preference Share shall be convertible at any time and from time to time at the option of the holder thereof into fully paid and nonassessable Common Shares. The number of Common Shares deliverable upon conversion of a Preference Share as of the Issuance Date, subject to adjustment as hereinafter provided, shall be one.
(2) Mandatory Conversion. Following the later of (a) receipt of the Requisite Shareholder Approval and the Requisite Regulatory Approval, and (b) 90 days after the Fourth Anniversary Adjustment Date, the Preference Shares shall automatically convert into Common Shares. The number of Common Shares deliverable upon conversion of a Preference Share shall be as set forth in paragraphs (g)(1) and (h).
(3) Fractional Shares. In connection with the conversion of any Preference Shares, no fractions of Common Shares shall be issued, but in lieu thereof, the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price of the Common Shares as of the date of conversion. If more than one Preference Share shall be surrendered for conversion by the same holder at the same time, the number of full Common Shares issuable on conversion thereof shall be computed on the basis of the total number of Preference Shares so surrendered.
(4) Mechanics of Conversion. (a) Before any holder of Preference Shares shall be entitled to convert the same into Common Shares, he shall surrender the certificate or certificates therefor, duly endorsed, or deliver an appropriate indemnity agreement, at the office of the Company or its transfer agent for the Preference Shares and shall give written notice to the Company of the election to convert the same and shall state therein the name or names in which the certificate or certificates for Common Shares are to be issued. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preference Shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of Common Shares to which such holder shall be entitled as aforesaid. A certificate or certificates will be issued for the remaining Preference Shares in any case in which fewer than all of the Preference Shares represented by a certificate are converted.
(b) In connection with the mandatory conversion, the Company shall deliver written notice to each such holder that the conversion date has occurred and the place where certificates are to be surrendered for conversion.
(5) Issue Taxes. The Company shall pay all issue taxes, if any, incurred in respect of the issue of Common Shares on conversion. If a holder of shares surrendered for conversion specifies that the Common Shares to be issued on conversion are to be issued in a name or names other than the name or names in which such surrendered shares stand, the Company shall not be required to pay any transfer or other taxes incurred by reason of the issuance of such Common Shares to the name of another.
(6) Reservation of Shares. The Company shall at all times reserve and keep available, free from preemptive rights, for issuance upon the conversion of Preference Shares, such number of its authorized but unissued Common Shares as will from time to time be sufficient to permit the conversion of all outstanding Preference Shares. Prior to the delivery of any securities which the Company shall be obligated to deliver upon conversion of the Preference Shares, the Company shall comply with all applicable laws and regulations which require action to be taken by the Company. All Common Shares delivered upon conversion of the Preference Shares will upon delivery be duly and validly issued and fully paid and nonassessable, free of all liens and charges and not subject to any preemptive rights.
(h) Adjustments. The number of Common Shares into which each Preference Share is convertible shall be subject to adjustment from time to time as follows:
(1) Share Splits and Combinations. In case the Company shall at any time or from time to time after the Issuance Date (A) subdivide or split the outstanding Common Shares, (B) combine or reclassify the outstanding Common Shares into a different number of shares or (C) issue by reclassification of the Common Shares any shares of the Company, then, and in each such case, the number of Common Shares into which each Preference Share is convertible shall be adjusted so that the holder of any Preference Shares thereafter surrendered for conversion shall be entitled to receive the number of Common Shares or other securities of the Company which such holder would have owned or have been entitled to receive after the occurrence of any of the events described above, had such Preference Shares been surrendered for conversion immediately prior to the occurrence of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this subparagraph (1) shall become effective at the close of business on the day upon which such corporate action becomes effective. Such adjustment shall be made successively whenever any event listed above shall occur.
(2) Share Dividends in Common Shares. In case the Company at any time or from time to time after the Issuance Date pays a dividend or makes a distribution in
Common Shares on any class of shares of the Company (other than a dividend or distribution of Common Shares or other securities which is made directly to the holders of Preference Shares pursuant to paragraph (d), or with respect to which adjustments are provided in paragraph (h)(1) above) the number of Common Shares into which each Preference Share is convertible shall be adjusted so that the holder of any Preference Shares thereafter surrendered for conversion shall be entitled to receive the number of Common Shares which such holder would have owned or have been entitled to receive after such dividend, had such Preference Shares been surrendered for conversion immediately prior to the record date for the determination of holders entitled to receive such dividend.
(3) Distribution of Indebtedness, Securities or Assets. In case the Company distributes to all holders of Common Shares (whether by dividend or other distribution, or in a merger, amalgamation or consolidation or otherwise) evidences of indebtedness, shares of any class or series, other securities, including rights or warrants to subscribe for securities, cash or assets, in each case, of the Company or any of its subsidiaries (other than a dividend or distribution which is made directly to the holders of Preference Shares pursuant to paragraph (d) above), the Company shall distribute to the holders of Preference Shares the same in an amount per Preference Share equal to the amount as would be payable with respect to the number of Common Share(s) into which such Preference Share is convertible pursuant to paragraphs (g)(1) and (h).
(4) Transactions in Which Common Shares are Exchanged. In case at any
time the Company shall be a party to any transaction (including, without
limitation, a merger, amalgamation, consolidation, sale of all or
substantially all of the Company's assets, liquidation or recapitalization
of the Common Shares and excluding any transaction to which clauses (1),
(2) or (3) of this paragraph (h) apply) in which the previously outstanding
Common Shares shall be changed into or exchanged for different securities
of the Company or common stock or other securities of another corporation
or entity (including cash) or any combination of any of the foregoing (each
such transaction being a "Transaction"), the Company shall make all
necessary provisions such that each Preference Share shall thereafter be
convertible into, in lieu of Common Shares, the amount of securities or
other property to which such holder would actually have been entitled as a
holder of Common Shares upon the consummation of the Transaction if such
holder had converted such Preference Shares immediately prior to such
Transaction (subject to adjustments from and after consummation of the
Transaction as nearly equivalent as possible to the adjustments provided
for in this paragraph (h)).
(5) Below Market Offerings of Common Shares. In case the Company shall at any time, or from time to time, issue Common Shares (or securities convertible
into, or exercisable for, Common Shares) at a price per share (or having a
conversion or exercise price per share) less than the Current Market Price
(or, in the case of an issuance or sale in connection with an underwritten
public offering, less than 99% of the Current Market Price, as determined
by the underwriters, less underwriting discounts and commissions) as of the
date of issuance of such shares or of such other securities, then, and in
each such case, the number of Common Shares into which each Preference
Share is convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion thereof, the
number of Common Shares determined by multiplying (A) the number of Common
Shares into which such share was convertible on the day immediately prior
to such date by (B) a fraction, the numerator of which shall be the sum of
(i) the number of Common Shares outstanding on such date and (ii) the
number of additional Common Shares issued (or into which the other
securities may convert or be exercised), and the denominator of which shall
be the sum of (aa) the number of Common Shares outstanding on such date and
(bb) the number of Common Shares which the aggregate consideration
receivable by the Company for the total number of Common Shares so issued
(or into which the other securities may convert or be exercised) would
purchase at such Current Market Price on such date. An adjustment made
pursuant to this subparagraph (5) shall be made on the next Business Day
following the date on which any such issuance is made and shall be
effective retroactively immediately after the close of business on such
date. For purposes of this subparagraph (5), the aggregate consideration
receivable by the Company in connection with the issuance of Common Shares,
or of other securities convertible into or exercisable for Common Shares,
shall be deemed to be equal to the sum of the aggregate offering price
(before deduction of reasonable underwriting discounts or commissions and
expenses) of all such securities plus the minimum aggregate amount, if any,
payable upon conversion or exercise of any such other securities into
Common Shares.
The provisions of this clause (h) shall not apply to the issuance of any Common Shares (i) pursuant to any restricted share, share option, share purchase or similar plan or arrangement for the benefit of employees or directors of the Company or any of its subsidiaries approved by the Board of Directors or a duly organized committee thereof, (ii) pursuant to options, warrants and conversion rights outstanding on November 20, 2001, or (iii) issued upon conversion of Preference Shares or exercise of Class A Warrants issued under the Subscription Agreement or the Management Subscription Agreement, including pursuant to the purchase price adjustments therein.
(i) Certain Definitions. As used in this Schedule, the following terms shall have the following meanings, unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or a United States federal or Bermuda holiday.
"Current Market Price" means the average of the closing bid and asked prices of the Common Shares as reported by the National Association of Securities Dealers Automated Quotation System, or if the Common Shares are not there listed, on the principal United States national exchange on which such shares are listed or admitted.
"Fourth Anniversary Adjustment Date" means (i) the last date on which an adjustment could be required to be determined under Section B.3.g. of the Subscription Agreement or (ii) if such an adjustment is required to be determined, the date of completion of such adjustment.
"Issuance Date" means the first date of issuance of any Preference Shares.
"Management Subscription Agreement" means the Management Subscription Agreement, dated as of October 24, 2001, by and between the Company and certain of its officers and directors parties thereto.
"Requisite Nasdaq Approval" means the approval by the holders of Common Shares and Preference Shares of the issuance of Common Shares issuable upon conversion of all Preference Shares issued under the Subscription Agreement and the Management Subscription Agreement and the issuance of Common Shares issuable upon exercise of all Class A Warrants issued under the Subscription Agreement and the Management Subscription Agreement (including by operation of the anti-dilution adjustments in the Class A Warrants), to the extent that the number or voting power of all such Common Shares and the 140,380 Common Shares issued on November 20, 2001 would exceed 19.9% of the total number or the total voting power of the Common Shares issued and outstanding on November 19, 2001.
"Requisite Regulatory Approval" means approval by the insurance authorities in the States of Florida, Missouri, Nebraska and Wisconsin of the acquisition of greater than 9.9% of the total voting power of all shares of the Company entitled to vote generally in the election of directors by the "Warburg Purchasers" and the "H&F Purchasers" (as defined in the Shareholders Agreement) who are original signatories to the Shareholders Agreement.
"Requisite Shareholder Approval" means (a) the approval by the holders of Common Shares and Preference Shares of an amendment to bye-law 45 in the form included in Exhibit III to the Subscription Agreement and (b) the Requisite Nasdaq Approval.
"Shareholders Agreement" means the Shareholders Agreement, dated as of November 20, 2001, by and between the Company and the shareholders named therein, as amended from time to time in accordance with its terms.
"Subscription Agreement" means the Subscription Agreement, dated as of October 24, 2001, by and between the Company and each of the Purchasers named therein, as amended from time to time in accordance with its terms.
(j) Headings. The headings of the paragraphs of this Schedule are for convenience of reference only and shall not define, limit or affect any of the provisions hereof.
(k) Bye-laws. This Schedule shall be attached to the Bye-laws of the Company and shall become incorporated in such Bye-laws.
Exhibit 3.2
Amended Bye-law 45
45. Limitation on voting rights of Controlled Shares
(1) Except as provided in the other paragraphs of this Bye-law 45, every Member of record owning shares conferring the right to vote present in person or by proxy shall have one vote, or such other number of votes as may be specified in the terms of the issue and rights and privileges attaching to such shares or in these Bye-laws, for each such share registered in such Member's name.
(2) If, as a result of giving effect to the foregoing provisions of this
Bye-law 45 or otherwise, the votes conferred by the Controlled Shares, directly
or indirectly or by attribution, to any U.S. Person would otherwise represent
more than 9.9% of the voting power of all shares entitled to vote generally at
an election of Directors, the votes conferred by the Controlled Shares on such
U.S. Person shall be reduced by whatever amount is necessary so that after any
such reduction the votes conferred by the Controlled Shares to such U.S. Person
shall constitute 9.9% of the total voting power of all shares of the Company
entitled to vote generally at any election of Directors (provided, however, that
(a) votes shall be reduced only (i) in shares of the Company, if any, held by
such U.S. Person within the meaning of Section 958(a) of the Internal Revenue
Code of 1986, as amended (the "Code") and (ii) in shares of the Company if any
(other than shares held directly by the H&F Funds or the WP Funds) held by such
U.S. Person within the meaning of Section 958(b) of the Code, (b) votes shall be
reduced in shares of the Company held directly by the H&F Funds and the WP Funds
only if and to the extent that reductions in the vote of other shares do not
result in satisfaction of the 9.9% threshold set forth in this paragraph (2),
(c) such reduction (or portion thereof) in votes conferred by shares held
directly by an H&F Fund shall not be effective on or after such date, if any, as
such H&F Fund reasonably objects in writing to such reduction (or portion
thereof) after reasonable notice given to such H&F Fund in advance (to the
extent feasible) of any meeting of shareholders (which notice the Company shall
provide in writing) and (d) such reduction (or portion thereof) in votes
conferred by shares held directly by a WP Fund shall not be effective on or
after such date, if any, as such WP Fund reasonably objects in writing to such
reduction (or portion thereof) after reasonable notice given to such WP Fund in
advance (to the extent feasible) of any meeting of shareholders (which notice
the Company shall provide in writing)).
(3) (a) "Controlled Shares" in reference to any person means all shares
of the Company directly, indirectly or constructively owned by
such person within the meaning of Section 958 of the Code;
(b) "U.S. Person" means a United States person as defined in Section
7701(a)(30) of the Code;
|
(c) "H&F Fund" means the Hellman & Friedman parties to the Shareholders Agreement by and among the Company and certain investors dated as of November 20, 2001 (the "Shareholders Agreement"); and
(d) "WP Fund" means the Warburg Pincus parties to the Shareholders Agreement.
(4) Upon written notification by a Member to the Board, the number of votes conferred by the total number of shares held directly by such Member shall be reduced to that percentage of the total voting power of the Company, as so designated by such Member (subject to acceptance of such reduction by the Board in its sole discretion), so that (and to the extent that) such Member may meet any applicable insurance or other regulatory requirement or voting threshold or limitation that may be applicable to such Member or to evidence that such person's voting power is no greater than such threshold.
(5) Notwithstanding the foregoing provisions of this Bye-law 45, after
having applied such provisions as best as they consider reasonably practicable,
the Board may make such final adjustments to the aggregate number of votes
conferred, directly or indirectly or by attribution, by the Controlled Shares on
any U.S. Person that they consider fair and reasonable in all the circumstances
to ensure that such votes represent 9.9% (or the percentage designated by a
Member pursuant to paragraph (4) of this Bye-law 45) of the aggregate voting
power of the votes conferred by all the shares of the Company entitled to vote
generally at any election of Directors. Such adjustments intended to implement
the 9.9% limitation set forth in paragraph (2) of this Bye-law 45 shall be
subject to the proviso contained in such paragraph (2), but adjustments intended
to implement the limitation set forth in a notification pursuant to paragraph
(4) of this Bye-law 45 shall not be subject to the proviso contained in
paragraph (2).
(6) Each Member shall provide the Company with such information as the Company may reasonably request so that the Company and the Board may make determinations as to the ownership (direct or indirect or by attribution) of Controlled Shares to such Member or to any person to which Shares may be attributed as a result of the ownership of Shares by such Member.
Amended Bye-law 75
75. Certain Subsidiaries
With respect to any company incorporated under the laws of Bermuda, Barbados or the Cayman Islands all of the voting shares of which are owned (directly or indirectly through subsidiaries) by the Company, and any other subsidiary of the Company designated by the Board of the Company (together, the "Designated Companies"), the board of directors of each such Designated Company shall consist of the persons who have been elected by the Members as Designated Company Directors. Notwithstanding the general authority set out in Bye-law 2(1), the Board shall vote all shares owned by the Company in each Designated Company to ensure the constitutional documents of such Designated Company require such Designated Company Directors to be elected as the directors of such Designated Company, and to elect such Designated Company Directors as the directors of such Designated Company. The Company shall enter into agreements with each such Designated Company to effectuate or implement this Bye-law.
Exhibit 4.1
[ ] CLASS A WARRANTS, EACH WARRANT ENTITLING
THE HOLDER TO PURCHASE ONE COMMON SHARE
OF ARCH CAPITAL GROUP LTD.
ARCH CAPITAL GROUP LTD.
THIS WARRANT (THE "WARRANT") AND THE UNDERLYING COMMON SHARES MAY NOT BE TRANSFERRED, OFFERED OR SOLD EXCEPT (A) IN COMPLIANCE WITH THE PROVISIONS OF A CERTAIN SUBSCRIPTION AGREEMENT AND A CERTAIN SHAREHOLDERS AGREEMENT EXECUTED IN CONNECTION HEREWITH 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.
ARCH CAPITAL GROUP LTD., a Bermuda exempted limited company (the "Company"), hereby certifies that, for value received, [ ] (the "Holder"), or its assigns, is entitled, subject to the terms set forth below, to purchase from the Company, at any time and from time to time in whole or in part, an aggregate of [ ] fully paid and nonassessable common shares, par value $.01 per share ("Common Shares"), of the Company during the period beginning on the date of issuance hereof (the "Closing Date") and ending on September 19, 2002 (the "Exercise Period").
1. PURCHASE PRICE. Such Common Shares shall be purchased at a purchase price per share, subject to the provisions of Paragraph 3 hereof, equal to $20.00 (as adjusted in accordance with the terms hereof, the "Purchase Price"). The number and character of such Common Shares are subject to adjustment as provided below, and the term "Common Shares" shall mean, unless the context otherwise requires, the Common Shares or other securities or property at the time deliverable upon the exercise of this Warrant.
2. EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant shall
be exercised by the Holder surrendering this Warrant, with the form of
subscription at the end hereof duly executed by such Holder (the "Exercise
Notice"), to the Company at its offices, 20 Horseneck Lane, Greenwich,
Connecticut 06830, accompanied by payment as specified below of the aggregate
Purchase Price determined as of the Determination Date (as defined below) of the
Common Shares being purchased pursuant to such exercise. Payment of the
aggregate Purchase Price may be made, at the option of the Holder, (i) in cash,
(ii) by certified check or bank cashier's check payable to the order of the
Company in the amount of such Purchase Price, (iii) by delivering Common Shares
with an aggregate Market Price (as hereinafter defined) as of the day prior to
the Company's receipt of the Exercise Notice (the "Determination Date") equal to
the product of the Purchase Price and the number of Common Shares being
purchased, (iv) by the Company reducing, at the request of the Holder, the
number of Common Shares for which this Warrant is exercisable by a number of
Common Shares (the "Surrendered Stock") such that the product of (a) the Market
Price per Common Share as of the Determination Date less the Purchase Price in
effect on the Determination Date multiplied by (b) the Surrendered Stock equals
or exceeds the product of (x) the Purchase Price in effect on the Determination
Date and (y) the number of Common Shares being purchased, or any combination of
the methods of payment described in clauses (i) through (iv) above.
2.1. Partial Exercise. This Warrant may be exercised for less than the full number of Common Shares at the times called for hereby, in which case the number of Common Shares receivable upon the exercise of this Warrant as a whole, the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon any such partial exercise, the Company at its expense will forthwith issue to the Holder hereof a new Warrant or Warrants of like tenor for the number of Common Shares as to which rights have not been exercised, such Warrant or Warrants to be issued in the name of the Holder hereof or his nominee (upon payment by such Holder of any applicable transfer taxes).
2.2. Delivery of Certificates for Common Shares on Conversion. As soon as practicable after the exercise of this Warrant and payment of the Purchase Price, and in any event within ten (10) days thereafter, the Company, at its expense, will cause to be issued in the name of and delivered to the Holder hereof a certificate or certificates for the number of fully paid and nonassessable Common Shares or other securities or property to which such Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash in an amount determined in accordance with Paragraph 3.9 hereof. The Company agrees that the Common Shares so received shall be deemed to be issued to the Holder as the record owner of such Common Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment for such Common Shares made as aforesaid.
3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to prevent dilution of the right granted hereunder, the Purchase Price shall be subject to adjustment from time to time in accordance with this Paragraph 3. Upon each adjustment of the Purchase Price pursuant to this Paragraph 3, the registered holder hereof shall thereafter be entitled to acquire upon exercise of this Warrant, at the Purchase Price resulting from such adjustment, the number of shares of the Company's Common Shares obtainable by multiplying the Purchase Price in effect immediately prior to such adjustment by the number of shares of the Company's Common Shares acquirable upon
conversion thereof immediately prior to such adjustment and dividing the product thereof by the Purchase Price resulting from such adjustment.
3.1. Adjustment for Issue or Sale of Common Shares. Except as provided in
Paragraph 3.5 below, if and whenever on or after the date of issuance hereof the
Company shall issue or sell, or shall in accordance with subparagraphs (1) to
(8) of this Paragraph 3.1 inclusive, be deemed to have issued or sold any Common
Shares to any person for a consideration per share less than the Market Price
(or, in the case of an issuance or sale in connection with an underwritten
public offering, 99% of the Market Price less underwriting discounts and
commissions) in effect immediately prior to the time of such issue or sale, then
forthwith upon such issue or sale (each, a "Triggering Transaction"), the
Purchase Price shall, subject to subparagraphs (1) to (8) of this Paragraph 3.1,
be reduced to the Purchase Price (calculated to the nearest tenth of a cent)
determined by multiplying the Purchase Price in effect immediately prior to the
time of such Triggering Transaction by a fraction, the numerator of which shall
be the sum of (x) the product of the Number of Common Shares Deemed Outstanding
(as defined below) immediately prior to such Triggering Transaction multiplied
by the Market Price immediately prior to such Triggering Transaction plus (y)
the total amount, if any, received or receivable at any time by the Company as
consideration for the issuance or sale of such Common Shares, and the
denominator of which shall be the product of (x) the Number of Common Shares
Deemed Outstanding immediately after such Triggering Transaction, multiplied by
(y) the Market Price immediately prior to such Triggering Transaction; provided
that in the case of a sale of Common Shares pursuant to a purchase, underwriting
or similar agreement, the Market Price shall mean the Market Price in effect
upon the date such agreement is executed by the Company.
For purposes of this Paragraph 3, the term "Number of Common Shares Deemed
Outstanding" at any given time shall mean the sum of (i) the number of Common
Shares outstanding at such time, and (ii) the number of Common Shares deemed to
be outstanding under subparagraphs (1) to (8) of this Paragraph 3, inclusive, at
such time. For purposes of this Paragraph 3, inclusive, at such time. For
purposes of this Paragraph 3, the term "Market Price" shall mean, as of any
date, (a) for any period during which a security shall be listed for trading on
a national securities exchange or on the Nasdaq Stock Market ("Nasdaq"), or (in
the case of non-United States securities) similar securities exchange, the
closing price per share of such security as of such day, or, in case no reported
sale occurs on such trading day, the mean of the reported closing bid and asked
prices per share for the prior five trading days ending on such day, (b) for any
period during which such security shall not be so listed, but when prices for
such security shall be reported by Nasdaq or similar system in the case of
non-U.S. securities, the mean of the most recent average bid and asked prices
per share as quoted by Nasdaq or such other system or (c) the market price per
share of such security as determined by the Board of Directors of the Company
(the "Board of Directors") as of the next preceding day, in the event neither
(a) nor (b) above shall be applicable, or in the event the Board of Directors
shall be in good faith determine that application of (a) or (b) would not result
in a fair determination of the Market Price.
For purposes of determining the adjusted Purchase Price under this Paragraph 3.1, the following subparagraphs (1) to (8), inclusive, shall be applicable:
(1) In case the Company at any time shall in any manner issue or sell (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Shares or any other securities convertible into or exchangeable or exercisable for Common Shares (such rights or options being herein called "Options" and such convertible, exchangeable or exercisable shares or securities being herein called "Convertible Securities"), whether or not such Options or the right to convert, exercise or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Shares are issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the issuing of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, by (y) the total maximum number of Common Shares issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities) shall be less than the Market Price (or, in the case of an issuance or sale in connection with an underwritten public offering, less than 99% of the Market Price less underwriting discounts and commissions), determined as of the date of such issuance or sale (or, in the case of an issuance or sale pursuant to a purchase, underwriting or similar agreement, the Market Price determined as of the date such agreement is executed by the Company), then the total maximum number of Common Shares issuable upon exercise of such Options or conversion or exchange of all such Convertible Securities shall (as of the date of the grant of such Option) be deemed to be outstanding and to have been issued and sold by the Company for such price per share. No adjustment of the Purchase Price shall be made upon exercise of such Options or conversion or exchange of such Convertible Securities, except as otherwise provided in subparagraph (3) below.
(2) In case the Company at any time shall in any manner issue or sell
(whether directly or by assumption in a merger or otherwise) any
Convertible Securities, whether or not the rights to exchange, exercise or
convert thereunder are immediately exercisable, and the price per share for
which Common Shares are issuable upon such conversion, exercise or exchange
(determined by dividing (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or exchange thereof, by
(y) the total maximum number of Common Shares issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Market Price (or, in the case of an issuance or sale in connection with an
underwritten public offering, less than 99% of the Market Price less
underwriting discounts and commissions), determined as of the date of such
issuance or sale (or, in the case of an issuance or sale pursuant to a
purchase, underwriting or similar agreement, the Market Price determined as
of the date such agreement is executed by the Company), then the total
maximum number of Common Shares issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding and to have been
issue and sold by the Company for such price per share. No adjustment of
the Purchase Price shall be made upon the actual issue of such Common
Shares upon exercise of the rights to exchange or convert under such
Convertible Securities, except as otherwise provided in subparagraph (3)
below.
(3) If the exercise price provided for in any Options referred to in subparagraph (1), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraph (1) or (2), or the rate at which any Convertible Securities referred to in subparagraph (1) or (2) are convertible into or exchangeable for Common Shares, shall change at any time (other than under or by reason of provisions designed to protect against dilution of the type set forth in Paragraph 3.1 or 3.3), the Purchase Price in effect at the time of such change shall forthwith be readjusted to the Purchase Price which would have been in effect at the time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion or exchange rate, as the case may be, at the time initially granted, issued or sold. If the exercise price provided for in any Option referred to in subparagraph (1), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraph (1) or (2), or the rate at which any Convertible Securities referred to in subparagraph (1) or (2) are convertible into or exchangeable for Common Shares, shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then the Purchase Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Security never been issued as to such Common Shares and had adjustments been made upon the issuance of Common Shares delivered as aforesaid, but only if as a result of such adjustment the Purchase Price then in effect hereunder is hereby reduced and provided that there shall be no duplication of any adjustments otherwise made in accordance with the terms hereof.
(4) On the expiration of any Option or the termination of any right to convert or exchange any Convertible Securities, the Purchase Price then in effect hereunder shall forthwith be increased to the Purchase Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
(5) In case any Options shall be issued in connection with the issue or sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration.
(6) In case any Common Shares, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor. In case any Common Shares, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration as determined in good faith by the Board of Directors.
(7) The number of Common Shares outstanding at any given time shall not include shares owned or held by or for the account of the Company, but the disposition of any
shares so owned or held shall be considered an issue or sale of Common Shares for the purpose of this Paragraph 3.1.
(8) In case the Company shall declare a dividend or make any other distribution upon the stock of the Company payable in Common Shares, Options or Convertible Securities, then in such case any Common Shares, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.
3.2. Determination of Date of Issuance or Sale of Common Shares. For purposes of Paragraph 3.1, in case the Company shall take a record of the holders of its Common Shares for the purpose of determining holders entitled (x) to receive a dividend or other distribution payable in Common Shares, Options or Convertible Securities, or (y) to subscribe for or purchase Common Shares, Options or Convertible Securities, then such record date shall be deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right or subscription or purchase, as the case may be.
3.3. Subdivisions and Combinations. In case the Company shall at any time subdivide (other than by means of a dividend payable in Common Shares covered by subparagraph 3.1(8)) its outstanding Common Shares into a greater number of shares, the Purchase Price in effect immediately prior to such subdivision shall be appropriately reduced, and, conversely, in case the outstanding Common Shares of the Company shall be combined into a smaller number of shares, the Purchase Price in effect immediately prior to such combination shall be proportionately increased.
3.4. Reorganization, Reclassification, Consolidation, Merger or Sale of Assets. If any capital reorganization or reclassification of the shares of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Shares shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Shares, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the Holder of this Warrant shall have the right to acquire and receive upon exercise hereof such common stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation, merger or sale) with respect to or in exchange for such number of outstanding Common Shares of the Company as would have been received upon exercise of this Warrant at the Purchase Price then in effect. The Company will not effect any such consolidation, merger or sale unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument, mailed or delivered to the Holder of this Warrant at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such holder such common stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. In the event that pursuant to the terms of this Paragraph 3.4, this Warrant becomes exercisable for securities other than Common Shares, then the provisions of Section 3 shall apply to such securities as though such securities were Common Shares. If a purchase, tender or exchange offer is made to and accepted by the holders of more than 50% of the outstanding Common Shares of the Company, the Company shall not effect any
consolidation, merger or sale with the person having made such offer or with any Affiliate of such person unless prior to the consummation of such consolidation, merger or sale the holder of this Warrant shall have been given a reasonable opportunity to then elect to receive upon the exercise of this Warrant either the common shares, securities or assets then issuable with respect to the Common Shares of the Company or the common shares, securities or assets, or the equivalent, issued to previous holders of the Common Shares in accordance with such offer. For purposes hereof the term "Affiliate" with respect to any given person shall mean any person controlling, controlled by or under common control with the given person.
3.5. No Adjustment for Exercise of Certain Options, Warrants, Etc. The provisions of this Section 3 shall not apply to any Common Shares issued, issuable or deemed outstanding under subparagraphs (1) to (8) of paragraph 3.1, inclusive: (i) to any person pursuant to any stock option, stock purchase or similar plan or arrangement for the benefit of employees or directors of the Company or its subsidiaries; provided that any Common Shares issued pursuant to any such plan or arrangement (in excess of 1,700,000 shares) shall be approved by the Board of Directors or a duly organized committee thereof, it being further provided that, with respect to Class A Warrants exercised by the Initial Investors or their Affiliates (as defined in the Registration Statement filed by the Company in connection with the Company's public offering of its Common Shares), this Section 3 shall apply with respect to any Common Shares issued pursuant to any such plan or arrangement in excess of 1,700,000 shares (ii) pursuant to options, warrants and conversion rights in existence on the date of issuance hereof or (iii) pursuant to the exercise of any Class A Warrants or Class B Warrants described in the Company's prospectus relating to the initial public offering of its Common Shares.
3.6. Notices of Record Date, Etc. In the event that:
(1) the Company shall declare any cash dividend upon its Common Shares, or
(2) the Company shall declare any dividend upon its Common Shares payable in common shares or make any special dividend or other distribution to the holders of its Common Shares, or
(3) the Company shall offer for subscription pro rata to the holders of its Common Shares any additional common shares of any class or other rights, or
(4) there shall be any capital reorganization or reclassification of the shares of the Company, including any subdivision or combination of its outstanding Common Shares, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation, or
(5) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in connection with such event, the Company shall give to the Holder of this Warrant:
(i) at least ten (10) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and
(ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least ten (10) days prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Shares shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Shares shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first class mail, postage prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the books of the Company.
3.7. Adjustments for Other Distributions. If at any time or from time to time on or after the date of issuance hereof, the Company shall distribute, grant or issue to all holders of its Common Shares any of its assets or debt securities or any rights or warrants to purchase assets or securities of the Company (including securities or cash, but excluding (x) distributions covered by Section 3.1 or (y) cash dividends or other cash distributions that are paid out of consolidation current net earnings or earnings retained in the business as shown on the books of the Company unless such cash distributions in any twelve month period exceed 3.00% of the average Market Price of the Common Shares for the fifteen (15) trading days ending on the first day of such twelve month period) (collectively, the "Purchase Rights"), then the Holder of this Warrant shall be entitled to, at its option:
(i) have the Purchase Price reduced to the Purchase Price (calculated to the nearest tenth of a cent) determined by multiplying the Purchase Price in effect immediately prior to the time of distribution of such Purchase Rights by a fraction, the numerator of which shall be the difference between (x) the Market Price immediately prior to such distribution and (y) the fair market value of the assets, securities, rights or warrants applicable to one Common Share (which fair market value shall be determined by the Company in accordance with generally accepted accounting principals) and the denominator of which shall be the Market Price immediately prior to such distribution; provided that in the case of a distribution, grant or issuance pursuant to a purchase, underwriting or similar agreement, the Market Price shall mean the Market Price in effect upon the date such agreement is executed by the Company; or
(ii) acquire (within thirty (30) days after the later to occur of the initial exercise date of such Purchase Rights or receipt by such Holder of the notice concerning Purchase Rights to which such Holder shall be entitled under Para-
graph 3.6) and upon the terms applicable to such Purchase Rights either: (x) the aggregate Purchase Rights which such Holder could have acquired if it had held the number of Common Shares acquirable upon exercise of this Warrant immediately before the grant, issuance or sale of such Purchase Rights; provided that if any Purchase Rights were distributed to holders of Common Shares without the payment of additional consideration by such holders, corresponding Purchase Rights shall be distributed to the exercising holder of this Warrant as soon as possible after such exercise and it shall not be necessary for the exercising holder of this Warrant specifically to request delivery of such rights; or (y) in the event that any such Purchase Rights shall have expired or shall expire prior to the end of said thirty (30) day period, the number of Common Shares or the amount of property which such Holder could have acquired upon such exercise at the same time or times at which the Company granted, issued or sold such expired Purchase Rights.
3.8. Adjustment by Board of Directors. If any event occurs as to which the provisions of this Section 3 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holder of this Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of increasing the Purchase Price as otherwise determined pursuant to any of the provisions of this Section 3 except in the case of a combination of shares of a type contemplated in Paragraph 3.3 and then in no event to an amount larger than the Purchase Price as adjusted pursuant to Paragraph 3.3.
3.9. Fractional Shares. The company shall not issue fractions of Common Shares upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a Common Share would, except for the provisions of this Paragraph 3.9, be issuable upon exercise of this Warrant, the company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the product of such fraction, calculated to the nearest one-hundredth (1/100), and the Market Price of a Common Share as of such date of exercise.
3.10. Officers' Statement as to Adjustments. Whenever the Purchase Price shall be adjusted as provided in this Section 3, the Company shall forthwith file at the office designated for the exercise of this Warrant a statement, signed by the chairman of the Board, the President, any Vice President or the Treasurer of the Company, showing in reasonable detail the facts requiring such adjustment and the Purchase Price that will be effective after such adjustment. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to the record holder of this warrant at his or its address appearing on the Warrant register of the Company. If such notice relates to an adjustment resulting from an event referred to in Paragraph 3.6, such notice shall be included as part of the notice required to be mailed and published under the provisions of Paragraph 3.6.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its charter or through reorganization, reclassification, consolidation, amalgamation, merger, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder hereof against dilution or other impairment. Without limiting the generality of the foregoing, the Company will not increase the par value of any Common Share receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and at all times will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Common Shares upon the exercise of this Warrant.
5. RESERVATION OF COMMON SHARES, ETC., ISSUABLE UPON EXERCISE OF WARRANTS. The Company shall at all times reserve and keep available out of its authorized but unissued Common Shares, solely for issuance and delivery upon the exercise of this Warrant and other similar warrants, such number of its duly authorized Common Shares as from time to time shall be issuable upon the exercise of this Warrant and all other similar warrants at the time outstanding.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to it, or (in the case of mutilation) upon surrender and cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of like tenor.
7. REMEDIES. The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that the same may be specifically enforced.
8. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to all of which each taker or owner hereof consents and agrees:
(a) Nether this Warrant, the Common Shares underlying this Warrant (the "Underlying Stock") nor the rights of the Holder hereunder may be transferred except in compliance with the provisions of a certain Subscription Agreement and a certain Shareholders Agreement executed in connection with the issuance of this Warrant, copies of which are on file at the principal office of the Company.
The provisions of this Section 8 shall be binding upon any transferee of this Warrant and upon each holder of Underlying Stock.
(b) Subject to the limitation described in this Section 8, title to this Warrant may be transferred by endorsement (by the Holder hereof executing the form of assignment at the end hereof including guaranty of signature) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery.
(c) Any person in possession of this Warrant properly endorsed and, if not the original holder hereof, to whom possession was transferred in accordance with the provisions was transferred in accordance with the provisions of clauses (a) and (b) of this Section 8 is authorized to represent himself as absolute owner hereof and is granted power to transfer absolute title hereto by endorsement and delivery hereof to a bona fide purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of every such bona fide purchaser, and every such bona fide purchaser shall acquire title hereto and to all rights represented hereby.
(d) Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder of this Warrant as the absolute owner hereof for all purposes without being affected by any notice to the contrary.
(e) The Company shall not be required to pay any U.S. federal or state transfer tax or charge that may be payable in respect of any transfer involved in the transfer or delivery of this Warrant or the issuance or conversion or delivery of certificates for Common Shares in a name other than that of the registered Holder of this warrant or to issue or deliver any certificates for Common Shares upon the exercise of this Warrant until any and all such taxes and charges shall have been paid by the Holder of this Warrant or until it has been established to the Company's satisfaction that no such tax or charge is due.
9. NO RIGHTS TO VOTE OR RECEIVE DIVIDENDS OR OTHER DISTRIBUTIONS. Prior to the exercise of this Warrant, the Holder hereof shall not be entitled to any rights of a shareholder of the Company with respect to Common Shares for which this Warrant shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
10. MAILING OF NOTICES, ETC. All notices and other communications from the Company to the Holder of this Warrant shall be mailed by first-class certified mail, postage prepaid, to the address furnished to the Company in writing by the last Holder of this Warrant who shall have furnished an address to the Company in writing.
11. CHANGE, WAIVER, ETC. The terms of this Warrant may not be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the Holder of this Warrant against which enforcement of the change, waiver, discharge or termination is sought.
12. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of Bermuda, without regard to principles regarding conflicts of laws.
ARCH CAPITAL GROUP LTD.
Title:
Dated:
Attest:
[To be signed only upon exercise of Warrant]
To Arch Capital Group Ltd.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ________________ Common Shares of Arch Capital Group Ltd. and herewith makes payment of $_________ therefor and/or requests that the number of Common Shares for which the within Warrant is exercisable to reduced by __________ Common Shares (in addition to the Common Shares being purchased) and/or delivers _________ Common Shares, the aggregate of such payment being equal to the aggregate purchase price for the Common Shares being purchased, and requests that the certificates for the Common Shares being purchased be issued in the name of, and be delivered to, _____________, whose address is ----------------.
Dated:
[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ______________ the within Warrant and appoints _______________ attorney to transfer said right on the books of Arch Capital Group Ltd. with full power of substitution in the premises.
Dated:
In the presence of
Exhibit 4.2
CONFORMED COPY
SHAREHOLDERS AGREEMENT
BY AND AMONG
THE SHAREHOLDERS SIGNATORY HERETO
AND
ARCH CAPITAL GROUP LTD.
DATED AS OF NOVEMBER 20, 2001
CONFORMED TO REFLECT
AMENDMENT DATED JANUARY 3, 2001
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions.........................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company...............9 Section 2.2. Representations and Warranties of Warburg...................9 Section 2.3. Representations and Warranties of H&F......................10 Section 2.4. Representations and Warranties of GE.......................10 Section 2.5. Representations and Warranties of Trident..................10 Section 2.6. Representations and Warranties of Farallon.................11 |
ARTICLE III
VOTING; BOARD REPRESENTATION
Section 3.1. Board of Directors.........................................11 Section 3.2. Committees of the Board....................................13 Section 3.3. Investor Protection Matters................................14 Section 3.4. Voting.....................................................16 Section 3.5. Chairman of the Company....................................17 Section 3.6. Certain Transactions.......................................17 |
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1. Demand Registrations.......................................17 Section 4.2. Shelf Registration.........................................20 Section 4.3. Piggy-Back Registration....................................20 Section 4.4. Allocation of Shares to be Registered......................20 Section 4.5. Registration Procedures....................................21 Section 4.6. Registration Expenses......................................25 Section 4.7. Indemnification; Contribution..............................25 |
ARTICLE V
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS;
RESTRICTIONS ON TRANSFER AND CONVERSION
Section 5.1. Tag-Along Rights; Drag-Along Rights........................27 Section 5.2. Restrictions on Transfer...................................29 Section 5.3. Restrictions on Conversion.................................29 |
ARTICLE VI
RESTRICTIONS ON DIVIDENDS AND SHARE REPURCHASES
ARTICLE VII
EFFECTIVENESS AND TERMINATION
Section 7.1. Effectiveness..............................................30
Section 7.2. Termination................................................30
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Injunctive Relief..........................................31 Section 8.2. Successors and Assigns.....................................31 Section 8.3. Amendments; Waiver.........................................32 Section 8.4. Notices....................................................32 Section 8.5. Applicable Law.............................................33 Section 8.6. Headings...................................................34 Section 8.7. Integration................................................34 Section 8.8. Severability...............................................34 Section 8.9. Consent to Jurisdiction....................................34 Section 8.10. Counterparts...............................................34 |
SHAREHOLDERS AGREEMENT, dated as of November 20, 2001 (this "Agreement"), by and among ARCH Capital Group Ltd., a company registered under the laws of Bermuda (the "Company"), WARBURG PINCUS (BERMUDA) PRIVATE EQUITY VIII, L.P., a limited partnership organized under the laws of Bermuda, WARBURG PINCUS (BERMUDA) INTERNATIONAL PARTNERS, L.P., a limited partnership organized under the laws of Bermuda, WARBURG PINCUS NETHERLANDS INTERNATIONAL PARTNERS I, C.V., an entity organized under the laws of the Netherlands, WARBURG PINCUS NETHERLANDS INTERNATIONAL PARTNERS II, C.V., an entity organized under the laws of the Netherlands (each, a "Warburg Purchaser," and collectively, "Warburg"), HFCP IV (BERMUDA), L.P., a limited partnership organized under the laws of Bermuda, H&F INTERNATIONAL PARTNERS IV-A (BERMUDA), L.P., a limited partnership organized under the laws of Bermuda, H&F INTERNATIONAL PARTNERS IV-B (BERMUDA), L.P., a limited partnership organized under the laws of Bermuda, and H&F EXECUTIVE FUND IV (BERMUDA), L.P., a limited partnership organized under the laws of Bermuda (each, a "H&F Purchaser," and collectively, "H&F," and together with Warburg and such other Persons that are, or may hereafter become, parties hereto (in either case for purposes of such provisions hereof as may be indicated immediately above the signature of such other Persons) pursuant to the terms of Section 8.2 hereof, the "Investors").
W I T N E S S E T H :
WHEREAS, the Company and certain of the Investors have entered into a Subscription Agreement, dated as of October 24, 2001, as amended November 20, 2001 (the "Subscription Agreement"), pursuant to the terms of which, among other things, the Company shall issue and sell to the Investors, and Investors shall acquire from the Company, (1) Series A Convertible Preference Shares, par value U.S. $0.01 per share, of the Company (the "Preference Shares"), and (2) Class A Warrants to purchase common shares, par value U.S. $0.01 per share, of the Company (the "Common Shares") (the "Class A Warrants," and together with the Preference Shares, the "Purchased Securities") (such sale and purchase and the other transactions contemplated by the Subscription Agreement or described in the following recitals, the "Transactions");
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, Purchased Securities;
WHEREAS, the Company, Warburg, H&F and Trident have entered into a letter agreement, dated as of November 8, 2001, pursuant to the terms of which, among other things, Warburg assigned to Trident its right, and Trident assumed from Warburg its obligation, under the Subscription Agreement to purchase certain Purchased Securities;
WHEREAS, the Company, Warburg, H&F and GE have entered into a letter agreement, dated as of November 20, 2001, pursuant to the terms of which, among other things, Warburg assigned to GE its right, and GE assumed from Warburg its obligation, under the Subscription Agreement to purchase certain Purchased Securities;
WHEREAS, the Company, Warburg, H&F and Farallon have entered into a letter agreement, dated as of November 20, 2001, pursuant to the terms of which, among other things, H&F assigned to Farallon its right, and Farallon assumed from H&F its obligation, under the Subscription Agreement to purchase certain Purchased Securities;
WHEREAS, the execution of this Agreement is a condition to the obligation of the parties to consummate the Transactions; and
WHEREAS, the Company and Investors desire to establish in this Agreement certain terms and conditions concerning the acquisition of Purchased Securities and related provisions concerning the Investors' relationship with and investment in the Company following the consummation of the Transactions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. In addition to other terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the meanings ascribed to them below:
"Affiliate" shall mean, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person (including with respect to individuals, any trusts, foundations, family limited partnerships or similar entities); provided, however, that no portfolio investment of either Warburg or H&F, or any of their respective Affiliates, shall be
deemed to be an Affiliate of Warburg or H&F, as the case may be; provided, further, that none of the Farallon Purchasers or Farallon, or any of their respective Affiliates, shall be deemed to be an Affiliate of H&F. As used in this definition, "control" (including, with correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).
"Agreement" shall have the meaning assigned to such term in the preamble hereto.
"Approval Date" shall mean the later of the dates on which the Requisite Shareholder Approval and the Requisite Regulatory Approval occur.
"Beneficially Own" shall mean, with respect to any securities, having "beneficial ownership" of such securities for purposes of Rule 13d-3 or 13d-5 under the Exchange Act as in effect on the date hereof, and "Beneficial Ownership" shall have the corresponding meaning.
"Blackout Period" shall have the meaning assigned in Section 4.1(c).
"Board" shall mean the duly elected Board of Directors of the Company in office at the applicable time.
"Business Day" shall mean any day that is not a Saturday, Sunday or other day on which the commercial banks in New York City are authorized or required by law to remain closed.
"Bye-laws" shall mean the bye-laws of the Company.
"Claims" shall have the meaning assigned in Section 4.7(a).
"Class A Warrants" shall have the meaning assigned in the recitals hereto.
"Closing" shall mean the consummation of the Transactions pursuant to the terms of the Subscription Agreement.
"Common Shares" shall have the meaning assigned in the recitals hereto.
"Company" shall have the meaning assigned in the preamble hereto.
"Demand Registration" shall mean any registration effected pursuant to a Warburg Demand Request or a H&F Demand Request.
"Director" shall mean any member of the Board.
"Effective Period" shall have the meaning assigned in Section 4.5(a)(3).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations that may from time to time be promulgated thereunder.
"Existing Registration Rights" shall have the meaning assigned in Section 4.1(a) hereof.
"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".
"Farallon Permitted Transferee" shall mean, with respect to any Farallon Purchaser, any Person or entity that directly or indirectly through one or more intermediaries controls, or is controlled by or is under common control with such Farallon Purchaser or an entity over which such Farallon Purchaser has management rights.
"GE" shall mean Insurance Private Equity Investors, L.L.C. and Orbital Holdings, Ltd., collectively, with each individually being a "GE Purchaser".
"GE Permitted Transferee" shall mean, with respect to any GE Purchaser, any Person or entity that directly or indirectly through one or more intermediaries controls, or is controlled by or is under common control with such GE Purchaser or an entity over which such GE Purchaser has management rights, or any successor trustees or trust (if applicable).
"H&F" shall have the meaning assigned in the preamble hereto.
"H&F Demand Request" shall have the meaning assigned in Section 4.1(b) hereof.
"H&F Demand Shares" shall have the meaning assigned in Section 4.1(b) hereof.
"H&F Directors" shall have the meaning assigned in Section 3.1(c) hereof.
"H&F Purchaser" shall have the meaning assigned the preamble hereto.
"H&F Registrable Shares" shall have the meaning assigned in Section 4.1(b) hereof.
"Independent Director" means a Director who is not an Affiliate of either Warburg or H&F.
"Initial H&F Director" shall have the meaning assign in Section 3.1(b).
"Initial Investment" shall mean, with respect to any Investor, the total number of Common Shares issuable (a) upon conversion of the Preference Shares acquired by such Investor at the Closing, (b) upon conversion of any additional Preference Shares acquired by such Investor with respect to the Preference Shares referred to in clause (a) pursuant to the terms of the Subscription Agreement (or the Management Subscription Agreement), (c) upon exercise for cash of the Class A Warrants acquired by such Investor at Closing, (d) upon exercise for cash of any additional Class A Warrants acquired by such Investor pursuant to the terms of the Subscription Agreement (or the Management Subscription Agreement) and (e) any other securities issued in respect of the securities described in clauses (a) though (d) of this definition or into which such securities shall be converted in connection with stock splits, reverse stock splits, stock dividends or distributions, or combinations or similar recapitalizations.
"Initial Shares" shall mean, with respect to any Investor, (a) the Preference Shares acquired by such Investor at the Closing, (b) any additional Preference Shares acquired by such Investor with respect to the Preference Shares referred to in clause (a) pursuant to the terms of the Subscription Agreement (or the Management Subscription Agreement), (c) the Class A Warrants acquired by such Investor at Closing, (d) any additional Class A Warrants acquired by such Investor pursuant to the terms of the Subscription Agreement (or the Management Subscription Agreement) and (e) any other securities issued in respect of the securities described in clauses (a) though (d) of this definition or into which such securities shall be converted in connection with stock splits, reverse stock splits, stock dividends or distributions, or combinations or similar recapitalizations. References to the "the number of Initial Shares" shall mean the number of Common Shares comprising the Initial Shares (based, in the case of Preference Shares and Class A Warrants, upon the number of Common Shares issuable upon conversion or exercise for cash thereof).
"Initial Warburg Director" shall have the meaning assigned in Section 3.1(b) hereof.
"Interested Party Transaction" shall mean any transaction between the Company or any of its Subsidiaries and any officer or Director, or Affiliate of any officer or Director, of the Company.
"Investors" shall have the meaning assigned in the preamble hereto.
"Investor Shares" shall mean, at any time, any Common Shares issuable in respect of Initial Shares acquired by an Investor and any Common Shares acquired by an Investor after the Closing (and any Common Shares or other securities issued in respect thereof or into which such Common Shares shall be converted in connection with stock splits, reverse stock splits, stock dividends or distributions, or combinations or similar recapitalizations).
"Management Purchasers" shall have the meaning set forth in the recitals hereto.
"Management Subscription Agreement" shall have the meaning set forth in the recitals hereto.
"Mandatory Conversion Date" shall have the meaning set forth in Section 3.3 hereof.
"Market Value" shall mean, as of any date, the average of the daily high and low sales prices per Common Share on the Nasdaq for each of the twenty full trading days immediately preceding (but not including) such date.
"Material Transaction" shall have the meaning assigned in Section 4.1(c).
"Maximum Number" shall have the meaning assigned in Section 4.4.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"Nasdaq Independent Director" shall have the meaning specified in Rule 4200(a)(14) of the Rules of the National Association of Securities Dealers, Inc.
"Participating Investor" shall have the meaning assigned in Section 4.5(a)(2) hereof.
"Per Share Price" shall have the meaning assigned in the Subscription Agreement.
"Person" shall mean any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"Piggy-Back Registration" shall have the meaning assigned in Section 4.3.
"Piggy-Back Request" shall have the meaning assigned in Section 4.3.
"Preference Shares" shall have the meaning assigned in the recitals hereto.
"Purchased Securities" shall have the meaning assigned in the recitals hereto.
"Registrable Shares" shall have the meaning assigned in Section 4.1(b) hereof.
"Requisite Nasdaq Approval" shall have the meaning assigned in the Certificate of Designations for the Preference Shares.
"Requisite Regulatory Approval" shall have the meaning assigned in the Certificate of Designations for the Preference Shares.
"Requisite Shareholder Approval" shall have the meaning assigned in the Certificate of Designations for the Preference Shares.
"Retained Investment" shall mean, with respect to any Investor, at any time, the amount of the Initial Investment Beneficially Owned by such Investor at such time.
"Retained Percentage" shall mean, with respect to any Investor, at any time, the quotient, expressed as a percentage, of (a) such Investor's Retained Investment, over (b) such Investor's Initial Investment.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations that may from time to time be promulgated thereunder.
"Selling Investor" shall have the meaning assigned in Section 5.1(a) hereof.
"Shelf Registration Statement" shall have the meaning assigned in Section 4.2 hereof.
"Subscription Agreement" means the Subscription Agreement, dated as of October 24, 2001, by and between the Company and each of the Purchasers named therein, as amended from time to time in accordance with its terms.
"Subsidiary" shall mean, with respect to any Person, any other entity of which securities or other ownership interests having ordinary power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.
"Tag-Along Investor" shall have the meaning assigned in Section 5.1(a) hereof.
"Third Party Sale" shall have the meaning assigned in Section 5.1(a) hereof.
"Third Party Sale Notice" shall have the meaning assigned in Section 5.1(a) hereof.
"Transactions" shall have the meaning assigned in the recitals hereto.
"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."
"Votes" shall mean votes entitled to be cast generally in the election of Directors.
"Voting Power" shall mean, calculated at a particular point in time, the ratio, expressed as a percentage, of (a) the Votes represented by the Voting Securities with respect to which the Voting Power is being determined, to (b) the aggregate Votes represented by all then outstanding Voting Securities. For this purpose, the votes attributable to the Preference Shares shall be on an as-converted basis, without regard to the limitations imposed under the Certificate of Designations.
"Voting Securities" shall mean (a) the Common Shares, (b) the Preference Shares and (c) shares of any other class of securities of the Company then entitled to vote generally in the election of Directors.
"Warburg" shall have the meaning assigned in the preamble hereto.
"Warburg Demand Request" shall have the meaning assigned in Section 4.1(a) hereof.
"Warburg Demand Shares" shall have the meaning assigned in Section 4.1(a) hereof.
"Warburg Directors" shall have the meaning assigned in Section 3.1(c) hereof.
"Warburg Purchaser" shall have the meaning assigned in the preamble hereto.
"Warburg Registrable Shares" shall have the meaning assigned in Section 4.1(a) hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company. The Company represents and warrants to each Investor as follows:
(a) The Company has been duly formed and is validly existing as a company in good standing under the laws of Bermuda and has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by the Company and the Company has taken all necessary and appropriate action to execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by the Company and, assuming due authorization and valid execution and delivery by each other party hereto, is a valid and binding obligation of the Company, enforceable against it in accordance with its terms.
Section 2.2. Representations and Warranties of Warburg. Each Warburg Purchaser represents and warrants to each other party hereto as follows:
(a) Such Warburg Purchaser has been duly formed and is validly existing and in good standing, to the extent applicable, under the laws of its respective jurisdiction of formation and has all necessary power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by such Warburg Purchaser and such Warburg Purchaser has taken all necessary and appropriate action to execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by such Warburg Purchaser and, assuming due authorization and valid execution and delivery by the Company, is a valid and binding obligation of such Warburg Purchaser, enforceable against it in accordance with its terms.
Section 2.3. Representations and Warranties of H&F. Each H&F Purchaser represents and warrants to each other party hereto as follows:
(a) Such H&F Purchaser has been duly formed and is validly existing under the laws of its respective jurisdiction of formation and has all necessary power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by such H&F Purchaser and such H&F Purchaser has taken all necessary and appropriate action to execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by such H&F Purchaser and, assuming due authorization and valid execution and delivery by the Company, is a valid and binding obligation of such H&F Purchaser, enforceable against it in accordance with its terms.
Section 2.4. Representations and Warranties of GE. Each GE Purchaser represents and warrants to each other party hereto as follows:
(a) Such GE Purchaser has been duly formed and is validly existing under the laws of its respective jurisdiction of formation and has all necessary power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by such GE Purchaser and such GE Purchaser has taken all necessary and appropriate action to execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by such GE Purchaser and, assuming due authorization and valid execution and delivery by the Company, is a valid and binding obligation of such GE Purchaser, enforceable against it in accordance with its terms.
Section 2.5. Representations and Warranties of Trident. Each Trident Purchaser represents and warrants to each other party hereto as follows:
(a) Such Trident Purchaser has been duly formed and is validly existing under the laws of its respective jurisdiction of formation and has all necessary power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by such Trident Purchaser and such Trident Purchaser has taken all necessary and appropriate action to execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by such Trident Purchaser and, assuming due authorization and valid execution and delivery by the
Company, is a valid and binding obligation of such Trident Purchaser, enforceable against it in accordance with its terms.
Section 2.6. Representations and Warranties of Farallon. Each Farallon Purchaser represents and warrants to each other party hereto as follows:
(a) Such Farallon Purchaser has been duly formed and is validly existing under the laws of its respective jurisdiction of formation and has all necessary power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by such Farallon Purchaser and such Farallon Purchaser has taken all necessary and appropriate action to execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by such Farallon Purchaser and, assuming due authorization and valid execution and delivery by the Company, is a valid and binding obligation of such Farallon Purchaser, enforceable against it in accordance with its terms.
ARTICLE III
VOTING; BOARD REPRESENTATION
Section 3.1. Board of Directors. (a) The Company shall be managed by its duly elected officers subject to the overall direction and supervision of the Board. Each of Warburg and H&F shall, and shall cause its controlled Affiliates to, vote all Voting Securities that such Investor and its controlled Affiliates Beneficially Own and take any and all actions as may be reasonably necessary to cause the provisions of this Section 3.1, including the election of the Warburg Directors and H&F Directors, to be effectuated.
(b) Prior to the Closing, and as a condition to the Closing, the Company shall use its best efforts to secure the resignation of a number of Directors such that there remain seven Directors immediately following the Closing (the "Pre-Closing Directors"), of whom at least two shall qualify as Nasdaq Independent Directors. Immediately following the Closing, the size of the Board shall be decreased such that the Board shall consist of nine Directors, and one Director designated by Warburg, (the "Initial Warburg Director") and one Director designated by H&F (the "Initial H&F Director") shall each be appointed by the Board as a director to serve in such classes of Directors as may be necessary to assure that each class in Directors is as near in equal in number as possible and that the Initial Warburg Director and the Initial H&F Director are distributed among different classes.
(c) Effective as of 12:00 a.m. on the date immediately following the Approval Date, the size of the Board shall be increased such that the Board shall then and thereafter consist of 17 Directors (such number not to be increased without the consent of Warburg and H&F) and (i) five individuals designated by Warburg (together with the Initial Warburg Director, and any other replacements or substitutions therefor, the "Warburg Directors"), and (ii) two individual designated by H&F (together with the Initial H&F Director, and any other replacements or substitutions therefor, the "H&F Directors") shall each be appointed by the Board as a Director to serve in such classes of Directors as may be necessary to assure that each class in Directors is as near in equal in number as possible and that the Warburg Directors and the H&F Directors, respectively, are distributed among different classes.
(d) Following the Approval Date, for so long as Warburg's Retained Percentage is "x" as set forth in the table below, the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual meeting of shareholders shall include such number of individuals designated by Warburg, which together with the number of Warburg Directors whose term is not scheduled to expire, is equal to the number set forth opposite such Warburg's Retained Percentage in the table below:
Warburg's Retained Number of Nominees
Percentage
x > 75% 6
-
65% < x < 75% 5
-
55% < x < 65% 4
-
40% < x < 55% 3
-
25% < x < 40% 2
-
10% < x < 25% 1;
-
|
provided that, if the Approval Date has not occurred, for so long as Warburg's Retained Percentage is equal to or exceeds 10%, at least one Warburg Director shall be included in the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual general meeting of shareholders at which a Warburg Director's term is scheduled to expire. For so long as Warburg has the power to have at least two Directors included in the slate of nominees recommended by the Board, power with respect to one such Director shall be exercised by Warburg Pincus (Bermuda) Private Equity VIII, L.P and power with respect to one such Director shall be exercised by Warburg Pincus (Bermuda) International Partners, L.P.
(e) Following the Approval Date, for so long as H&F's Retained Percentage is "x" as set forth in the table below, the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual meeting of shareholders shall include such number of individuals designated by H&F, which together with the number
of H&F Directors whose term is not scheduled to expire, is equal to the number set forth opposite such H&F's Retained Percentage in the table below:
H&F's Retained Number of Nominees
Percentage
x > 60% 3
-
35% < x < 60% 2
-
20% < x < 35% 1;
-
|
provided that, if the Approval Date has not occurred, for so long as H&F's Retained Percentage is equal to or exceeds 20%, at least one H&F Director shall be included in the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual general meeting of shareholders at which an H&F Director's term is scheduled to expire. For so long as H&F has the power to have at least one Director included in the slate of nominees recommended by the Board, such power shall be exercised by HFCP IV (Bermuda), L.P.
(f) Each of Warburg and H&F shall provide to the Company in a timely manner all information required by Regulation 14A and Schedule 14A under the Exchange Act with respect to each Warburg Director and each H&F Director, respectively.
(g) The Company shall use its best efforts (i) to cause a special meeting of the Board to be called upon the request of at least three Directors and (ii) to cause to be submitted, at the 2002 annual general meeting of the Company's shareholders, a proposal to amend Bye-Law 20 of the Company to replace "by a majority of the total number of Directors" with "by three Directors or a majority of the total number of Directors (whichever is fewer)".
Section 3.2. Committees of the Board. The Company and the Investors agree that (1) for so long as there is at least one Warburg Director on the Board, each committee of the Board shall include at least one Warburg Director, and (2) for so long as there is at least one H&F Director on the Board, each committee of the Board shall include at least one H&F Director. The foregoing is subject to any restrictions on service on the audit committee as may be applicable under the rules of the National Association of Securities Dealers, Inc. or the SEC.
Section 3.3. Investor Protection Matters. Except as specifically set forth herein, in accordance with the Company's Bye-laws, the Board shall act by the vote of a majority of the Directors present at a meeting, and the required quorum for a meeting of the Board shall be a majority of the whole Board. Notwithstanding the foregoing, and except as specifically set forth in the Subscription Agreement, (a) prior to the Approval Date, unless
also approved by the Initial Warburg Director and the Initial H&F Director, and
(b) following the Approval Date, unless also approved by (i) at least one
Warburg Director, if at such time Warburg's Retained Percentage equals or
exceeds 25%, and (ii) at least one H&F Director, if at such time H&F's Retained
Percentage equals or exceeds 50%, the Company shall not (and shall not permit
any of its Subsidiaries to):
(1) amend, or propose to amend, its certificate of incorporation, memorandum of association, bye-laws, or other organizational documents, or amend, terminate or waive any provision under, the Subscription Agreement or any other Agreement entered into in connection therewith;
(2) split, consolidate, combine, subdivide, redeem or reclassify its share capital or other equity interests, or amend any term of the outstanding securities of the Company or its Subsidiaries;
(3) declare, set aside, make or pay any dividend or other distribution in respect of its share capital or other equity interests, or purchase or redeem, directly or indirectly, any share capital or other equity interests (other than (A) dividends by a Subsidiary of the Company to the Company or a Subsidiary of the Company, and (B) dividends or other distributions by any entity in which the Company or any Subsidiary owns a minority interest, made in the normal course of business, consistent with past practice);
(4) other than (A) in respect of grants or exercises under the 1999 Long Term Incentive and Share Award Plan, the 1995 Long Term Incentive and Share Award Plan and the Long Term Incentive Plan for New Employees, (B) issuances of securities pursuant to the Subscription Agreement and the Management Subscription Agreement, and (C) issuances of securities upon conversion or exercise of securities issued pursuant to clause (B) or of securities outstanding on the date hereof, issue, deliver or sell, or authorize the issuance, delivery or sale of, any share capital of any class, any equity interest, or any options, warrants, conversion or other rights to purchase any such shares or equity interests, or any securities convertible into or exchangeable for such shares or equity interests, or issue or authorize the issuance of any other security in respect of or in lieu of or in substitution for shares of capital or equity interests, or enter into any agreements restricting the transfer of, or affecting the rights of holders of, Common Shares, grant any preemptive or anti-dilutive rights to any holder of any class of securities of the Company, or grant registration rights with respect to any of the Company's securities;
(5) amend or waive any rights under any grants made under the Long Term Incentive Plan for New Employees;
(6) incur any indebtedness for borrowed money, guarantee any such indebtedness or issue or sell any debt securities, in excess of $5,000,000 in the aggregate, or prepay or refinance any indebtedness for borrowed money;
(7) engage in any Interested Party Transaction;
(8) acquire any assets or properties for cash or otherwise for an amount in excess of $5,000,000 in the aggregate;
(9) acquire, whether by means of merger, stock or asset purchase, joint venture or other similar transaction, any equity interest in, or all or substantially all of the assets of any Person, or any business or division of any Person;
(10) replace the independent auditors of the Company or make any material change in any method of financial accounting or accounting practice, except for any such change required by reason of a concurrent change in U.S. generally accepted accounting principles;
(11) sell or otherwise dispose of assets material to the Company and its Subsidiaries taken as a whole, except as specifically contemplated by the Subscription Agreement;
(12) increase by 5% or more the annual base compensation of any officer or key employee of the Company, or enter into or make any material change in any severance contract or arrangement with any such officer or key employee;
(13) consummate a complete liquidation or dissolution of the Company, a merger or consolidation (A) in which the Company or any Subsidiary is a constituent corporation or (B) with respect to which the Common Shares would have the right to vote under applicable law, a sale of all or substantially all of the Company's assets, or any similar business combination; provided, however, that the foregoing shall not apply to any merger or consolidation solely between or among wholly owned Subsidiaries of the Company, other than any such transaction between Subsidiaries which are considered "Core Insurance Operations" under Section E, and Subsidiaries which are not considered "Core Insurance Operations";
(14) enter into any transaction involving in excess of $1,000,000, or, if such transaction is in the ordinary course of business consistent with past practice, $5,000,000;
(15) approve the annual plan, annual capital expenditure budget or the five-year plan of the Company and its Subsidiaries, taken as a whole;
(16) remove the Chief Executive Officer or Chairman of the Company, or appoint a new Chief Executive Officer or Chairman of the Company; or
(17) enter into any agreement with respect to the foregoing; provided,
however, transactions solely between or among the Company and/or one or
more of its wholly owned Subsidiaries shall be excluded from clauses (6),
(8), (9), (11) and (14) (and from clause (17) to the extent relating to an
agreement with respect to a transaction excluded by this proviso), other
than any such transaction between Subsidiaries which are considered "Core
Insurance Operations" under Section E, and Subsidiaries which are not
considered "Core Insurance Operations". In addition, prior to the Approval
Date, and after the Approval Date for so long as the Warburg Directors and
the H&F Directors together constitute a majority of the Board, (i) the
notice for each meeting of the Board called by the Chairman of the Board,
the President of the Company, the Warburg Directors or the H&F Directors
shall include a list of topics to be discussed at the meeting (the
"Agenda") and (ii) the Board shall not act on any matter that is not within
the Agenda without the consent of at least one Warburg Director and at
least one H&F Director.
Nothing in this Section 3.3 shall grant either H&F or Warburg any right or consent to the extent that such right would result in such party being deemed to "control" an insurance subsidiary of the Company that is domiciled in any state in the United States, where the exercise of such control would otherwise require the prior approval of such state. In addition, the rights of Warburg and H&F set forth in this Section 3.3 shall, in any event, terminate upon the mandatory conversion of the Preference Shares under paragraph (g)(2) of the Certificate of Designations for the Preference Shares (the "Mandatory Conversion Date") or the earlier conversion of all Preference Shares in accordance with their terms.
Section 3.4. Voting. Each Investor agrees to vote all Voting Securities Beneficially Owned by such Investor or by any controlled Affiliate of such Investor in favor of (a) the proposals to be submitted for approval of the shareholders of the Company at the special general meeting of the Company's shareholders to be held in connection with the Transactions and (b) the proposals to approve the grant to Robert Clements of 1,689,629 restricted shares and the grant to John M. Pasquesi of options to purchase 1,126,419 Common Shares at $20.00 per share, which grants were made in connection with the Transactions, which such proposals will be submitted for approval of the shareholders of the Company at the 2002 annual general meeting of the Company's shareholders.
Section 3.5. Chairman of the Company. For so long as he is willing and able to serve as the Chairman of the Company, Warburg and H&F agree to take such actions as may be necessary to cause Robert Clements to be duly elected as Chairman of the Company.
Section 3.6. Certain Transactions. For a period of two years after the Closing, except for transactions specifically contemplated by this Agreement, the Related Agreements (as defined in the Subscription Agreement) or the Purchased Securities, neither Warburg nor H&F nor any of their respective Affiliates will, directly or indirectly, without the prior approval of a majority of the Independent Directors: (a) acquire securities or assets from the Company or any of its Subsidiaries, (b) engage in any "Rule 13e-3 transaction" (as such term is defined in Rule 13e-3(a)(3) under the Securities Exchange Act of 1934, as amended) involving the Company, or (c) engage in any other transaction that would result in the compulsory acquisition of Common Shares. The Company shall not agree to amend this Section 3.6, without the prior approval of a majority of the Independent Directors. The Company, Warburg and H&F shall endeavor to include at all times two Independent Directors on the Board.
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1. Demand Registrations. (a) Warburg may at any time following
the date hereof and on not more than five separate occasions in the aggregate
and not more frequently than once during any 180 day period, require the Company
to file a registration statement under the Securities Act in respect of all or a
portion of the Investor Shares then Beneficially Owned by Warburg or by any
other person that Beneficially Owns Investor Shares and who acquired such
Investor Shares in connection with such person's status as a partner in any
partnership in which Warburg or any of its Affiliates is the general partner
(all such Investor Shares, the "Warburg Registrable Shares") (provided that such
request covers Warburg Registrable Shares with a Market Value on the date of the
Demand Request of at least $25 million), by delivering to the Company a written
notice stating that such right is being exercised, specifying the number of
Common Shares to be included in such registration (the shares subject to such
request, the "Warburg Demand Shares") and describing the intended method of
distribution thereof (a "Warburg Demand Request"). Upon receiving a Warburg
Demand Request, the Company shall (1) provide written notice of the Warburg
Demand Request, pursuant to Section 4.3 hereof, to H&F and each other Investor,
(2) use reasonable efforts to file as promptly as reasonably practicable a
registration statement on such form as the Company may reasonably deem
appropriate providing for the registration of the sale of such Warburg Demand
Shares and any other Investor Shares to be included pursuant to Sections 4.3 and
4.4 hereof pursuant to the intended method of distribution and (3) after the
filing of an initial version of the registration statement, use reasonable
efforts to cause such registration statement to be declared effective under the
Securities Act as promptly as practicable after the date of filing of such
registration
statement. Any Demand Registration filed pursuant to the request of Warburg may, subject to the provisions of Section 4.4 below, include other Common Shares that the Company is required to include in such registration statement by virtue of existing agreements between the holders of such Common Shares and the Company (the "Existing Registration Rights").
(b) H&F may at any time following the date hereof and on not more than five separate occasions in the aggregate and not more frequently than once during any 180 day period, require the Company to file a registration statement under the Securities Act in respect of all or a portion of the Investor Shares then Beneficially Owned by H&F or by any other person that Beneficially Owns Investor Shares and who acquired such Investor Shares in connection with such person's status as a partner in any partnership in which H&F or any of its Affiliates is the general partner (all such Common Shares, the "H&F Registrable Shares," and together with the Warburg Registrable Shares, the "Registrable Shares") (provided that such request covers H&F Registrable Shares with a Market Value on the date of the Demand Request of at least $25 million), by delivering to the Company a written notice stating that such right is being exercised, specifying the number of Common Shares to be included in such registration (the shares subject to such request, the "H&F Demand Shares") and describing the intended method of distribution thereof (a "H&F Demand Request"). Upon receiving a H&F Demand Request, the Company shall (1) provide written notice of the H&F Demand Request, pursuant to Section 4.3 hereof, to Warburg and each other Investor, (2) use reasonable efforts to file as promptly as reasonably practicable a registration statement on such form as the Company may reasonably deem appropriate providing for the registration of the sale of such H&F Demand Shares and any other Investor Shares to be included therein pursuant to Section 4.3 and 4.4 hereof pursuant to the intended method of distribution, and (3) after the filing of an initial version of the registration statement, use reasonable efforts to cause such registration statement to be declared effective under the Securities Act as promptly as practicable after the date of filing of such registration statement. Any Demand Registration filed pursuant to the request of H&F may, subject to the provisions of Section 4.4 below, include other Common Shares that the Company is required to include in such registration statement by virtue of the Existing Registration Rights.
(c) Notwithstanding anything in this Agreement to the contrary, the Company shall be entitled to postpone and delay, for reasonable periods of time not to exceed 60 consecutive days and in no event to exceed more than an aggregate of 90 days during any 360-day period (a "Blackout Period"), the filing or effectiveness of any Demand Registration if the Board shall determine that any such filing or the offering of any Registrable Shares would (1) in the good faith judgment of the Board, impede, delay or otherwise interfere with any pending or contemplated acquisition, corporate reorganization or other similar material transaction involving the Company (each, a "Material Transaction"), (2) based upon advice from the Company's investment banker or financial advisor, adversely affect any pending or contemplated financing, offering or sale of any class of securities by the Company, or (3) in
the good faith judgment of the Board, require disclosure of material non-public
information (other than information relating to an event described in clauses
(1) or (2) above) which, if disclosed at such time, would be harmful to the best
interests of the Company and its shareholders. Upon notice by the Company to
each Investor of any such determination, such Investor shall keep the fact of
any such notice strictly confidential, and during any Blackout Period promptly
halt any offer, sale, trading or transfer by it or any of its Subsidiaries of
any Common Shares for the duration of the Blackout Period set forth in such
notice (or until such Blackout Period shall be earlier terminated in writing by
the Company) and promptly halt any use, publication, dissemination or
distribution of the Demand Registration, each prospectus included therein, and
any amendment or supplement thereto by it for the duration of the Blackout
Period set forth in such notice (or until such Blackout Period shall be earlier
terminated in writing by the Company) and, if so directed by the Company, will
deliver to the Company any copies then in its possession of the prospectus
covering such Registrable Shares.
(d) In case a Demand Registration has been filed, if a Material Transaction has occurred, the Company may cause such Demand Registration to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Demand Registration for a reasonable period of time; provided, however, that in no event shall a Demand Registration so withdrawn by the Company count for the purposes of determining the number of Demand Registrations to which either Warburg or H&F is entitled under Section 4.1(a) or (b).
(e) In connection with any underwritten offering under this Section 4.1, the managing underwriter for such Demand Registration shall be jointly selected by Warburg and H&F, provided that such managing underwriter shall be a nationally recognized investment banking firm.
(f) Nothing in this Article IV shall affect or supersede any of the transfer restrictions set forth in Article V hereof or any of the other provisions of this Agreement.
Section 4.2. Shelf Registration. At the request of either Warburg or H&F, the Company shall use reasonable best efforts to file a registration statement on Form S-3, or any successor form thereto, covering the offering of Investor Shares by all Investors (subject to the provisions of Section 5.2 hereof) on a delayed or continuous basis (the "Shelf Registration Statement") to be effective as soon as reasonably practicable following the Closing Date. Upon effectiveness of the Shelf Registration Statement, the Company will use its reasonable best efforts to keep the Shelf Registration Statement effective with the SEC until such time the Investor Shares held by all Investors are freely tradable under Rule 144(k) under the Securities Act. Notwithstanding the foregoing, the Company may suspend the effectiveness of the Shelf Registration Statement during any Blackout Period.
Section 4.3. Piggy-Back Registration. If, at any time following the date hereof, the Company proposes to register any Common Shares under the Securities Act on its behalf or on behalf of any of its shareholders (including pursuant to a Demand Registration), on a form and in a manner that would permit registration of Common Shares (other than in connection with dividend reinvestment plans, rights offerings or a registration statement on Form S-4 or S-8 or any similar successor form), the Company shall give reasonably prompt written notice to each Investor of its intention to do so. Upon the written election of any Investor (a "Piggy-Back Request"), given within ten Business Days following the receipt by such Investor of any such written notice (which election shall specify the number of the Investor Shares intended to be disposed of by such Investor), the Company shall include in such registration statement (a "Piggy-Back Registration"), subject to the provisions of Section 4.4 hereof, such number of the Investor Shares as shall be set forth in such Piggy-Back Request.
Section 4.4. Allocation of Shares to be Registered. In the event that the Company proposes to register Common Shares in connection with an underwritten offering and a nationally recognized investment banking firm selected by the Company, or in the case of a Demand Registration selected by Warburg and H&F, to act as managing underwriter thereof reasonably and in good faith shall have advised the Company and each Investor in writing that, in its opinion, the inclusion in the registration statement of some or all of the Investor Shares sought to be registered in a Piggy-Back Request would adversely affect the price or success of the offering, the Company shall include in such registration statement such number of Common Shares as the Company is advised can be sold in such offering without such an effect (the "Maximum Number") as follows and in the following order of priority: (a) first, if such registration is not in connection with a Demand Registration, such number of Common Shares, if any, as the Company intended to be registered by the Company for its own account, or to be registered pursuant to Existing Registration Rights, to the extent such Existing Registration Rights so require; (b) second, if and to the extent that the number of Common Shares to be registered under clause (a) is less than the Maximum Number (or because the registration is a Demand Registration, in which case the Company is not permitted to offer Common Shares), such number of Investor Shares as Warburg, H&F, Trident, Farallon and GE (and, to the extent required by any Existing Registration Rights, any other holder of Common Shares having such rights) shall have intended to register which, when added to the number of Common Shares to be registered under clause (a), is less than or equal to the Maximum Number, it being understood that the number of shares included by Warburg, H&F, Trident, Farallon and GE (and such other holders under Existing Registration Rights) shall be cut back, if necessary, in proportion to their relative ownership at the time; and (c) third, if and to the extent that the number of Common Shares to be registered under clause (b) is less than the Maximum Number, such number of Investor Shares as the Participating Investors (other than Warburg, H&F, Trident, Farallon and GE (and such other holders under Existing Registration Rights)) shall have intended to register which, when
added to the number of Common Shares to be registered under clauses (a) and (b), is less than or equal to the Maximum Number, it being understood that the number of shares included by the Participating Investors (other than Warburg, H&F, Trident, Farallon and GE (and such other holders under Existing Registration Rights)) shall be cut back, if necessary, in proportion to their relative ownership.
Section 4.5. Registration Procedures. (a) In connection with each registration statement prepared pursuant to this Article IV, and in accordance with the intended method or methods of distribution of the Investor Shares as described in such registration statement, the Company shall, as soon as reasonably practicable and to the extent practicable:
(1) prepare and file with the SEC a registration statement on an appropriate registration form and use reasonable efforts to cause such registration statement to become and remain effective as promptly as reasonably practicable; provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall furnish to counsel to H&F and Warburg, if disposing of Registrable Shares under such registration statement, draft copies of all such documents proposed to be filed at least five days prior to such filing, which documents will be subject to the reasonable review of each of H&F and Warburg, as appropriate, and its agents and representatives;
(2) furnish without charge to each Investor seeking to dispose of Investor Shares thereunder (each, a "Participating Investor"), and the managing underwriter or underwriters, if any, at least one conformed copy of the registration statement and each post-effective amendment or supplement thereto (but excluding schedules, all documents incorporated or deemed incorporated therein by reference and all exhibits, unless requested in writing by such Participating Investor or such underwriter) and such number of copies of the summary, preliminary, final, amended or supplemented prospectuses included in such registration statement as such Participating Investor or such underwriter may reasonably request;
(3) except with respect to a Shelf Registration Statement, the obligations of the Company with respect to the effectiveness thereof to be governed by Section 4.2, use reasonable best efforts to keep such registration statement effective for the earlier of (A) 180 days and (B) such time as all of the securities covered by the registration statement have been disposed (the "Effective Period"); prepare and file with the SEC such amendments, post-effective amendments and supplements to the registration statement and the prospectus as may be necessary to maintain the effectiveness of the registration for the Effective Period and to cause the prospectus (and any amendments or supplements thereto) to be filed;
(4) use reasonable efforts to register or qualify the Investor Shares covered by such registration statement under such other securities or "blue sky" laws of such jurisdictions in the United States as are reasonably necessary, keep such registrations or qualifications in effect for so long as the registration statement remains in effect, and do any and all other acts and things which may be reasonably necessary to enable each Participating Investor or any underwriter to consummate the disposition of the Investor Shares in such jurisdictions;
(5) use reasonable efforts to cause the Investor Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable each Participating Investor to consummate the disposition of the Investor Shares;
(6) use reasonable efforts to cause all Investor Shares covered by such registration statement to be listed on the Nasdaq or on the principal securities exchange on which the Common Shares are then listed;
(7) promptly notify each Participating Investor and the managing underwriter or underwriters, if any, after becoming aware thereof, (A) when the registration statement or any related prospectus or any amendment or supplement thereto has been filed, and, with respect to the registration statement or any post-effective amendment, when the same has become effective, (B) of any request by the SEC for amendments or supplements to the registration statement or the related prospectus or for additional information, (C) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose, (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Investor Shares to be registered for sale in any jurisdiction or the initiation of any proceeding for such purpose or (E) within the Effective Period of the happening of any event or the existence of any fact that makes any statement in the registration statement or any post-effective amendment thereto, prospectus or any amendment or supplement thereto, or any document incorporated therein by reference untrue in any material respect or which requires the making of any changes in the registration statement or post-effective amendment thereto or any prospectus or amendment or supplement thereto so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(8) during the Effective Period, use its reasonable efforts to obtain the withdrawal of any order enjoining or suspending the use or effectiveness of the registration statement or any post-effective amendment thereto;
(9) deliver promptly to each of Warburg and H&F, if disposing of Investor Shares under such registration statement, copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and permit each of Warburg and H&F, if disposing of Investor Shares under such registration statement, to do such investigation, with respect to information contained in or omitted from the registration statement, as it reasonably deems necessary;
(10) in the case of an underwritten offering, use best efforts to enter into an underwriting agreement customary in form and scope for underwritten secondary offerings of the nature contemplated by the applicable registration statement;
(11) provide a transfer agent and registrar for all such Investor Shares covered by such registration statement not later than the effective date of such registration statement, subject to any applicable laws or regulations; and
(12) cooperate with each Participating Investor and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing such Investor Shares to be sold under the registration statement; and, in the case of an underwritten offering, enable such Investor Shares to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, may request in writing at least two Business Days prior to any sale of the Investor Shares to the underwriters.
(b) In the event that the Company would be required, pursuant to Section 4.5(a)(7)(E) above, to notify each Participating Investor or the managing underwriter or underwriters, if any, of the happening of any event specified therein, the Company shall, subject to the provisions of Section 4.1(c) hereof, as promptly as practicable, prepare and furnish to each Participating Investor and to each such underwriter a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Investor Shares that have been registered pursuant to this Agreement, such prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each Participating Investor agrees that, upon receipt of any notice from the Company pursuant to Section 4.5(a)(7)(E) hereof, it shall, and shall use its reasonable best efforts to cause any sales or placement agent or agents for the Investor Shares and the underwriters, if any, to, forthwith discontinue disposition of the Investor Shares until such Person shall have received copies of such amended or supplemented prospectus and, if so directed by the Company, to destroy or to deliver to the Company all copies, other than permanent file copies, then in its possession of the prospectus (prior to such
amendment or supplement) covering such Investor Shares as soon as practicable after such Participating Investor's receipt of such notice.
(c) Each Participating Investor shall furnish to the Company in writing its intended method of distribution of the Investor Shares it proposes to dispose of and such other information as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order for the Company to comply with its obligations under all applicable securities and other laws and to ensure that the prospectus relating to such Investor Shares conforms to the applicable requirements of the Securities Act. Each Participating Investor shall notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Participating Investor to the Company or of the occurrence of any event, in either case as a result of which any prospectus relating to the Investor Shares contains or would contain an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(d) In the case of any registration under Section 4.1 hereof pursuant to an underwritten offering, or in the case of a registration under Section 4.3 hereof if the Company has determined to enter into an underwriting agreement in connection therewith, all Investor Shares to be included in such registration shall be subject to the applicable underwriting agreement and no Person may participate in such registration unless such Person agrees to sell such Person's securities on the basis provided therein and completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) which must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be reasonably requested to register such Person's Investor Shares.
Section 4.6. Registration Expenses. The Company shall bear all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, fees and expenses in connection with the review of underwriting arrangements by the NASD Regulation, Inc. (including the fees of any "qualified independent underwriter"), agent fees and commissions, printing costs and fees and disbursements of its counsel, and of one counsel as may be reasonably selected by Warburg and H&F on behalf of the Participating Investors, and accountants, in each case, in connection with any registration and listing of any Investor Shares pursuant to Section 4.1, 4.2 or 4.3, other than underwriting discounts or
commissions in connection with the Investor Shares disposed of by any Participating Investor, which shall be borne by such Participating Investor.
Section 4.7. Indemnification; Contribution. (a) The Company shall, and it hereby agrees to, indemnify and hold harmless each Participating Investor and its partners, members, officers, directors, employees and controlling Persons, if any, and each underwriter, its partners, officers, directors, employees and controlling Persons, if any, in any offering or sale of Common Shares, against any losses, claims, damages or liabilities to which each such indemnified party may become subject, insofar as such losses, claims, damages or liabilities, or actions or proceedings in respect thereof, including any amounts paid in settlement as provided herein (collectively, "Claims"), arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement, or any preliminary or final prospectus contained therein, or any amendment or supplement thereto, or any document incorporated by reference therein, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and the Company shall, and it hereby agrees to, reimburse each Participating Investor or any such underwriter for any legal or other out-of-pocket expenses reasonably incurred by it in connection with investigating or defending any such Claims; provided, however, that the Company shall not be liable to any such Person in any such case to the extent that any such Claims arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary or final prospectus, or amendment or supplement thereto, in reliance upon and in conformity with information furnished in writing to the Company by such Participating Investor or any underwriter expressly for use therein.
(b) Each Participating Investor shall, and hereby agrees to (1) indemnify and hold harmless the Company, its directors, officers, employees and controlling Persons, if any, and each underwriter, its partners, officers, directors, employees and controlling Persons, if any, in any offering or sale of Common Shares, against any Claims to which each such indemnified party may become subject, insofar as such Claims arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary or final prospectus contained therein, or any amendment or supplement thereto, or any document incorporated by reference therein, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Participating Investor expressly for use therein, and (2) reimburse the Company for any legal or other out-of-pocket expenses reasonably incurred by the Company in connection with investigating or defending any such Claim.
(c) Promptly after receipt by an indemnified party under Section 4.7(a) or
Section 4.7(b) of written notice of the commencement of any action or proceeding
for which indemnification under Section 4.7(a) or Section 4.7(b) may be
requested, such indemnified party shall notify the indemnifying party in writing
of the commencement of such action or proceeding, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party in respect of such action or proceeding hereunder
unless the indemnifying party was materially prejudiced by such failure of the
indemnified party to give such notice, and in no event shall such omission
relieve the indemnifying party from any other liability it may have to such
indemnified party. In case any such action or proceeding shall be brought
against any indemnified party and it shall notify an indemnifying party of the
commencement thereof, such indemnifying party shall be entitled to participate
therein and, to the extent that it shall determine, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, such indemnifying party shall not be liable to such
indemnified party for any legal or any other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. If the indemnifying party is not entitled to,
or elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for each indemnified party with
respect to such claim. The indemnifying party will not be subject to any
liability for any settlement made without its consent, which consent shall not
be unreasonably withheld or delayed. No indemnifying party shall, without the
prior written consent of the indemnified party, compromise or consent to entry
of any judgment or enter into any settlement agreement with respect to any
action or proceeding in respect of which indemnification is sought under Section
4.7(a) or Section 4.7(b) (whether or not the indemnified party is an actual or
potential party thereto), unless such compromise, consent or settlement includes
an unconditional release of the indemnified party from all liability in respect
of such claim or litigation and does not subject the indemnified party to any
material injunctive relief or other material equitable remedy.
(d) Each Participating Investor and the Company agree that if, for any reason, the indemnification provisions contemplated by Sections 4.7(a) or 4.7(b) hereof are unavailable to or are insufficient to hold harmless an indemnified party in respect of any Claims referred to therein (other than as a result of the provisos thereto), then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such Claims in such proportion as is appropriate to reflect the relative fault of and benefits derived by the indemnifying party, on the one hand, and the indemnified party, on the other hand, as well as other equitable considerations. The amount paid or payable by an indemnified party as a result of the Claims referred to above shall be deemed to include (subject to the limitations set forth in Section 4.7(c) hereof) any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action, pro-
ceeding or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
ARTICLE V
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS;
RESTRICTIONS ON TRANSFER AND CONVERSION
Section 5.1. Tag-Along Rights; Drag-Along Rights. (a) In the event that Warburg, H&F or GE proposes to sell, convey, dispose or otherwise transfer Initial Shares (such party proposing to sell, the "Selling Investor") in a bona fide transaction to an un-Affiliated third party, or in a series of related bona fide transactions to multiple un-Affiliated third parties, and the net proceeds of such sale are reasonably expected to exceed $50 million (such a transaction, or series of related transactions, a "Third Party Sale"), such Selling Investor shall notify the other Investors having rights under this Section 5.1 (each such other Investor, a "Tag-Along Investor") in writing of such Third Party Sale, which notice shall set forth the material terms of such Third Party Sale, including, without limitation, the number of Initial Shares proposed to be sold and the per share price thereof (the "Third Party Sale Notice"). Such Tag-Along Investor shall have the right, but not the obligation, to participate in such Third Party Sale with respect to Initial Shares upon providing the Selling Investor written notice of intent to exercise such right within ten Business Days of the receipt of Third Party Sale Notice; provided, however, that (i) GE shall have such rights only (A) if Warburg is the Selling Investor, or (B) if H&F is the Selling Investor and Warburg shall have exercised its rights to become at Tag-Along Investor under this Section 5.1, and (ii) Farallon shall have such rights only (A) if H&F is the Selling Investor, or (B) if Warburg is the Selling Investor and H&F shall have exercised its rights to become a Tag-Along Investor under this Section 5.1. Such notice shall set forth the number of Initial Shares that such Tag-Along Investor desires to sell in such Third Party Sale, which such number shall not exceed that number of Initial Shares equal to the product of (i) the number of Initial Shares set forth in the Third Party Sale Notice, and (ii) the quotient of (A) the Retained Investment of such Tag-Along Investor, over (B) the sum of (I) the Retained Investment of the Selling Investor, and (II) the Retained Investment of all Tag-Along Investors. Notwithstanding the foregoing, this Section 5.1 shall not be applicable to any sale effected in the public markets (including by means of a "block trade" effected through any registered broker-dealer), or to any distribution to partners of any partnership in which either Warburg or H&F, or any of their respective Affiliates, is the general partner.
(b) In the event that Warburg or H&F proposes to become a Selling Investor under Section 5.1(a), Trident shall have the rights of a Tag-Along Investor under Section 5.1(a).
(c) In the event that Warburg and/or H&F proposes to sell, convey, dispose or otherwise transfer Initial Shares representing either 51% of the votes then entitled to be cast in the election of directors, or 51% of the then outstanding Common Shares (taking into account Common Shares issuable upon conversion of the Preference Shares) in a transaction, or in a series of related transactions, to a single Person or group, Warburg and H&F shall have the right to require that Trident, and Trident shall have the obligation to, participate in such transaction, up to a number of Initial Shares then Beneficially Owned by Trident that shall not exceed that number of Initial Shares equal to the product of (i) the number of Initial Shares proposed to be transferred, and (ii) the quotient of (A) the Retained Investment of Trident, over (B) the sum of (I) the Retained Investment of Warburg and H&F, and (II) the Retained Investment of Trident and all other Investors participating in such sale.
(d) No Tag-Along Investor under this Sections 5.1 shall be required to assume any responsibility for any indemnification obligations arising under such Third Party Sale in excess of the proportion of the number of Initial Shares sold by such party to the total number of Initial Shares sold in such Third Party Sale; provided, however, that the limitation provided in this Section 5.1(d) shall not be applicable to any indemnification obligations resulting from representations or warranties specifically relating to, and made by or on behalf of, such party.
Section 5.2. Restrictions on Transfer. Until the earliest to occur of (a) the first anniversary of the Closing, (b) the occurrence of any event that would cause Company's outstanding Class B Warrants to vest and/or become exercisable, or (c) the completion by the Company of a registered public offering of Common Shares the net proceeds to the Company of which exceed $25 million, each of Warburg, H&F, Farallon, GE and Trident, and each Management Purchaser, agrees that it or he will not sell, dispose, convey or otherwise transfer any of such Investor's Initial Shares if, following the consummation of such sale, the Retained Percentage of such Investor would be less that 66%; provided, however, that GE and Farallon shall have the right to sell, dispose, convey or otherwise transfer Initial Shares to any GE Permitted Transferee or any Farallon Permitted Transferee, respectively; provided, further, that such GE Permitted Transferee or such Farallon Permitted Transferee, as the case may be, shall become a party hereto and agree to be bound by the terms hereof. Following the earliest to occur of clauses (a), (b) or (c) in the preceding sentence, there shall be no restrictions on transfer of any Initial Shares, except as may be imposed by applicable law, including by the Securities Act. Nothing in this Section 5.2 shall be deemed to affect any disposition of Initial Shares pursuant to the terms of any merger, consolidation or other business combination transaction, or to the tender of any Initial Shares into any tender or
exchange offer, provided, that such merger, consolidation or other business combination has been approved by, or such tender or exchange offer has been recommended to, the shareholders of the Company by, the Board.
Section 5.3. Restrictions on Conversion. Prior to the receipt of the
Requisite Nasdaq Approval, no Investor shall convert any Preference Share or
exercise any Class A Warrant, if the number of Common Shares to be issued to
such Investor upon such conversion or exercise, together with all Common Shares
issued upon prior conversions or exercise by such holder, would exceed such
Investor's Permissible Conversion Amount. An Investor's "Permissible Conversion
Amount" shall be a number of Common Shares equal to the product of (a) the total
number of Common Shares issuable to such Investor upon conversion or exercise of
all such Investor's Initial Shares, and (b) a fraction the numerator of which is
(i) (A) the lesser of (x) the product of .199 times the total number of Common
Shares issued and outstanding on November 19, 2001 and (y) the product of .199
times the total voting power of the Common Shares issued and outstanding on
November 19, 2001, minus (B) the 140,380 Common Shares issued on November 20,
2001, and the denominator of which is (ii) the total number of Common Shares
issuable upon conversion or exercise of all Initial Shares. Prior to the Receipt
of the Requisite Shareholder Approval, each holder of Preference Shares and
Class A Warrants issued under the Subscription Agreement or the Management
Subscription Agreement shall require any transferee of Preference Shares or
Class A Warrants to agree to this restriction, such that it applies to such
transferee as if such transferee had acquired such securities at Closing, and
attributing to such transferee a pro rata portion of any conversion or exercise
by the transferor, prior to such transfer. Prior to receipt of the Requisite
Regulatory Approval, no Investor shall convert any Preference Shares into Common
Shares or exercise any Class A Warrants unless all necessary approvals for such
ownership of Common Shares have been obtained, it being understood that, subject
to Section 5.2 hereof, this restriction on conversion and exercise shall not
restrict an Investor from converting or exercising and selling, or otherwise
disposing of, the shares received on conversion or exercise in such a manner as
would not result in violation of any applicable regulation. GE shall not convert
any Preference Shares, or exercise any Class A Warrant, until such time as any
required waiting period, including extensions thereof, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have
expired or been terminated.
ARTICLE VI
RESTRICTIONS ON DIVIDENDS AND SHARE REPURCHASES
The Company shall not declare any dividend or make any other distribution on, or in respect of, any Common Shares, and shall not repurchase any Common Shares, until such time as the Company has repurchased from Warburg and H&F, in proportion to their respective Retained Investments at the time of such repurchase, Initial Shares having an aggregate value of $250 million, at a per share price acceptable to Warburg and H&F.
ARTICLE VII
EFFECTIVENESS AND TERMINATION
Section 7.1. Effectiveness. This Agreement shall take effect immediately
upon the Closing and shall remain in effect until it is terminated pursuant to
Section 7.2 hereof.
Section 7.2. Termination. Other than with respect to Article IV hereof and with respect to the termination provisions specifically elsewhere set forth in this Agreement as may be applicable to any particular Section of this Agreement, this Agreement shall terminate upon the earliest to occur of the following:
(a) the tenth anniversary of the Closing; or
(b) mutual written agreement of the Company, Warburg and H&F at any time to terminate this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Injunctive Relief. Each party hereto acknowledges that it would be impossible to determine the amount of damages that would result from any breach of any of the provisions of this Agreement and that the remedy at law for any breach, or threatened breach, of any of such provisions would likely be inadequate and, accordingly, agrees that each other party shall, in addition to any other rights or remedies which it may have, be entitled to seek such equitable and injunctive relief as may be available from any
court of competent jurisdiction to compel specific performance of, or restrain any party from violating, any of such provisions. In connection with any action or proceeding for injunctive relief, each party hereto hereby waives the claim or defense that a remedy at law alone is adequate and agrees, to the maximum extent permitted by law, to have each provision of this Agreement specifically enforced against it, without the necessity of posting bond or other security against it, and consents to the entry of injunctive relief against it enjoining or restraining any breach or threatened breach of such provisions of this Agreement.
Section 8.2. Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of and be enforceable by the Company, Warburg and H&F, and for the purposes of such provisions hereof as may be indicated immediately above the signatures of Farallon, GE, Trident and each Management Purchaser, and their respective successors and permitted assigns, and no such term or provision is for the benefit of, or intended to create any obligations to, any other Person, except as otherwise specifically provided in this Agreement. Neither this Agreement nor any rights or obligations hereunder shall be assignable without the consent of each other party; provided, however, that in connection with any sale or transfer by Warburg or H&F of any Investor Shares, the transferee of such Investor Shares may become a party hereto solely for purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof and have the rights of, and be subject to the obligations of, an "Investor" upon due execution and delivery of a counterpart signature page hereto. Notwithstanding the foregoing, GE or Farallon may assign its rights hereunder to any GE Permitted Transferee or any Farallon Permitted Transferee, respectively, provided such GE Permitted Transferee or Farallon Permitted Transferee, as the case may be, becomes a party hereto and agrees to be bound by the terms hereof.
Section 8.3. Amendments; Waiver. This Agreement may be amended only by an agreement in writing executed by the parties hereto. Any party may waive in whole or in part any benefit or right provided to it under this Agreement, such waiver being effective only if contained in a writing executed by the waiving party. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon breach thereof shall constitute a waiver of any such breach or of any other covenant, duty, agreement or condition, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.
Section 8.4. Notices. Except as otherwise provided in this Agreement, all notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, when delivered personally or by facsimile transmission if promptly electronically confirmed, as follows, or as set forth on the signature page executed by the any Investor:
If to Company:
Arch Capital Group, Ltd.
20 Horseneck Lane
Greenwich, Connecticut 06830
Attention: General Counsel Telephone: (203) 862-4300 Fax: (203) 861-7240
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Immanuel Kohn, Esq.
Telephone: (212) 701-3000
Fax: (212) 269-5420
If to Warburg:
c/o Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Scott A. Arenare, Esq.
Telephone: (212) 878-0600
Fax: (212) 878-9200
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Andrew R. Brownstein, Esq.
Telephone: (212) 403-1000
Fax: (212) 403-2000
If to H&F:
c/o Hellman & Friedman LLC
One Maritime Plaza
Suite 1200
San Francisco, CA 94111
Attention: Richard M. Levine, Esq.
Telephone: (415) 788-5111
Fax: (415) 788-0176
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Patricia A. Vlahakis, Esq.
Telephone: (212) 403-1000
Fax: (212) 403-2000
or to such other address, facsimile number or telephone as either party may, from time to time, designate in a written notice given in a like manner.
Section 8.5. Applicable Law. Except to the extent of the applicability of the Companies Law of Bermuda to this Agreement, this Agreement shall be governed by and construed in accordance with the laws of the State of New York with regard to contracts formed and to be entirely performed within such state without giving effect to principles of conflicts of law.
Section 8.6. Headings. The descriptive headings of the several sections in this Agreement are for convenience only and do not constitute a part of this Agreement and shall not be deemed to limit or affect in any way the meaning or interpretation of this Agreement. References to "Sections" and "Articles" herein shall be to the Sections or Articles of this Agreement, unless the context requires otherwise.
Section 8.7. Integration. This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter.
Section 8.8. Severability. If any term or provision of this Agreement or any application thereof shall be declared or held invalid, illegal or unenforceable, in whole or in part, whether generally or in any particular jurisdiction, such provision shall be deemed
amended to the extent, but only to the extent, necessary to cure such invalidity, illegality or unenforceability, and the validity, legality and enforceability of the remaining provisions, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby.
Section 8.9. Consent to Jurisdiction. In connection with any suit, claim, action or proceeding arising out of this Agreement, the parties each hereby consent to the in personam jurisdiction of the United States federal courts and state courts located in the Borough of Manhattan, City of New York, State of New York; the Company, Warburg and H&F each agree that service in the manner set forth in Section 8.4 hereof shall be valid and sufficient for all purposes; and the parties each agree o, and irrevocably waive any objection based on forum non conveniens or venue, appear in any United States federal court or state court located in the Borough of Manhattan, City of New York, State of New York.
Section 8.10. Counterparts. This Agreement may be executed by the parties hereto in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective authorized officers as of the date set forth at the head of this Agreement.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
--------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President and
General Counsel
|
HFCP 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
|
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.,
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 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
|
WARBURG PINCUS NETHERLANDS
INTERNATIONAL PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
its General Partner,
By: /s/ Kewsong Lee
---------------------------------------------
Name: Kewsong Lee
Title: Partner
|
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)
INTERNATIONAL PARTNERS, L.P.
By: Warburg, Pincus (Bermuda)
International Ltd.
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
|
For purposes of Articles II, IV and V and Section 3.4 hereof:
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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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 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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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 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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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
For purposes of Articles II, IV and V and Section 3.4 hereof:
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.
For purposes of Articles II, IV and V and Section 3.4 hereof:
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
For purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof:
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
For purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof:
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
For purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof:
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: Robert Clements
Facsimile: (203) 625-8366
For purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof:
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
For purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof:
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
For purposes of Article IV and Sections 3.4, 5.2 and 5.3 hereof:
MARC GRANDISSON
By: /s/ Marc Grandisson
---------------------------------------------
Name: Marc Grandisson
|
Notice Information Marc Grandisson:
c/o Arch Reinsurance Ltd.
Craig Appin House
8 Wesley Street
Hamilton HM 11
Bermuda
Attention: Marc Grandisson
Facsimile: (441) 296-8241
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-
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).
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).
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."
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
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.
Exhibit 10.2
EXECUTION COPY
AMENDMENT NO. 2
Reference is made to the Subscription Agreement dated as of October 24, 2001, as amended November 20, 2001 (the "Subscription Agreement"), by and among Arch Capital Group Ltd., a company organized under the laws of Bermuda (the "Company"), the parties listed on the signature pages hereto and certain other persons. Capitalized terms used without definition herein have the meanings given to them in the Subscription Agreement.
This amendment ("Amendment") to the Subscription Agreement, the Shareholders Agreement, the Certificate and the form of Bye-Law 75 is made as of January 3, 2002.
For good and valid consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:
A. AMENDMENTS TO SUBSCRIPTION AGREEMENT
1. Section B.2 of the Subscription Agreement is amended and restated in its entirety as follows:
"2. Adjustment for Triggering Event. In the event that a Triggering Event occurs, then, within five business days of the occurrence of such Triggering Event or the Applicable Date (whichever is later), the Company shall issue and deliver to each Purchaser one or more certificates registered in the name of such Purchaser (or its designee) representing that number of Preference Shares equal to the difference between (i) such Purchaser's Total Purchase Price divided by an amount equal to the difference between the Per Share Price and $1.50 and (ii) such Purchaser's Total Purchase Price divided by the Per Share Price."
2. Section B.3.f of the Subscription Agreement is amended and restated in its entirety as follows:
"(f) In addition to paragraph (e), if the Adjustment Basket is less than zero and in the event that a Triggering Event occurs, then, on the Second Applicable Date, the Company shall also issue and deliver to each Purchaser a number of Preference Shares equal to the difference between (A) such Purchaser's Total Purchase Price divided by an amount equal to [P - $1.50 - B/12.86 million] and (B) the Purchaser's Total Purchase Price divided by an amount equal to (P - $1.50)."
3. Section D.4.b of the Subscription Agreement is amended to restate clause
(ii) in its entirety as follows: "(ii) the proposal to obtain the Requisite
Nasdaq Approval".
4. Section E.2 of the Subscription Agreement is amended by replacing the last sentence thereof with the following:
"Until the latest of (a) the receipt of Requisite Shareholder Approval, (b) the receipt of Requisite Regulatory Approval and (c) ninety days following the Fourth Anniversary Adjustment Date, to the extent that the number and kind of outstanding capital shares of the Company change from time to time, a corresponding adjustment shall be made by the Company in the number and kind of outstanding capital shares of Newco."
5. Section E.3 of the Subscription Agreement is amended by replacing the last sentence thereof with the following:
"An "Exchange Trigger Event" shall mean any one or more of the following:
(a) failure to obtain the Requisite Shareholder Approval (unless such
failure was due to a breach by the Purchaser of a covenant hereunder)
within five months of the Closing Date, (b) failure to obtain the Requisite
Regulatory Approval (unless such failure was due to a breach by the
Purchaser of a covenant hereunder) within six months of the Closing Date or
(c) if the Adjustment Basket (as determined pursuant to paragraphs (a)
through (g) of Section B.3) is less than zero and its absolute value at any
time exceeds $250 million."
6. Section E.4 of the Subscription Agreement is amended by replacing
"ninety days following the consummation of the Final Adjustment contemplated by
Section B.3. of this Agreement" with "ninety days following the Fourth
Anniversary Adjustment Date".
7. Section F.5 of the Subscription Agreement is amended by replacing "Second Applicable Date" with "Fourth Anniversary Adjustment Date".
8. Schedule A of the Subscription Agreement is amended to add the following definitions:
"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
"Fourth Anniversary Adjustment Date" means (i) the last date on which an
adjustment could be required to be determined under Section B.3.g. hereof or
(ii) if such an adjustment is required to be determined, the date of completion
of such adjustment.
"Requisite Nasdaq Approval" has the meaning given to such term in the Certificate.
"Triggering Event" means either:
(i) the closing price of the Common Shares being at or above $30 per share (as adjusted, for any event which would subject the exercise price of the Warrants to an adjustment, by the same percentage as the percentage adjustment of such exercise price) for 20 out of 30 consecutive trading days at any time following the Closing Date; or
(ii) the acquisition by any person, entity or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more, in the aggregate, of either the voting power of the then outstanding Common Shares or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in election of directors; provided, however, that if such acquisition results in whole or in part from -------- ------- a transfer of any Common Shares or other voting securities by Marsh & McLennan Companies, Inc. or any of its subsidiaries (or by any parent of Marsh & McLennan Companies, Inc. or any of its subsidiaries), such acquisition shall not constitute a Triggering Event unless such transfer is effected pursuant to an offer by such acquiror to purchase all of the Company's outstanding Common Shares.
9. Schedule B of the Subscription Agreement is amended to add the following at the end of the definition of "C":
"For the avoidance of doubt, the foregoing shall not include, and in no event shall the Per Share Price be reduced by, any payments made in exchange for cancellation of the Company's class B warrants outstanding on the date of this Agreement."
B. AMENDMENTS TO CERTIFICATE OF DESIGNATIONS
1. Paragraph (f)(3)(B) shall be amended by replacing "Requisite Shareholder Approval" with "Requisite Nasdaq Approval".
2. Paragraph (g)(2) shall be amended and restated in its entirety as follows:
"(2) Mandatory Conversion. Following the later of (a) receipt of the
Requisite Shareholder Approval and the Requisite Regulatory Approval, and
(b) 90 days after the Fourth Anniversary Adjustment Date, the Preference
Shares shall automatically convert into Common Shares. The number of Common
Shares deliverable upon conversion of a Preference Share shall be as set
forth in paragraphs (g)(1) and (h)."
3. Paragraph (h) shall be amended by replacing the heading "Conversion Price Adjustments" with "Adjustments".
4. Paragraph (i) shall be amended by adding the following definitions:
"Fourth Anniversary Adjustment Date" means (i) the last date on which an adjustment could be required to be determined under Section B.3.g. of the Subscription Agreement or (ii) if such an adjustment is required to be determined, the date of completion of such adjustment.
"Requisite Nasdaq Approval" means the approval by the holders of Common Shares and Preference Shares of the issuance of Common Shares issuable upon conversion of all Preference Shares issued under the Subscription Agreement and the Management Subscription Agreement and the issuance of Common Shares issuable upon exercise of all Class A Warrants issued under the Subscription Agreement and the Management Subscription Agreement (including by operation of the anti-dilution adjustments in the Class A Warrants), to the extent that the number or voting power of all such Common Shares and the 140,380 Common Shares issued on November 20, 2001 would exceed 19.9% of the total number or the total voting power of the Common Shares issued and outstanding on November 19, 2001.
"Shareholders Agreement" means the Shareholders Agreement, dated as of November 20, 2001, by and between the Company and the shareholders named therein, as amended from time to time in accordance with its terms.
5. Paragraph (i) shall be amended by replacing the definition of "Requisite Regulatory Approval" in its entirety with the following:
"Requisite Regulatory Approval" means approval by the insurance authorities in the States of Florida, Missouri, Nebraska and Wisconsin of the acquisition of greater than 9.9% of the total voting power of all shares of the Company entitled to vote generally in the election of directors by the "Warburg Purchasers" and the "H&F Purchasers" (as defined in the Shareholders Agreement) who are original signatories to the Shareholders Agreement.
6. Paragraph (i) shall be amended by replacing the definition of "Requisite Shareholder Approval" in its entirety with the following:
"Requisite Shareholder Approval" means (a) the approval by the holders of Common Shares and Preference Shares of an amendment to bye-law 45 in the form included in Exhibit III to the Subscription Agreement and (b) the Requisite Nasdaq Approval.
7. Paragraph (i) shall be amended by replacing the definition of "Subscription Agreement" in its entirety with the following:
"Subscription Agreement" means the Subscription Agreement, dated as of October 24, 2001, by and between the Company and each of the Purchasers named therein, as amended from time to time in accordance with its terms.
8. Paragraph (i) shall be amended by deleting the definition of "Conversion Price" in its entirety.
C. AMENDMENTS TO FORM OF BYE-LAW 75
Exhibit III to the Subscription Agreement is amended and restated in the form annexed hereto.
D. AMENDMENTS TO SHAREHOLDERS AGREEMENT
1. Section 1.1 of the Shareholders Agreement is amended to add the following definition:
"Requisite Nasdaq Approval" shall have the meaning assigned in the Certificate of Designations for the Preference Shares.
2. Section 3.1(c)-(e) of the Shareholders Agreement is amended and restated in its entirety as follows:
"(c) Effective as of 12:00 a.m. on the date immediately following the
Approval Date, the size of the Board shall be increased such that the Board
shall then and thereafter consist of 17 Directors (such number not to be
increased without the consent of Warburg and H&F) and (i) five individuals
designated by Warburg (together with the Initial Warburg Director, and any
other replacements or substitutions therefor, the "Warburg Directors"), and
(ii) two individual designated by H&F (together with the Initial H&F
Director, and any other replacements or substitutions therefor, the "H&F
Directors") shall each be appointed by the Board as a Director to serve in
such classes of Directors as may be necessary to assure that each class in
Directors is as near in equal in number as possible and that the Warburg
Directors and the H&F Directors, respectively, are distributed among
different classes.
(d) Following the Approval Date, for so long as Warburg's Retained Percentage is "x" as set forth in the table below, the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual meeting of shareholders shall include such number of individuals designated by War-
burg, which together with the number of Warburg Directors whose term is not scheduled to expire, is equal to the number set forth opposite such Warburg's Retained Percentage in the table below:
Warburg's Retained Number of Nominees
Percentage
x > 75% 6
-
65% < x < 75% 5
-
55% < x < 65% 4
-
40% < x < 55% 3
-
25% < x < 40% 2
-
10% < x < 25% 1;
-
|
provided that, if the Approval Date has not occurred, for so long as Warburg's Retained Percentage is equal to or exceeds 10%, at least one Warburg Director shall be included in the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual general meeting of shareholders at which a Warburg Director's term is scheduled to expire. For so long as Warburg has the power to have at least two Directors included in the slate of nominees recommended by the Board, power with respect to one such Director shall be exercised by Warburg Pincus (Bermuda) Private Equity VIII, L.P and power with respect to one such Director shall be exercised by Warburg Pincus (Bermuda) International Partners, L.P.
(e) Following the Approval Date, for so long as H&F's Retained Percentage is "x" as set forth in the table below, the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual meeting of shareholders shall include such number of individuals designated by H&F, which together with the number of H&F Directors whose term is not scheduled to expire, is equal to the number set forth opposite such H&F's Retained Percentage in the table below:
H&F's Retained Number of Nominees
Percentage
x > 60% 3
-
35% < x < 60% 2
-
20% < x < 35% 1;
-
|
provided that, if the Approval Date has not occurred, for so long as H&F's Retained Percentage is equal to or exceeds 20%, at least one H&F Director shall be included in
the slate of nominees recommended by the Board to shareholders for election as directors of the Company at each annual general meeting of shareholders at which an H&F Director's term is scheduled to expire. For so long as H&F has the power to have at least one Director included in the slate of nominees recommended by the Board, such power shall be exercised by HFCP IV (Bermuda), L.P."
3. Section 3.1 of the Shareholders Agreement is amended to add the following as clause (g):
"(g) The Company shall use its best efforts (i) to cause a special meeting of the Board to be called upon the request of at least three Directors and (ii) to cause to be submitted, at the 2002 annual general meeting of the Company's shareholders, a proposal to amend Bye-Law 20 of the Company to replace "by a majority of the total number of Directors" with "by three Directors or a majority of the total number of Directors (whichever is fewer)"."
4. Section 3.3 of the Shareholders Agreement is amended to add the following after the semicolon in clause (13):
"provided, however, that the foregoing shall not apply to any merger or consolidation solely between or among wholly owned Subsidiaries of the Company, other than any such transaction between Subsidiaries which are considered "Core Insurance Operations" under Section E, and Subsidiaries which are not considered "Core Insurance Operations";".
5. Section 3.3 of the Shareholders Agreement is amended to delete the period at the end of clause (17) and adding the following before the last paragraph:
"; provided, however, transactions solely between or among the Company and/or one or more of its wholly owned Subsidiaries shall be excluded from clauses (6), (8), (9), (11) and (14) (and from clause (17) to the extent relating to an agreement with respect to a transaction excluded by this proviso), other than any such transaction between Subsidiaries which are considered "Core Insurance Operations" under Section E, and Subsidiaries which are not considered "Core Insurance Operations". In addition, prior to the Approval Date, and after the Approval Date for so long as the Warburg Directors and the H&F Directors together constitute a majority of the Board, (i) the notice for each meeting of the Board called by the Chairman of the Board, the President of the Company, the Warburg Directors or the H&F Directors shall include a list of topics to be discussed at the meeting (the "Agenda") and (ii) the Board shall not act on any matter that is not within the Agenda without the consent of at least one Warburg Director and at least one H&F Director."
6. Section 5.3 of the Shareholders Agreement is amended to replace the first two sentences only with the following:
"Section 5.3. Restrictions on Conversion. Prior to the receipt of the Requisite Nasdaq Approval, no Investor shall convert any Preference Share or exercise any Class A Warrant, if the number of Common Shares to be issued to such Investor upon such conversion or exercise, together with all Common Shares issued upon prior conversions or exercise by such holder, would exceed such Investor's Permissible Conversion Amount. An Investor's "Permissible Conversion Amount" shall be a number of Common Shares equal to the product of (a) the total number of Common Shares issuable to such Investor upon conversion or exercise of all such Investor's Initial Shares, and (b) a fraction the numerator of which is (i) (A) the lesser of (x) the product of .199 times the total number of Common Shares issued and outstanding on November 19, 2001 and (y) the product of .199 times the total voting power of the Common Shares issued and outstanding on November 19, 2001, minus (B) the 140,380 Common Shares issued on November 20, 2001, and the denominator of which is (ii) the total number of Common Shares issuable upon conversion or exercise of all Initial Shares."
E. MISCELLANEOUS
1. 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.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
------------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General Counsel &
Secretary
|
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/ Georgia Lee
-------------------------------------
Name: Georgia Lee
Title: Vice President
|
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/ Georgia Lee
-------------------------------------
Name: Georgia Lee
Title: Vice President
|
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/ Georgia Lee
-------------------------------------
Name: Georgia Lee
Title: Vice President
|
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/ Georgia Lee
-------------------------------------
Name: Georgia Lee
Title: Vice President
|
Annex to Amendment No. 2
Bye-Law 75
75. Certain Subsidiaries
With respect to any company incorporated under the laws of Bermuda, Barbados or the Cayman Islands all of the voting shares of which are owned (directly or indirectly through subsidiaries) by the Company, and any other subsidiary of the Company designated by the Board of the Company (together, the "Designated Companies"), the board of directors of each such Designated Company shall consist of the persons who have been elected by the Members as Designated Company Directors. Notwithstanding the general authority set out in Bye-law 2(1), the Board shall vote all shares owned by the Company in each Designated Company to ensure the constitutional documents of such Designated Company require such Designated Company Directors to be elected as the directors of such Designated Company, and to elect such Designated Company Directors as the directors of such Designated Company. The Company shall enter into agreements with each such Designated Company to effectuate or implement this Bye-law.
Exhibit 10.3
EXECUTION COPY
ARCH CAPITAL GROUP LTD.
20 Horseneck Lane
Greenwich, CT 06830
November 20, 2001
Orbital Holdings, Ltd. Warburg Pincus Private Equity VIII, L.P.
(the "GE Orbital Holdings Warburg Pincus International Partners, L.P.
Purchaser") Warburg Pincus Netherlands International
c/o GE Capital Partners I, C.V.
120 Longridge Rd. Warburg Pincus Netherlands International
Stamford, CT 06927 Partners II, C.V.
(collectively, "Warburg")
466 Lexington Avenue
New York, NY 10017
HFCP IV (Bermuda), L.P. ("H&F")
c/o Hellman & Friedman LLC
One Maritime Plaza
Suite 1200
San Francisco, CA 94111
|
Ladies and Gentlemen:
This letter agreement (this "Agreement") confirms the agreement reached today among each of the parties signatories hereto regarding the participation of the GE Orbital Holdings Purchaser in the purchase of a portion of the Securities, as contemplated by, and on the terms set forth in, this Agreement and the Subscription Agreement dated as of October 24, 2001, as amended (the "Subscription Agreement") by and among Arch Capital Group Ltd. ("Arch"), Warburg and H&F (the "Original Signatories"), and certain other matters in connection therewith. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Subscription Agreement.
1. Investment by GE Orbital Holdings Purchaser. Warburg hereby assigns, without recourse or warranty by it, to the GE Orbital Holdings Purchaser (as set forth in Schedule 1 hereto) the right, and obligation, to purchase an aggregate of $10,000,000 of the Securities on the terms and conditions set forth in the Subscription Agreement (except as ex-
plicitly modified hereby), as a Purchaser (as defined in the Subscription Agreement). The GE Orbital Holdings Purchaser acknowledges that its investment will be required to be made on the Closing Date, simultaneously with the investments being made by the Original Signatories. The GE Orbital Holdings Purchaser shall become a "Purchaser" under the Subscription Agreement and an "Investor" under the Shareholders Agreement (solely for purposes of Sections 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof, and the provisions implementing the provisions described in paragraph 2 below); provided that:
(a) Warburg and H&F shall jointly have the sole right (on behalf of themselves and all other Purchasers) to make any and all determinations with respect to, or to take any and all actions necessary to effectuate the provisions of, Section B of the Subscription Agreement (including the right to approve any amendment or acceleration of, or to waive compliance by Arch with, any of the terms thereof), provided that the consequences of such determinations and actions by Warburg and H&F do not apply differently to the GE Orbital Holdings Purchaser than to Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Orbital Holdings Purchaser or more favorable to Warburg and H&F as a result of such determination or action);
(b) Warburg and H&F shall have the sole right to determine whether each condition for the Purchasers contained in Section C of the Subscription Agreement is satisfied;
(c) the failure of the conditions set forth in Section C.2 of the Subscription Agreement due to any breach by the GE Orbital Holdings Purchaser of any representation, warranty or covenant shall not affect the obligation of the Company to sell the Securities on the Closing Date to either Warburg or H&F
(d) the GE Orbital Holdings Purchaser shall be subject to Section D.1 and D.2 of the Subscription Agreement, including the covenants thereunder;
(e) the GE Orbital Holdings Purchaser shall have no rights (including
no right to consent to any action proposed to be taken by Arch under, or
any right to waive compliance by Arch with, any covenant or agreement) as a
"Purchaser" under Section D.4 of the Subscription Agreement, it being
acknowledged that each GE Orbital Holdings Purchaser shall, however, have
the obligations of a "Purchaser" under Sections D.4(d), (g) and (i)
thereof; provided that any information provided to the Company pursuant to
Section D.4(g) shall be held
confidentially and not used for any purpose other than as set forth in
Section D.4(g);
(f) the GE Orbital Holdings Purchaser shall not be considered an "original signatory" to the Subscription Agreement for purposes of Section E.6 thereof; provided that no amendment, modification or waiver of Section E of the Subscription Agreement shall affect the GE Orbital Holdings Purchaser differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Orbital Holdings Purchaser or more favorable to Warburg and H&F as a result of such determination or action);
(g) no consent of the GE Orbital Holdings Purchaser shall be required to effect any modification or amendment to the Subscription Agreement (including, without limitation, Schedules A and B, and Exhibits I, II and III thereto), unless such amendment or modification affects the GE Orbital Holdings Purchaser differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Orbital Holdings Purchaser or more favorable to Warburg and H&F as a result of such determination or action);
(h) the GE Orbital Holdings Purchaser shall have no rights under
Section F.2 (except the right to be reimbursed by the Company, together
with the other GE Orbital Holdings Purchaser, for up to an aggregate of up
to $50,000 in counsel fees), and no right to assign under Section F.4, of
the Subscription Agreement (except that the GE Orbital Holdings Purchaser
may assign its rights and obligations under the Subscription Agreement in
connection with a transfer of Securities to (i) any person or entity that
directly or indirectly through one or more intermediaries controls, or is
controlled by or under common control with, such GE Orbital Holdings
Purchaser, (ii) an entity over which such GE Orbital Holdings Purchaser has
management rights, or (iii) if such GE Orbital Holdings Purchaser is
affiliated with a trustee of a pension trust, to a successor trustee or
trust, in each case so long as such transferee becomes a party to, and
bound by, this Agreement, Amendment No. 1 to the Subscription Agreement and
the Shareholders Agreement (a "Permitted Transferee");
(i) Amendment No. 1 to the Subscription Agreement will contain a covenant by the Company to conduct its business in compliance with law including, without limitation, the Foreign Corrupt Practices Act;
(j) so long as the GE Orbital Holdings Purchaser owns any equity interest in the Company, the Company agrees to furnish to the GE Orbital Holdings Purchaser a copy of its annual and quarterly reports filed under the Securities and Exchange Act of 1934; and
(k) for the avoidance of doubt, the GE Orbital Holdings Purchaser shall become parties to the Shareholders Agreement as an "Investor" solely for purposes of Sections 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof and the provisions thereof implementing the provisions of paragraph 2 below; it being further understood that Warburg and H&F can consent on behalf of all other Investors to (A) any amendment or modification whatsoever of the Sections of the Shareholders Agreement that do not apply to the GE Orbital Holdings Purchaser and (B) any amendment or modification of the Sections of the Shareholders Agreement that do apply to the GE Orbital Holdings Purchaser, so long as in the case of clause (B), such amendment or modification does not affect the GE Orbital Holdings Purchaser differently than Warburg and H&F (or, if it affects them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement or the Shareholders Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Orbital Holdings Purchaser or more favorable to Warburg and H&F as a result of such determination or action).
2. Registration; Tag-Along.
Arch, the Original Signatories and the GE Orbital Holdings Purchaser agree that the Shareholders Agreement will be amended and restated to provide that:
(a) if the GE Orbital Holdings Purchaser exercises its right under
Section 4.3 thereof, any cutback pursuant to Section 4.4 thereof will treat
the GE Orbital Holdings Purchaser at least as favorably as Warburg and H&F
(i.e., the GE Orbital Holdings Purchaser will have priority under clause
(b), and not under clause (c), thereof);
(b) Warburg and H&F agree that in the case of a Warburg Demand or an H&F Demand involving an underwritten public offering, when selecting an underwriter, the consent of the General Electric Pension Trust will be required for the selection of any underwriter in which the General Electric
Com-
pany has a direct or indirect interest of 5% or more if the GE Orbital Holdings Purchaser will be a participating seller in the offering;
(c) the GE Orbital Holdings Purchasers will have the obligations of a
Selling Investor (considered together for the purpose of determining
whether the Selling Investor has met the $50 million threshold), and the
rights of a Tag-Along Investor, under Section 5.1 thereof; provided that
(1) each Investor participating in a transaction under Section 5.1 shall
only be responsible for its pro rata portion of any indemnification (except
in respect of representations specifically relating to such Investor) and
(2) in the event that H&F is a Selling Investor, the GE Orbital Holdings
Purchasers shall only be permitted to elect to participate as a Tag-Along
Investor if Warburg so elects;
(d) the GE Orbital Holdings Purchaser shall be subject to the restrictions of Section 5.2 of the Shareholders Agreement with respect to the Securities acquired by it under the Subscription Agreement and any securities acquired in respect thereof, to the same extent that Warburg and H&F are restricted with respect to the Securities acquired by them under the Subscription Agreement and any securities acquired in respect thereof, provided that the GE Orbital Holdings Purchaser will be permitted to transfer Securities to a Permitted Transferee.
"Tag-Along Investor," "Third Party Sale" and "Selling Investor" have the meanings given to them in the Shareholders Agreement and to the extent necessary the term "Tag-Along Investor" shall be deemed to include more than one party.
3. Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary or desirable under applicable legal requirements, to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date, any further action is necessary or desirable to carry out the purposes of this Agreement, the parties hereto shall use their reasonable best efforts to take or cause to be taken all such necessary or desirable action and execute, and deliver and file, or cause to be executed, delivered and filed, all necessary or desirable documentation. The GE Orbital Holdings Purchaser agrees (to the full extent of their current or future ownership of securities of Arch) to vote in favor of all matters to be submitted to shareholders of Arch in connection with the foregoing or the transactions contemplated by the Subscription Agreement (and the grants of any shares or options contemplated thereby or in connection therewith). Each of the parties will consult with each other with respect to the issuance of any press release or public announcement with respect to the foregoing.
4. Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in per-
son at, or mailed by registered or certified mail, return receipt requested, postage prepaid, to, the addresses (and shall be deemed effective at the time of receipt thereof):
(a) If to Arch:
Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Peter Appel, President and Chief Executive Officer
Facsimile: (203) 861-7240
(b) If to the GE Orbital Holdings Purchaser:
c/o GE Capital
120 Longridge Rd.
Stamford, CT 06927
or to such other address as the party to whom notice is to be given may have previously furnished notice in writing to the other in the manner set forth above. A notice hereunder shall not be deemed given until copies thereof are given as contemplated above. Notices to all other parties hereto shall be given in accordance with the Subscription Agreement.
5. Entire Agreement; Amendment. This Agreement, together with the Subscription Agreement, Amendment No. 1 to the Subscription Agreement (including the exhibits thereto) the Shareholders Agreement contains all of the terms agreed upon by the parties with respect to the subject matter hereof. This Agreement may be amended or the provisions thereof waived only by a written instrument signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
6. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof.
7. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party without the prior written consent of the other party; provided that this Agreement may be assigned by a Purchaser consistent with an assignment in accordance with Section F.4 of the Subscription Agreement and Section 1(h) of this Agreement, so long as the assignee executes an agreement in the form of this Agreement.
8. Severability. In the event that any provision or any part of this Agreement is held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not effect the validity or enforceability of any other provision or part thereof.
9. Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the substantive laws of the State of New York, without giving effect to principles of conflicts of laws.
10. Counterparts. This Agreement and any instrument delivered in connection herewith may be executed in any number of counterparts with the same effect as if the signatures on all counterparts are upon the same instrument.
[Signature pages follow]
Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the duplicate enclosed copy of this Agreement.
Very truly yours,
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
--------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President and
General Counsel
|
Agreed to and Accepted
As of the Date First Above Written:
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
HFCP 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
|
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
|
SCHEDULE 1
Amount
Warburg Purchaser Assigned
----------------- --------
Warburg Pincus Private Equity VIII, L.P. $5,000,000
Warburg Pincus International Partners, L.P. $4,800,000
Warburg Pincus Netherlands International Partners I, C.V. $120,000
Warburg Pincus Netherlands International Partners II, C.V. $80,000
=================
Total $10,000,000
|
Exhibit 10.4
EXECUTION COPY
ARCH CAPITAL GROUP LTD.
20 Horseneck Lane
Greenwich, CT 06830
November 20, 2001
Insurance Private Equity Investors, Warburg Pincus Private Equity VIII, L.P.
L.L.C. (the "GE Private Equity
Purchaser") Warburg Pincus International Partners, L.P.
c/o GE Asset Management Warburg Pincus Netherlands International
Incorporated Partners I, C.V.
3003 Summer Street
Stamford, CT 06905 Warburg Pincus Netherlands International
Partners II, C.V.
(collectively, "Warburg")
466 Lexington Avenue
New York, NY 10017
HFCP IV (Bermuda), L.P. ("H&F")
c/o Hellman & Friedman LLC
One Maritime Plaza
Suite 1200
San Francisco, CA 94111
|
Ladies and Gentlemen:
This letter agreement (this "Agreement") confirms the agreement reached today among each of the parties signatories hereto regarding the participation of the GE Private Equity Purchaser in the purchase of a portion of the Securities, as contemplated by, and on the terms set forth in, this Agreement and the Subscription Agreement dated as of October 24, 2001, as amended (the "Subscription Agreement") by and among Arch Capital Group Ltd. ("Arch"), Warburg and H&F (the "Original Signatories"), and certain other matters in connection therewith. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Subscription Agreement.
1. Investment by GE Purchaser. Warburg hereby assigns, without recourse or warranty by it, to the GE Private Equity Purchaser (as set forth in Schedule 1 hereto)
the right, and obligation, to purchase an aggregate of $50,000,000 of the Securities on the terms and conditions set forth in the Subscription Agreement (except as explicitly modified hereby), as a Purchaser (as defined in the Subscription Agreement). The GE Private Equity Purchaser acknowledges that its investment will be required to be made on the Closing Date, simultaneously with the investments being made by the Original Signatories. The GE Private Equity Purchaser shall become a "Purchaser" under the Subscription Agreement and an "Investor" under the Shareholders Agreement (solely for purposes of Sections 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof, and the provisions implementing the provisions described in paragraph 2 below); provided that:
(a) Warburg and H&F shall jointly have the sole right (on behalf of themselves and all other Purchasers) to make any and all determinations with respect to, or to take any and all actions necessary to effectuate the provisions of, Section B of the Subscription Agreement (including the right to approve any amendment or acceleration of, or to waive compliance by Arch with, any of the terms thereof), provided that the consequences of such determinations and actions by Warburg and H&F do not apply differently to the GE Private Equity Purchaser than to Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Private Equity Purchaser or more favorable to Warburg and H&F as a result of such determination or action);
(b) Warburg and H&F shall have the sole right to determine whether each condition for the Purchasers contained in Section C of the Subscription Agreement is satisfied;
(c) the failure of the conditions set forth in Section C.2 of the Subscription Agreement due to any breach by the GE Private Equity Purchaser of any representation, warranty or covenant shall not affect the obligation of the Company to sell the Securities on the Closing Date to either Warburg or H&F
(d) the GE Private Equity Purchaser shall be subject to Section D.1 and D.2 of the Subscription Agreement, including the covenants thereunder;
(e) the GE Private Equity Purchaser shall have no rights (including no right to consent to any action proposed to be taken by Arch under, or any right to waive compliance by Arch with, any covenant or agreement) as a "Purchaser" under Section D.4 of the Subscription Agreement, it being acknowledged that each GE Private Equity Purchaser shall, however, have the obligations of a "Purchaser" under Sections D.4(d), (g) and (i) thereof; provided that any information provided to the Company
pursuant to Section D.4(g) shall be held confidentially and not used for any purpose other than as set forth in Section D.4(g);
(f) the GE Private Equity Purchaser shall not be considered an "original signatory" to the Subscription Agreement for purposes of Section E.6 thereof, provided that no amendment, modification or waiver of Section E of the Subscription Agreement shall affect the GE Private Equity Purchaser differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Private Equity Purchaser or more favorable to Warburg and H&F as a result of such determination or action);
(g) no consent of the GE Private Equity Purchaser shall be required to effect any modification or amendment to the Subscription Agreement (including, without limitation, Schedules A and B, and Exhibits I, II and III thereto), unless such amendment or modification affects the GE Private Equity Purchaser differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Private Equity Purchaser or more favorable to Warburg and H&F as a result of such determination or action);
(h) the GE Private Equity Purchaser shall have no rights under Section F.2 (except the right to be reimbursed by the Company, together with the other GE Private Equity Purchaser, for up to an aggregate of up to $50,000 in counsel fees), and no right to assign under Section F.4, of the Subscription Agreement (except that the GE Private Equity Purchaser may assign its rights and obligations under the Subscription Agreement in connection with a transfer of Securities to (i) any person or entity that directly or indirectly through one or more intermediaries controls, or is controlled by or under common control with, such GE Private Equity Purchaser, (ii) an entity over which such GE Private Equity Purchaser has management rights, or (iii) if such GE Private Equity Purchaser is affiliated with a trustee of a pension trust, to a successor trustee or trust, in each case so long as such transferee becomes a party to, and bound by, this Agreement, Amendment No. 1 to the Subscription Agreement and the Shareholders Agreement (a "Permitted Transferee");
(i) Amendment No. 1 to the Subscription Agreement will contain a covenant by the Company to conduct its business in compliance with law including, without limitation, the Foreign Corrupt Practices Act;
(j) so long as the GE Private Equity Purchaser owns any equity interest in the Company, the Company agrees to furnish to the GE Private Equity Purchaser a copy of its annual and quarterly reports filed under the Securities and Exchange Act of 1934; and
(k) for the avoidance of doubt, the GE Private Equity Purchaser shall become parties to the Shareholders Agreement as an "Investor" solely for purposes of Sections 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof and the provisions thereof implementing the provisions of paragraph 2 below; it being further understood that Warburg and H&F can consent on behalf of all other Investors to (A) any amendment or modification whatsoever of the Sections of the Shareholders Agreement that do not apply to the GE Private Equity Purchaser and (B) any amendment or modification of the Sections of the Shareholders Agreement that do apply to the GE Private Equity Purchaser, so long as in the case of clause (B), such amendment or modification does not affect the GE Private Equity Purchaser differently than Warburg and H&F (or, if it affects them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement or the Shareholders Agreement (as modified by this Agreement) and such differences are not made more adverse to the GE Private Equity Purchaser or more favorable to Warburg and H&F as a result of such determination or action).
2. Registration; Tag-Along.
Arch, the Original Signatories and the GE Private Equity Purchaser agree that the Shareholders Agreement will be amended and restated to provide that:
(a) if the GE Private Equity Purchaser exercises its right under
Section 4.3 thereof, any cutback pursuant to Section 4.4 thereof will treat
the GE Private Equity Purchaser at least as favorably as Warburg and H&F
(i.e., the GE Private Equity Purchaser will have priority under clause (b),
and not under clause (c), thereof);
(b) Warburg and H&F agree that in the case of a Warburg Demand or an H&F Demand involving an underwritten public offering, when selecting an underwriter, the consent of the General Electric Pension Trust will be required for the selection of any underwriter in which the General Electric Company has a direct or indirect interest of 5% or more if the GE Private Equity Purchaser will be a participating seller in the offering;
(c) the GE Private Equity Purchasers will have the obligations of a
Selling Investor (considered together for the purpose of determining
whether the Selling Investor has met the $50 million threshold), and the
rights of a Tag-Along Investor, under Section 5.1 thereof; provided that
(1) each Investor participating in a transaction
under Section 5.1 shall only be responsible for its pro rata portion of any indemnification (except in respect of representations specifically relating to such Investor) and (2) in the event that H&F is a Selling Investor, the GE Private Equity Purchasers shall only be permitted to elect to participate as a Tag-Along Investor if Warburg so elects;
(d) the GE Private Equity Purchaser shall be subject to the restrictions of Section 5.2 of the Shareholders Agreement with respect to the Securities acquired by it under the Subscription Agreement and any securities acquired in respect thereof, to the same extent that Warburg and H&F are restricted with respect to the Securities acquired by them under the Subscription Agreement and any securities acquired in respect thereof, provided that the GE Private Equity Purchaser will be permitted to transfer Securities to a Permitted Transferee.
"Tag-Along Investor," "Third Party Sale" and "Selling Investor" have the meanings given to them in the Shareholders Agreement and to the extent necessary the term "Tag-Along Investor" shall be deemed to include more than one party.
3. Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary or desirable under applicable legal requirements, to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date, any further action is necessary or desirable to carry out the purposes of this Agreement, the parties hereto shall use their reasonable best efforts to take or cause to be taken all such necessary or desirable action and execute, and deliver and file, or cause to be executed, delivered and filed, all necessary or desirable documentation. The GE Private Equity Purchaser agrees (to the full extent of their current or future ownership of securities of Arch) to vote in favor of all matters to be submitted to shareholders of Arch in connection with the foregoing or the transactions contemplated by the Subscription Agreement (and the grants of any shares or options contemplated thereby or in connection therewith). Each of the parties will consult with each other with respect to the issuance of any press release or public announcement with respect to the foregoing.
4. Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by registered or certified mail, return receipt requested, postage prepaid, to, the addresses (and shall be deemed effective at the time of receipt thereof):
(a) If to Arch:
Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Peter Appel, President and Chief Executive Officer
Facsimile: (203) 861-7240
(b) If to the GE Private Equity Purchaser:
c/o GE Asset Management Incorporated
3003 Summer Street
Stamford, CT 06905
Attention: Michael M. Pastore, Esq.
or to such other address as the party to whom notice is to be given may have previously furnished notice in writing to the other in the manner set forth above. A notice hereunder shall not be deemed given until copies thereof are given as contemplated above. Notices to all other parties hereto shall be given in accordance with the Subscription Agreement.
5. Entire Agreement; Amendment. This Agreement, together with the Subscription Agreement, Amendment No. 1 to the Subscription Agreement (including the exhibits thereto) the Shareholders Agreement contains all of the terms agreed upon by the parties with respect to the subject matter hereof. This Agreement may be amended or the provisions thereof waived only by a written instrument signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
6. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof.
7. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party without the prior written consent of the other party; provided that this Agreement may be assigned by a Purchaser consistent with an assignment in accordance with Section F.4 of the Subscription Agreement and Section 1(h) of this Agreement, so long as the assignee executes an agreement in the form of this Agreement.
8. Severability. In the event that any provision or any part of this Agreement is held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not effect the validity or enforceability of any other provision or part thereof.
9. Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the substantive laws of the State of New York, without giving effect to principles of conflicts of laws.
10. Counterparts. This Agreement and any instrument delivered in connection herewith may be executed in any number of counterparts with the same effect as if the signatures on all counterparts are upon the same instrument.
[Signature pages follow]
Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the duplicate enclosed copy of this Agreement.
Very truly yours,
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
-------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President
and General Counsel
Agreed to and Accepted
As of the Date First Above Written:
|
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.
HFCP IV (BERMUDA), L.P.
By: H&F Investors (Bermuda) IV, 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
|
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
|
SCHEDULE 1
Amount
Warburg Purchaser Assigned
----------------- --------
Warburg Pincus Private Equity VIII, L.P. $25,000,000
Warburg Pincus International Partners, L.P. $24,000,000
Warburg Pincus Netherlands International Partners I, C.V. $600,000
Warburg Pincus Netherlands International Partners II, C.V. $400,000
=================
Total $50,000,000
|
Exhibit 10.5
EXECUTION COPY
ARCH CAPITAL GROUP LTD.
20 Horseneck Lane
Greenwich, CT 06830
November 20, 2001
Farallon Capital Partners, L.P. Warburg Pincus Private Equity VIII, L.P.
Farallon Capital Institutional Partners II, L.P. Warburg Pincus International Partners, L.P.
Farallon Capital Institutional Partners III, L.P. Warburg Pincus Netherlands International
RR Capital Partners, L.P. (collectively, the Partners I, C.V.
"Farallon Purchasers" and, individually, a Warburg Pincus Netherlands International
"Farallon Purchaser") Partners II, C.V.
c/o Farallon Capital Management, L.L.C. (collectively, "Warburg")
One Maritime Plaza, Suite 1325 466 Lexington Avenue
San Francisco, CA 94111 New York, NY 10017
Telephone: (415) 421-2132
Facsimile: (415) 421-2133 HFCP IV (Bermuda), L.P. ("H&F")
c/o Hellman & Friedman LLC
One Maritime Plaza
Suite 1200
San Francisco, CA 94111
|
Ladies and Gentlemen:
This letter agreement (this "Agreement") confirms the agreement reached today among each of the parties signatories hereto regarding the participation of the Farallon Purchasers in the purchase of a portion of the Securities, as contemplated by, and on the terms set forth in, this Agreement and the Subscription Agreement dated as of October 24, 2001, as amended (the "Subscription Agreement") by and among Arch Capital Group Ltd. ("Arch"), Warburg and H&F (the "Original Signatories"), and certain other matters in connection therewith. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Subscription Agreement.
1. Investment by Farallon Purchasers. H&F hereby assigns, without recourse or warranty by it, to the Farallon Purchasers the right, and obligation, to purchase an aggregate of $25,000,000 of the Securities (in the respective amounts set forth on Schedule 1 hereto) on the terms and conditions set forth in the Subscription Agreement (except as explicitly modified hereby), each Farallon Purchaser as a Purchaser (as defined in the Subscription Agreement). Each Farallon Purchaser acknowledges that its investment will be required to be made on the Closing Date, simultaneously with the investments being made by the Original Signatories. Each Farallon Purchaser shall become a "Purchaser" under the Subscription Agreement and an "Investor" under the Shareholders Agreement (solely for purposes of Sec-
tions 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof, and the provisions implementing the provisions described in paragraph 2 below); provided that:
(a) Warburg and H&F shall jointly have the sole right (on behalf of themselves and all other Purchasers) to make any and all determinations with respect to, or to take any and all actions necessary to effectuate the provisions of, Section B of the Subscription Agreement (including the right to approve any amendment or acceleration of, or to waive compliance by Arch with, any of the terms thereof), provided that the consequences of such determinations and actions by Warburg and H&F do not apply differently to the Farallon Purchasers than to Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the Farallon Purchasers or more favorable to Warburg and H&F as a result of such determination or action);
(b) Warburg and H&F shall have the sole right to determine whether each condition for the Purchasers contained in Section C of the Subscription Agreement is satisfied;
(c) the failure of the conditions set forth in Section C.2 of the Subscription Agreement due to any breach by a Farallon Purchaser of any representation, warranty or covenant shall not affect the obligation of the Company to sell the Securities on the Closing Date to either Warburg or H & F;
(d) the Farallon Purchasers shall be subject to Section D.1 and D.2 of the Subscription Agreement, including the covenants thereunder;
(e) the Farallon Purchasers shall have no rights (including no right to consent to any action proposed to be taken by Arch under, or any right to waive compliance by Arch with, any covenant or agreement) as a "Purchaser" under Section D.4 of the Subscription Agreement, it being acknowledged that the Farallon Purchasers shall, however, have the obligations of a "Purchaser" under Sections D.4(d), (g) and (i) thereof; provided that any information provided to the Company pursuant to Section D.4(g) shall be held confidentially and not used for any purpose other than as set forth in Section D.4(g);
(f) the Farallon Purchasers shall not be considered an "original signatory" to the Subscription Agreement for purposes of Section E.6 thereof, provided that no amendment, modification or waiver of Section E of the Subscription Agreement shall affect the Farallon Purchasers differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of
Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the Farallon Purchasers or more favorable to Warburg and H&F as a result of such determination or action);
(g) no consent of the Farallon Purchasers shall be required to effect any modification or amendment to the Subscription Agreement (including, without limitation, Schedules A and B, and Exhibits I, II and III thereto), unless such amendment or modification affects the Farallon Purchasers differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to the Farallon Purchasers or more favorable to Warburg and H&F as a result of such determination or action);
(h) the Farallon Purchasers shall have no rights under Section F.2, and no right to assign under Section F.4 of the Subscription Agreement (except that a Farallon Purchaser may assign its rights and obligations under the Subscription Agreement to (i) any person or entity that directly or indirectly through one or more intermediaries controls, or is controlled by or under common control with, such Farallon Purchaser or (ii) an entity over which such Farallon Purchaser has management rights, in each case so long as such transferee becomes a party to, and bound by, this Agreement, Amendment No. 1 to the Subscription Agreement and the Shareholders Agreement (a "Permitted Transferee")); and
(i) for the avoidance of doubt, each Farallon Purchaser shall become a party to the Shareholders Agreement as an "Investor" solely for purposes of Sections 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof and the provisions thereof implementing the provisions of paragraph 2 below; it being further understood that Warburg and H&F can consent on behalf of all other Investors to (A) any amendment or modification whatsoever of the Sections of the Shareholders Agreement that do not apply to the Farallon Purchasers and (B) any amendment or modification of the Sections of the Shareholders Agreement that do apply to the Farallon Purchasers, so long as in the case of clause (B), such amendment or modification does not affect the Farallon Purchasers differently than Warburg and H&F (or, if they affect them differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement or the Shareholders Agreement (as modified by this Agreement) and such differences are not made more adverse to the Farallon Purchaser or more favorable to Warburg and H&F as a result of such determination or action).
2. Registration; Tag-Along.
Arch, the Original Signatories and the Farallon Purchasers agree that the Shareholders Agreement will be amended and restated to provide that (and once so amended and restated, the Shareholders Agreement shall govern with respect to the matters covered by this Section 2):
(a) if a Farallon Purchaser exercises its right under Section 4.3 thereof, any cutback pursuant to Section 4.4 thereof will treat the Farallon Purchaser at least as favorably as Warburg and H&F (i.e., the Farallon Purchaser will have priority under clause (b), and not under clause (c), thereof);
(b) the Farallon Purchasers will have the rights of a Tag-Along Investor, under Section 5.1 thereof to participate ratably on the basis of securities owned in a Third Party Sale (excluding any sale or distribution described in the last sentence of Section 5.1 of the Shareholders Agreement) on the same terms as a Selling Investor (but for the avoidance of doubt, not have the obligations of a Selling Investor under Section 5.1 thereof); provided that (1) each Investor participating in a transaction under Section 5.1 shall only be responsible for its pro rata portion of any indemnification (except in respect of representations specifically relating to such Investor) and (2) that in the event that Warburg is a Selling Investor, the Farallon Purchasers shall only be permitted to elect to participate as a Tag-Along Investor if H&F so elects;
(c) the Farallon Purchasers shall be subject to the restrictions of
Section 5.2 of the Shareholders Agreement with respect to the Securities
acquired by them under the Subscription Agreement and any securities
acquired in respect thereof, to the same extent that Warburg and H&F are
restricted with respect to the Securities acquired by them under the
Subscription Agreement and any securities acquired in respect thereof.
"Tag-Along Investor," "Third Party Sale and "Selling Investor" have the meanings given to them in the Shareholders Agreement and to the extent necessary the term "Tag-Along Investor" shall be deemed to include more than one party.
3. Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary or desirable under applicable legal requirements, to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date, any further action is necessary or desirable to carry out the purposes of this Agreement, the parties hereto shall use their reasonable best efforts to take or cause to be taken all such necessary or desirable action and execute, and
deliver and file, or cause to be executed, delivered and filed, all necessary or desirable documentation. The Farallon Purchasers agree (to the full extent of their current or future ownership of securities of Arch) to vote in favor of all matters to be submitted to shareholders of Arch in connection with the foregoing or the transactions contemplated by the Subscription Agreement (and the grants of any shares or options contemplated thereby or in connection therewith). Each of the parties will consult with each other with respect to the issuance of any press release or public announcement with respect to the foregoing.
4. Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by registered or certified mail, return receipt requested, postage prepaid, to, the addresses (and shall be deemed effective at the time of receipt thereof):
(a) If to Arch:
Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: Peter Appel, President and Chief Executive Officer
Facsimile: (203) 861-7240
(b) If to the Farallon Purchasers:
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
Telephone: (415) 421-2132 Facsimile: (415) 421-2133 Attention: Mark Wehrly and Sarah Aitcheson |
or to such other address as the party to whom notice is to be given may have previously furnished notice in writing to the other in the manner set forth above. A notice hereunder shall not be deemed given until copies thereof are given as contemplated above. Notices to all other parties hereto shall be given in accordance with the Subscription Agreement.
5. Entire Agreement; Amendment. This Agreement, together with the Subscription Agreement, Amendment No. 1 to the Subscription Agreement (including the exhibits thereto) and the Shareholders Agreement, contain all of the terms agreed upon by the parties with respect to the subject matter hereof. This Agreement may be amended or the provisions thereof waived only by a written instrument signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
6. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof.
7. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party without the prior written consent of the other party; provided that this Agreement may be assigned by a Purchaser consistent with an assignment in accordance with Section F.4 of the Subscription Agreement and Section 1(h) hereof, so long as the assignee executes an agreement in the form of this Agreement.
8. Severability. In the event that any provision or any part of this Agreement is held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not effect the validity or enforceability of any other provision or part thereof.
9. Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the substantive laws of the State of New York, without giving effect to principles of conflicts of laws.
10. Counterparts. This Agreement and any instrument delivered in connection herewith may be executed in any number of counterparts with the same effect as if the signatures on all counterparts are upon the same instrument.
[Signature pages follow]
Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the duplicate enclosed copy of this Agreement.
Very truly yours,
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
---------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President and
General Counsel
|
Agreed to and Accepted
As of the Date First Above Written:
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
|
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
|
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
|
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 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.:
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
Acknowledged:
HFCP 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
|
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
|
Amount
Assignee Assigned to Assignee
-------- --------------------
Farallon Capital Partners, L.P. $17,363,247.95
Farallon Capital Institutional Partners II, L.P. $3,971,282.15
Farallon Capital Institutional Partners III, L.P. $3,156,495.67
RR Capital Partners, L.P. $508,974.23
==============
Total $25,000,000.00
|
Exhibit 10.6
ARCH CAPITAL GROUP LTD.
Restricted Share Agreement
THIS AGREEMENT, dated on November 19, 2001, between Arch Capital Group Ltd. (the "Company"), a Bermuda company, and Robert Clements (the "Executive").
WHEREAS, the Executive has been granted the following award as compensation for services to be rendered;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.
1. Award of Shares. The Executive is hereby awarded 21,472 shares of restricted common stock of the Company (the "Award"), subject to the terms and conditions herein set forth. This Award shall be rescinded if it is not approved by shareholders prior to the first anniversary hereof.
2. Terms and Conditions. It is understood and agreed that the Award evidenced hereby is subject to the following additional terms and conditions:
(a) Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in five equal annual installments, beginning on the first anniversary of October 23, 2001. Notwithstanding the foregoing, if the service of the Executive as Chairman of the Board of the Company is terminated by the Company or is not continued by the Company for any reason, or the Executive's service terminates due to his death or Permanent Disability, then the Award shall become immediately vested in full upon such termination of service. "Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
(b) Termination of Service; Forfeiture of Unvested Shares. Except as otherwise set forth in Section 2(a) above, in the event the Executive terminates his service with the Company (other than due to his death or Permanent Disability or the failure of the Company to continue his service) prior to the date of vesting of an installment of the Award, the unvested installments shall be forfeited by the Executive and become the property of the Company. For purposes of this Agreement, service with any of the Company's wholly owned subsidiaries shall be considered to be service with the Company.
(c) Certificates. Each certificate issued in respect of an Award made hereunder shall be dated the date hereof and deposited with the Company, or its designee, together with, if requested by the Company, a stock power executed in blank by the Executive, and shall bear a legend disclosing the restrictions on transferability imposed on such Award by this Agreement (the "Restrictive Legend"). Upon the vesting of the Award pursuant to Section 2(a) hereof, the certificates evidencing such vested Shares, not bearing the Restrictive Legend, shall be delivered to the Executive.
(d) Rights of a Stockholder. Prior to the time an Award is fully vested hereunder, except as set forth in Section 2(e) below, the Executive shall have no right to transfer, pledge, hypothecate or otherwise encumber such Award. Beginning on the date hereof and during such period, the Executive shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends at the time paid on such Award.
(e) Transferability. Except as set forth below, prior to vesting this Award shall not be transferable by the Executive except by will or the laws of descent and distribution. Notwithstanding the foregoing, if the Board of Directors provides its consent (which consent shall not be unreasonably withheld), the Award (or any part thereof) may be transferred by the Executive to members of his or her "immediate family" or to a trust or other entity established for the exclusive benefit of solely one or more members of the Executive's "immediate family" or the Executive. Any Award held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Award immediately prior to the transfer, except that the Award will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Executive's children, stepchildren, grandchildren, great grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), in-laws, and relationships arising because of legal adoption.
3. Noncompetition. The Executive acknowledges that during his service with the Company, he will become familiar with trade secrets and other confidential information concerning the Company and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that, in the event his service with the Company is terminated by the Company prior to the fifth anniversary of October 23, 2001, during the period ending on the later of the fifth anniversary of October 23, 2001 or one year following the date of his termination by the Company, he will not, without the Company's written consent, directly or indirectly manage, participate in, or render services for any business competing with the businesses of the Company or its subsidiaries as such businesses exist or are in process as of the date of termination, within any geographical area in which the Company or its subsidiaries engage in such businesses.
4. Enforcement. If, at the enforcement of Section 3, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable
under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in Section 3 to cover the maximum duration, scope and area permitted by law.
5. Transfer of Shares. The vested shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.
6. Antidilution. In the event that the Board of Directors of the Company shall determine that any dividend in shares, recapitalization, share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Company common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of the Executive hereunder, then the Board of Directors of the Company shall make such equitable changes or adjustments as are appropriate and adjust any or all of the number and kind of shares, other securities or other consideration issued or issuable in respect of this Award.
7. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Executive. The Company shall pay, and indemnify the Executive from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of shares hereunder.
8. References. References herein to rights and obligations of the Executive shall apply, where appropriate, to the Executive's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
9. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn.: Secretary
If to the Executive: To the last address given to the Company by the Executive in the manner set forth in this Section 9.
10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
11. Entire Agreement. This Agreement constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement.
12. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Peter A. Appel
-------------------------------------
Name: Peter A. Appel
Title: President and Chief Executive
Officer
/s/ Robert Clements
--------------------------------------------
Robert Clements
|
Exhibit 10.7
RETENTION AGREEMENT
Agreement, dated January 4, 2002, by and between Arch Capital Group Ltd., a Bermuda company (the "Company"), Arch Capital Group (U.S.) Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the "Subsidiary"), and Robert Clements (the "Director").
WHEREAS, the board of directors of the Company (the "Board") wishes to assure that it will have the continued dedication of the Director and the availability of his advice and counsel, and to induce the Director to remain in the service of the Company; and
WHEREAS, the Director is willing to continue to serve the Company or one of its subsidiaries taking into account the provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and the respective covenants and agreements of the parties herein contained, the parties agree as follows:
1. Position & Responsibilities. The Company retains the Director to serve as Chairman of the Board, and in such capacity the Director shall report to the Board, and the Director accepts said retention. The term of the Director's retention as Chairman of the Board shall continue so long as the Director remains on the Board, provided that such retention shall terminate upon notice by either the Company to the Director or by the Director to the Company.
2. Compensation.
(a) Compensation for the Director's services shall be at an annual compensation rate equal to (1) 50% of the then annual base salary of the Chief Executive Officer of the Company (the "Share Portion") plus (2) the amount, calculated on an after-tax basis (net of any actual tax benefits, including any interest expense deductions, to the Director with respect thereto, as determined by an accounting firm selected by the Company and reasonably acceptable to the Director), sufficient to defray the interest payable on the Loan (defined below) (the "Cash Portion"). The Director may also receive an annual cash bonus to be determined by the Board.
(b) The Share Portion of the annual compensation for each year shall be payable in restricted common shares of the Company based on the fair market value of the common shares of the Company on January 1 of that year. The restricted shares granted as annual compensation for any year shall fully vest on January 1 of the following year, so long as Director continues to serve as Chairman of the Board.
(c) The Cash Portion of the annual compensation for each year shall be paid in semiannual installments, on the business day preceding each date of payment of interest on the Loan.
(d) If the Director's service as chairman is terminated for any reason, he shall receive an amount equal to a prorated portion of the Share Portion and Cash Portion of his annual compensation for the year of such termination.
(e) The Director waives his right to receive the annual retainer and compensation for meetings that non-employee directors of the Company are eligible to receive.
3. Additional Terms. As a non-employee director, the Director is eligible to participate in the Company's 1995 and 1999 Long Term Incentive and Share Award Plans and any other similar plans adopted by the Company under which annual awards of options and/or other shares-based awards may be granted by the Board or its duly authorized committee; provided that the Director acknowledges that he has no right to receive any awards under such plans.
4. Loan.
(a) The Director represents and warrants that he has made an election under
Section 83(b) of the United States Internal Revenue Code of 1986, as amended
(the "Code"), with respect to the 1,668,157 restricted shares of the Company
granted to him on October 23, 2001 (the "Applicable Restricted Shares"), and
that the Director will have an income tax liability of approximately $13,530,000
as a result of such election.
(b) The Subsidiary agrees to make a non-recourse loan (the "Loan") to the Director in an amount equal to $13,530,000 to be used by the Director solely for the purpose of paying his income and self-employment taxes with respect to the Applicable Restricted Shares. The Loan shall be secured by, and recourse only to, the Applicable Restricted Shares and be evidenced by a non-recourse promissory note (the "Note"), substantially in the form attached hereto as Exhibit A. The Company and the Director agree that in the event of foreclosure in accordance with the provisions of the Note, the Subsidiary shall be entitled to take title to the Applicable Restricted Shares, free and clear of all liens and contractual restrictions.
(c) The Director shall give notice to the Subsidiary at least 10 business days prior to the date on which he is required to pay the aforementioned income and self-employment taxes with respect to the Applicable Restricted Shares. The Subsidiary shall advance the proceeds of the Loan, to the account specified by the Director, not later than the business day preceding such date on which payment is required.
5. Certain Additional Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that the Applicable Restricted Shares or the 21,472 restricted shares of the Company granted to the Director on November 19, 2001 (together with the Applicable Restricted Shares, the "Restricted Shares") would be subject to the excise tax imposed by Section 4999 of the Code or any corresponding provisions of state or local tax law, or any interest or penalties are incurred by the Director with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Director shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Director of all taxes (including any Excise Tax, income tax or employment tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes (excluding any such interest or penalties caused by the Director's willful inaction), the Director retains from the
Gross-Up Payment an amount equal to the Excise Tax imposed upon the Restricted Shares. The payment of a Gross-Up Payment under this Section 5(a) shall not be conditioned upon the Director's termination of service.
(b) Subject to the provisions of Section 5(c), all determinations required
to be made under this Section 5, including the determination of whether a
Gross-Up Payment is required and of the amount of any such Gross-up Payment,
shall be made by PricewaterhouseCoopers (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Director
within 15 business days after the receipt of notice from the Company that the
Director has become subject to the Excise Tax with respect to the Restricted
Shares, or such earlier time as is requested by the Company. The initial
Gross-Up Payment, if any, as determined pursuant to this Section 5(b), shall be
paid to the Director no later than the later of (i) the due date for the payment
of any Excise Tax, and (ii) the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm meeting the requirements of this
Section 5(b) shall be binding upon the Company and the Director. As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment") or Gross-up Payments are made by the Company which should
not have been made ("Overpayment"), consistent with the calculations required to
be made hereunder. In the event that the Company exhausts its remedies pursuant
to Section 5(c) and the Director thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Director. In the event the Gross-up Payment
exceeds the amount necessary to reimburse the Director for the Excise Tax, the
Accounting Firm shall determine the Overpayment that has been made and any such
Overpayment shall be promptly paid by the Director to or for the benefit of the
Company. The fees and disbursements of the Accounting Firm shall be paid by the
Company. The Director agrees not to take any excise tax reporting position
inconsistent with any position taken by the Company with respect to the
Restricted Shares.
(c) The Director shall notify the Company in writing of any specific claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable and shall apprise the Company of the nature of such claim and the date on which such Claim is requested to be paid. The Director shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Director in writing prior to the expiration of such period that it desires to contest such claim, the Director shall:
(i) give the Company any information reasonably requested by the Company relating to such claim,
(ii) take such action in connection with contesting such claim as the Company shall reasonably and in good faith request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Director harmless, on an after-tax basis, for any Excise Tax, income tax or employment tax, including interest and penalties with respect thereto (other than any such interest or penalties caused by the Director's willful inaction), imposed as a result of such representation and payment of costs and expenses.
If the Company directs the Director to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Director on an interest-free basis and shall indemnify and hold the Director harmless, on an after-tax basis, from any Excise Tax, income tax or employment tax, including interest or penalties with respect thereto (other than any such interest or penalties caused by the Director's willful inaction), imposed with respect to such advance. The Company's rights hereunder shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Director shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Director of an amount advanced by the Company pursuant to Section 5(c), the Director becomes entitled to receive any refund with respect to such claim, the Director shall (subject to the Company's complying with the requirements of Section 5(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Director of an amount advanced by the Company pursuant to Section 5(c), a determination is made that the Director shall not be entitled to any refund with respect to such claim and the Company does not notify the Director in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Director's continuing or future participation in any benefit, bonus, policies or programs provided by the Company or any of its subsidiaries and for which the Director may qualify, nor, except as provided in Section 10(e), shall anything herein limit or otherwise affect such rights as the Director may have under any share option or other agreements with the Company or any of its subsidiaries.
7. Full Settlement; Legal Expenses. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or any of its subsidiaries may have against the Director or others. The Company agrees to pay, upon written demand therefor by the Director accompanied by an invoice for such fees and expenses, all legal fees and expenses which the Director may reasonably incur as a result of any dispute or contest by or with the Company or others regarding the validity or enforceability of, or liability
under, any provision of this Agreement (including as a result of any contest by the Director about the amount of any payment hereunder), plus in each case interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code, unless the Company prevails on all material causes of action in the dispute or contest. In any such action brought by the Director for damages or to enforce any provision of this Agreement, the Director shall be entitled to seek both legal and equitable relief and remedies, including, without limitation, specific performance of the Company's obligations hereunder, in the Director's sole discretion.
8. Confidential Information; Nonsolicitation of Employees and Customers. The Director shall hold in a fiduciary capacity for the benefit of the Company and its subsidiaries all secret or confidential information, knowledge or data relating to the Company or any of its subsidiaries, and their respective businesses and joint ventures, which shall have been obtained by the Director during the Director's services with the Company or any of its subsidiaries (except for information, knowledge or data which shall be or subsequently become known or generally available to the public other than by acts of the Director or his representatives in violation of this Agreement). After the date of termination of the Director's services with the Company or any of its subsidiaries, the Director shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by the Company. The Director shall return to the Company at the time of the termination of the Director's services with the Company or any of its subsidiaries all tangible property of the Company or any its subsidiaries in the Director's possession, including, but not limited to, confidential information relating to the Company or any of its subsidiaries.
The Director shall not, during the term of his retention by the Company or any of its subsidiaries and for one year thereafter, directly or indirectly, on behalf of the Director or any other person or entity, induce, or seek to induce, any employee of the Company or any of its subsidiaries to terminate services with the Company or any of its subsidiaries. In addition, the Director hereby agrees that, in the event his service with the Company is terminated by the Company prior to the fifth anniversary of the date hereof, during the period ending on the later of the fifth anniversary of the date hereof or one year following the date of his termination by the Company, he will not, without the Company's written consent, directly or indirectly manage, participate in, or render services for any business competing with the businesses of the Company or its subsidiaries as such businesses exist or are in process as of the date of termination, within any geographical area in which the Company or its subsidiaries engage in such businesses.
In the event of a breach or threatened breach by the Director of any provision of this Section 8, the Director acknowledges that the Company and its subsidiaries shall be entitled to an injunction restraining the Director from such act or threatened act, in addition to monetary damages and any other available remedies. The Director hereby expressly consents and agrees that, for any breach or threatened breach of any provision of this Section 8, a restraining order and/or an injunction may be issued against the Director in addition to any other rights the Company or any of its subsidiaries may have with respect to such violation or breach. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Director under this Agreement. If, at the enforcement of this Section 8, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the
parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in Section 8 to cover the maximum duration, scope and area permitted by law.
9. Successors.
(a) This Agreement is personal to the Director and without the prior written consent of the Company shall not be assignable by the Director otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Director's legal representatives or successors in interest.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the businesses and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For this purpose, any company that owns the Company's Bermuda operations and becomes directly owned by shareholders of the Company shall be deemed to be a successor of the Company. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees (or is required hereunder to assume and agree) to perform this Agreement by operation of law or otherwise.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Director:
Robert Clements
104 Wallachs Point Drive
Stamford, CT 06902
If to the Company:
Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attention: General Counsel
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d) The Director's or the Company's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof.
(e) This Agreement replaces and supersedes in its entirety the Retention and Change in Control Agreement dated as of May 5, 2000 between the Company and the Director, which shall cease to be in effect.
(f) This Agreement contains the entire understanding of the Company and the Director with respect to the subject matter hereof but, except as otherwise expressly stated herein, does not supersede or override the provisions of any share option, restricted share, employee benefit or other plan, program, policy or practice in which the Director is a participant or under which the Director is a beneficiary.
IN WITNESS WHEREOF, the Director has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed as of the date first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
------------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General Counsel &
Secretary
|
ARCH CAPITAL GROUP (U.S.) INC.
By: /s/ Louis T. Petrillo
-------------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General Counsel &
Secretary
|
DIRECTOR:
/s/ Robert Clements -------------------------------------------------- Robert Clements |
Exhibit A
SECURED NON-RECOURSE PROMISSORY NOTE
US$13,530,000 Greenwich, CT April __, 2002
The undersigned, ROBERT CLEMENTS (the "Borrower"), HEREBY PROMISES TO PAY to the order of Arch Capital Group (U.S.) Inc. (the "Holder"), US$13,530,000 (Thirteen Million Five Hundred Thirty Thousand United States Dollars), together with interest thereon, in accordance with the terms and conditions set forth below (including, without limitation, paragraph (k)).
(a) Interest; Maturity. Interest on the principal balance of this Note from time to time outstanding shall accrue from the date hereof (the "Effective Date") at _____%,(1) compounded semi-annually. Interest shall accrue and be payable on each March 31 and September 30 and on the Maturity Date (defined below). Interest shall be computed on the basis of a year of a 365-day year and shall be paid for the actual number of days on which principal is outstanding. In any event, the entire outstanding principal balance of this Note, together with any accrued interest and other charges as may be due hereunder, shall be paid on the fifth anniversary of the Effective Date (the "Maturity Date").
(b) Payments. Amounts due hereunder are payable in lawful money of the United States and in immediately available funds at the offices of the Holder located at Arch Capital Group (U.S.) Inc., 20 Horseneck Lane, Greenwich, CT 06830 or at such other place as the Holder shall designate in writing to the Borrower.
(c) Optional Prepayment. The Borrower may, at his option, prepay this Note, in whole or in part, at any time and from time to time, without premium or penalty.
(d) Representations. The Borrower represents and warrants as follows: (i) Borrower has full power and authority to execute, deliver, and perform his obligations under this Note; (ii) the execution, delivery and performance by the Borrower does not contravene any agreement to which Borrower is a party or by which he or any of his assets are bound; and (iii) this Note constitutes the legal, valid and binding non-recourse obligation of the Borrower, enforceable against the Borrower in accordance with its terms (including, without limitation, paragraph (k)).
1 Applicable federal rate (mid term rate) in effect at time of issuance of
note.
(e) Collateral. As collateral security for the payment and performance when due (whether at maturity, by acceleration or otherwise) of all obligations of the Borrower to the Holder under this Note, the Borrower hereby pledges and assigns to the Holder a continuing first priority security interest in all right, title and interest of the Borrower in and to the following:
(i) 1,668,157 common shares, par value $0.01 per share, of ACGL granted under the Restricted Share Agreement, dated October 23, 2001 (the "Restricted Share Agreement") between the Borrower and Arch Capital Group Ltd., a Bermuda company ("ACGL"), and all securities or other property (including cash) issued in respect of or in exchange for such common shares (collectively, the "Pledged Securities"); and
(ii) all dividends and distributions received or receivable in respect of such shares and the proceeds of all of the foregoing (collectively, the "Collateral").
The Borrower shall deliver to the Holder any and all original certificates held by Borrower representing the Pledged Securities, together with blank, undated assignments or share powers relating thereto. In addition, the Borrower shall deliver such other documents, instruments and agreements and do such further acts and things as the Holder shall reasonably request to further confirm unto the Holder the security interest in the Collateral granted hereunder.
(f) Voting. So long as no Event of Default has occurred and is continuing under this Note, the Borrower shall be permitted to vote the Pledged Securities without any further consent of the Holder, provided that the Borrower shall not vote the Pledged Securities or otherwise take any other action that would materially adversely affect the value of the Collateral or affect the lien on the Collateral granted hereunder.
(g) Sale of Pledged Securities by the Borrower. The Borrower may sell the Pledged Securities at any time (subject to vesting requirements for the Pledged Securities), provided that while any portion of the principal or interest on this Note remains payable, the net after-tax proceeds of any such sale (or any unrestricted cash received in any merger or other corporate transaction) shall be applied to the payment of any such unpaid principal and interest, as provided in paragraph (c) above.
(h) Offset. The Borrower shall not offset any amounts due under this Note against any amounts due or alleged due to the Borrower from the Holder or any of its affiliates.
(i) Acceleration. The following shall constitute "Events of Default":
(i) the Borrower fails to make any payment within 5 days after the date it is due;
(ii) the Borrower files a voluntary petition in bankruptcy, or is adjudicated bankrupt, under the Bankruptcy Code of the United States;
(iii) the Borrower is the subject of a petition filed in the federal or territorial courts for the appointment of a trustee or receiver in bankruptcy or insolvency, which petition or proceeding, as it relates to Borrower, is not discharged or dismissed within 60 days after the commencement or filing of the same;
(iv) the Borrower makes a general assignment for the benefit of creditors;
(v) ACGL terminates the service of the Borrower as Chairman of the Board of Directors of ACGL for Cause (as defined below); or
(vi) the Borrower terminates his service as Chairman of the Board of Directors of ACGL and breaches his obligation not to induce employees of ACGL or any of its subsidiaries to terminate service with ACGL or any of its subsidiaries as set forth in Section 8 of the Retention Agreement between ACGL, the Holder and the Borrower dated January 4, 2002 (the "Retention Agreement").
Upon the occurrence of any Event of Default, the entire balance of the principal sum of this Note, together with all accrued and unpaid interest, if any, shall become immediately due and payable. For purposes hereof, "Cause" shall mean the conviction of the Borrower of a felony.
(j) Remedies. Upon the occurrence and during the continuance of any Event of Default, the Holder shall be entitled to exercise all remedies available to a secured creditor upon the default of a debtor under applicable Connecticut law, including, without limitation, selling the Collateral at a public or private sale without notice to the Borrower to the extent permitted under applicable Connecticut law.
(k) No Personal Liability. Neither the Borrower nor any of his heirs, legal representatives, successors or assigns shall have any personal liability for the payment or performance of any of the Borrower's obligations hereunder. The Holder may enforce its rights in, to, or against only the Collateral, and Lender shall have full recourse to and the right to proceed against, only such Collateral. In all events, no monetary or deficiency judgment shall be sought or enforced against the Borrower or any of his heirs, legal representatives, successors or assigns.
(l) Assigns. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, personal or legal representatives and permitted assigns. This Note is personal to the Borrower and without the prior written consent of the Holder shall not be assignable by the Borrower otherwise than by will or the laws of descent and distribution. This Note shall not be assignable by the Holder without the prior written consent of the Borrower, except to any non-Bermuda subsidiary of ACGL or any person that assumes the Retention Agreement.
(m) Presentment. The Borrower hereby waives presentment for payment, demand, protest and notice of dishonor of this Note.
(n) Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of Connecticut without giving effect to the conflict of laws principles thereof.
(o) Jurisdiction; Venue. The Borrower hereby (i) irrevocably submits to the jurisdiction of any State or Federal court sitting in Connecticut in any action or proceeding arising out of or relating to this Note, (ii) irrevocably waives any defense based on doctrines of venue or forum non conveniens, or similar rules or doctrines, and (iii) irrevocably agrees that all claims in respect of such an action or proceeding may be heard and determined in such State or Federal court.
(p) Severability. Wherever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Note and shall be interpreted so as to be effective and valid.
SIGNED AND DELIVERED by the undersigned to be effective as of the Effective Date set forth above.
Exhibit 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of October 23, 2001 between Arch Capital Group Ltd., a Bermuda corporation (the "Company"), and John M. Pasquesi (the "Executive").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Subsidiaries; (b) malfeasance or gross negligence in the performance of the Executive's duties without the same being corrected within twenty (20) days after being given written notice thereof; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) continued and habitual use of alcohol by the Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within twenty (20) days after being given written notice thereof; or (e) the Executive's use of illegal drugs without the same being corrected within twenty (20) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to
the public and that was or is used, developed or obtained by the Company or its
Subsidiaries in connection with its business. It shall not include information
(a) required to be disclosed by court or administrative order, (b) lawfully
obtainable from other sources or which is in the public domain through no fault
of the Executive; or (c) the disclosure of which is consented to in writing by
the Company.
"Date of Termination" has the meaning set forth in Section 5.06.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) the material diminution of the duties or responsibilities of the Executive without the same being corrected within twenty (20) days after being given written notice thereof; provided, however, that the Company shall have the right to receive notice and, therefore, the right to make such a correc-
tion only once during any twelve (12) month period; or (b) a reduction in the Executive's Base Salary.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Notice of Termination" has the meaning set forth in Section 5.05.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Reimbursable Expenses" has the meaning set forth in Section 4.03.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01. Employment. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in Section 5.01. The period beginning on the date hereof and ending as provided in Section 5.01 is referred to herein as the "Employment Period."
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01. Position and Duties. The Executive shall serve as Vice-Chairman of the Company, reporting to, and subject to the control of, the Board of Directors of the Company. The Executive shall be responsible for the oversight of capital allocation and investment with respect to the Company. The Executive will devote such time to his employment hereunder as is necessary to carry out his duties and responsibilities. The Executive's services hereunder shall not be required to be provided from a location other than San Francisco, California. In addition, if requested by the Company the Executive will provide the services set forth above as an employee of a wholly-owned United States subsidiary of the Company.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01. Base Salary. During the Employment Period, the Executive's base salary will be $30,000 per annum (the "Base Salary"). The Base Salary will be payable bimonthly on the fifteenth and last working days of each month in arrears. The Executive acknowledges that, as an executive officer of the Company, he will not be entitled to any additional compensation for his service as a member of the Board of Directors of the Company.
SECTION 4.02. Benefits. In addition to the Base Salary, the Executive shall be entitled to benefits under any plan or arrangement available generally for senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents.
SECTION 4.03. Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him (including business class airfare) in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, ("Reimbursable Expenses"), subject to the Company' requirements with respect to reporting and documentation of expenses.
SECTION 4.04. Stock Options Restricted Stock and Stock Purchase. On the date hereof, the Company shall grant to the Executive an option to acquire 375,473 shares of the Company's common stock at an exercise price of $20.00 per share. The other terms of the stock option shall be as set forth in the form of Stock Option Agreement attached hereto as Exhibit A. The stock option award provided for in this Section 4.04 is made as an inducement essential to the Executive's entering into this Agreement.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01. Term. The Employment Period will terminate one day following
the second anniversary hereof; provided that (a) the Employment Period shall
terminate prior to such date upon the Executive's death or Permanent Disability,
(b) the Employment Period may be terminated by the Company for any reason prior
to such date, and (c) the Employment Period may be terminated by the Executive
at any time prior to such date.
SECTION 5.02. Unjustified Termination. Except as otherwise provided in
Section 5.03, if the Employment Period shall be terminated prior to the
expiration of the second anniversary of the date hereof by the Executive for
Good Reason or by the Company not for Cause (collectively, an "Unjustified
Termination") (it being understood that a termination (a) for Cause, (b) as a
result of the Executive's resignation or leaving his employment other than for
Good Reason, or (c) as a result of the death or Permanent Disability of the
Executive shall not constitute an Unjustified Termination), the Executive shall
be paid solely (except as provided in Section 5.04 below) the amount of six
months' of his Base Salary, provided the Executive shall be entitled to such
payments only if the Executive has not breached and does not breach the
provisions of Sections 6.01, 7.01, 8.01 or 9.01 and the Executive has entered
into and not revoked a general release of claims reasonably satisfactory to the
Company. Such amounts will be payable in equal monthly installments for a period
of six (6) months commencing on the first month anniversary of the Date of
Termination, and such amounts will be reduced by any amount earned by the
Executive during such six (6) month period from other employment, including
self-employment. In addition, promptly following an Unjustified Termination, the
Executive shall also be reimbursed all Reimbursable Expenses incurred by the
Executive prior to such Unjustified Termination.
SECTION 5.03. Justified Termination. If the Employment Period shall be
terminated prior to the expiration of the second anniversary of the date hereof
(a) for Cause, (b) as a result of the Executive's resignation or leaving of his
employment, other than for Good Reason, or (c) as a result of the death or
Permanent Disability of the Executive (collectively, a "Justified
Termination"), the Executive shall be entitled to receive solely (except as provided in Section 5.04 below) his Base Salary through the Date of Termination and reimbursement of all Reimbursable Expenses incurred by the Executive prior to such Justified Termination.
SECTION 5.04. Benefits. Except as otherwise required by mandatory provisions of law or as otherwise provided in any stock option agreement with the Company, all of the Executive's rights to fringe and other benefits under this Agreement or otherwise, if any, accruing after the termination of the Employment Period as a result of a Justified Termination will cease upon such Justified Termination. Notwithstanding the foregoing, the provisions of the stock option agreements between the Company and the Executive shall govern the consequences of termination of the Executive's employment on such stock options.
SECTION 5.05. Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
SECTION 5.06. Date of Termination. "Date of Termination" shall mean (a) if
the Employment Period is terminated as a result of a Permanent Disability, five
(5) days after a Notice of Termination is given, (b) if the Employment Period is
terminated for Good Reason, the date specified in the Notice of Termination, and
(c) if the Employment Period is terminated for any other reason (including for
Cause), the date designated by the Company in the Notice of Termination.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01. Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01. Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company' interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERLALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01. Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company.
ARTICLE 9
NONSOLICITATION
SECTION 9.01. Nonsolicitation. The Executive hereby agrees that during the Employment Period and for a period of two (2) years after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof.
SECTION 9.02. Enforcement. If, at the enforcement of Section 9.01, a court holds that the duration or scope restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration or scope reasonable under such circumstances will be substituted for the stated duration or scope and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration and scope permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01. Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01 or 9.01 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01 or 9.01, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS
SECTION 11.01. Executive Representations. The Executive hereby represents
and warrants to the Company that (a) the execution, delivery and performance of
this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which the Executive is a party or by which he is bound,
(b) as of the date hereof, the Executive is not a party to or
bound by any written employment agreement or any noncompetition agreement or confidentiality agreement with any other Person and (c) upon the execution and delivery of this Agreement by the Company, this Agreement will be the valid and binding obligation of the Executive, enforceable in accordance with its terms.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Remedies. The Company will have all rights and remedies set forth in this Agreement, all rights and remedies which the Company have been granted at any time under any other agreement or contact and all of the rights which the Company have under any law. The Company will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02. Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03. Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the manner set forth herein.
Copies (which shall not constitute notice) of notices to the Executive shall also be sent to:
Greene Radovsky Maloney & Share LLP Four Embarcadero Center, Suite 4000 San Francisco, California 94111
Attn: Richard L. Greene, Esq.
If to the Company: Arch Capital Group Ltd,
Executive Offices
20 Horseneck Lane
Greenwich, CT 06830
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Attn: General Counsel
Copies (which shall not constitute notice) of notices to the Company shall also be sent to:
Cahill Gordon & Reindel 80 Pine Street New York, NY 10005
Attn: Immanuel Kohn, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08. Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09. No Third Party Beneficiary. This Agreement will not confer any rights or remedies upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.
SECTION 12.11. Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12. Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
-------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President,
General Counsel and
Secretary
/s/ John M. Pasquesi
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John M. Pasquesi
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Exhibit 10.9
ARCH CAPITAL GROUP LTD.
Non-Qualified Stock Option Agreement
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Arch Capital Group Ltd. (the "Company"), a Bermuda company, hereby grants to John M. Pasquesi, Vice Chairman of the Company on the date hereof (the "Option Holder"), the option to purchase common shares, $0.01 par value per share, of the Company ("Shares"), upon the following terms:
WHEREAS, the Option Holder has been granted the following award in connection with his agreeing to be employed by the Company as its Vice Chairman and as compensation for services to be rendered;
WHEREAS, this option has been granted under the Company's Long Term Incentive Plan for New Employees (the "Plan");
(a) Grant. The Option Holder is hereby granted an option (the "Option") to purchase 375,473 Shares (the "Option Shares") pursuant to the Plan, the terms of which are incorporated herein by reference. The Option is granted as of October 23, 2001 (the "Date of Grant") and such grant is subject to the terms and conditions herein and the terms and conditions of the applicable provisions of the Plan. This Option shall not be treated as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended. In the event of any conflict between this Agreement and the Plan, the Plan shall control.
(b) Status of Option Shares. The Option Shares shall upon issue rank equally in all respects with the other Shares.
(c) Option Price. The purchase price for the Option Shares shall be, except as herein provided, $20.00 per Option Share, hereinafter sometimes referred to as the "Option Price," payable immediately in full upon the exercise of the Option.
(d) Term of Option. The Option may be exercised only during the period (the "Option Period") set forth in paragraph (f) below and shall remain exercisable until the tenth anniversary of the Date of Grant. Thereafter, the Option Holder shall cease to have any rights in respect thereof. The right to exercise the Option shall be subject to sooner termination in the event service with the Company is terminated, as provided in paragraph (j) below.
(e) No Rights of Shareholder. The Option Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity.
(f) Exercisability. Except as otherwise set forth in paragraph (j) below, the Option shall become exercisable in full on the second anniversary of the Date of Grant. Subject to paragraph (j) below, the Option may be exercised at any time or from time to time
during the Option Period in regard to all or any portion of the Option which is then exercisable, as may be adjusted pursuant to paragraph (g) below.
(g) Adjustments. In the event that, prior to the expiration of the Option, any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other such change affects the Shares such that they are increased or decreased or changed into or exchanged for a different number or kind of shares, other securities of the Company or of another corporation or other consideration, then in order to maintain the proportionate interest of the Option Holder and preserve the value of the Option, (i) there shall automatically be substituted for each Share subject to the unexercised Option the number and kind of shares, other securities or other consideration (including cash) into which each outstanding Share shall be changed or for which each such Share shall be exchanged, and (ii) the exercise price shall be increased or decreased proportionately so that the aggregate purchase price for the Shares subject to the unexercised Option shall remain the same as immediately prior to such event.
(h) Nontransferability. The Option, or any interest therein, may not be assigned or otherwise transferred, disposed of or encumbered by the Option Holder, other than by will or by the laws of descent and distribution. During the lifetime of the Option Holder, the Option shall be exercisable only by the Option Holder or by his or her guardian or legal representative. Notwithstanding the foregoing, the Option may be transferred by the Option Holder to members of his or her "immediate family " or to a trust or other entity established for the exclusive benefit of solely one or more members of the Option Holder's "immediate family." Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Option Holder's children stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brother and sisters), in laws, and relationships arising because of legal adoption.
(i) Exercise of Option. In order to exercise the Option, the Option Holder shall submit to the Company an instrument in writing signed by the Option Holder, specifying the whole number of Option Shares in respect of which the Option is being exercised, accompanied by payment, in a manner acceptable to the Company (which shall include by broker assisted exercise arrangements), of the Option Price for the Option Shares for which the Option is being exercised. Payment to the Company in cash or Shares already owned by the Option Holder (provided that the Option Holder has owned such Shares for a minimum period of six months or has purchased such Shares on the open market) and having a total Fair Market Value (as defined below) equal to the exercise price, or in a combination of cash and such Shares, shall be deemed acceptable for purposes hereof. Option Shares will be issued accordingly by the Company on the date of exercise.
The Company shall not be required to issue fractional Shares upon the exercise of the Option. If any fractional interest in a Share would be deliverable upon the exercise of the Option in whole or in part but for the provisions of this paragraph, the Company, in lieu of delivering any such fractional share therefor, shall pay a cash adjustment therefor in an amount equal to
their Fair Market Value (or if any Shares are not publicly traded, an amount equal to the book value per share at the end of the most recent fiscal quarter) multiplied by the fraction of the fractional share which would otherwise have been issued hereunder. Anything to the contrary herein notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the issuance of such Option Shares would violate the provision of any applicable law, in which event the Company shall, as soon as practicable, take whatever action it reasonably can so that such Option Shares may be issued without resulting in such violations of law. For purposes hereof, Fair Market Value shall mean the mean between the high and low selling prices per Share on the immediately preceding date (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange on which the Shares are traded, as such prices are officially quoted on such exchange.
(j) Termination of Employment. In the event the Option Holder's employment with the Company terminates (i) due to his death or Permanent Disability (as defined in the Employment Agreement between the Option Holder and the Company dated as of October 23, 2001 (the "Employment Agreement")) or (ii) due to termination of his employment by the Company not for Cause (as defined in the Employment Agreement) or termination of his employment by the Option Holder for Good Reason (as defined in the Employment Agreement), the Option shall become immediately exercisable in full and shall continue to be exercisable by the Option Holder (or his Beneficiary or estate in the event of his death) for the remainder of the Option Period. In the event the Option Holder's employment is terminated by the Option Holder not for Good Reason (and not due to his death or Permanent Disability) or by the Company for Cause, the Option, to the extent then exercisable, may be exercised for the remainder of the Option Period, and, to the extent the Option is not then exercisable, the Option shall be immediately forfeited.
(k) Obligations as to Capital and Registration. The Company agrees that it will at all times maintain authorized and unissued share capital sufficient to fulfill all of its obligations under the Option. The Company also agrees to use reasonable best efforts to maintain an effective Registration Statement on Form S-8 (or any similar successor form) covering the issuance to the Option Holder of the Option Shares.
(l) Transfer of Shares. The Option, the Option Shares, or any interest in either, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws and the terms and conditions hereof.
(m) Expenses of Issuance of Option Shares. The issuance of stock certificates upon the exercise of the Option in whole or in part, shall be without charge to the Option Holder. The Company shall pay, and indemnify the Option Holder from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the exercise of the Option in whole or in part or the resulting issuance of the Option Shares.
(n) Withholding. No later than the date of exercise of the Option granted hereunder, the Option Holder shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Option Holder, federal, state and local taxes of any kind required by law to be withheld upon the exercise of such Option.
(o) References. References herein to rights and obligations of the Option Holder shall apply, where appropriate, to the Option Holder's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Option.
(p) Notices. Any notice required or permitted to be given under this agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn: Secretary
If to the Option Holder:
John M. Pasquesi
Otter Capital LLC
One Maritime Plaza
San Francisco, CA 94111
Copies (which shall not constitute notice) of notices to the Option Holder shall also be sent to:
Greene Radovsky Maloney & Share LLP Four Embarcadero Center, Suite 4000 San Francisco, California 94111
Attn: Richard L. Greene, Esq.
(q) Governing Law. This agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
(r) Entire Agreement. This Agreement constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.
(s) Counterparts. This agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the Date of Grant.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
----------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General Counsel
and Secretary
/s/ John M. Pasquesi
--------------------------
John M. Pasquesi
|
Exhibit 10.10
ARCH CAPITAL GROUP LTD.
Non-Qualified Stock Option Agreement
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Arch Capital Group Ltd. (the "Company"), a Bermuda company, hereby grants to John M. Pasquesi (the "Option Holder"), the option to purchase common shares, $0.01 par value per share, of the Company ("Shares"), upon the following terms:
WHEREAS, the Option Holder has been granted the following award in consideration for his having provided structuring and advisory services to the Company in connection with various financing alternatives;
(a) Grant. The Option Holder is hereby granted an option (the "Option") to purchase 750,946 Shares (the "Option Shares"). The Option is granted as of October 23, 2001 (the "Date of Grant") and such grant is subject to the terms and conditions herein. This Option shall not be treated as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended. This Option shall be rescinded if it is not approved by shareholders of the Company prior to the first anniversary hereof.
(b) Status of Option Shares. The Option Shares shall upon issue rank equally in all respects with the other Shares.
(c) Option Price. The purchase price for the Option Shares shall be, except as herein provided, $20.00 per Option Share, hereinafter sometimes referred to as the "Option Price," payable immediately in full upon the exercise of the Option.
(d) Term of Option. The Option may be exercised during the period beginning on the Date of Grant and ending on the tenth anniversary of the Date of Grant (the "Option Period"). Thereafter, the Option Holder shall cease to have any rights in respect thereof.
(e) No Rights of Shareholder. The Option Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity.
(f) Adjustments. In the event that, prior to the expiration of the Option, any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other such change affects the Shares such that they are increased or decreased or changed into or exchanged for a different number or kind of shares, other securities of the Company or of another corporation or other consideration, then in order to maintain the proportionate interest of the Option Holder and preserve the value of the Option, (i) there shall automatically be substituted for each Share subject to the unexercised Option the number and kind of shares, other securities or other consideration (including cash) into which each outstanding Share shall be changed or for which each such Share shall be exchanged, and (ii) the exercise price shall be in-
creased or decreased proportionately so that the aggregate purchase price for the Shares subject to the unexercised Option shall remain the same as immediately prior to such event.
(g) Nontransferability. The Option, or any interest therein, may not be assigned or otherwise transferred, disposed of or encumbered by the Option Holder, other than by will or by the laws of descent and distribution. During the lifetime of the Option Holder, the Option shall be exercisable only by the Option Holder or by his or her guardian or legal representative. Notwithstanding the foregoing, the Option may be transferred by the Option Holder to members of his or her "immediate family " or to a trust or other entity established for the exclusive benefit of solely one or more members of the Option Holder's "immediate family." Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Option Holder's children stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brother and sisters), in laws, and relationships arising because of legal adoption.
(h) Exercise of Option. In order to exercise the Option, the Option Holder shall submit to the Company an instrument in writing signed by the Option Holder, specifying the whole number of Option Shares in respect of which the Option is being exercised, accompanied by payment, in a manner acceptable to the Company (which shall include by broker assisted exercise arrangements), of the Option Price for the Option Shares for which the Option is being exercised. Payment to the Company in cash or Shares already owned by the Option Holder (provided that the Option Holder has owned such Shares for a minimum period of six months or has purchased such Shares on the open market) and having a total Fair Market Value (as defined below) equal to the exercise price, or in a combination of cash and such Shares, shall be deemed acceptable for purposes hereof. Option Shares will be issued accordingly by the Company on the date of exercise.
The Company shall not be required to issue fractional Shares upon the exercise of the Option. If any fractional interest in a Share would be deliverable upon the exercise of the Option in whole or in part but for the provisions of this paragraph, the Company, in lieu of delivering any such fractional share therefor, shall pay a cash adjustment therefor in an amount equal to their Fair Market Value (or if any Shares are not publicly traded, an amount equal to the book value per share at the end of the most recent fiscal quarter) multiplied by the fraction of the fractional share which would otherwise have been issued hereunder. Anything to the contrary herein notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the issuance of such Option Shares would violate the provision of any applicable law, in which event the Company shall, as soon as practicable, take whatever action it reasonably can so that such Option Shares may be issued without resulting in such violations of law. For purposes hereof, Fair Market Value shall mean the mean between the high and low selling prices per Share on the immediately preceding date (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange on which the Shares are traded, as such prices are officially quoted on such exchange.
(i) Obligations as to Capital and Registration. The Company agrees that it will at all times maintain authorized and unissued share capital sufficient to fulfill all of its obligations under the Option. The Company also agrees to use reasonable best efforts to maintain an effective Registration Statement on Form S-8 (or any similar successor form) covering the issuance to the Option Holder of the Option Shares.
(j) Transfer of Shares. The Option, the Option Shares, or any interest in either, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws and the terms and conditions hereof.
(k) Expenses of Issuance of Option Shares. The issuance of stock certificates upon the exercise of the Option in whole or in part, shall be without charge to the Option Holder. The Company shall pay, and indemnify the Option Holder from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the exercise of the Option in whole or in part or the resulting issuance of the Option Shares.
(l) Withholding. No later than the date of exercise of the Option granted hereunder, the Option Holder shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Option Holder, federal, state and local taxes of any kind required by law to be withheld upon the exercise of such Option.
(m) References. References herein to rights and obligations of the Option Holder shall apply, where appropriate, to the Option Holder's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Option.
(n) Notices. Any notice required or permitted to be given under this agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn: Secretary
If to the Option Holder:
John M. Pasquesi
Otter Capital LLC
One Maritime Plaza
San Francisco, CA 94111
Copies (which shall not constitute notice) of notices to the Option Holder shall also be sent to:
Greene Radovsky Maloney & Share LLP Four Embarcadero Center, Suite 4000 San Francisco, California 94111
Attn: Richard L. Greene, Esq.
(o) Governing Law. This agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
(p) Entire Agreement. This Agreement constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement.
(q) Counterparts. This agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the Date of Grant.
ARCH CAPITAL GROUP LTD.
By:/s/ Louis T. Petrillo
----------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General Counsel
and Secretary
/s/ John M. Pasquesi
--------------------------
John M. Pasquesi
|
Exhibit 10.11
ARCH CAPITAL GROUP LTD.
Non-Qualified Stock Option Agreement
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Arch Capital Group Ltd. (the "Company"), a Delaware corporation, hereby grants to Peter A. Appel, an officer of the Company on the date hereof (the "Option Holder"), the option to purchase common stock, $.01 par value per share, of the Company ("Shares"), upon the following terms:
WHEREAS, the Option Holder is the President and Chief Executive Officer of the Company; and
WHEREAS, the Option Holder has been granted the following award as compensation for services to be rendered and in consideration for the Option Holder's noncompetition and nonsolicitation agreements set forth herein; and
WHEREAS, this Option has also been granted to the Option Holder in lieu of payment of an annual cash bonus or receipt of other incentive compensation for calendar year 2001; and
WHEREAS, this Option is granted pursuant to the Company's 1999 Long Term Incentive and Share Award Plan (the "Plan").
(a) Grant. The Option Holder is hereby granted an option (the "Option") to
purchase 422,407 Shares (the "Option Shares") pursuant to the Plan, the terms of
which are incorporated herein by reference. The Option is granted as of October
23, 2001 (the "Date of Grant") and such grant is subject to the terms and
conditions herein and the terms and conditions of the applicable provisions of
the Plan. Such Option shall not be treated as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended.
(b) Status of Option Shares. The Option Shares shall upon issue rank equally in all respects with the other Shares.
(c) Option Price. The purchase price for the Option Shares shall be, except as herein provided, $20.00 per Option Share, hereinafter sometimes referred to as the "Option Price," payable immediately in full upon the exercise of the Option.
(d) Term of Option. The Option may be exercised only during the period (the "Option Period") set forth in paragraph (f) below and shall remain exercisable
until the tenth anniversary of the Date of Grant. Thereafter, the Option Holder
shall cease to have any rights in respect thereof. Subject to paragraphs (f) and
(j) below, the Option may be exercised at any time or from time to time during
the Option Period in regard to all or any portion of the Option, as may be
adjusted pursuant to paragraph (g) below.
(e) No Rights of Shareholder. The Option Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity.
(f) Vesting and Exercisability.
(i) This Option, to the extent of 50,000 Shares, shall be vested and exercisable on the Date of Grant.
(ii) This Option, to the extent of an additional 172,407 Shares, shall become vested and exercisable on the Vesting Date (as defined below.)
(iii) This Option, to the extent of an additional 200,000 Shares (the "B Shares"), shall become vested on the Vesting Date and shall become exercisable on the later of (x) the Vesting Date and (y) the Market Price Date (as defined below).
The "Market Price Date" shall be the date on which the Market Price (as defined in paragraph 4 of the Company's Class B Warrants (the "Class B Warrants")) of the common stock of the Company has traded at or above $30.00 per share (the "Hurdle Price") for 20 out of 30 consecutive trading days at any time following the Date of Grant. The Hurdle Price shall be subject to adjustment from time to time for any event which would subject the Purchase Price (as defined in the Class B Warrants) to an adjustment by the same percentage as the percentage adjustment of the Purchase Price in accordance with paragraph 4 of the Class B Warrants. Notwithstanding the foregoing, in the event that, prior to the occurrence of the Market Price Date, either a Change of Control (as defined in the Class B Warrants) of the Company occurs or none of the Class B Warrants remain outstanding, the date of such Change of Control or the date none of the Class B Warrants remain outstanding, as the case may be, shall be the Market Price Date.
The "Vesting Date" shall be the earlier of (i) the date the Company has consummated the sale or other disposition (or, in the case of the escrowed assets referred to below, termination or settlement of the escrow) of at least 50%, by book value on the date hereof , of its Non-Core Assets or (ii) the first anniversary of the Date of Grant.
"Non-Core Assets" shall mean the following: (A) unless it has been designated a Core Asset by the Company, American Independent Insurance Holding Company, a Penn-
sylvania corporation; (B) Hales & Co. Inc., a Delaware corporation; (C) escrow assets under the Folkamerica disposition agreement, net of the contingent reserve recorded as of June 30, 2001, as adjusted for 18.5% tax benefits and minus all liabilities, contingent or otherwise, not transferred to the purchaser under such disposition agreement, including "Excluded Liabilities" under such disposition agreement; and (D) all non-public securities held by the Company, Arch Capital Group (U.S.) Inc., a Delaware corporation, and Arch Reinsurance Company, a Nebraska corporation.
(g) Adjustments for Recapitalization and Dividends. In the event that, prior to the expiration of the Option, any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other such change affects the Shares such that they are increased or decreased or changed into or exchanged for a different number or kind of shares, other securities of the Company or of another corporation or other consideration, then in order to maintain the proportionate interest of the Option Holder and preserve the value of the Option, (i) there shall automatically be substituted for each Share subject to the unexercised Option the number and kind of shares, other securities or other consideration into which each outstanding Share shall be changed or for which each such Share shall be exchanged, and (ii) the exercise price shall be increased or decreased proportionately so that the aggregate purchase price for the Shares subject to the unexercised Option shall remain the same as immediately prior to such event.
(h) Nontransferability. The Option may not be assigned or otherwise transferred, disposed of or encumbered by the Option Holder, other than by will or by the laws of descent and distribution. During the lifetime of the Option Holder, the Option shall be exercisable only by the Option Holder or by his or her guardian or legal representative. Notwithstanding the foregoing, the Option may be transferred for no consideration by the Option Holder to members of his or her "immediate family" or to a trust established for the exclusive benefit of solely one or more members of the Option Holder's "immediate family." Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Option Holder's children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), in-laws, and relationships arising because of legal adoption.
(i) Exercise of Option. In order to exercise the Option, the Option Holder shall submit to the Company an instrument in writing signed by the Option Holder, specifying the number of Option Shares in respect of which the Option is being exercised, accompanied by payment, in a manner acceptable to the Company (which shall
include a broker assisted exercise arrangement), of the Option Price for the Option Shares for which the Option is being exercised. Payment to the Company in cash or Shares already owned by the Option Holder (provided that the Option Holder has owned such Shares for a minimum period of six months) and having a total Fair Market Value (as defined below) equal to the exercise price, or in a combination of cash and such Shares, shall be deemed acceptable. Option Shares will be issued accordingly by the Company within 15 business days, and a share certificate dispatched to the Option Holder within 30 days.
The Company shall not be required to issue fractional Shares upon the exercise of the Option. If any fractional interest in a Share would be deliverable upon the exercise of the Option in whole or in part but for the provisions of this paragraph, the Company, in lieu of delivering any such fractional share therefor, shall pay a cash adjustment therefor in an amount equal to their Fair Market Value (or if any Shares are not publicly traded, an amount equal to the book value per share at the end of the most recent fiscal quarter) multiplied by the fraction of the fractional share which would otherwise have been issued hereunder. Anything to the contrary herein notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the issuance of such Option Shares would violate the provision of any applicable law, in which event the Company shall, as soon as practicable, take whatever action it reasonably can so that such Option Shares may be issued without resulting in such violations of law. For purposes hereof, Fair Market Value shall mean the mean between the high and low selling prices per Share on the immediately preceding date (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange on which the Shares are traded, as such prices are officially quoted on such exchange.
(j) Termination of Service. In the event the Option Holder ceases to be an employee of the Company (a) due to his death or disability (as determined under the Company's long-term disability plan), or (b) due to termination (x) by the Company for any reason or (y) by the Option Holder for Good Reason, the Option, to the extent not already vested and exercisable in full, shall become immediately vested and exercisable in full and shall continue to be exercisable by the Option Holder (or his Beneficiary or estate in the event of his death) for the full Option Period. In the event the Option Holder ceases to be an employee of the Company due to termination by the Option Holder not for Good Reason, the Option, to the extent then vested and exercisable, may be exercised for the full term of the Option Period, and, with respect to the option to purchase B Shares, to the extent then vested, the Option shall become exercisable on the Market Price Date and shall remain exercisable through the remainder of the Option. To the extent the Option is not vested immediately following the time of termination of employment, the Option shall be immediately forfeited.
Termination of employment by the Option Holder for "Good Reason" shall mean termination by the Option Holder subsequent to any of the following: (a) the assignment of duties and responsibilities inconsistent in any material and adverse respect with the Option Holder's position or a significant diminution in his duties or responsibilities; (b) reduction in the Option Holder's base salary or bonus opportunity; (c) the requirement that the Option Holder work at a location outside of Fairfield County, Connecticut, or Westchester County, New York; (d) the failure to provide the Option Holder with benefits and incentive compensation opportunities at least as favorable, in the aggregate, as the benefits and incentive compensation opportunities available to the Employee on the Date of Grant; or (e) the failure to secure the agreement of any successor corporation or other entity to the Company to fully assume the Company's obligations under the arrangements described herein. The Option Holder shall exercise his right to terminate employment for Good Reason by giving the Company a written notice of termination specifying in reasonable detail the circumstances constituting such Good Reason. In that event, the Option Holder's employment shall terminate on the last day of the month in which such notice is given unless an earlier date is specified in writing by the Executive. A termination of employment by the Option Holder shall be for Good Reason if one of the occurrences specified in clauses (a) through (e) of this subsection shall have occurred, notwithstanding that the Option Holder may have other reasons for terminating employment, including employment by another employer which the Option Holder desires to accept.
(k) Obligations as to Capital. The Company agrees that it will at all times maintain authorized and unissued share capital sufficient to fulfill all of its obligations under the Option.
(l) Transfer of Shares. The Option, the Option Shares, or any interest in either, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws and the terms and conditions hereof.
(m) Expenses of Issuance of Option Shares. The issuance of stock certificates upon the exercise of the Option in whole or in part, shall be without charge to the Option Holder. The Company shall pay, and indemnify the Option Holder from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the exercise of the Option in whole or in part or the resulting issuance of the Option Shares.
(n) Withholding. The Option Holder agrees to make appropriate arrangements with the Company for satisfaction of any applicable tax withholding requirements, or similar requirements, arising out of the Option.
(o) Noncompetition. The Option Holder acknowledges that during his employment with the Company, he has become familiar with trade secrets and other confidential information concerning the Company, its subsidiaries and their respective predecessors, and that his services are of special, unique and extraordinary value to the Company. In addition, the Option Holder hereby agrees that at any time during his employment by the Company, and for a period ending two (2) years after the date of termination of his employment with the Company for any reason, he will not, without the Company's written consent, be employed by, manage or consult with the insurance or reinsurance businesses of any business in competition with the insurance and reinsurance businesses of the Company or its subsidiaries as such insurance or reinsurance businesses of the Company and its subsidiaries exist or are in process as of the date of termination, within any geographical area in which the Company or its subsidiaries engage in such businesses.
(p) Nonsolicitation. The Option Holder hereby agrees that during his employment with the Company and for a period of two (2) years after the date of termination of his employment with the Company for any reason the Option Holder will not, without the consent of the Company, induce or attempt to induce any employee of the Company or its subsidiaries to leave the employ of the Company or its subsidiaries.
(q) Enforcement. If, at the enforcement of paragraphs (o) or (p) above, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained therein to cover the maximum duration, scope and area permitted by law. Paragraphs (o), (p) and (q) hereof shall survive, in accordance with their terms, and continue in full force and effect following exercise of this Option.
(r) References. References herein to rights and obligations of the Option Holder shall apply, where appropriate, to the Option Holder's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Option.
(s) Settlement of Disputes. Any dispute between the parties arising from or relating to the terms of this Option shall be resolved by arbitration held in the State of Connecticut in accordance with the rules of the American Arbitration Associa-
tion. All costs associated with any arbitration, including all legal expenses, for both parties shall be borne by the Company.
(t) Notices. Any notice required or permitted to be given under this agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Arch Capital Group Ltd.
20 Horseneck Lane
Greenwich, CT 06830
Attn: Secretary
If to the Option Holder:
Peter A. Appel
2 Lounsbery Road
Bedford Corners, NY 10549
(u) Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws.
(v) Entire Agreement. This agreement constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this agreement.
(w) Counterparts. This agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the Date of Grant.
ARCH CAPITAL GROUP LTD.
By: /s/ Robert Clements
--------------------------------
Robert Clements
Chairman
/s/ Peter A. Appel
--------------------------------------------
Peter A. Appel
|
Exhibit 10.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of October 23, 2001 between Arch Capital Group Ltd., a Bermuda corporation ("Parent"), Arch Reinsurance Ltd., a Bermuda corporation (the "Company" and, together with Parent, collectively referred to herein as the "Companies"), and Paul B. Ingrey (the "Executive").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to
the Companies or their Subsidiaries; (b) malfeasance or gross negligence in the
performance of the Executive's duties; (c) the commission by the Executive of
any felony or any crime involving moral turpitude; (d) willful or prolonged
absence from work by the Executive (other than by reason of disability due to
physical or mental illness) or failure, neglect or refusal by the Executive to
perform his duties and responsibilities without the same being corrected within
ten (10) days after being given written notice thereof; (e) continued and
habitual use of alcohol by the Executive to an extent which materially impairs
the Executive's performance of his duties without the same being corrected
within ten (10) days after being given written notice thereof; (f) the
Executive's use of illegal drugs without the same being corrected within ten
(10) days after being given written notice thereof; (g) the Executive's failure
to use his best efforts to obtain, maintain or renew the work permit described
in Section 3.02 below without the same being corrected within ten (10) days
after being given written notice thereof; or (h) the material breach by the
Executive of any of the covenants contained in this Agreement.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Companies or their Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Companies.
"Date of Termination" has the meaning set forth in Section 5.06.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) the material diminution of any material duties or responsibilities of the Executive without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction in the Executive's Base Salary; or (c) the Company giving written notice pursuant to Section 5.01 of its intention not to extend the Employment Period.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Notice of Termination" has the meaning set forth in Section 5.05.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Companies and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50)
percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01. Employment. The Company shall employ the Executive, and the
Executive shall accept employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the date the
work permit described in Section 3.02 is issued to the Executive (the "Work
Permit Date") and ending as provided in Section 5.01. For the period beginning
on the date hereof and ending on the Work Permit Date, Parent shall employ the
Executive, and the Executive hereby accepts employment with Parent for such
period. The period beginning on the date hereof and ending as provided in
Section 5.01 is referred to herein as the "Employment Period."
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01. Position and Duties. Effective on the Work Permit Date, the Executive shall serve as Chairman and Chief Executive Officer of the Company and shall have such responsibilities, powers and duties as may from time to time be prescribed by the Board of Directors of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. Prior to the Work Permit Date the Executive shall be employed by Parent and shall only provide services reasonably required in connection with obtaining financing for Parent. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Companies. The parties hereto anticipate that the Executive's working time hereunder will be approximately three (3) days per week. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Companies or their Subsidiaries, whether for compensation or otherwise, without prior written consent of the Parent. Notwithstanding the foregoing, the Executive may continue to serve as a non-employee director of Fairfax Financial Holdings and its subsidiary, Odyssey Reinsurance so long as such service does not materially interfere with the performance of the Executive's duties hereunder.
SECTION 3.02. Work Permits. The Executive shall use his best efforts to obtain, maintain and renew a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03. Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda. The Executive shall travel to such places outside the United States on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01. Base Salary. During the Employment Period, the Executive's base salary will be $750,000 per annum (the "Base Salary"). The Base Salary will be payable bi-monthly on the 15th and last working day of each month in arrears. Annually during the Employment Period the Board of Directors of the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment at the Company are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than the normal hours per week and the Executive shall not be entitled to receive any additional remuneration for work outside normal hours.
SECTION 4.02. Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 100% of his Base Salary.
SECTION 4.03. Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the usual public holidays and eight (8) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period (Section 11 of the Bermuda Employment Act 2000 shall otherwise not apply to the Executive's employment hereunder); and
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents.
SECTION 4.04. Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Companies' requirements with respect to reporting and documentation of expenses.
SECTION 4.05. Stock Options Restricted Stock and Stock Purchase. On the
date hereof, Parent shall grant to the Executive an option to acquire 417,000
shares of Parent's common stock at an exercise price of $20.00 per share. The
other terms of the stock option shall be as set forth in the form of Stock
Option Agreement attached hereto as Exhibit A. On the date hereof, Parent shall
also grant to the Executive 417,000 shares of restricted common stock of Parent
on the terms set forth in the form of Restricted Stock Agreement attached hereto
as Exhibit B. The stock option and restricted stock awards provided for this
Section 4.05 are made as an inducement essential to the Executive's entering
into the Agreement.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01. Term. The Employment Period will terminate on the third
anniversary of the date hereof; provided that (a) the Employment Period shall
terminate prior to such date upon the Executive's death or Permanent Disability,
(b) the Employment Period may be terminated by the Companies for any reason
prior to such date, and (c) the Employment Period may be terminated by the
Executive at any time prior to such date, if such termination shall be for Good
Reason. In addition, this Agreement will be automatically extended on the same
terms and conditions for successive one year periods following the original
three (3) year term until either the Companies or the Executive, at least sixty
(60) days prior to the expiration of the original term or any extended term,
shall give written notice of their intention not to renew the Agreement.
SECTION 5.02. Unjustified Termination. Except as otherwise provided in
Section 5.03, if the Employment Period shall be terminated prior to the
expiration of the third anniversary of the date hereof (or the extension of the
Employment Period pursuant to Section 5.01) by the Executive for Good Reason or
by the Companies not for Cause (collectively, an "Unjustified Termination") (it
being understood that a termination (a) for Cause, (b) as a result of the
Executive's resignation or leaving his employment other than for Good Reason, or
(c) as a result of the death or Permanent Disability of the Executive shall not
constitute an Unjustified Termination), the Executive shall be paid solely
(except as provided in Section 5.04 below) the amount of his Base Salary,
provided the Executive shall be entitled to such payments only if the Executive
has not breached and does not breach the provisions of Sections 6.01, 7.01,
8.01, 9.01 or 9.02 and the Executive has entered into and not revoked a general
release of claims reasonably satisfactory to the Companies. Such amounts will be
payable in equal monthly installments for a period of twelve (12) months
commencing on the first month anniversary of the Date of Termination. In
addition, promptly following an Unjustified Termination, the Executive shall
also be reimbursed all Reimbursable Expenses incurred by the Executive prior to
such Unjustified Termination.
SECTION 5.03. Justified Termination. If the Employment Period shall be
terminated prior to the expiration of the third anniversary of the date hereof
(or the extension of the Employment Period pursuant to Section 5.01) (a) for
Cause, (b) as a result of the Executive's resignation or leaving of his
employment, other than for Good Reason, (c) as a result of the death or
Permanent Disability of the Executive, or (d) as a result of the Executive's
provision of written notice not to extend the Employment Period under Section
5.01 (collectively, a "Justified Termination"), the Executive shall be entitled
to receive solely (except as provided in Section 5.04 below) his Base Salary
through the Date of Termination and reimbursement of all Reimbursable Expenses
incurred by the Executive prior to such Justified Termination.
SECTION 5.04. Benefits. Except as otherwise required by mandatory
provisions of law, all of the Executive's rights to fringe and other benefits
under this Agreement or otherwise, if any, accruing after the termination of the
Employment Period as a result of a Justified Termination will cease upon such
Justified Termination. Notwithstanding the foregoing, if such Justified
Termination is a result of a Permanent Disability or if the Employment Period is
terminated as a result of an Unjustified Termination, the Executive shall
continue to receive his major medical insurance coverage benefits from the
Company's plan in effect at the time of such termination for a period of twelve
(12) months after the Date of Termination.
SECTION 5.05. Notice of Termination. Any termination by the Companies for Permanent Disability or Cause or without Cause or by the Executive for Good Reason shall be communicated by written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
SECTION 5.06. Date of Termination. "Date of Termination" shall mean (a) if
the Employment Period is terminated as a result of a Permanent Disability, five
(5) days after a Notice of Termination is given, (b) if the Employment Period is
terminated for Good Reason, the date specified in the Notice of Termination, and
(c) if the Employment Period is terminated for any other reason (including for
Cause), the date designated by the Companies in the Notice of Termination.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01. Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01. Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Companies generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Companies as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Companies and hereby assigns all right title and interest in and to such Intellectual Property to the Companies. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Companies will own all of the rights comprised
in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Companies to protect the Companies' interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Companies, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01. Delivery of Materials upon Termination of Employment. As requested by the Companies, from time to time and upon the termination of the Executive's employment with the Companies for any reason, the Executive will promptly deliver to the Companies all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Companies, will provide the Companies with written confirmation that all such materials have been delivered to the Companies.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01. Noncompetition. The Executive acknowledges that during his employment with the Companies, he will become familiar with trade secrets and other Confidential Information concerning the Companies, their Subsidiaries and their respective predecessors, and that his services will be of special, unique and extraordinary value to the Companies. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending two (2) years after the Date of Termination (if such termination is for Cause or as a result of the Executive's resignation or leaving employment not for Good Reason) (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Companies or their Subsidiaries as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Companies or their Subsidiaries engage or plan to engage in such businesses. Notwithstanding the foregoing, the Noncompetition Period shall be twelve (12) months following the Date of Termination if such termination is by the Companies without Cause, by the Executive for Good Reason or due to the Executive giving written
notice pursuant to Section 5.01 of his intention not to extend the Employment Period; provided however, that in such circumstances, the Noncompetition Period may be extended up to a period of eighteen (18) months following the Date of Termination by the Company if it elects in writing to pay the Executive his Base Salary for the additional six (6) month period, such amount to be payable in monthly installments over the additional six (6) month period. It shall not be considered a violation of this Section 9.01 for the Executive (i) to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation, or (ii) to serve as a nonemployee director of Fairfax Financial Holdings or its subsidiary Odyssey Reinsurance.
SECTION 9.02. Nonsolicitation. The Executive hereby agrees that (a) during the Employment Period and for a period of two (2) years after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Companies or their Subsidiaries to leave the employ of the Companies or their Subsidiaries, or in any way interfere with the relationship between the Companies or their Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Companies or their Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto and (b) during the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Companies or their Subsidiaries to cease doing business with the Companies or their Subsidiaries.
SECTION 9.03. Enforcement. If, at the enforcement of Sections 9.01 or 9.02, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01. Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Companies contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause irreparable harm to the Companies for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Companies may have at law, in the event of an actual or
threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02, the Companies shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS
SECTION 11.01. Executive Representations. The Executive hereby represents
and warrants to the Companies that (a) the execution, delivery and performance
of this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which the Executive is a party or by which he is bound,
(b) the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person and
(c) upon the execution and delivery of this Agreement by the Companies, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Remedies. The Companies will have all rights and remedies set forth in this Agreement, all rights and remedies which the Companies have been granted at any time under any other agreement or contact and all of the rights which the Companies have under any law. The Companies will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02. Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Companies and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03. Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed
or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Companies.
SECTION 12.04. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Companies at the addresses set forth below.
If to the Executive: To the last
address delivered to the
Companies by the Executive in the
manner set forth herein.
If to Parent: Arch Capital Group Ltd,
Executive Offices
20 Horseneck Lane
Greenwich, CT 06830
Attn: General Counsel
If to the Company: Arch Reinsurance Ltd.
Richmond House
Par-la-Ville Road
Hamilton HM 11
Bermuda
|
Attn: General Counsel
Copies (which shall not constitute notice) of notices to Parent and the Company shall also be sent to:
Cahill Gordon & Reindel 80 Pine Street New York, NY 10005
Attn: Immanuel Kohn, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08. Withholding. The Companies may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09. No Third Party Beneficiary. This Agreement will not confer any rights or remedies upon any person other than the Companies, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11. Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12. Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
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Printed Name: Louis T. Petrillo
Title: Senior Vice President and
General Counsel
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ARCH REINSURANCE LTD.
By: /s/ Graham B.R. Collis
----------------------------------------------
Printed Name: Graham B.R. Collis
Title: Director
/s/ Paul B. Ingrey
------------------------------------------------
Paul B. Ingrey
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Exhibit 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of October 23, 2001 between Arch Capital Group Ltd., a Bermuda corporation ("Parent"), Arch Reinsurance Ltd., a Bermuda corporation (the "Company" and, together with Parent, collectively referred to herein as the "Companies"), and Dwight R. Evans (the "Executive").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to
the Companies or their Subsidiaries; (b) malfeasance or gross negligence in the
performance of the Executive's duties; (c) the commission by the Executive of
any felony or any crime involving moral turpitude; (d) willful or prolonged
absence from work by the Executive (other than by reason of disability due to
physical or mental illness) or failure, neglect or refusal by the Executive to
perform his duties and responsibilities without the same being corrected within
ten (10) days after being given written notice thereof; (e) continued and
habitual use of alcohol by the Executive to an extent which materially impairs
the Executive's performance of his duties without the same being corrected
within ten (10) days after being given written notice thereof; (f) the
Executive's use of illegal drugs without the same being corrected within ten
(10) days after being given written notice thereof; (g) the Executive's failure
to use his best efforts to obtain, maintain or renew the work permit described
in Section 3.02 below without the same being corrected within ten (10) days
after being given written notice thereof; or (h) the material breach by the
Executive of any of the covenants contained in this Agreement.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Companies or their Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Companies.
"Date of Termination" has the meaning set forth in Section 5.06.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) the material diminution of any material duties or responsibilities of the Executive without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction in the Executive's Base Salary; or (c) the Company giving written notice pursuant to Section 5.01 of its intention not to extend the Employment Period.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Notice of Termination" has the meaning set forth in Section 5.05.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Companies and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50) percent or
more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01. Employment. The Company shall employ the Executive, and the
Executive shall accept employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the date the
work permit described in Section 3.02 is issued to the Executive (the "Work
Permit Date") and ending as provided in Section 5.01. For the period beginning
on the date hereof and ending on the Work Permit Date, Parent shall employ the
Executive, and the Executive hereby accepts employment with Parent for such
period. The period beginning on the date hereof and ending as provided in
Section 5.01 is referred to herein as the "Employment Period."
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01. Position and Duties. Effective on the Work Permit Date, the Executive shall serve as President of the Company and shall have such responsibilities, powers and duties as may from time to time be prescribed by the Chairman and Chief Executive Officer of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. Prior to the Work Permit Date the Executive shall be employed by Parent and shall only provide services reasonably required in connection with obtaining financing for Parent. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Companies. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Companies or their Subsidiaries, whether for compensation or otherwise, without prior written consent of the Parent.
SECTION 3.02. Work Permits. The Executive shall use his best efforts to obtain, maintain and renew a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03. Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda. The Executive shall travel to such places outside the United States on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
SECTION 3.04. Relocation. The Company shall reimburse the Executive for all reasonable expenses incurred by him in relocating his household items to Bermuda, subject to the Company's requirements with respect to reporting and documentation of such expenses.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01. Base Salary. During the Employment Period, the Executive's base salary will be $500,000 per annum (the "Base Salary"). The Base Salary will be payable bi-monthly on the 15th and last working day of each month in arrears. Annually during the Employment Period the Chairman and Chief Executive Officer of the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than the normal hours per week and the Executive shall not be entitled to receive any additional remuneration for work outside normal hours.
SECTION 4.02. Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 100% of his Base Salary.
SECTION 4.03. Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the usual public holidays and eight (8) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of
the Employment Period (Section 11 of the Bermuda Employment Act 2000 shall otherwise not apply to the Executive's employment hereunder);
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents; and
(d) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
SECTION 4.04. Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Companies' requirements with respect to reporting and documentation of expenses.
SECTION 4.05. Stock Options Restricted Stock and Stock Purchase. On the
date hereof, Parent shall grant to the Executive an option to acquire 100,000
shares of Parent's common stock at an exercise price of $20.00 per share. The
other terms of the stock option shall be as set forth in the form of Stock
Option Agreement attached hereto as Exhibit A. On the date hereof, Parent shall
also grant to the Executive 50,000 shares of restricted common stock of Parent
on the terms set forth in the form of Restricted Stock Agreement attached hereto
as Exhibit B. The stock option and restricted stock awards provided for this
Section 4.05 are made as an inducement essential to the Executive's entering
into the Agreement.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01. Term. The Employment Period will terminate on the third
anniversary of the date hereof; provided that (a) the Employment Period shall
terminate prior to such date upon the Executive's death or Permanent Disability,
(b) the Employment Period may be terminated by the Companies for any reason
prior to such date, and (c) the Employment Period may be terminated by the
Executive at any time prior to such date, if such termination shall be for Good
Reason. In addition, this Agreement will be automatically extended on the same
terms and conditions for successive one year periods following the original
three (3) year term until either the Companies or the Executive, at least sixty
(60) days prior to the expiration of the original term or any extended term,
shall give written notice of their intention not to renew the Agreement.
SECTION 5.02. Unjustified Termination. Except as otherwise provided in
Section 5.03, if the Employment Period shall be terminated prior to the
expiration of the third anniversary of the date hereof (or the extension of the
Employment Period pursuant to Section 5.01) by the Executive for Good Reason or
by the Companies not for Cause (collectively, an "Unjustified Termination") (it
being understood that a termination (a) for Cause, (b) as a result of the
Executive's resignation or leaving his employment other than for Good Reason, or
(c) as a result of the death or Permanent Disability of the Executive shall not
constitute an Unjustified Termination), the Executive shall be paid solely
(except as provided in Section 5.04 below) the amount of his Base Salary,
provided the Executive shall be entitled to such payments only if the Executive
has not breached and does not breach the provisions of Sections 6.01, 7.01,
8.01, 9.01 or 9.02 and the Executive has entered into and not revoked a general
release of claims reasonably satisfactory to the Companies. Such amounts will be
payable in equal monthly installments for a period of twelve (12) months
commencing on the first month anniversary of the Date of Termination. In
addition, promptly following an Unjustified Termination, the Executive shall
also be reimbursed all Reimbursable Expenses incurred by the Executive prior to
such Unjustified Termination.
SECTION 5.03. Justified Termination. If the Employment Period shall be
terminated prior to the expiration of the third anniversary of the date hereof
(or the extension of the Employment Period pursuant to Section 5.01) (a) for
Cause, (b) as a result of the Executive's resignation or leaving of his
employment, other than for Good Reason, (c) as a result of the death or
Permanent Disability of the Executive, or (d) as a result of the Executive's
provision of written notice not to extend the Employment Period under Section
5.01 (collectively, a "Justified Termination"), the Executive shall be entitled
to receive solely (except as provided in Section 5.04 below) his Base Salary
through the Date of Termination and reimbursement of all Reimbursable Expenses
incurred by the Executive prior to such Justified Termination.
SECTION 5.04. Benefits. Except as otherwise required by mandatory
provisions of law, all of the Executive's rights to fringe and other benefits
under this Agreement or otherwise, if any, accruing after the termination of the
Employment Period as a result of a Justified Termination will cease upon such
Justified Termination. Notwithstanding the foregoing, if such Justified
Termination is a result of a Permanent Disability or if the Employment Period is
terminated as a result of an Unjustified Termination, the Executive shall
continue to receive his major medical insurance coverage benefits from the
Company's plan in effect at the time of such termination for a period of twelve
(12) months after the Date of Termination.
SECTION 5.05. Notice of Termination. Any termination by the Companies for Permanent Disability or Cause or without Cause or by the Executive for Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
SECTION 5.06. Date of Termination. "Date of Termination" shall mean (a) if
the Employment Period is terminated as a result of a Permanent Disability, five
(5) days after a Notice of Termination is given, (b) if the Employment Period is
terminated for Good Reason, the date specified in the Notice of Termination, and
(c) if the Employment Period is terminated for any other reason (including for
Cause), the date designated by the Companies in the Notice of Termination.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01. Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01. Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Companies generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Companies as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Companies and hereby assigns all right title and interest in and to such Intellectual Property to the Companies. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Companies will own all of the rights comprised in the copyright
therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Companies to protect the Companies' interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Companies, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01. Delivery of Materials upon Termination of Employment. As requested by the Companies, from time to time and upon the termination of the Executive's employment with the Companies for any reason, the Executive will promptly deliver to the Companies all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Companies, will provide the Companies with written confirmation that all such materials have been delivered to the Companies.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01. Noncompetition. The Executive acknowledges that during his employment with the Companies, he will become familiar with trade secrets and other Confidential Information concerning the Companies, their Subsidiaries and their respective predecessors, and that his services will be of special, unique and extraordinary value to the Companies. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending two (2) years after the Date of Termination (if such termination is for Cause or as a result of the Executive's resignation or leaving employment not for Good Reason) (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Companies or their Subsidiaries as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Companies or their Subsidiaries engage or plan to engage in such businesses. Notwithstanding the foregoing, the Noncompetition Period shall be twelve (12) months following the Date of Termination if such termination is by the Companies without Cause, by the Executive for Good Reason or due to the Executive giving written notice pursuant to
Section 5.01 of his intention not to extend the Employment Period; provided however, that in such circumstances, the Noncompetition Period may be extended up to a period of eighteen (18) months following the Date of Termination by the Company if it elects in writing to pay the Executive his Base Salary for the additional six (6) month period, such amount to be payable in monthly installments over the additional six (6) month period. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
SECTION 9.02. Nonsolicitation. The Executive hereby agrees that (a) during the Employment Period and for a period of two (2) years after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Companies or their Subsidiaries to leave the employ of the Companies or their Subsidiaries, or in any way interfere with the relationship between the Companies or their Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Companies or their Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto and (b) during the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Companies or their Subsidiaries to cease doing business with the Companies or their Subsidiaries.
SECTION 9.03. Enforcement. If, at the enforcement of Sections 9.01 or 9.02, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01. Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Companies contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause irreparable harm to the Companies for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Companies may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02, the Companies shall have the absolute right to apply to any court of
competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS
SECTION 11.01. Executive Representations. The Executive hereby represents
and warrants to the Companies that (a) the execution, delivery and performance
of this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which the Executive is a party or by which he is bound,
(b) the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person and
(c) upon the execution and delivery of this Agreement by the Companies, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Remedies. The Companies will have all rights and remedies set forth in this Agreement, all rights and remedies which the Companies have been granted at any time under any other agreement or contact and all of the rights which the Companies have under any law. The Companies will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02. Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Companies and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03. Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Companies.
SECTION 12.04. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Companies at the addresses set forth below.
If to the Executive: To the last
address delivered to the
Companies by the Executive in
the manner set forth herein.
If to Parent: Arch Capital Group Ltd,
Executive Offices
20 Horseneck Lane
Greenwich, CT 06830
Attn: General Counsel
If to the Company: Arch Reinsurance Ltd.
Richmond House
Par-la-Ville Road
Hamilton HM 11
Bermuda
Attn: General Counsel
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Copies (which shall not constitute notice) of notices to Parent and the Company shall also be sent to:
Cahill Gordon & Reindel 80 Pine Street New York, NY 10005
Attn: Immanuel Kohn, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08. Withholding. The Companies may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09. No Third Party Beneficiary. This Agreement will not confer any rights or remedies upon any person other than the Companies, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11. Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12. Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
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Printed Name: Louis T. Petrillo
Title: Senior Vice President and
General Counsel
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ARCH REINSURANCE LTD.
By: /s/ Graham B.R. Collis
----------------------------------------------
Printed Name: Graham B.R. Collis
Title: Director
/s/ Dwight R. Evans
----------------------------------------------
Dwight R. Evans
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Exhibit 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of October 23, 2001 between Arch Capital Group Ltd., a Bermuda corporation ("Parent"), Arch Reinsurance Ltd., a Bermuda corporation (the "Company" and, together with Parent, collectively referred to herein as the "Companies"), and Marc Grandisson (the "Executive").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to
the Companies or their Subsidiaries; (b) malfeasance or gross negligence in the
performance of the Executive's duties; (c) the commission by the Executive of
any felony or any crime involving moral turpitude; (d) willful or prolonged
absence from work by the Executive (other than by reason of disability due to
physical or mental illness) or failure, neglect or refusal by the Executive to
perform his duties and responsibilities without the same being corrected within
ten (10) days after being given written notice thereof; (e) continued and
habitual use of alcohol by the Executive to an extent which materially impairs
the Executive's performance of his duties without the same being corrected
within ten (10) days after being given written notice thereof; (f) the
Executive's use of illegal drugs without the same being corrected within ten
(10) days after being given written notice thereof; (g) the Executive's failure
to use his best efforts to obtain, maintain or renew the work permit described
in Section 3.02 below without the same being corrected within ten (10) days
after being given written notice thereof; or (h) the material breach by the
Executive of any of the covenants contained in this Agreement.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Companies or their Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Companies.
"Date of Termination" has the meaning set forth in Section 5.06.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) the material diminution of any material duties or responsibilities of the Executive without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction in the Executive's Base Salary; or (c) the Company giving written notice pursuant to Section 5.01 of its intention not to extend the Employment Period.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Notice of Termination" has the meaning set forth in Section 5.05.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Companies and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to
have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01. Employment. The Company shall employ the Executive, and the
Executive shall accept employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the date the
work permit described in Section 3.02 is issued to the Executive (the "Work
Permit Date") and ending as provided in Section 5.01. For the period beginning
on the date hereof and ending on the Work Permit Date, Parent shall employ the
Executive, and the Executive hereby accepts employment with Parent for such
period. The period beginning on the date hereof and ending as provided in
Section 5.01 is referred to herein as the "Employment Period."
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01. Position and Duties. Effective on the Work Permit Date, the Executive shall serve as Senior Vice President, Chief Actuary of the Company and shall have such responsibilities, powers and duties as may from time to time be prescribed by the Chairman and Chief Executive Officer of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. Prior to the Work Permit Date the Executive shall be employed by Parent and shall only provide services reasonably required in connection with obtaining financing for Parent. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Companies. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Companies or their Subsidiaries, whether for compensation or otherwise, without prior written consent of the Parent.
SECTION 3.02. Work Permits. The Executive shall use his best efforts to obtain, maintain and renew a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any
other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03. Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda. The Executive shall travel to such places outside the United States on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
SECTION 3.04. Relocation. The Company shall reimburse the Executive for all reasonable expenses incurred by him in relocating his household items to Bermuda, subject to the Company's requirements with respect to reporting and documentation of such expenses.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01. Base Salary. During the Employment Period, the Executive's base salary will be $400,000 per annum (the "Base Salary"). The Base Salary will be payable bi-monthly on the 15th and last working day of each month in arrears. Annually during the Employment Period the Chairman and Chief Executive Officer of the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than the normal hours per week and the Executive shall not be entitled to receive any additional remuneration for work outside normal hours.
SECTION 4.02. Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 100% of his Base Salary.
SECTION 4.03. Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior execu-
tive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the usual public holidays and eight (8) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period (Section 11 of the Bermuda Employment Act 2000 shall otherwise not apply to the Executive's employment hereunder);
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents; and
(d) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
SECTION 4.04. Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Companies' requirements with respect to reporting and documentation of expenses.
SECTION 4.05. Stock Options and Restricted Stock. On the date hereof, Parent shall grant to the Executive an option to acquire 37,500 shares of Parent's common stock at an exercise price of $20.00 per share. The other terms of the stock option shall be as set forth in the form of Stock Option Agreement attached hereto as Exhibit A. On the date hereof, Parent shall also grant to the Executive 12,500 shares of restricted common stock of Parent on the terms set forth in the form of Restricted Stock Agreement attached hereto as Exhibit B. The stock option and restricted stock awards provided for this Section 4.05 are made as an inducement essential to the Executive's entering into the Agreement.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01. Term. The Employment Period will terminate on the third
anniversary of the date hereof; provided that (a) the Employment Period shall
terminate prior to such date upon the Executive's death or Permanent Disability,
(b) the Employment Period may be terminated by the Companies for any reason
prior to such date, and (c) the Employment Period may be terminated by the
Executive at any time prior to such date, if such termination shall be for Good
Reason. In addition, this Agreement will be automatically
extended on the same terms and conditions for successive one year periods following the original three (3) year term until either the Companies or the Executive, at least sixty (60) days prior to the expiration of the original term or any extended term, shall give written notice of their intention not to renew the Agreement.
SECTION 5.02. Unjustified Termination. Except as otherwise provided in
Section 5.03, if the Employment Period shall be terminated prior to the
expiration of the third anniversary of the date hereof (or the extension of the
Employment Period pursuant to Section 5.01) by the Executive for Good Reason or
by the Companies not for Cause (collectively, an "Unjustified Termination") (it
being understood that a termination (a) for Cause, (b) as a result of the
Executive's resignation or leaving his employment other than for Good Reason, or
(c) as a result of the death or Permanent Disability of the Executive shall not
constitute an Unjustified Termination), the Executive shall be paid solely
(except as provided in Section 5.04 below) the amount of his Base Salary,
provided the Executive shall be entitled to such payments only if the Executive
has not breached and does not breach the provisions of Sections 6.01, 7.01,
8.01, 9.01 or 9.02 and the Executive has entered into and not revoked a general
release of claims reasonably satisfactory to the Companies. Such amounts will be
payable in equal monthly installments for a period of twelve (12) months
commencing on the first month anniversary of the Date of Termination. In
addition, promptly following an Unjustified Termination, the Executive shall
also be reimbursed all Reimbursable Expenses incurred by the Executive prior to
such Unjustified Termination.
SECTION 5.03. Justified Termination. If the Employment Period shall be
terminated prior to the expiration of the third anniversary of the date hereof
(or the extension of the Employment Period pursuant to Section 5.01) (a) for
Cause, (b) as a result of the Executive's resignation or leaving of his
employment, other than for Good Reason, (c) as a result of the death or
Permanent Disability of the Executive, or (d) as a result of the Executive's
provision of written notice not to extend the Employment Period under Section
5.01 (collectively, a "Justified Termination"), the Executive shall be entitled
to receive solely (except as provided in Section 5.04 below) his Base Salary
through the Date of Termination and reimbursement of all Reimbursable Expenses
incurred by the Executive prior to such Justified Termination.
SECTION 5.04. Benefits. Except as otherwise required by mandatory provisions of law, all of the Executive's rights to fringe and other benefits under this Agreement or otherwise, if any, accruing after the termination of the Employment Period as a result of a Justified Termination will cease upon such Justified Termination. Notwithstanding the foregoing, if such Justified Termination is a result of a Permanent Disability or if the Employment Period is terminated as a result of an Unjustified Termination, the Executive shall continue to receive his major medical insurance coverage benefits from the Company's
plan in effect at the time of such termination for a period of twelve (12) months after the Date of Termination.
SECTION 5.05. Notice of Termination. Any termination by the Companies for Permanent Disability or Cause or without Cause or by the Executive for Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
SECTION 5.06. Date of Termination. "Date of Termination" shall mean (a) if
the Employment Period is terminated as a result of a Permanent Disability, five
(5) days after a Notice of Termination is given, (b) if the Employment Period is
terminated for Good Reason, the date specified in the Notice of Termination, and
(c) if the Employment Period is terminated for any other reason (including for
Cause), the date designated by the Companies in the Notice of Termination.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01. Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01. Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Companies generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Companies as
now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Companies and hereby assigns all right title and interest in and to such Intellectual Property to the Companies. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Companies will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Companies to protect the Companies' interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Companies, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01. Delivery of Materials upon Termination of Employment. As requested by the Companies, from time to time and upon the termination of the Executive's employment with the Companies for any reason, the Executive will promptly deliver to the Companies all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Companies, will provide the Companies with written confirmation that all such materials have been delivered to the Companies.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01. Noncompetition. The Executive acknowledges that during his employment with the Companies, he will become familiar with trade secrets and other Confidential Information concerning the Companies, their Subsidiaries and their respective predecessors, and that his services will be of special, unique and extraordinary value to the Companies. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending two (2) years after the Date of Termination (if such termination is for Cause or as a result of the Executive's resignation or leaving employment not for Good Reason) (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in
any business competing with the businesses of the Companies or their Subsidiaries as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Companies or their Subsidiaries engage or plan to engage in such businesses. Notwithstanding the foregoing, the Noncompetition Period shall be twelve (12) months following the Date of Termination if such termination is by the Companies without Cause, by the Executive for Good Reason or due to the Executive giving written notice pursuant to Section 5.01 of his intention not to extend the Employment Period; provided however, that in such circumstances, the Noncompetition Period may be extended up to a period of eighteen (18) months following the Date of Termination by the Company if it elects in writing to pay the Executive his Base Salary for the additional six (6) month period, such amount to be payable in monthly installments over the additional six (6) month period. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
SECTION 9.02. Nonsolicitation. The Executive hereby agrees that (a) during the Employment Period and for a period of two (2) years after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Companies or their Subsidiaries to leave the employ of the Companies or their Subsidiaries, or in any way interfere with the relationship between the Companies or their Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Companies or their Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto and (b) during the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Companies or their Subsidiaries to cease doing business with the Companies or their Subsidiaries.
SECTION 9.03. Enforcement. If, at the enforcement of Sections 9.01 or 9.02, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01. Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a
breach or threatened breach by him of any of his covenants and agreements with the Companies contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause irreparable harm to the Companies for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Companies may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02, the Companies shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS
SECTION 11.01. Executive Representations. The Executive hereby represents
and warrants to the Companies that (a) the execution, delivery and performance
of this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which the Executive is a party or by which he is bound,
(b) the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person and
(c) upon the execution and delivery of this Agreement by the Companies, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Remedies. The Companies will have all rights and remedies set forth in this Agreement, all rights and remedies which the Companies have been granted at any time under any other agreement or contact and all of the rights which the Companies have under any law. The Companies will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02. Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Companies and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03. Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Companies.
SECTION 12.04. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement. SECTION 12.06. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Companies at the addresses set forth below.
If to the Executive: To the last
address delivered to the
Companies by the Executive in the
manner set forth herein.
If to Parent: Arch Capital Group Ltd,
Executive Offices
20 Horseneck Lane
Greenwich, CT 06830
Attn: General Counsel
|
If to the Company: Arch Reinsurance Ltd.
Richmond House
Par-la-Ville Road
Hamilton HM 11
Bermuda
|
Attn: General Counsel
Copies (which shall not constitute notice) of notices to Parent and the Company shall also be sent to:
Cahill Gordon & Reindel 80 Pine Street New York, NY 10005
Attn: Immanuel Kohn, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08. Withholding. The Companies may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09. No Third Party Beneficiary. This Agreement will not confer any rights or remedies upon any person other than the Companies, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11. Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12. Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
----------------------------------------------
Printed Name: Louis T. Petrillo
Title: Senior Vice President and
General Counsel
|
ARCH REINSURANCE LTD.
By: /s/ Graham B.R. Collis
----------------------------------------------
Printed Name: Graham B.R. Collis
Title: Director
/s/ Marc Grandisson
------------------------------------------------
Marc Grandisson
|
Exhibit 10.15
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of December 20, 2001 between Arch Capital Group Ltd., a Bermuda corporation ("Parent"), Arch Capital Group (U.S.) Inc., a Delaware corporation (the "Company" and, together with Parent, collectively referred to herein as the "Companies"), and Constantine Iordanou (the "Executive").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to
the Companies or their Subsidiaries; (b) the Executive's conviction of, or plea
of nolo contendere to, any felony or any misdemeanor involving moral turpitude;
(c) willful or prolonged absence from work by the Executive (other than by
reason of disability due to physical or mental illness) or willful failure or
refusal by the Executive to perform his duties and responsibilities, without the
same being corrected within thirty (30) days after being given written notice
thereof; (d) continued and habitual use of alcohol by the Executive to an extent
which materially impairs the Executive's performance of his duties, without the
same being corrected within thirty (30) days after being given written notice
thereof; (e) the Executive's use of illegal drugs, without the same being
corrected within thirty (30) days after being given written notice thereof; or
(f) the material breach by the Executive of any of the provisions contained in
this Agreement, including, without limitation, Section 3.01 and Section 11.01,
without the same (other than in the case of Section 11.01) being corrected
within thirty (30) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Companies or their Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order; (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Companies.
"Date of Termination" has the meaning set forth in Section 5.07.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) any material diminution of the duties or responsibilities of the Executive, without the same being corrected within thirty (30) days after being given written notice thereof; (b) any material breach by the Companies of the provisions contained in this Agreement, without the same being corrected within thirty (30) days after being given written notice thereof; or (c) upon the departure of Mr. Paul Ingrey from employment with Arch Reinsurance Ltd. and its affiliates, the Executive is not promoted to the position of chief executive officer of the worldwide insurance and reinsurance businesses of the Parent and its Subsidiaries, without the same being corrected within thirty (30) days after the Executive gives written notice thereof, but only if the Executive terminates his employment with the Companies for any reason (other than by reason of death or Permanent Disability) within eighteen (18) months from the date of such departure by Mr. Ingrey.
For purposes of clause (a), a material diminution of duties or
responsibilities shall include, without limitation, either of the following: (i)
a requirement that the Executive report to anyone other than Mr. Paul Ingrey,
the chief executive officer of the Parent and the Board of Directors of the
Companies; or (ii) if, following an event or series of events where any Person
or group of related Persons under common control that engages in a substantial
property and casualty insurance or reinsurance business (the "Acquiror"), other
than a Permitted Person, are or become the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), directly or indirectly, of voting securities of the Parent representing
more than 50% of the total voting power of all then outstanding voting
securities of the Parent, the Executive is no longer the chief executive officer
(other than during the period that Paul Ingrey is the chief executive officer)
of the worldwide insurance and reinsurance businesses of the parent/subsidiary
group then including the Parent, the Acquiror and their Subsidiaries. For
purposes of this paragraph, "Permitted Persons" means (A) the Parent; (B) any
Related Party; (C) Hellman & Friedman or any of its subsidiaries or investment
funds managed or controlled by Hellman & Friedman or any of its subsidiaries;
(D) Warburg Pincus or any of its subsidiaries or any investment funds managed or
controlled by Warburg Pincus or any of its subsidiaries; or (E) any group (as
defined in Rule 13b-3 under the Exchange Act) comprised of any or all of the
foregoing; and "Related Party" means (A) a majority-owned subsidiary of the
Parent; (B) a trustee or other fiduciary holding securities under an employee
benefit plan of the Parent or any majority-owned subsidiary of the Parent; or
(C) any entity, 50% or more of the voting power of which is owned directly or
indirectly by the stockholders of the Parent in substantially the same
proportion as their ownership of voting securities of the Parent immediately
prior to the transaction.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Notice of Termination" has the meaning set forth in Section 5.06.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01. Employment. Subject to the receipt on or before December 21, 2001 by the Company of a written letter of resignation from the Executive to his prior employer or a written notice of termination from such prior employer to the Executive which, in either case, is effective on or before December 31, 2001, the Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on January 1, 2002 (the date of the beginning of such period to be referred to herein as the "Start Date") and ending as provided in Section 5.01 (the "Employment Period"). If the Executive fails to satisfy the condition set forth in the preceding sentence or fails to commence the performance of his duties and responsibilities hereunder by January 2, 2002, he shall forfeit all rights hereunder and incur no obligations hereunder; provided, that any breach of the requirements described in this sentence shall be disregarded unless notice of such breach is provided to the Executive by January 31, 2002.
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01. Position and Duties. During the Employment Period, the Executive shall serve as President and Chief Executive Officer of the Company and shall be responsible for the general management and oversight of the United States insurance operations of the Company and its United States affiliates. In such capacity, the Executive shall have such responsibilities, powers and duties as may from time to time be prescribed by the Board of Directors of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Companies and their Subsidiaries. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Companies or their Subsidiaries, whether for compensation or otherwise, without prior written consent of the Parent. Notwithstanding the foregoing, Executive may continue to serve as a non-employee director of the Insurance Service Office (or any successor thereto) and a reasonable number of non-profit organizations so long as such service does not interfere with the performance of the Executive's duties hereunder. If, after two years from the date hereof, the Board of Directors of Parent determines that it is necessary for Executive to provide his services to Parent and its Subsidiaries from offices located in Bermuda, Executive would agree to relocate to Bermuda to provide such services, and Parent would agree to provide Executive benefits customarily provided to similarly situated senior executives residing in Bermuda. Except as indicated in the preceding sentence and for the normal travel requirements of his position, Executive's principal place of business shall be located in the New York Metropolitan area, including New York City, Westchester County, New York, Long Island, Fairfield County, Connecticut, and Morris, Essex, Bergen and other locations in northern New Jersey.
SECTION 3.02. Parent Board Seat. During the Employment Period, Parent shall use its best efforts to cause the Executive to be elected to the Board of Directors of Parent. In the event that the Executive's employment with the Company terminates for any reason, the Ex-
ecutive shall resign from the Board of Directors of Parent and any committee of such Board of Directors on which he serves. In such capacity as a Director of Parent, the Executive will provide oversight and stewardship for Parent's non-United States insurance and reinsurance subsidiaries.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01. Base Salary. During the Employment Period, the Executive's base salary will be $1,000,000 per annum (the "Base Salary"). The Base Salary will be payable bi-monthly on the 15th and last working day of each month in arrears. Annually during the Employment Period, the Board of Directors of the Company shall review with the Executive his job performance and compensation, and, commencing with calendar year 2004, if deemed appropriate by the Board of Directors of the Company, in its discretion, the Executive's Base Salary may be increased.
SECTION 4.02. Bonuses. In addition to the Base Salary, the Executive shall participate in an annual bonus plan on terms established from time to time by the Board of Directors of the Company, in consultation with the senior executives of the Company, including the Executive. The Executive's target annual bonus will be 100% of his Base Salary.
SECTION 4.03. Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) four (4) weeks of paid vacation annually during the Employment Period; and
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents.
SECTION 4.04. Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Companies' requirements with respect to reporting and documentation of expenses. If the Executive relocates to Bermuda, any private aircraft owned or leased by the Companies at such time (if any), or such other air transportation as is reasonably acceptable to the Executive, shall be made available to him upon his reasonable request and at the Company's expense for travel between Bermuda and the New York Metropolitan area.
SECTION 4.05. Stock Options and Restricted Stock. On the Start Date, Parent shall grant to the Executive an option to acquire 425,000 shares of Parent's common stock at an exercise price equal to $23.50 per share. The other terms of the stock option shall be as set forth in the form of the Stock Option Agreement attached hereto as Exhibit A. On the Start Date, Parent shall also grant to the Executive 325,000 shares of restricted common stock of Parent on the terms set forth in the form of Restricted Stock Agreement attached hereto as Exhibit B. The stock option and restricted stock awards provided for in this Section 4.05 are made as an inducement essential to the Executive's entering into the Agreement. In addition, the Executive shall be eligible to participate in Parent's Long Term Incentive and Share Award Plans (and any similar plan adopted by the Parent) under which awards of options or other stock-based awards may be granted by the Board of Directors of Parent. In any year during the period extending through December 31, 2003, the Executive shall be entitled to receive not less than 75% of the largest award of restricted shares and stock options granted to any continuing member of management of the Companies in such year (for the avoidance of doubt, this provision does not apply to any stock-based awards made to any new hire as an inducement essential to the initial employment of such individual).
SECTION 4.06. Signing Bonus Restricted Stock Grant. On the Start Date,
Parent shall grant to the Executive 106,383 shares of restricted common stock of
Parent on the terms set forth in the form of the Restricted Stock Agreement
attached hereto as Exhibit B. The restricted stock award provided for in this
Section 4.06 is made as an inducement essential to the Executive's entering into
the Agreement.
SECTION 4.07. Review of Benefit Plans. As soon as practicable after the Start Date, the Companies shall appoint a committee consisting of members of the Board of Directors of Parent and senior management of the Companies, including the Executive, to review the adequacy of the existing company-sponsored plans providing group life, disability and pension benefits.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01. Term. The Employment Period will terminate on the fifth anniversary of the Start Date unless otherwise agreed by the parties; provided, that (a) the Employment Period shall terminate prior to such date upon the Executive's death or Permanent Disability, and (b) the Employment Period may be terminated at any time by the Company upon 30 days' prior written notice to the Executive or by the Executive upon 60 days' prior written notice to the Company. In addition, this Agreement will be automatically extended on the same terms and conditions for successive one year periods following the original five (5) year term until either the Company or the Executive, at least twelve (12) months prior to the expiration of the original term or any extended term, shall give written notice of their intention not to renew the Agreement (it being understood that any such notice by the Company or the Executive shall not be considered a termination of employment by the Company or the Executive for purposes of Section 5.03).
SECTION 5.02. Termination Due to Death or Permanent Disability. If the
Employment Period shall be terminated due to the death of the Executive, the
Executive's estate or legal representative shall be paid solely (except as
provided in Section 5.05 below) (i) a portion of the bonus (if any) that would
have been payable to the Executive for the year of termination as determined by
the Board of Directors in accordance with the annual bonus plan, prorated for
the portion of the bonus year during which he was employed by the Company, and
(ii) an amount equal to two times the sum of the Base Salary and the target
annual bonus set forth in Section 4.02. Such amount will be payable in a lump
sum as soon as practicable following termination of the Executive's employment
and shall be offset by any proceeds received by the Executive's estate or legal
representative from any insurance coverages provided by the Company or any of
its affiliates. If the Employment Period shall be terminated due to the
Permanent Disability of the Executive, the Executive (or his legal
representative) shall be paid solely (except as provided in Section 5.05 below)
(i) a portion of the bonus (if any) that would have been payable to the
Executive for the year of termination as determined by the Board of Directors in
accordance with the annual bonus plan, prorated for the portion of the bonus
year during which he was employed by the Company, and (ii) at a rate equal to
40% of the Base Salary on a monthly basis during the period of the Executive's
Permanent Disability up to a maximum period as set forth in the Company's
long-term disability plan, offset by any proceeds received by the Executive or
his legal representative from any insurance coverages provided by the Company or
any of its affiliates. In addition, promptly following any such termination, the
Executive (or his estate or legal representative) shall also be reimbursed all
Reimbursable Expenses incurred by the Executive prior to such termination.
SECTION 5.03. Termination for Good Reason or Without Cause. If the
Employment Period shall be terminated (a) by the Executive for Good Reason or
(b) by the Company not for Cause, subject to reduction as set forth in Section
12.01, the Executive shall be paid solely (except as provided in Section 5.05
below) (i) a portion of the bonus (if any) that would have been payable to the
Executive for the year of termination as determined by the Board of Directors in
accordance with the annual bonus plan, prorated for the portion of the bonus
year during which he was employed by the Company, and (ii) an amount equal to
two times the sum of the Base Salary and the target annual bonus set forth in
Section 4.02. Such amount will be payable in equal monthly installments for a
period of eighteen (18) months commencing on the first month anniversary of the
Date of Termination. In addition, promptly following any such termination, the
Executive shall also be reimbursed all Reimbursable Expenses incurred by the
Executive prior to such termination.
SECTION 5.04. Termination for Cause or Other Than Good Reason. If the Employment Period shall be terminated (a) for Cause, or (b) as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, the Executive shall be entitled to receive solely the Base Salary through the Date of Termination and reimbursement of all Reimbursable Expenses incurred by the Executive prior to such termination.
SECTION 5.05. Benefits. If the Employment Period is terminated as a result
of a termination of employment as specified in Section 5.02 or 5.03, the
Executive and his spouse shall continue to receive major medical insurance
coverage benefits from the Company's plan in effect at the time of such
termination, at the expense of the Company, for a period equal to the lesser of
(x) eighteen (18) months following the Date of Termination or (y) if applicable,
until the Executive is provided by another employer with benefits substantially
comparable (with no preexisting condition limitations) to the benefits provided
by such plan. The statutory health care continuation coverage period under
Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code"),
will commence at the end of such period. In addition, if the Employment Period
is terminated as a result of a termination of employment as specified in Section
5.02 or 5.03, any unvested stock options and any unvested shares of restricted
stock of Parent granted to the Executive under Section 4.05 and Section 4.06
shall vest in accordance with the terms of the applicable award agreements.
Except as otherwise required by mandatory provisions of law, all of the
Executive's rights to fringe and other benefits under this Agreement or other
plans or arrangements of the Companies, if any, accruing after the termination
of the Employment Period as a result of a termination of employment as specified
in Section 5.04 will cease upon such termination; provided, that the foregoing
shall not apply with respect to the Executive's rights as set forth in any
deferred compensation plans maintained by the Company or its affiliates, and
under Section 11.03.
SECTION 5.06. Notice of Termination. Any termination by the Companies or by the Executive for any reason shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
SECTION 5.07. Date of Termination. "Date of Termination" shall mean (a) if
the Employment Period is terminated as a result of a Permanent Disability, five
(5) days after a Notice of Termination is given, (b) if the Employment Period is
terminated for Good Reason, the date specified in the Notice of Termination, (c)
if the Employment Period is terminated for Cause, the date designated by the
Company in the Notice of Termination, and (d) if the Employment Period is
otherwise terminated under Section 5.01, after the applicable notice period
specified in such section has elapsed.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01. Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01. Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Companies generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Companies as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Companies and hereby assigns all right title and interest in and to such Intellectual Property to the Companies. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Companies will own all of the rights comprised in the copyright therein. The Executive will cooperate with the Companies to protect the Companies' interests in and rights to such Intellectual Property (including providing reasonable assistance in securing pat-
ent protection and copyright registrations and executing all documents as reasonably requested by the Companies, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01. Delivery of Materials upon Termination of Employment. As requested by the Companies, from time to time and upon the termination of the Executive's employment with the Companies for any reason, the Executive will promptly deliver to the Companies all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Companies, will provide the Companies with written confirmation that all such materials have been delivered to the Companies.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01. Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Companies, their Subsidiaries and their respective predecessors, and that his services will be of special, unique and extraordinary value to the Companies. In addition, in consideration of the rights to the payments set forth in Article 5 of this Agreement, the Executive hereby agrees that at any time during the Employment Period, and for a period ending eighteen (18) months after the termination of Executive's employment (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, render services (as an employee, consultant or in any other capacity) for or in any manner engage in any business competing with the insurance and reinsurance businesses of the Companies or their Subsidiaries as such businesses exist as of the termination of Executive's employment, within any geographical area in which the Companies or their Subsidiaries engage in such businesses; provided, however, that, if such termination is by the Company not for Cause or by the Executive for Good Reason under Section 5.03, the Executive shall be bound by this Section 9.01 only to extent that the Company provides to the Executive the benefits set forth in Section 5.03 and Section 5.05; provided, further, that, if such termination is due to (i) the expiration of the original five year term of this Agreement or any extended term or (ii) by reason of Executive's resignation or leaving of his employment other than for
Good Reason, the Executive shall be bound by this Section 9.01 for the period of
up to eighteen (18) months that the Company, at its sole option, within thirty
(30) days following such termination, elects in writing to (a) pay the Executive
an amount equal to two times the sum of the Base Salary and the target annual
bonus set forth in Section 4.02 (such amount to be payable in equal monthly
installments over such period), and (b) provide the benefits set forth in
Section 5.05. It shall not be considered a violation of this Section 9.01 for
the Executive to be a passive owner of not more than 2% of the outstanding stock
of any class of a corporation which is publicly traded, so long as the Executive
has no active participation in the business of such corporation. In addition, it
shall not be considered a violation of this Section 9.01 for the Executive to
provide services in a non-managerial capacity to a non-risk bearing entity (for
example, as an insurance broker or analyst).
SECTION 9.02. Nonsolicitation. The Executive hereby agrees that (a) during the Employment Period and for a period of eighteen (18) months after the termination of Executive's employment (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Companies or their Subsidiaries to leave the employ of the Companies or their Subsidiaries, or in any way interfere with the relationship between the Companies or their Subsidiaries and any employee thereof and (b) during the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Companies or their Subsidiaries to cease doing business with the Companies or their Subsidiaries.
SECTION 9.03. Enforcement. If, at the enforcement of Sections 9.01 or 9.02, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Article 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01. Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Companies contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause irreparable harm to the Companies for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Companies may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections
6.01, 7.01, 8.01, 9.01 or 9.02, the Companies shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances, and the Companies will be entitled to enforce such rights specifically, without posting a bond or other security.
ARTICLE 11
REPRESENTATIONS; CERTAIN COVENANTS
SECTION 11.01. Executive Representations. The Executive hereby represents
and warrants to the Companies that (a) the execution, delivery and performance
of this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which the Executive is a party or by which he is bound,
(b) the Executive is not a party to or bound by any noncompetition agreement
with any other Person and (c) upon the execution and delivery of this Agreement
by the Companies, this Agreement will be the valid and binding obligation of the
Executive.
SECTION 11.02. Companies Representations. Each Company hereby represents
and warrants to the Executive that (a) it has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and (b) the execution and delivery of this Agreement by each Company
has been duly and validly authorized by all necessary corporate action. The
Parent also agrees to use reasonable best efforts to maintain an effective
Registration Statement on Form S-8 (or any similar successor form) covering the
issuance to the Executive of (i) the shares of the Parent's common stock upon
the exercise of the option referred to in Section 4.05 (the "Option Shares") and
(ii) the shares of restricted common stock of the Parent referred to in Section
4.05 and Section 4.06 (together with the Option Shares, the "Shares"). Parent
hereby represents and warrants that, on the date hereof, the Shares are
registered under the Securities Act of 1933, as amended, on a currently
effective Form S-8 Registration Statement.
SECTION 11.03. General Indemnification. The Parent and Company agree that if the Executive is made a party, or is threatened to be made a party, to any pending or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or the Parent or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, the Executive shall be indemnified and held harmless by the Companies to the fullest extent permitted or authorized by applicable law and the Companies' certificate of incorporation or bylaws, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection
therewith, including, without limitation, attorneys' fees and disbursements and judgments, and the Companies shall advance expenses in connection therewith, to the fullest extent permitted or authorized by applicable law and the Companies' certificate of incorporation or bylaws. Such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to continue and maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
SECTION 11.04. Legal Fees. The Company shall reimburse the Executive for all reasonable expenses incurred by him for legal advice in finalizing the Agreement, subject to a maximum of $15,000. In addition, the Company agrees to pay, upon written demand therefor by the Executive, all legal fees which the Executive may reasonably incur as a result of any dispute or contest by or with the Companies regarding the validity or enforceability of, or liability under, any provision of this Agreement or otherwise in connection with the enforcement of this Agreement, unless the Company substantially prevails on all material causes of action in the dispute or contest.
ARTICLE 12
CERTAIN ADDITIONAL PAYMENTS
SECTION 12.01. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment, award, benefit or
distribution (including, without limitation, the acceleration of any payment,
award, distribution or benefit), by the Company or any of its affiliates to or
for the benefit of the Executive (whether pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Article 12) (as reduced as set forth in this Section 12.01,
a "Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or any corresponding provisions of state or local tax law, or any interest
or penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be paid
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any Excise Tax, and any
federal, state and local income tax or employment tax) imposed upon the Gross-Up
Payment and any interest or penalties imposed with respect to such taxes, the
Executive retains from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the Payments; provided that, the Payments, in the aggregate, shall
be reduced (subject to the following sentences of this section) by an amount
equal to the lesser of: (x) the smallest amount possible such that no Payment
would be treated as a "parachute payment" under Section 280G of the Code; and
(y) $500,000, $1,000,000, $1,500,000, $2,000,000, and $2,500,000 for Payments
that become payable as a
result of a termination of employment occurring in calendar years 2002, 2003, 2004, 2005 and 2006, respectively, even if actually paid in later years. The reduction of the Payments, if applicable, shall be made by first reducing the payments under Section 5.03, unless an alternative method of reduction is elected by the Executive prior to the effective date of the event that triggers the Payments. No reduction shall be made with respect to any Payment received or otherwise required to be included in income for federal income tax purposes prior to such event. Notwithstanding anything to the contrary in the three preceding sentences, if, without regard to any Gross-Up Payment and without any reduction in Payments, the net amount retained by the Executive, after subtracting from the Payments otherwise to be made all taxes imposed thereon (including the Excise Tax), would exceed the after-tax amount that would be retained by the Executive with the Gross-Up Payment and after the reduction computed above, then no reduction in Payments shall be made and no Gross-Up Payment shall be made. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rates of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence (or, if greater, the state and locality in which the Executive is required to file a nonresident income tax return with respect to the Payment) on the date of termination of employment, net of the reduction in federal income taxes that may be obtained from the deduction of such state and local taxes. In addition, no reduction shall be made (and no Excise Tax shall be withheld) with respect to any Payment if the Executive elects (i) to provide to the Company an opinion of counsel reasonably acceptable to the Company to the effect that no Excise Tax should be due with respect to the Payments and (ii) to release the Company from any liability under this Article 12.
SECTION 12.02. Subject to the provisions of Section 12.03, all
determinations required to be made under this Article 12, including the
determination of whether a Gross-Up Payment is required and of the amount of any
such Gross-up Payment, shall be made by a "Big 5" accounting firm (other than
the regular outside accounting firm retained by the Company) selected by the
Company and agreed to by the Executive, which agreement shall not be
unreasonably withheld (the "Accounting Firm"), which Accounting Firm shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days after the receipt of notice from the Company that the
Executive has received a Payment, or such earlier time as is requested by the
Company. The initial Gross-Up Payment, if any, as determined pursuant to this
Section 12.02, shall be paid to the Executive (or for the benefit of the
Executive to the extent of the Company's withholding obligation with respect to
applicable taxes) within 10 days after the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm meeting the requirements
of this Section 12.02 shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Com-
pany should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 12.03 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be paid by the Company to or for the benefit of the Executive within 10 days after delivery of copies of a statement setting forth such determination, and the underlying calculations, to the Company and the Executive. The fees and disbursements of the Accounting Firm shall be paid by the Company. If required, the Company shall enter into an engagement letter with the Accounting Firm containing reasonable and customary terms and provisions.
SECTION 12.03. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but not later than ten business days after the Executive receives written notice of such claim and shall apprise the Company of the nature of such claim and the date on which such Claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim,
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax, income tax or employment tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 12.03, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax, income tax or employment tax, including interest or penalties with respect thereto, imposed with respect to such advance; and further provided that any extension of the statute of limitations relating to the payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
SECTION 12.04. If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 12.03, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Sections 12.01, 12.02 and 12.03) promptly pay to the Company, upon receipt of the refund, the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 12.03, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Certain Procedures. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 13.02. Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Companies and
the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 13.03. Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Companies; provided further that the Companies may not assign the rights of the Companies hereunder except to a Person that expressly assumes the obligations of the Companies hereunder.
SECTION 13.04. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 13.05. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 13.06. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 13.07. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Companies at the addresses set forth below.
If to the Executive: To the last address of the Executive on record with the Companies.
Copies (which shall not constitute notice) of notices to the Executive shall also be sent to:
Roberts & Holland LLP 825 Eighth Avenue, 37th Floor
New York, NY 10019
Attn: David E. Kahen, Esq.
If to Parent: Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn: General Counsel
If to the Company: Arch Capital Group (U.S.) Inc.
20 Horseneck Lane
Greenwich, CT 06830
Attn: General Counsel
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Copies (which shall not constitute notice) of notices to Parent and the Company shall also be sent to:
Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attn: Immanuel Kohn, Esq.
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 13.08. Withholding. The Companies may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 13.09. No Third Party Beneficiary. This Agreement will not confer any rights or remedies upon any person other than the Companies, the Executive and their respective heirs, executors, successors and assigns.
SECTION 13.10. Parent Guarantee. Parent hereby guarantees all of the obligations of the Company hereunder.
SECTION 13.11. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.
SECTION 13.12. Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 13.13. Survival. Sections 6.01, 7.01, 8.01 and Articles 9, 10, 12 and 13 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 13.14. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 13.15. JURISDICTION . The parties agree to the nonexclusive jurisdiction of the federal and state courts situated in New York County, New York, for the resolution of any dispute arising under this Agreement, the Stock Option Agreement or the Restricted Stock Agreements referenced in Sections 4.05 and 4.06.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
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ARCH CAPITAL GROUP (U.S.) INC.
By: /s/ Louis T. Petrillo
------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
/s/ Constantine Iordanou
-------------------------------------------------
Constantine Iordanou
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Exhibit 10.16
ARCH CAPITAL GROUP LTD.
Non-Qualified Stock Option Agreement
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Arch Capital Group Ltd. (the "Company"), a Bermuda company, hereby grants to Constantine Iordanou, an employee of a subsidiary of the Company on the date hereof (the "Option Holder"), the option to purchase common shares, $0.01 par value per share, of the Company ("Shares"), upon the following terms:
WHEREAS, the Option Holder has been granted the following award in connection with his retention as an employee and as compensation for services to be rendered; and the following terms reflect the Company's Long Term Incentive Plan for New Employees (the "Plan");
(a) Grant. The Option Holder is hereby granted an option (the "Option") to purchase 425,000 Shares (the "Option Shares") pursuant to the Plan, the terms of which are incorporated herein by reference. The Option is granted as of January 1, 2002 (the "Date of Grant") and such grant is subject to the terms and conditions herein and the terms and conditions of the applicable provisions of the Plan. This Option shall not be treated as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended. In the event of any conflict between this Agreement and the Plan, the Plan shall control.
(b) Status of Option Shares. The Option Shares shall upon issue rank equally in all respects with the other Shares.
(c) Option Price. The purchase price for the Option Shares shall be, except as herein provided, $23.50 per Option Share, hereinafter sometimes referred to as the "Option Price," payable immediately in full upon the exercise of the Option.
(d) Term of Option. The Option may be exercised only during the period (the "Option Period") set forth in paragraph (f) below and shall remain exercisable until the tenth anniversary of the Date of Grant. Thereafter, the Option Holder shall cease to have any rights in respect thereof. The right to exercise the Option shall be subject to sooner termination in the event employment with the Company is terminated, as provided in paragraph (j) below.
(e) No Rights of Shareholder. The Option Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity.
(f) Exercisability. Except as otherwise set forth in paragraph (j) below, the Option shall become vested and exercisable in three equal annual installments, beginning on the Date of Grant and continuing on the first and second anniversaries of the Date of Grant. Subject to paragraph (j) below, the Option may be exercised at any time or from time to time during the Option Period in regard to all or any portion of the Option which is then vested and exercisable, as may be adjusted pursuant to paragraph (g) below.
(g) Adjustments for Recapitalization. In the event that, prior to the expiration of the Option, any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other such change affects the Shares such that they are increased or decreased or changed into or exchanged for a different number or kind of shares, other securities of the Company or of another corporation or other consideration, then in order to maintain the proportionate interest of the Option Holder and preserve the value of the Option, (i) there shall automatically be substituted for each Share subject to the unexercised Option the number and kind of shares, other securities or other consideration (including cash) into which each outstanding Share shall be changed or for which each such Share shall be exchanged, and (ii) the exercise price shall be increased or decreased proportionately so that the aggregate purchase price for the Shares subject to the unexercised Option shall remain the same as immediately prior to such event.
(h) Nontransferability. The Option, or any interest therein, may not be assigned or otherwise transferred, disposed of or encumbered by the Option Holder, other than by will or by the laws of descent and distribution. During the lifetime of the Option Holder, the Option shall be exercisable only by the Option Holder or by his or her guardian or legal representative. Notwithstanding the foregoing, the Option may be transferred by the Option Holder to members of his or her "immediate family" or to a trust or other entity established for the exclusive benefit of solely one or more members of the Option Holder's "immediate family." Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be exercisable by the transferee and will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Option Holder's children stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brother and sisters), in laws, and relationships arising because of legal adoption.
(i) Exercise of Option. In order to exercise the Option, the Option Holder shall submit to the Company an instrument in writing signed by the Option Holder, specifying the whole number of Option Shares in respect of which the Option is being exercised, accompanied by payment, in a manner acceptable to the Company (which shall include a broker assisted exercise arrangement), of the Option Price for the Option Shares for which the Option is being exercised. Payment to the Company in cash or Shares already owned by the Option Holder (provided that the Option Holder has owned such Shares for a minimum period of six months or has purchased such Shares on the open market) and having a total Fair Market Value (as defined below) equal to the exercise price, or in a combination of cash and such Shares, shall be deemed acceptable for purposes hereof. Option Shares will be issued accordingly by the Company within 15 business days, and a share certificate dispatched to the Option Holder within 30 days.
The Company shall not be required to issue fractional Shares upon the exercise of the Option. If any fractional interest in a Share would be deliverable upon the exercise of the Option in whole or in part but for the provisions of this paragraph, the Company, in lieu of delivering any such fractional share therefor, shall pay a cash adjustment therefor in an amount equal to their Fair Market Value (or if any Shares are not publicly traded, an amount equal to the book value per share at the end of the most recent fiscal quarter) multiplied by the fraction of the fractional share which would otherwise have been issued hereunder. Anything to the contrary herein notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the issuance of such Option Shares would violate the provision of any applicable law, in which event the Company shall, as soon as practicable, take whatever action it reasonably can so that such Option Shares may be issued without resulting in such violations of law. For purposes hereof, Fair Market Value shall mean the mean between the high and low selling prices per Share on the immediately preceding date (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange on which the Shares are traded, as such prices are officially quoted on such exchange.
(j) Termination of Service. In the event the Option Holder ceases to be an employee of the Company (a) due to his death or Permanent Disability (as defined in the Employment Agreement, among the Option Holder, the Company and Arch Capital Group (U.S.) Inc., dated as of December 20, 2001 (the "Employment Agreement")), or (b) due to termination (x) by the Company not for Cause (as defined in the Employment Agreement) or (y) by the Option Holder for Good Reason (as defined in the Employment Agreement), the Option, to the extent not already vested and exercisable in full, shall become immediately vested and (i) in the case of termination due to death or Permanent Disability, shall become immediately exercisable in full, and (ii) in the case of termination by the Company not for Cause or by the Option Holder for Good Reason, shall continue to become exercisable on the schedule set forth in paragraph (f) above; and, once exercisable, the Option shall continue to be exercisable by the Option Holder (or his
Beneficiary or estate in the event of his death) for a period of three years following such termination of employment (but not beyond the Option Period). In the event the Option Holder ceases to be an employee of the Company for any other reason, except due to a termination of the Option Holder's employment by the Company for Cause (as defined in the Employment Agreement), the Option, to the extent then vested and exercisable, may be exercised for 90 days following termination of employment (but not beyond the Option Period). In the event of a termination of the Option Holder's employment for Cause, the Option shall immediately cease to be exercisable and shall be immediately forfeited. To the extent the Option is not vested at the time of termination of employment, the Option shall be immediately forfeited. For purposes of this Option, service with any of the Company's Subsidiaries (as defined in the Plan) shall be considered to be service with the Company.
(k) Obligations as to Capital. The Company agrees that it will at all times maintain authorized and unissued share capital sufficient to fulfill all of its obligations under the Option.
(l) Transfer of Shares. The Option, the Option Shares, or any interest in either, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws and the terms and conditions hereof.
(m) Expenses of Issuance of Option Shares. The issuance of stock certificates upon the exercise of the Option in whole or in part, shall be without charge to the Option Holder. The Company shall pay, and indemnify the Option Holder from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the exercise of the Option in whole or in part or the resulting issuance of the Option Shares.
(n) Withholding. No later than the date of exercise of the Option granted hereunder, the Option Holder shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Option Holder, federal, state and local taxes of any kind required by law to be withheld upon the exercise of such Option.
(o) References. References herein to rights and obligations of the Option Holder shall apply, where appropriate, to the Option Holder's legal representative or
estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Option.
(p) Notices. All notices required or permitted to be given under this agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the party concerned at the addresses set forth below:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn: Secretary
If to the Option Holder:
To the last address of the Option Holder on record with the Company;
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
(q) Governing Law. This agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflict of laws.
(r) Entire Agreement. This agreement, the Employment Agreement (as defined above) and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this agreement and the Plan.
(s) Counterparts. This agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the Date of Grant.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
------------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
/s/ Constantine Iordanou
----------------------------
Constantine Iordanou
|
Exhibit 10.17
ARCH CAPITAL GROUP LTD.
Restricted Share Agreement
THIS AGREEMENT, dated as of January 1, 2002, between Arch Capital Group Ltd. (the "Company"), a Bermuda company, and Constantine Iordanou (the "Employee").
WHEREAS, the Employee has been granted the following award in connection with his retention as an employee and as compensation for services to be rendered; and the following terms reflect the Company's Long Term Incentive Plan For New Employees (the "Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.
1. Award of Shares. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded 106,383 Restricted Shares (the "Award"), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.
2. Terms and Conditions. It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:
(a) Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested on December 31, 2002. Unless otherwise provided by the Company, all dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan shall be subject to the vesting schedule in this Section 2(a).
(b) Termination of Service; Forfeiture of Unvested Shares. Except as otherwise set forth in Section 2(a) above, in the event the Employee ceases to be an employee of the Company prior to the date the Restricted Shares otherwise become vested (i) due to his death or Permanent Disability (as defined in the Employment Agreement, among the Employee, the Company and Arch Capital Group (U.S.) Inc., dated as of December 20, 2001 (the "Employment Agreement")), or (ii) due to termination (A) by the Company not for Cause (as defined in the Employment Agreement) or (B) by the Employee for Good Reason (as defined in the Employment Agreement), the Restricted Shares subject to the Award shall become vested in full at the time of such termination of service; provided, however, that in the case of a termination by the Company not for Cause or by the Employee for Good Reason, the Restricted Shares subject to the Award shall not be transferable prior to December 31, 2002, except that a number of Shares having a fair market value equal to the amount of any income and employment taxes imposed upon vesting of the Restricted Shares shall be transferable upon such termination solely for the purpose of funding any such income and employment taxes. For purposes of the preceding sentence, income and employment taxes shall be computed at the highest marginal rates in the jurisdictions in which the Employee is subject to tax at the time of vesting. If the Employee ceases to be an Employee of the Company for any other reason prior to the date the Restricted Shares become vested, the Award shall be forfeited by the Employee and become the property of the Company. For purposes of this Agreement, service with any of the Company's Subsidiaries (as defined in the Plan) shall be considered to be service with the Company.
(c) Certificates. Each certificate issued in respect of Restricted Shares awarded hereunder shall be deposited with the Company, or its designee, together with, if requested by the Company, a stock power executed in blank by the Employee, and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the "Restrictive Legend"). Upon the release of all restrictions imposed hereunder and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing the vested Shares, not bearing the Restrictive Legend, shall be delivered to the Employee.
(d) Rights of a Stockholder. Prior to the time a Restricted Share is fully vested hereunder and otherwise as provided in Section 2(b) above, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share. During such period, the Employee shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.
(e) No Right to Continued Employment. This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee's employment at any time.
3. Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.
4. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of Shares.
5. Withholding. No later than the date of vesting of (or the date of an election by the Employee under Section 83(b) of the Code with respect to) the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time.
6. References. References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
7. Notices. All notices required or permitted to be given under this agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the party concerned at the addresses set forth below:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn.: Secretary
If to the Employee:
To the last address of the Employee on record with the Company or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflict of laws.
9. Entire Agreement. This Agreement, the Employment Agreement (as defined above) and the Plan constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.
10. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
----------------------------------
Name: /s/ Louis T. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
/s/ Constantine Iordanou
-----------------------------------
Constantine Iordanou
|
Exhibit 10.18
ARCH CAPITAL GROUP LTD.
Restricted Share Agreement
THIS AGREEMENT, dated as of January 1, 2002, between Arch Capital Group Ltd. (the "Company"), a Bermuda company, and Constantine Iordanou (the "Employee").
WHEREAS, the Employee has been granted the following award in connection with his retention as an employee and as compensation for services to be rendered; and the following terms reflect the Company's Long Term Incentive Plan For New Employees (the "Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.
1. Award of Shares. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded 325,000 Restricted Shares (the "Award"), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.
(a) Terms and Conditions. It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions: Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested on December 31, 2006. Unless otherwise provided by the Company, all dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan shall be subject to the vesting schedule in this Section 2(a).
(b)Termination of Service; Forfeiture of Unvested Shares. Except as
otherwise set forth in Section 2(a) above, in the event the Employee ceases to
be an employee of the Company prior to the date the Restricted Shares otherwise
become vested (i) due to his death or Permanent Disability (as defined in the
Employment Agreement, among the Employee, the Company and Arch Capital Group
(U.S.) Inc., dated as of December 20, 2001 (the "Employment Agreement")), or
(ii) due to termination (A) by the Company not for Cause (as defined in the
Employment Agreement) or (B) by the Employee for Good Reason (as defined in the
Employment Agreement), the Restricted Shares subject to the Award shall become
vested in full at the time of such termination of service; provided, however,
that in the case of a termination by the Company not for Cause or by the
Employee for Good Reason, the Restricted Shares subject to the Award shall not
be transferable prior to December 31, 2006, except that a number of Shares
having a fair market value equal to the amount of any income and employment
taxes imposed upon vesting of the Restricted Shares shall be transferable upon
such termination solely for the purpose of funding any such income and
employment taxes. For purposes of the preceding sentence, income and employment
taxes shall be computed at the highest marginal rates in the jurisdictions in
which the Employee is subject to tax at the time of vesting. If the Employee
ceases to be an Employee of the Company for any other reason prior to the date
the Restricted Shares become vested, the Award shall be forfeited by the
Employee and become the property of the Company. For purposes of this Agreement,
service with any of the Company's Subsidiaries (as defined in the Plan) shall be
considered to be service with the Company.
(c) Certificates. Each certificate issued in respect of Restricted Shares awarded hereunder shall be deposited with the Company, or its designee, together with, if requested by the Company, a stock power executed in blank by the Employee, and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the "Restrictive Legend"). Upon the release of all restrictions imposed hereunder and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing the vested Shares, not bearing the Restrictive Legend, shall be delivered to the Employee.
(d) Rights of a Stockholder. Prior to the time a Restricted Share is fully vested hereunder and otherwise as provided in Section 2(b) above, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share. During such period, the Employee shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.
(e) No Right to Continued Employment. This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee's employment at any time.
3. Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.
4. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of Shares.
5. Withholding. No later than the date of vesting of (or the date of an election by the Employee under Section 83(b) of the Code with respect to) the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time.
6. References. References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
7. Notices. All notices required or permitted to be given under this agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the party concerned at the addresses set forth below:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn.: Secretary
If to the Employee:
To the last address of the Employee on record with the Company or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflict of laws.
9. Entire Agreement. This Agreement, the Employment Agreement (as defined above) and the Plan constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan.
10. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
-------------------------------------
Name: Louis T. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
/s/ Constantine Iordanou
-------------------------------------
Constantine Iordanou
|
Exhibit 10.19
ARCH CAPITAL GROUP LTD.
Restricted Share Agreement
THIS AGREEMENT, dated on October 23, 2001, between Arch Capital Group Ltd. (the "Company"), a Bermuda company, and Robert Clements (the "Executive").
WHEREAS, the Executive has been granted the following award as compensation for services to be rendered;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.
1. Award of Shares. The Executive is hereby awarded 1,668,157 shares of restricted common stock of the Company (the "Award"), subject to the terms and conditions herein set forth. This Award shall be rescinded if it is not approved by shareholders prior to the first anniversary hereof.
2. Terms and Conditions. It is understood and agreed that the Award evidenced hereby is subject to the following additional terms and conditions:
(a) Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in five equal annual installments, beginning on the first anniversary of the date hereof. Notwithstanding the foregoing, if the service of the Executive as Chairman of the Board of the Company is terminated by the Company or is not continued by the Company for any reason, or the Executive's service terminates due to his death or Permanent Disability, then the Award shall become immediately vested in full upon such termination of service. "Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
(b) Termination of Service; Forfeiture of Unvested Shares. Except as otherwise set forth in Section 2(a) above, in the event the Executive terminates his service with the Company (other than due to his death or Permanent Disability or the failure of the Company to continue his service) prior to the date of vesting of an installment of the Award, the unvested installments shall be forfeited by the Executive and become the property of the Company. For purposes of this Agreement, service with any of the Company's wholly owned subsidiaries shall be considered to be service with the Company.
(c) Certificates. Each certificate issued in respect of an Award made
hereunder shall be dated the date hereof and deposited with the Company, or
its designee, together with, if requested by the Company, a stock power
executed in blank by the Executive, and shall bear a legend disclosing the
restrictions on transferability imposed on such Award by this Agreement
(the "Restrictive Legend"). Upon the vesting of the Award pursuant to
Section 2(a) hereof, the certificates evidencing such vested Shares, not
bearing the Restrictive Legend, shall be delivered to the Executive.
(d) Rights of a Stockholder. Prior to the time an Award is fully vested hereunder, except as set forth in Section 2(e) below, the Executive shall have no right to transfer, pledge, hypothecate or otherwise encumber such Award. Beginning on the date hereof and during such period, the Executive shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends at the time paid on such Award.
(e) Transferability. Except as set forth below, prior to vesting this Award shall not be transferable by the Executive except by will or the laws of descent and distribution. Notwithstanding the foregoing, if the Board of Directors provides its consent (which consent shall not be unreasonably withheld), the Award (or any part thereof) may be transferred by the Executive to members of his or her "immediate family" or to a trust or other entity established for the exclusive benefit of solely one or more members of the Executive's "immediate family" or the Executive. Any Award held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Award immediately prior to the transfer, except that the Award will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Executive's children, stepchildren, grandchildren, great grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), in-laws, and relationships arising because of legal adoption.
3. Noncompetition. The Executive acknowledges that during his service with the Company, he will become familiar with trade secrets and other confidential information concerning the Company and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that, in the event his service with the Company is terminated by the Company prior to the fifth anniversary of the date hereof, during the period ending on the later of the fifth anniversary of the date hereof or one year following the date of his termination by the Company, he will not, without the Company's written consent, directly or indirectly manage, participate in, or render services for any business competing with the businesses of the Company or its subsidiaries as such businesses exist or are in process as of the date of termination, within any geographical area in which the Company or its subsidiaries engage in such businesses.
4. Enforcement. If, at the enforcement of Section 3, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable
under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in Section 3 to cover the maximum duration, scope and area permitted by law.
5. Transfer of Shares. The vested shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.
6. Antidilution. In the event that the Board of Directors of the Company shall determine that any dividend in shares, recapitalization, share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Company common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of the Executive hereunder, then the Board of Directors of the Company shall make such equitable changes or adjustments as are appropriate and adjust any or all of the number and kind of shares, other securities or other consideration issued or issuable in respect of this Award.
7. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Executive. The Company shall pay, and indemnify the Executive from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) or by reason of the issuance of shares hereunder.
8. References. References herein to rights and obligations of the Executive shall apply, where appropriate, to the Executive's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
9. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Arch Capital Group Ltd.
Executive Offices:
20 Horseneck Lane
Greenwich, CT 06830
Attn.: Secretary
If to the Executive: To the last address given to the Company by
the Executive in the manner set forth in this
Section 9.
10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
11. Entire Agreement. This Agreement constitutes the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement.
12. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written.
ARCH CAPITAL GROUP LTD.
By: /s/ Louis T. Petrillo
-------------------------------------
Name: Louis t. Petrillo
Title: Senior Vice President, General
Counsel and Secretary
/s/ Robert Clements
--------------------------------------------
Robert Clements
|