EXECUTION COPY
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("First Amendment") is
entered into as of March 16, 1999 between ACE Bermuda Insurance, Ltd., an
insurance company licensed and registered under the laws of the Islands of
Bermuda (the "Purchaser"), and Capital Re Corporation, a Delaware corporation
(the "Company").
Background and Purpose
The Purchaser and the Company are parties to that certain Stock Purchase
Agreement dated as of February 19, 1999 (the "Agreement") pursuant to which the
Purchaser agreed to purchase and the Company agreed to issue shares of the
Company's common stock, $.01 par value per share (the "Common Stock"). The
parties hereto have agreed to amend certain provisions contained in the
Agreement and have therefore agreed to enter into and perform this First
Amendment.
NOW, THEREFORE, in consideration of the continuance of the Agreement and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto, intending to be legally bound
thereby, hereby agree as follows:
Agreement
1. Definitions. All capitalized terms used in this First Amendment shall
have the meanings given them in the Agreement.
2. Amendment to Purchase Price Determination. Section 2 of the Agreement is
hereby deleted in its entirety and the following inserted in place thereof:
"2. SALE AND PURCHASE OF SHARES
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, the
Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
agrees to purchase from the Company, that number of shares of Common Stock
(the "Shares") equal to $75,000,000 (the "Purchase Price") divided by the
lesser per share price of: (a) the fully diluted book value per share of
the Common Stock at December 31, 1998, determined from the Company's 1998
audited financial statements as described in Section 2 of the Disclosure
Schedule ($18.87) and (b) the average of the five highest consecutive
closing prices of the Common Stock between March 12, 1999 and April 15,
1999 inclusive, as reported on the New York Stock Exchange composite tape.
At the Closing, the Purchaser shall deliver to the Company the amount of
$75,000,000 by wire transfer of immediately available funds, and the
Company will deliver to the Purchaser one or more stock certificates, as
the Purchaser may request, registered in the name of the Purchaser or
otherwise as the Purchaser may direct, evidencing the Shares.
Notwithstanding the foregoing, in no event will the number of Shares exceed
19.9% of the total number of shares of Common Stock outstanding immediately
prior to the Closing (the "Maximum Amount"). In the event the number of
Shares to be issued on the date selected for Closing would exceed the
Maximum Amount, the Company shall, at the Purchaser's option and upon the
written request of the Purchaser, issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, the Maximum Amount of Shares,
and the Purchase Price shall be adjusted in accordance with the applicable
per share price as determined under the formula set forth in the first
sentence of this Section 2. In the event that the Purchaser does not
exercise the option set forth in the prior sentence, the Closing will not
occur, this Agreement shall be immediately terminated and no party shall be
under any further obligation to the other."
3. Amendment to Board Nominee Covenant. Section 4.6 of the Agreement is
hereby retitled "Board Nominees" and paragraph (a) thereof is hereby deleted in
its entirety and the following inserted in place thereof:
"(a) The Company covenants that the Company will nominate and
recommend as a candidate for election to the Board of Directors, so long as
the Purchaser (and/or its Affiliates) holds at least 8% of the Total Voting
Power, two individuals, in each case such individuals to be reasonably
acceptable to the then current Board of Directors of the Company and to be
designated in writing by an executive officer of the Purchaser, provided
that any executive officer of Purchaser shall be presumed to be acceptable.
In the event Purchaser is entitled to designate such nominees between
regular annual stockholder meetings, the Company will take such action as
is required (including, if necessary, increasing the size of its Board of
Directors) to appoint such nominees to the Board of Directors to serve
until the next annual stockholders meeting."
4. Deletion of Standstill Provision. The phrase "Standstill Provisions;" is
hereby deleted from the title of Section 7 and the third line of Section 10.1 of
the Agreement and Section 7.1 of the Agreement is hereby deleted in its
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entirety. All definitions of terms in Exhibit A that relate solely to Section
7.1 of the Agreement are also hereby deleted in their entirety.
5. Waiver of Condition Precedent. Purchaser hereby waives fulfillment of
the condition precedent set forth in the first clause of Section 3.2(e) of the
Agreement relating to the financial strength rating affirmation by Xxxxx'x
Investor Services, Inc.
6. Continuance of Agreement. Except as specifically amended hereby, the
terms, conditions, provisions and agreements contained in the Agreement shall be
and remain in full force and effect, unchanged, unamended and unaltered in any
way or manner whatsoever.
7. Counterparts. This First Amendment may be executed by the parties hereto
in one or more counterparts each of which shall be deemed an original, but all
of which taken together shall constitute one and the same agreement, it being
understood that all of the parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment, or have caused this First Amendment to be duly executed on their
behalf, as of the day and year first above written.
PURCHASER:
ACE BERMUDA INSURANCE, LTD.
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
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Xxxxxxxxxxx X. Xxxxxxxx, Director
COMPANY:
CAPITAL RE CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
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