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EXHIBIT 4.4
CGA GROUP, LTD.
SHAREHOLDERS AGREEMENT
DATED AS OF JUNE 12, 1997
AS AMENDED AND RESTATED AS OF MARCH 31, 1999
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TABLE OF CONTENTS
PAGE
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1. TRANSFERS................................................... 2
(a) Separation of Investment Units and Resale of
Securities.................................................. 2
(b) Right of First Offer.................................... 3
(c) Drag Along Right........................................ 4
(d) Tag Along Right......................................... 5
(e) Preemption Right........................................ 5
(f) Regulatory Transfer..................................... 7
(g) Termination of Rights................................... 7
2. RESTRICTIONS ON STOCK OWNERSHIP............................. 7
(a) Share Ownership Limitations............................. 7
(b) Prompt Disposition of Shares............................ 8
(c) Manner of Disposition................................... 8
3. REGISTRATION RIGHTS......................................... 8
(a) Definitions............................................. 9
(b) Demand Registration..................................... 9
(c) Piggyback Registration.................................. 11
(d) Expenses of Registration................................ 12
(e) Registration Procedures................................. 12
(f) Indemnification......................................... 14
(g) Information by the Holders.............................. 17
(h) Rule 144 Reporting...................................... 17
(i) "Market Stand-off" Agreement............................ 17
(j) Assignability........................................... 18
(k) Termination............................................. 18
4. INFORMATION AS TO COMPANY AND RELATED COVENANTS............. 18
(a) Auditors................................................ 18
(b) Financial Information................................... 19
(c) Business Report......................................... 19
(d) Inspection.............................................. 19
5. DEFINITIONS................................................. 19
(a) Terms Defined........................................... 19
6. MISCELLANEOUS............................................... 21
(a) Legends................................................. 21
(b) Waiver; Amendments...................................... 21
(c) Amendment of Schedules I and II to this Agreement....... 21
(d) Recapitalization, Exchanges, Etc. ...................... 21
(e) Specific Performance.................................... 21
(f) Notices................................................. 21
(g) Successors and Assigns.................................. 22
(h) Counterparts............................................ 22
(i) Entire Agreement........................................ 22
(j) Applicable Law.......................................... 22
(k) Section Headings........................................ 22
(l) Holders of Warrant Shares............................... 22
(m) Series B Holders........................................ 22
(n) Series C Holders........................................ 22
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SHAREHOLDERS AGREEMENT
Shareholders Agreement, dated as of June 12, 1997, as amended and restated
as of March 31, 1999 (this "Agreement") among CGA Group, Ltd., a company with
limited liability organized under the laws of Bermuda (the "Company"), each of
the persons whose names and addresses appear on Schedule I hereto, as such
Schedule I may be amended from time to time in accordance with the terms hereof
(the "Common Holders") and each of the persons whose names and addresses appear
on Schedule II hereto, as such Schedule II may be amended from time to time in
accordance with the terms hereof (the "Series C Holders"). It is expressly
understood among the parties that the term "Common Holders", as used herein,
shall include, without limitation, holders of Series B Conversion Shares and/or
Series C Conversion Shares (each as defined below). Each of the foregoing
defined terms shall include such persons' successors and assigns as permitted by
this Agreement. Certain capitalized terms used in this Agreement have the
meanings set forth in Section 5 of this Agreement.
RECITALS
WHEREAS, the Company has issued or has agreed to issue shares of the
following classes of capital stock: (i) Series A Cumulative Voting Preference
Shares, par value $.01 per share, of the Company ("Series A Preferred Stock"),
(ii) Series B Cumulative Voting Preference Shares, par value $.01 per share, of
the Company ("Series B Preferred Stock"), (iii) Series C Cumulative Voting
Preference Shares, par value $.01 per share, of the Company ("Series C Preferred
Stock") and (iv) common stock, par value of $.01 per share, of the Company (the
"Common Stock") (the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, and any other shares of capital
stock of the Company, being collectively referred to herein as the "Company
Stock"); and
WHEREAS, certain investors have (i) purchased, pursuant to the terms of the
Series A Preferred Stock Subscription Agreement, dated as of June 9, 1997 (the
"Series A Preferred Stock Subscription Agreement"), the Series A Preferred Stock
and (ii) purchased, pursuant to the terms of the Warrant Acquisition Agreement,
dated as of June 9, 1997 (the "Warrant Acquisition Agreement"), warrants
("Warrants") to purchase Common Stock (or such shares of other stock into which
such Common Stock may have been converted prior to the exercise of the Warrant);
and
WHEREAS, certain initial Common Holders have purchased, pursuant to the
terms of the Investment Units Subscription Agreement, dated as of June 4, 1997
(the "Investment Units Subscription Agreement"), an aggregate of 1,600,000
investment units (the "Investment Units"), each such Investment Unit consisting
(a) prior to the Series B Conversion (as defined below) of (i) one share of
Series B Preferred Stock, (ii) 4.8925 shares of Common Stock, and (iii) upon the
occurrence of certain events described in such subscription agreement, one and
one-half (1.5) additional shares of Series B Preferred Stock (the "Commitment")
and (b) following the Series B Conversion (as defined below), of (i) a number of
shares of Common Stock equal to the ratio for such shares set forth in the
Company's Amended and Restated Bye-laws, (ii) 4.8925 shares of Common Stock and
(iii) the Commitment; and
WHEREAS, certain other initial Common Holders have (i) purchased, pursuant
to the Founders' Subscription Agreement, dated as of June 12, 1997 (the
"Founders' Subscription Agreement"), an aggregate of 1,272,043 shares of Common
Stock and (ii) purchased, pursuant to the terms of the Sponsoring Investors' and
Founders' Stock Warrant Plan, dated as of June 17, 1997 (the "Sponsoring
Investors' and Founders' Stock Warrant Plan"), an aggregate of 847,729 warrants
to purchase Common Stock ("Sponsoring Investors' and Founders' Warrants"); and
WHEREAS, certain management employees of the Company have received and will
continue to receive the right to purchase, over the prescribed vesting period,
an aggregate of 1,494,771 warrants to purchase Common Stock (or such shares of
other stock into which such Common Stock may have been converted prior to the
exercise of the warrants) ("Employee Warrants") pursuant to the terms of the
Employee Stock Warrant Plan dated of June 17, 1997 (the "Employee Stock Warrant
Plan") (the Warrants, Sponsoring Investors' and Founders' Warrants and Employee
Warrants, collectively the "Warrant Shares"); and
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WHEREAS, pursuant to the Company's Amended and Restated Bye-laws, the
issued and outstanding shares of Series B Preferred Stock shall, on the closing
date of the Company's initial issuance of Series C Preferred Stock (the "Series
C Closing Date"), automatically convert (the "Series B Conversion") into shares
of Common Stock (the "Series B Conversion Shares"), subject to the Maximum
Percentage limitations set forth in the Company's Amended and Restated Bye-laws;
and
WHEREAS, certain investors have agreed, pursuant to the terms of the Series
C Preferred Stock Subscription Agreement dated as of March 1, 1999 (the "Series
C Subscription Agreement"), to purchase on the Series C Closing Date the Series
C Preferred Stock, which shall be convertible into Common Shares (the "Series C
Conversion Shares") of the Company, on the terms and at the conversion ratio set
forth in the Company's Amended and Restated Bye-laws; and
WHEREAS, the parties hereto have agreed that, as of the date of the Series
B Conversion or of the conversion of any shares of Series C Preferred Stock into
Series C Conversion Shares, the holders of such Series B Conversion Shares
and/or Series C Conversion Shares shall be required to become party to this
Agreement and be bound by the provisions of this Agreement to the extent of
their ownership of such shares, it being understood that the Series B Conversion
Shares and Series C Conversion Shares shall be shares of Common Stock, as such
term is used in this Agreement; and
WHEREAS, the Common Holders and the Company desire to enter into the
agreements contained herein with respect to certain matters relating to the
operations of the Company and the disposition of Company Stock.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:
1. TRANSFERS
(a) Separation of Investment Units and Resale of Securities.
(i) Prior to the occurrence of a Separation Event (as defined below), no
Common Holder may transfer any Company Stock constituting a part of an
Investment Unit other than collectively as a unit with the other Common Stock,
Series B Preferred Stock and the Commitment constituting a part of such
Investment Unit. Upon the occurrence of a Separation Event, a Common Holder may
transfer some or all of the Common Stock, the Series B Preferred Stock and the
Commitment constituting an Investment Unit other than collectively as a unit,
subject to applicable restrictions on transfers of Company Stock or Units set
forth in this Agreement, the Investment Units Subscription Agreement and the
Company's Amended and Restated Bye-Laws. The non-collective transfers described
in the immediately preceding sentence are referred to herein as the "Separate
Transfers". As used herein, the phrase "Separation Event" means the earlier to
occur of (x) a Trigger Event, provided that the Company receives written
notification from Duff & Xxxxxx Credit Rating Company ("DCR") that neither such
Trigger Event nor the Separate Transfers will cause the claims paying ability
rating of Commercial Guaranty Assurance, Ltd. to be downgraded by DCR or (y)
receipt by the Company of written notification from DCR that the Separate
Transfers will not cause DCR to downgrade CGA's claims paying ability. The
parties to this Agreement expressly agree that the Series B Conversion shall not
constitute a Separation Event. Within 10 days prior to the occurrence of each
Trigger Event, the Company shall request in writing that DCR deliver the written
notification referred to in the proviso to clause (x) above. Upon the request of
any Investment Unit holder, the Company shall request in writing that DCR
deliver the written notification specified in clause (y) above. Notwithstanding
the foregoing, prior to a Separation Event, Commitments with an aggregate value
(which value shall be determined based on the product of (A) the maximum number
of shares of Series B Preferred Stock required to be purchased pursuant to such
Commitments and (B) $25.00) of up to $7.5 million may be transferred separately
from the Common Stock and Series B Preferred Stock constituting the Investment
Units held by a Common Holder without receipt from DCR of the notices provided
above; provided, further, that Olympus Growth Fund II, L.P. and Olympus
Executive Fund, L.P. shall have the first right, prior to any other Common
Holder, to so transfer all or any portion of the Commitments that it, or its
Affiliates, own; provided, further, that if Olympus Growth Fund II, L.P. and
Olympus Executive Fund, L.P. notifies the Company prior to the occurrence of a
Separation Event
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that it will not exercise such first right or that it will not exercise such
first right with respect to Commitments with an aggregate value of $7.5 million,
Commitments with an aggregate value equal to the difference between $7.5 million
and the aggregate value of the Commitments so transferred by Olympus Growth Fund
II, L.P. and Olympus Executive Fund, L.P. may be transferred by such Common
Holders as shall request such right on a pro rata basis based on the amount of
shares of Common Stock owned by each such requesting Common Holder, as compared
to the aggregate of all of the shares of Common Stock owned by all of the
requesting Common Holders, and as shall be approved by the Board of the Company
in its sole discretion.
(ii) No Common Holder shall transfer, prior to a Separation Event, any
Investment Units or Common Stock and, after a Separation Event, any Common Stock
held by such Common Holder, whether held separately or as part of one or more
Investment Units, other than, in each case, (a) in accordance with the Company's
Amended and Restated Bye-Laws and the provisions of this Section 1 and Section 2
hereof and (b) in accordance with Article VII of the Investment Unit
Subscription Agreement, Article VII of the Series C Subscription Agreement,
Article VII of the Founders' Subscription Agreement or Article IV of the Warrant
Acquisition Agreement, as the case may be. Unless (x) a registration statement
is in effect with respect to the Common Stock to be transferred or (y) the
transfer is made pursuant to Rule 144 of the Securities Act, or (z) the transfer
is of Common Stock that has been transferred previously pursuant to (x) or (y),
no Common Holder shall transfer any Common Stock whether held separately or as
part of one or more Investment Units, unless the transferee of such shares has
agreed to be bound by the terms of this Agreement and has duly executed a
counterpart of this Agreement. Any transfer or purported transfer made in
violation of this Section 1 and Section 2 hereof shall be null and void and of
no effect and the Company shall cause any correction required to be made to the
register of the Members of the Company to be effected.
(iii) No Series C Holder shall transfer any Series C Preferred Stock held
by such holder, other than, in each case, (a) in accordance with the Company's
Amended and Restated Bye-Laws and the provisions of this Section 1 and Section 2
hereof and (b) in accordance with Article VII of the Series C Subscription
Agreement. Unless (x) a registration statement is in effect with respect to the
Series C Preferred Stock, or (y) the transfer is made pursuant to Rule 144 of
the Securities Act, or (z) the transfer is of stock that has been transferred
previously pursuant to (x) or (y), no Series C Holder shall transfer any such
shares unless the transferee of such shares has agreed to be bound by the terms
of this Agreement and has duly executed a counterpart of this Agreement. Any
transfer or purported transfer made in violation of this Section 1 and Section 2
hereof shall be null and void and of no effect and the Company shall cause any
correction required to be made to the register of the Members of the Company to
be effected.
(b) Right of First Offer.
(i) Subject to subsection (vii) below, any Common Holder desiring to
transfer, prior to any Separation Event, Investment Units or Common Stock,
whether held separately or as part of one or more Investment Units and after a
Separation Event any Common Stock (hereinafter for purposes of this Section 1(b)
only, the "Securities"), held by such Common Holder (the "Seller") shall give
written notice (the "Sales Notice") to the other Common Holders that the Seller
desires to effect such a transfer (a "Sale") and setting forth the number of
Investment Units or shares of Common Stock proposed to be transferred by the
Seller.
(ii) The receipt of the Sales Notice by each other Common Holder party to
this Shareholders Agreement shall constitute an offer (the "Offer") by the
Seller to sell to such Common Holder or group of Common Holders for cash the
Securities subject to the Sale, subject to the Seller's approval of the terms
and conditions of the Bid (as defined below). Each Common Holder, or any group
of one or more Common Holders, receiving an Offer shall have a 15-day period
(the "Order Period") in which to give a written notice (a "Bid") to the Seller
prior to the expiration of such 15-day period, which written notice shall set
the price per Security that such Common Holder or group of Common Holders
proposes to pay (the "Proposed Sales Price") and such other terms and conditions
it or they propose with respect to the Sale; provided, however, a Bid must be
for all of the Securities the Seller proposes to transfer as stated in the Sales
Notice.
(iii) Upon the receipt of all Bids, if any, the Seller shall have the right
to solicit offers for the Securities subject to the Sale from any non-affiliated
third-party (a "Third-Party Offer") for a period of 90 days from the date the
Order Period expires. To the extent the Seller receives a Third-Party Offer and
such Third-Party
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Offer contains a Proposed Sales Price in excess of the highest Sales Price
received by Seller pursuant to the Bids made by the Common Holders or group of
Common Holders, then Seller shall have the right to sell the Securities to the
Third-Party pursuant to its Offer. If no Bids are delivered during the Order
Period then the Seller shall be entitled to accept, in its sole discretion, any
Third-Party Offer it so chooses. If such sale pursuant to a Third-Party Offer is
not consummated within 120-days from receipt of the Third-Party Offer, and no
Bids of Common Holders are accepted by the Seller within 10 days following the
expiration of the 90-day period described in the first sentence of this
subparagraph (iii), then the provisions of this Section 1(b) shall be reinstated
as to any other transfers proposed to be made by the Seller.
(iv) The Common Holders or group of Common Holders providing a Bid to the
Seller during the Order Period as to all of the Securities subject to the Sale,
and which Bid is accepted by the Seller, shall be required to purchase and pay
for all the Securities accepted pursuant to their Bid within a 30-day period
from the date on which the buying Common Holder (or group of Common Holders)
receives written notice of the Seller's acceptance of the Bid; provided that if
the purchase and sale of such Securities is subject to any prior regulatory
approval, the time period during which such purchase and sale may be consummated
shall be extended until the expiration of five Business Days after all such
approvals shall have been received.
(v) Subject to the transfer restrictions of Section 1(a)(ii), the Seller
may transfer Investment Units or shares in accordance with subsection (b)(iii)
for consideration other than cash to an unaffiliated third-party only if the
Seller has first obtained and delivered to each of the Common Holders an opinion
of an independent investment banking firm of national standing indicating that
the fair market value of the per share non-cash consideration that the Seller
proposes to accept as consideration for such Investment Units or shares,
together with any per share cash consideration, is at least equal to the highest
proposed Sale Price received by the Seller pursuant to Bids made by the Common
Holders or group of Common Holders.
(vi) Notwithstanding any provision of this Section 1(b), no action may be
taken by the Seller, the other Common Holders or the Company that would cause a
violation of the provisions of Section 2.
(vii) The Company shall take all reasonable steps necessary to ensure
application is made for the appropriate permissions from the Bermuda authorities
in connection with any Transfer complying with this Agreement. The Company
hereby acknowledges that no prior approval of the Bermuda Monetary Authority is
necessary for any Transfer between Persons who are designated as non-residents
of Bermuda for the purposes of the Exchange Control Act, 1972.
(viii) The provisions of this Section 1(b) shall not apply to:
(A) a Transfer of shares of Common Stock to an Affiliate of the
Seller;
(B) a Transfer of shares of Common Stock to another Common Holder;
(C) a Transfer of Investment Units to a Common Holder holding
Investment Units;
(D) a Transfer by one or more Common Holders of a majority of all
shares of Common Stock (and, if prior to a Separation Event, Investment
Units) then outstanding to any Person or Persons;
(E) a Transfer required by the provisions of Section 1(c) or Section
2;
(F) a Transfer permitted by the provisions of Section 1(d);
(G) a Transfer pursuant to an effective registration statement with
respect to the Common Stock to be transferred; or
(H) a Transfer on or after June 12, 2002; or
(c) Drag Along Right.
(i) If at any time and from time to time after the date of this Agreement
Common Holders holding a majority of all shares of Common Stock then issued and
outstanding (whether or not any or all of such shares are held separately or as
part of Investment Units, the "Transferring Investors") wish to Transfer in a
bona fide arm's-length sale for cash consideration all of the Common Stock (and,
if prior to a Separation Event, the
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Investment Units) held by the Transferring Investors to any Person or Persons
who are not Affiliates of the Transferring Investors (for purposes of this
Section 1(c), the "Proposed Transferee"), the Transferring Investors shall have
the right (the "Drag-Along Right"), subject to applicable law and compliance
with Section 1(a) with respect to such Transfer, to require all (but not less
than all) other Common Holders to sell, pursuant to Section 1(c)(ii), to the
Proposed Transferee all (but not less than all) of the shares of Common Stock
(and, if prior to a Separation Event, the Investment Units) then owned by such
other Common Holders. Each Common Holder agrees to take all steps necessary to
enable such Common Holder to comply with the provisions of this Section 1(c).
(ii) To exercise a Drag-Along Right, the Transferring Investors shall give
each other Common Holder and the Company a written notice (for purposes of this
Section 1(c), a "Drag-Along Notice") containing (a) the aggregate number of
shares of Common Stock (and, if prior to a Separation Event, the Investment
Units) that the Proposed Transferee proposes to acquire from the Transferring
Investors and the other Common Holders, (b) the name and address of the Proposed
Transferee and (c) the proposed purchase price, terms of payment and other
material terms and conditions of the Proposed Transferee's offer. Each Common
Holder shall thereafter be obligated, subject to applicable law, to sell all
(but not less than all) of its shares of Common Stock (and, if prior to a
Separation Event, its Investment Units) as provided in such Drag-Along Notice,
provided that the sale to the Proposed Transferee is consummated within one
hundred and twenty (120) days of delivery of the Drag-Along Notice. If the sale
is not consummated within such 120-day period, then each Common Holder shall no
longer be obligated to sell such Common Holder's shares of Common Stock (or, if
prior to a Separation Event, Investment Units) pursuant to that specific
Drag-Along Right but shall remain subject to the provisions of this Section 1(c)
with respect to any subsequent Drag-Along Rights.
(d) Tag Along Right.
If at any time or from time to time after the date of this Agreement one or
more Common Holders (whether or not such shares are held separately or as part
of Investment Units, the "Transferors") wish to Transfer, in one transaction or
a Series of related transactions, a majority of the then issued and outstanding
Common Stock (whether or not such shares of Common Stock are held separately or
as part of Investment Units) to any Person or Persons who are not Affiliates of
the Transferors (other than pursuant to an effective registration statement with
respect to the shares of Common Stock to be transferred or as a result of a
pledge of shares as security for a bona fide loan), such Transferors shall
notify each other Common Holder holding Common Stock (and, if prior to a
Separation Event, Investment Units) (the "Other Holders") and the Company, in
writing, of such Transfer and its terms and conditions. Within 20 days of the
date that such notice is deemed to have been given (as provided in Section 6(f)
herein) to such Other Holders, each of the Other Holders shall notify the
Transferors if it elects to participate in such Transfer. Each of the Other
Holders that so notifies the Transferors shall be obligated to sell, at the same
price and on the same terms as the Transferors, such number of shares of Common
Stock (or, if prior to a Separation Event, such number of shares of Common Stock
or Investment Units, as the case may be) equal to the number of shares of Common
Stock (or, if prior to a Separation Event, such number of shares of Common Stock
or Investment Units, as the case may be) the third party actually proposes to
purchase multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock (or, if prior to a Separation Event, such number of
shares of Common Stock or Investment Units, as the case may be) owned by such
Other Holder and the denominator of which shall be the aggregate number of
shares of Common Stock (or, if prior to a Separation Event, such number of
shares of Common Stock or Investment Units, as the case may be) held by the
Transferors and each Other Holder exercising its rights under this Section 1(d).
(e) Preemption Right.
If at any time from and after the date hereof, the Company proposes to
issue equity securities of any kind (the term "equity securities" shall include
for these purposes any warrants, options or other rights to acquire equity
securities or debt securities convertible into equity securities) of the Company
(except for issuances pursuant to the terms of the Stock Warrant Plans and
issuances in connection with (i) a Qualified Public Offering, (ii) a conversion
or exchange of any outstanding securities, (iii) a stock dividend, (iv) the
exercise of any right existing pursuant to any agreements in effect immediately
following June 17, 1997 to acquire
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equity securities of the Company, including, without limitation, pursuant to the
Warrants and the Commitments, or (v) a merger, amalgamation, reclassification or
other reorganization), then, as to each Common Holder who holds Company Stock at
such time, the Company shall:
(i) give written notice (the "Offer Notice") setting forth in
reasonable detail (1) the designation and all of the terms and provisions
of the equity securities proposed to be issued (the "Proposed Securities"),
including, where applicable, the voting powers, preferences and relative
participating, optional or other special rights, and the qualification,
limitations or restrictions thereof and interest rate and maturity; (2) the
price, if applicable, and other terms of the proposed sale or issuance of
such securities; (3) the amount of such securities proposed to be issued;
and (4) such other information as may be reasonably required in order to
evaluate the proposed issuance; and
(ii) offer to issue to each such Common Holder a portion of the
Proposed Securities equal to a percentage determined by dividing (x) the
number of shares of Common Stock held by such Common Holder (whether held
separately or as part of one or more Investment Units) by (y) the total
number of shares of Common Stock including those part of any Investment
Units then issued and outstanding (the quotient of (x) and (y) with respect
to each such Common Holder is referred to hereinafter as such Common
Holder's "Allotted Amount").
Each such Common Holder that wishes to exercise any or all of its
preemption rights hereunder must deliver a written notice (the "Election
Notice") to that effect to the Company within fifteen (15) days after the date
the Offer Notice was deemed to have been given (as provided in Section 6(f)
herein) by the Company. Each such Election Notice shall set forth (i) the
portion of such Common Holder's Allotted Amount for which such Common Holder has
elected to subscribe and (ii) the amount, if any, of additional Proposed
Securities for which such Common Holder wishes to subscribe (the "Proposed
Overallotment Amount" with respect to each such Common Holder) in the event that
all of the Proposed Securities offered or issued to the Common Holders as a
whole are not fully subscribed for; provided, however, that in no event shall
any Common Holder be permitted to subscribe for or purchase shares of Company
Stock to the extent that such Common Holder would be in violation of Section 2
of this Agreement or the Maximum Percentage limitations set forth in Bye-law
1(ac) and Bye-law 50 of the Company's Amended and Restated Bye-laws.
Each Common Holder shall be entitled to subscribe for all or a portion of
its Proposed Overallotment Amount only to the extent that one or more Common
Holders does not subscribe for its full Allotted Amount. Any such
unsubscribed-for Proposed Securities ("Excess Proposed Securities") shall be
allocated pro rata (and by rounding down to the nearest whole share) among those
Common Holders electing to receive their Proposed Overallotment Amount in
proportion to the aggregate number of shares requested by them pursuant to the
Allotted Amount and Proposed Overallotment Amount; provided, however, that in no
event shall any Common Holder be permitted to subscribe for or purchase shares
of Company Stock to the extent that such Common Holder would be in violation of
Section 2 of this Agreement or the Maximum Percentage limitations set forth in
Bye-law 1(ac) and Bye-law 50 of the Company's Amended and Restated Bye-laws.
Upon the expiration of the offering period described above, the Company
may, in its sole discretion, offer to sell or issue such Proposed Securities
that the Common Holders have not elected to purchase or exercise, as the case
may be, during the 180 days following such expiration, on terms and conditions
no more favorable to the prospective purchasers thereof than those offered to
such Common Holders. Any such sale or issuance of Proposed Securities may be
consummated within 60 days after the expiration of such 180-day period. Any
Proposed Securities offered, sold or issued by the Company after such 180-day
period (other than pursuant to the immediately preceding sentence) must be
reoffered to the Common Holders pursuant to this Section 1(e). The election by a
Common Holder not to exercise its preemption rights under this Section 1(e) in
any one instance shall not affect its right (other than in respect of a
reduction in its percentage holdings) as to any subsequent proposed issuance.
Any sale or issuance of such securities by the Company without first giving the
Common Holders the rights described in this Section 1(e) shall be void and of no
force and effect and the Company shall cause any correction required to be made
to the Register of the Members of the Company to be effected.
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The Company hereby agrees that it shall cause each of its wholly-owned
subsidiaries to comply with the terms of this Section 1(e) with respect to the
issuance of any equity securities by such subsidiary (except for issuances of
stock dividends or in connection with a merger, amalgamation, reclassification
or other reorganization).
The parties to this Agreement agree that (a) for the purposes of this
Section 1(e) only, holders of Series B Preferred Stock shall be deemed to be
Common Holders with respect to the Company's offering of rights to purchase
Series C Preferred Stock, on substantially the terms set forth in the Rights
Offering Circular dated as of January 21, 1999, as supplemented on February 5,
1999 (the "Rights Offering"), it being understood that for the purposes of such
Rights Offering, the then-existing shares of Series B Preferred Stock shall be
deemed to have been converted into Series B Conversion Shares at the rate set
forth in the Company's Amended and Restated Bye-laws and (b) the Rights Offering
shall be deemed to be in full compliance with this Section 1(e).
The parties to this Agreement further agree that upon consummation of the
Rights Offering, the Company may, in the discretion of the Company's Board of
Directors, issue and sell additional equity securities of the Company at no less
than the per share price of Common Stock contemplated by the Rights Offering
(based upon the conversion price of the Series C Preferred Stock of $1.50 as of
the date of its original issuance and a purchase price of $1.50 per share of
Series C Preferred Stock) and for aggregate gross proceeds equal to the
difference between $200 million and the gross proceeds raised pursuant to the
Rights Offering (the "Subsequent Offering"), and that the Common Holders and
Series B Holders hereby consent to such Subsequent Offering and waive, for one
year following the consummation of the Rights Offering (and for an additional 60
days, as set forth above in this Section 1(e), if necessary, for the Company to
consummate the transactions contemplated in such Subsequent Offering), their
preemption rights contained in this Section 1(e) with respect to any such
Subsequent Offering.
(f) Regulatory Transfer.
If a Common Holder reasonably determines and delivers written notice to the
Company that its holding of shares of Company Stock (x) has resulted in a
violation of any law or governmental rule, regulation, order or decree to which
such Common Holder is subject, or (y) has caused such Common Holder to become
subject to and be required to comply with any law, regulation, order or decree
to which it was not theretofore subject, the result of which violation or
subjection and compliance, as the case may be, would be materially adverse to
such Common Holder, the Company shall use its commercially reasonable efforts,
after such Common Holder has complied with Section 1(b), to locate on behalf of
the Common Holder a purchaser for all or part of the Company Stock held by such
Common Holder.
(g) Termination of Rights.
The rights and obligations provided by this Section 1 shall expire upon a
Qualified Public Offering.
2. RESTRICTIONS ON STOCK OWNERSHIP
(a) Share Ownership Limitations.
(i) Notwithstanding any other provision of this Agreement, no Common Holder
may transfer, purchase or acquire (except by operation of law) any Company
Stock, directly, indirectly or by attribution, or take any other action if such
transfer, purchase, acquisition or other action would cause any Person to (A)
become a 10% Investor (as defined in Section 5(a) hereof) or (B) own more than
20% of the issued and outstanding shares of Common Stock calculated on a fully
diluted basis (a "20% Common Investor"). For avoidance of doubt, it is agreed
that for purposes of determining whether any person is a 20% Common Investor,
such person shall be deemed to own all shares of Common Stock issuable upon
exercise of warrants, options or other similar derivative securities or issuable
upon conversion or exchange of any convertible or exchangeable security of the
Company.
(ii) Without limiting Section 2(a)(i), if any Common Holder becomes a 10%
Investor or a 20% Common Investor, such Common Holder (the "Excess Investor")
shall give notice to the Company within
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five (5) days following the date of such Common Holder's becoming aware that it
has become a 10% Investor or 20% Common Investor. Such notice shall specify the
identity of such record or beneficial owner, and such Common Holder shall
furnish to the Company such other information as the Company shall reasonably
request.
(iii) Any proposed Transfer in violation of this Section (2)(a) made known
to the Company shall not be registered in the Register of Members of the
Company. If the Company learns that a Common Holder is holding Company Stock in
violation of this Section 2(a) that is registered in the Register of Members,
the Company may deregister the transfer of the Common Stock held in violation of
this Section 2(a) and register such Company Stock in the name of the Member that
transferred such Company Stock or repurchase the Company Stock held in violation
of this Section 2(a) as determined by the Board in its absolute and unfettered
discretion, subject to the restrictions on repurchase set forth in Bye-law 52(4)
of the Company's Amended and Restated Bye-laws.
(iv) The Board of Directors of the Company may, in its sole discretion,
waive any of the provisions of this Section 2(a) with respect to one or more
Common Holders.
(b) Prompt Disposition of Shares.
If a Common Holder takes any action resulting in a violation of the
provisions of Section (2)(a) and the Company determines, pursuant to a
Super-Majority Board Action (as defined in Section 5(a) hereof), that the
disposition of Company Stock by such Excess Investor is in the interest of the
Company and its Members, (i) the Company shall require the Excess Investor to
dispose of a number of shares of Company Stock such that such Excess Investor or
other Person, as the case may be, no longer exceeds the limitations set forth in
Section (2)(a) and (ii) each Common Holder hereby agrees, if so required by the
Company, to sell such Company Stock as the Company may direct in accordance with
Section 2(c). Any disposition pursuant to this Section (2)(b) should occur no
later than the 28th calendar day after the date on which the Excess Investor
first violated, or caused another Person to violate, the share ownership
limitations set forth in Section (2)(a) and such Excess Investor shall make all
reasonable efforts to effect such disposition within such 28-day period. The
determination of whether an Excess Investor is in violation of the share
ownership limitations of Section (2)(a) and, if so, whether such disposition is
in the interests of the Company and its members may be made on behalf of the
Company by the Board, pursuant to a Super-Majority Board Action, in its judgment
and such determination shall be binding on the Common Holders.
(c) Manner of Disposition.
Any Company Stock required to be disposed of pursuant to Section (2)(b)
shall (i) (x) if purchased by the Excess Investor or a Related Person from
another Common Holder or Common Holders, be resold to such other Common Holder
or Common Holders at the original purchase price and (y) each Common Holder
agrees, if applicable, to purchase such Company Stock back from the Excess
Investor as contemplated by the foregoing clause, or (ii) if otherwise acquired
by the Excess Investor, be sold to any Person subject to the restrictions of
Section (2)(a) (including, but not limited to, the Company if a sale to the
Company would not cause any Person to exceed the share ownership limitations of
Section (2)(a)), but within the time period set forth in Section (2)(b).
Notwithstanding the foregoing, a holder of Series A Preferred Stock shall
not be obligated to dispose of shares of such Stock, but it may be obligated in
accordance with the foregoing to dispose of other classes of stock of the
Company.
3. REGISTRATION RIGHTS
The Common Holders shall have the right to have their Registrable
Securities registered under the Securities Act and applicable United States
state securities laws in accordance with the following provisions.
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(a) Definitions.
As used in this Section 3:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other United States of America federal agency at the time administering
the Securities Act;
(ii) the term "Holder" shall mean any holder of Registrable
Securities;
(iii) the term "Initiating Holder" shall mean any Holder or Holders
who in the aggregate are Holders of more than 10% of the then issued and
outstanding Registrable Securities;
(iv) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed
or required to be filed) and the declaration or ordering of effectiveness
of such registration statement;
(v) the term "Registrable Securities" shall mean (1) Common Stock
issued to the initial Common Holders, (2) Series B Conversion Shares, (3)
Series C Conversion Shares, (4) any additional Common Stock acquired by the
Common Holders, including any Common Stock acquired upon the exercise of
options granted under the Stock Warrant Plans, and (5) any Common Stock
issued as a dividend or other distribution with respect to, or in exchange
for or in replacement of, the securities referred to in clauses (1), (2),
(3), and (4) above;
(vi) "Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with its obligations under Sections
3(b) and 3(c) hereof, including, without limitation, all Commission,
National Association of Securities Dealers ("NASD") and stock exchange or
Nasdaq registration and filing fees and expenses, fees and expenses of
compliance with applicable state securities or "blue sky" laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with "blue sky" qualifications of the
Registrable Securities), printing expenses, messenger and delivery
expenses, the fees and expenses incurred in connection with the listing of
the securities to be registered in an initial public offering on each
securities exchange or national market system on which such securities are
to be so listed and, following such initial public offering, the fees and
expenses incurred in connection with the listing of such securities to be
registered on each securities exchange or national market system on which
such securities are listed, fees and disbursements of counsel for the
Company and all independent certified public accountants (including the
expenses of any annual audit and "cold comfort" letters required by or
incident to such performance and compliance), the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities
(including the fees and expenses of any "qualified independent underwriter"
required by the NASD), the reasonable fees of one counsel retained in
connection with each such registration by the holders of a majority of the
Registrable Securities being registered, the reasonable fees and expenses
of any special experts retained by the Company in connection with such
registration, and fees and expenses of other Persons retained by the
Company (but not including any underwriting discounts or commission or
transfer taxes, if any, attributable to the sale of Registrable Securities
by holders of such Registrable Securities other than the Company); and
(vii) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
(b) Demand Registration.
(i) Request for Registration. If the Company shall receive from an
Initiating Holder, at any time after 180 days after a Qualified Public Offering,
a written request that the Company effect any registration with respect to all
or a part of the Registrable Securities, the Company will:
(A) promptly give written notice of the proposed registration to all
other Holders of Registrable Securities; and
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(B) as soon as practicable, use its best efforts to effect a
registration statement, in accordance with Section 3(e), as would permit or
facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request in accordance with
such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within 10 Business
Days after written notice from the Company is deemed given (as provided in
Section 6(f) herein) under Section 3(b)(i)(A) above; provided that the
Company shall not be obligated to effect, or take any action to effect, any
such registration pursuant to this Section 3(b):
(v) within 180 days following the effective date of any
underwritten public offering of the Company's securities;
(w) for a period of 180 days following the date of the Board
resolution described in this clause (w), if the Company furnishes to the
Holders requesting the filing of a registration statement pursuant to
this Section 3(b) a certificate signed by the President or Chief
Executive Officer of the Company stating that the Board has passed a
resolution authorizing the Company to register any of its equity
securities for its own account and the Company is in the process of
effecting such registration (it being understood that the limitation
described in this clause (w) shall not affect any Holder's rights with
respect to a registration effected pursuant to Section 3(c));
(x) in any particular jurisdiction in which the Company would be
required as a result of such registration to (1) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this clause (x), (2) subject itself to taxation or
regulation of its insurance business in any such jurisdiction other than
Bermuda or (3) consent to service of process in effecting such
registration, qualification or compliance;
(y) if the Registrable Securities requested by all Holders to be
registered pursuant to such request do not (i) represent at least 10% of
the Registrable Securities or (ii) have an anticipated aggregate public
offering price (before any underwriting discounts and commissions) of at
least $10,000,000.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 3(b)(ii) below, include other
securities of the Company which are held by Persons who, by virtue of agreements
with the Company, are entitled to include their securities in any such
registration, but the right of such Persons to include any of their securities
in any such registration shall be subject to the limitations set forth in
Section 3(b)(ii) below.
Holders holding a majority of the Registrable Securities requested to be
registered may, at any time prior to the effective date of the registration
statement relating to such registration, revoke such request, without liability
to any of the other Holders or the Other Shareholders (as defined below), by
providing a written notice to the Company revoking such request.
(ii) Underwriting. The Initiating Holders shall distribute the Registrable
Securities covered by their request by means of an underwriting (which
underwriter shall be selected by the Company and reasonably acceptable to the
Initiating Holders).
If holders of Common Stock other than Registrable Securities who are
entitled, by virtue of agreements with the Company, to have Common Stock
included in such a registration (the "Other Shareholders") request such
inclusion, the securities of such Other Shareholders shall be included in the
underwriting subject to the applicable provisions of this Section 3. The Holders
whose shares are to be included in such registration and the Company shall
(together with all Other Shareholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Company and reasonably acceptable to the Initiating
Holders. Notwithstanding any other provision of this Section 3(b), if the
representative advises the Holders or the Company in writing that (i) marketing
factors require a limitation on the number of shares to be underwritten or (ii)
the inclusion of shares held by officers and directors of the Company in the
offering could, in the representative's best judgment, materially reduce the
offering price per share, then, in the case of
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the preceding clause (i), the Common Stock held by Other Shareholders shall be
excluded from such underwriting to the extent so required by such limitations
and, in the case of the preceding clause (ii), the Common Stock held by officers
and directors of the Company shall be excluded from such underwriting to the
extent advised by the representative. If, after the exclusion of such shares,
further reductions are required to meet the limitation on the number of shares
to be underwritten as advised by the representative, the number of shares that
may be included in the underwriting by each Holder requesting inclusion in the
registration shall be reduced on a pro rata basis (based on the number of shares
held at such time by the respective Holders requesting inclusion in such
registration) by such minimum number of shares as is necessary to comply with
such limitation. If any Other Shareholder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. If the underwriter has not limited
the number of Registrable Securities or other securities to be underwritten, the
Company may include its securities for its own account in such registration if
the representative so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such registration
and underwriting will not thereby be limited. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall not be
included in such registration.
(iii) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting the filing of a registration statement pursuant to this
Section 3(b) a certificate signed by the President or Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board, it would be
materially detrimental to the Company and its members for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing for a period of not more than 90 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.
(c) Piggyback Registration.
(i) If the Company shall determine to register any of its Common Stock
either for its own account or for the account of a holder or holders of Common
Stock (other than a registration on Form S-8 (or similar or successor form)
relating solely to stock option, stock purchase or other employee benefit plans,
or a registration on Form S-4 (or similar or successor form) relating solely to
a transaction exempt under Rule 145 of the Securities Act, or a registration on
any registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities), the Company
will:
(A) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws); and
(B) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made by the Holders within fifteen (15) days after the date
written notice described in clause (i)(A) above is deemed given (as
provided in Section 6(f) herein) by the Company except as set forth in
Section 3(c)(ii) below. Such written request may specify all or a part of
the Holders' Registrable Securities.
(ii) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting (which underwriter
shall be selected by the Company, in its sole discretion), the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 3(c)(i)(A). In such event, the right of each of the Holders to
registration pursuant to this Section 3(c) shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall (together
with the Company and the Other Shareholders distributing their Common Stock
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of this Section
3(c), if the representative advises the Holders
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or the Company in writing that (i) marketing factors require a limitation on the
number of shares to be underwritten or (ii) the inclusion of shares held by the
officers and directors of the Company in the offering could, in the
representative's best judgment, materially reduce the offering price per share,
then, in the case of the preceding clause (i), the Common Stock held by Other
Shareholders shall be excluded from such underwriting to the extent so required
by such limitations and, in the case of the preceding clause (ii), the Common
Stock held by officers and directors of the Company shall be excluded from such
underwriting to the extent so advised by the representative. If, after exclusion
of such shares, further reductions are required to meet the limitation on the
number of shares to be underwritten as advised by the representative, the number
of shares that may be included in the underwriting by each Holder requesting
inclusion in such registration shall be reduced, on a pro rata basis (based on
the number of shares held at such time by the respective Holders requesting
inclusion in such registration), by such minimum number of shares as is
necessary to comply with such limitation (it is hereby understood that the
foregoing shall not be a limitation on the number of shares of Common Stock to
be registered by the Company). If any of the Holders or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall not be included in such registration.
(iii) Number. Each of the Holders shall be entitled to have its shares
included in an unlimited number of registrations pursuant to this Section 3(c).
(d) Expenses of Registration.
Upon the exercise of registration rights set forth in this Section 3, the
Company shall pay all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section 3, provided
that such expenses shall not include Selling Expenses which shall be borne by
the Holders of the securities so registered pro rata on the basis of the number
of their shares so registered; provided, however, that the Company shall not
otherwise be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by any of the Holders, as applicable,
including, without limitation, as provided in the last paragraph of Section
3(b)(i), the registration statement does not become effective, in which case
each of the Holders and Other Shareholders requesting registration and
thereafter withdrawing its request for registration shall bear such Registration
Expenses pro rata on the basis of the number of its shares so included in the
registration request (it is hereby understood that this proviso shall not apply
to a withdrawal of a registration being effected pursuant to Section 3(c));
provided, further, however, that the Company shall not otherwise be required to
pay any Registration Expenses after the Company has effected four (4)
registrations pursuant to Section 3(b) requested by an Initiating Holder and
such registrations have been declared or ordered effective and the sales of such
Registrable Securities shall have closed.
(e) Registration Procedures.
In the case of each registration effected by the Company pursuant to
Section 3, the Company will keep the Holders requesting inclusion in such
registration advised in writing as to the initiation of each registration and as
to the completion thereof. In connection with any offering of Registrable
Securities registered pursuant to clause (b) or (c) of this Section 3, the
Company shall use its best efforts to obtain all necessary permissions from the
Bermuda governmental authorities and, upon obtaining such permission, at its
expense, the Company shall:
(i) prepare and file with the Commission, as promptly as practical
after receipt of a request for registration pursuant to this Section 3, a
registration statement on any form for which the Company then qualifies,
and which form shall be available for the sale of the Registrable
Securities in accordance with the intended methods of distribution thereof,
and use its best efforts to cause such registration statement to become and
remain effective as provided herein; provided that before filing with the
Commission a registration statement or prospectus or any amendments or
supplements thereto, the Company will (A) furnish, to one counsel selected
by the Holders of a majority of the Registrable Securities requested to be
registered, copies of all such documents proposed to be filed for said
counsel's review and comment and (B) notify each Holder of Registrable
Securities to be registered of any stop order issued or
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threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
effective for a period of one hundred and eighty (180) days or until the
Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs (but not before the time
periods referred to in Section 4(3) of the Securities Act and Rule 174
promulgated thereunder, or any successor provisions, if applicable) and
comply with the provisions of the Securities Act with respect to the
disposition of securities covered by such registration statement during
such period in accordance with the intended method of disposition by
sellers thereof set forth in such registration statement; provided,
however, that (A) such 180-day period shall be extended for a period of
time equal to the period, if any, during which the Holders refrain from
selling any securities included in such registration in accordance with
provisions of the last paragraph of this Section 3(e) and (B) in the case
of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 180-day
period shall be extended until all such Registrable Securities are sold,
provided that (x) Rule 415, or any successor Rule under the Securities Act,
permits an offering on a continuous or delayed basis and (y) the applicable
rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (1) includes any prospectus required by Section 10(a)(3) of
the Securities Act or (2) reflects facts or events representing a material
or fundamental change in the information set forth in the registration
statement, the incorporation in the registration statement by reference to
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act
of the information specified in clauses (1) and (2) above;
(iii) furnish to each underwriter, if any, and each Holder of
Registrable Securities covered by such registration statement such number
of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto), and the prospectus
included in such registration statement (including each preliminary
prospectus) in conformity with the requirements of the Securities Act, and
such other documents incident thereto as each of the Holders from time to
time may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Holder;
(iv) use its best efforts to register or qualify such Registrable
Securities under such other state securities or "blue sky" laws of such
jurisdictions as any Holder, and underwriter, if any, of Registrable
Securities covered by such registration statement reasonably requests and
do any and all other acts and things that may be reasonably necessary or
advisable to enable such Holder and each underwriter, if any, to consummate
the disposition in such jurisdictions of the Registrable Securities owned
by such Holder; provided that the Company will not be required as a result
thereof to (A) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this clause (iv), (B)
subject itself to taxation or regulation of its insurance business in any
such jurisdiction other than Bermuda or (C) consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the Holder or Holders
thereof to consummate the disposition of such Registrable Securities;
(vi) immediately notify each Holder of such Registrable Securities at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event that comes to the
Company's attention if as a result of such event the prospectus included in
such registration statement contains 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 not misleading; and the Company
will promptly prepare and furnish to such Holder a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will not contain an
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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
not misleading;
(vii) use its best efforts to cause all such Registrable Securities to
be listed on a national securities exchange in the United States or Nasdaq
and on each securities exchange on which similar securities issued by the
Company may then be listed, and enter into such customary agreements
including a listing application and indemnification agreement in customary
form, and, subject to Bermuda law, to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement no later than the effective date of such registration statement;
(viii) enter into such customary agreements (including an underwriting
agreement or qualified independent underwriting agreement, in each case, in
customary form) and take all such other actions as the Holders of a
majority of the Registrable Securities being covered by such registration
statement or the underwriters retained by such Holders, if any, reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities, including customary representations, warranties,
indemnities and agreements;
(ix) make available for inspection, during business hours of the
Company, by any Holder of Registrable Securities covered by such
registration statement, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or
other agent retained by any such Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively,
"Records"), if any, as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's
officers, directors and employees, and those of the Company's affiliates,
if any, to supply all information and respond to all inquiries reasonably
requested by any such Inspector in connection with such registration
statement;
(x) use its best efforts to obtain a "cold comfort" letter from the
Company's appointed auditors in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the Holders of a
majority in interest of the Registrable Securities being sold reasonably
request; and
(xi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and all conditions imposed by
Bermuda governmental authorities or under Bermuda law, including, without
limitation, under the Bermuda Companies Act, and make available to the
Holders, as soon as reasonably practicable, an earnings statement covering
a period of at least twelve months beginning after the effective date of
the registration statement (as the term "effective date" is defined in Rule
158(c) under the Securities Act) which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
It shall be a condition precedent to the obligation of the Company to
take any action with respect to any Registrable Securities that the Holder
thereof shall furnish to the Company such information regarding the
Registrable Securities and any other Company Stock held by such Holder and
the intended method of disposition of the Registrable Securities held by
such Holder as the Company shall reasonably request and as shall be
required in connection with the action taken by the Company.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described
in Section 3(e)(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
3(e)(vi) hereof, and, if so directed by the Company (at the Company's
expense), such Holder will deliver to the Company all copies (including,
without limitation, any and all drafts), other than permanent file copies,
then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(f) Indemnification.
(i) In the event of any registration of any shares of Company Stock under
the Securities Act pursuant to this Agreement, the Company will indemnify and
hold harmless each of the Holders of any Registrable
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Securities covered by such registration statement, their respective directors
and officers, general partners, limited partners and managing directors, each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls, is controlled by or is
under common control with any such Holder or any such underwriter within the
meaning of the Securities Act (and directors, officers, controlling Persons,
partners and managing directors of any of the foregoing) against any and all
losses, claims, damages and liabilities (or actions in respect thereto), joint
or several, and expenses (including any amounts paid in any settlement effected
with the Company's consent, which consent will not be unreasonably withheld) to
which such Holder, any such director or officer or general or limited partner or
managing director or any such underwriter or controlling Person may become
subject under the Securities Act, United States state securities "blue sky"
laws, common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) or expenses arise out
of or are based upon (A) any untrue statement (or alleged untrue statement) of
any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto,
(B) 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,
or (C) any violation (or alleged violation) by the Company of any United States
federal, state or common law Rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in connection with any
such registration, qualification or compliance. The Company will reimburse each
such Holder, director, officer, general partner, limited partner, managing
director or underwriter and controlling Person (and directors, officers,
controlling Persons, partners and managing directors of any of the foregoing)
for any legal and any other expenses reasonably incurred in connection with
investigating or defending such claim, loss, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such claim, loss, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based on any untrue statement
(or alleged untrue statement) or omission (or alleged omission) made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to the Company by such Holder in its capacity as a
Holder or any such director, officer, general or limited partner, managing
director, underwriter or controlling Person specifically stating that it is for
use therein; provided, further, however, that the Company shall not be liable to
any Holder, any Person who participates as an underwriter in the offering or
sale of Registrable Securities, if any, or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, pursuant to
this Section 3(f) with respect to any untrue statement or omission or alleged
untrue statement or omission made in any preliminary prospectus or the final
prospectus or the final prospectus as amended or supplemented, as the case may
be, to the extent that any such loss, claim, damage or liability of such Holder,
underwriter or controlling Person results from the fact that such Holder or
underwriter sold Registrable Securities to a Person to whom there was not sent
or given, at or prior to the written confirmation of such sale, a copy of the
final prospectus or of the final prospectus as then amended or supplemented,
whichever is most recent, if the Company has previously furnished copies thereof
to such Holder or underwriter and such final prospectus, as then amended or
supplemented, had corrected any such misstatement or omission.
The indemnity provided for herein shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder or any such
director, officer, general partner, limited partner, managing director,
underwriter or controlling Person and shall survive the transfer of such
securities by such Holder.
(ii) Each of the Holders will, if Registrable Securities held by it are
included in any registration statement filed in accordance with the provisions
hereof, (x) indemnify, on a several and not joint basis, the Company and its
directors, officers, controlling Persons and all other prospective sellers and
their respective directors, officers, general and limited partners, managing
directors, and their respective controlling Persons against all claims, losses,
damages and liabilities (or actions in respect thereof) and expenses to which
any such Person may become subject under the Securities Act, United States state
securities "blue sky" laws, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) or
expenses arise out of or are based upon (A) any untrue statement (or alleged
untrue statement) of a material fact with respect to such Holder contained in
any such registration statement,
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preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, or (B) any omission (or alleged omission) to state therein a
material fact with respect to such Holder required to be stated therein or
necessary to make the statements made by such Holder therein not misleading and
(y) reimburse the Company and its directors, officers, controlling Persons and
all other prospective sellers and their respective directors, officers, general
and limited partners, managing directors, and their respective controlling
Persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in the case of both clause (x) and clause (y), to the extent, and only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by such Holder with respect to such Holder and stated
to be specifically for use therein; provided, however, that the obligations of
each of the Holders hereunder shall be limited to an amount equal to the
proceeds to be received by such Holder from securities sold by such Holder
pursuant to such registration statement or prospectus.
The indemnity provided for herein shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any of
the Holders of Registrable Securities, underwriters or any of their respective
directors, officers, general or limited partners, managing directors or
controlling Persons and shall survive the transfer of such securities by such
Holder.
(iii) Each party entitled to indemnification under this Section 3(f) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of the Indemnified Party's counsel shall be at the expense of
the Indemnifying Party and shall be reimbursed as they are incurred); and
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 3 except to the extent the Indemnifying Party is actually
materially prejudiced thereby. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as a term thereof the giving by the claimant or plaintiff to such
Indemnified Party of an unconditional release from all liability with respect to
such claim or litigation. Each Indemnified Party shall promptly furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(iv) In order to provide for a just and equitable contribution in
circumstances in which the foregoing indemnity agreements provided for in this
Section 3(f) is for any reason held to be unenforceable although applicable in
accordance with its terms, the Company and the Holders shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect (A) the relative benefits received by the Company, on the
one hand, and the Holders of the Registrable Securities included in the offering
on the other hand, from the offering of the Registrable Securities and any other
securities included in such offering, and (B) the relative fault of the Company,
on the one hand, and the Holders of the Registrable Securities included in the
offering, on the other, with respect to the statements or omissions that
resulted in such loss, liability, claim, damage or expense, or action in respect
thereof, as well as any other relevant equitable considerations; provided,
however, that no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to a
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to
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information supplied by the Company or the Holders of the Registrable
Securities, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders of the Registrable Securities agree that it would
not be just and equitable if a contribution pursuant to this Section 3(f) were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
Notwithstanding anything to the contrary contained herein, the Company and the
Holders agree that any contribution required to be made by a Holder pursuant to
this Section 3(f) shall not exceed the net proceeds from the offering of
Registrable Securities (before deducting expenses) received by such Holder with
respect to such offering. For purposes of this Section 3(f), each Person, if
any, who controls a Holder within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such Holder, and each director
of the Company, each officer of the Company who signed the registration
statement, and each Person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as the Company.
(v) The foregoing indemnity agreements of the Company and the Holders are
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity agreements shall not inure to the benefit of any
underwriter if a copy of the Final Prospectus was furnished to the underwriter
and was not furnished to the Person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(g) Information by the Holders.
Each of the Holders and each Other Shareholder holding Company Stock
included in any registration shall furnish to the Company such information
regarding such Holder or Other Shareholder and the distribution proposed by such
Holder or Other Shareholder as the Company may reasonably request in writing and
as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 3.
(h) Rule 144 Reporting.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the restricted
securities to the public without registration, the Company agrees to:
(A) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after the effective date of the first registration statement under
the Securities Act filed by the Company for an offering of its securities
to the general public;
(B) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and
(C) so long as any Holder owns any Registrable Securities, furnish to
such Holder upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 under the Securities
Act (at any time from and after the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as such Holder may
reasonably request in availing itself of any Rule or regulation of the
Commission allowing such Holder to sell any such securities without
registration.
(i) "Market Stand-off" Agreement.
(i) If any registration of Common Stock (or other securities) of the
Company shall be in connection with an underwritten public offering, each Holder
of Registrable Securities agrees not to effect any sale or
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distribution, including any private placement or any sale pursuant to Rule 144A
under the Securities Act (or any successor provision) or otherwise or any sale
pursuant to Rule 144 under the Securities Act (or any successor provision),
under the Securities Act of any Registrable Securities, other than by pro-rata
distribution to its shareholders, partners or other beneficial holders, and not
to effect any such sale or distribution of any other equity security of the
Company or of any security convertible into or exchangeable or exercisable for
any equity security of the Company (in each case, other than as part of such
underwritten public offering) during the ten calendar days prior to, and during
the 180 calendar day period (or such lesser period as may be agreed upon between
such Holders and the representative of the underwriters of such offering) that
begins on the effective date of such registration statement (except as part of
such registration), without the consent of the representative of the
underwriters of such offerings; provided, however, that written notice of such
registration has been deemed given (as provided in Section 6(f) herein) to each
Holder of Registrable Securities at least two Business Days prior to the
anticipated beginning of the ten calendar day period referred to above.
(ii) If requested by the representative of the underwriters, the Holders
shall execute a separate agreement to the foregoing effect. The Company may
impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of said 180-day period. The
provisions of this Section 3(ii) shall be binding upon any transferee who
acquires Registrable Securities, including, without limitation, any Holder's
shareholders, partners or other beneficial holders, whether or not such
transferee is entitled to the registration rights provided hereunder.
(iii) If any registration of Registrable Securities shall be in connection
with an underwritten public offering, the Company agrees (A) not to effect any
public sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution of such securities in
connection with any amalgamation, merger or consolidation by the Company or any
Affiliate of the Company or the acquisition by the Company or an Affiliate of
the Company of the shares or substantially all the assets of any other Person or
in connection with a stock option, stock purchase or other employee benefit
plan) during the ten days prior to, and during the 180-day period (or such
lesser period as may be agreed upon between the Company and the representative
of the underwriters of such offering) which begins on the effective date of such
registration statement (except as part of such registration) without the consent
of the representative of the underwriters of such offering and (B) that any
agreement entered into after the date hereof pursuant to which the Company
issues or agrees to issue any privately placed equity securities shall contain a
provision under which the holders of such securities agree not to effect any
sale or distribution of any such securities during the period and in the manner
referred to in the foregoing clause (A) of this Section 3(i)(iii).
(j) Assignability.
The registration rights set forth in this Section 3 shall be assignable by
any Holder, in whole or in part, to any transferee of Registrable Securities
provided such transferee agrees to be bound by all provisions of this Agreement.
(k) Termination.
The registration rights set forth in this Section 3 shall not be available
to any Holder if, in the opinion of counsel to the Company, all of the
Registrable Securities then owned by such Holder could be sold in any 90-day
period pursuant to Rule 144 under the Securities Act (without giving effect to
the provisions of Rule 144(k)).
4. INFORMATION AS TO COMPANY AND RELATED COVENANTS
(a) Auditors.
The Company shall maintain a system of accounting established and
administered in accordance with United States generally accepted accounting
principles ("U.S. GAAP") and shall set aside on its books all such proper
reserves as shall be required by U.S. GAAP. The Company shall retain a firm of
independent chartered accountants of recognized standing to audit and report on
the Company's annual consolidated
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balance sheets and statements of operations, shareholders' equity and cash flows
and to report to the Board. Subject to the requirements of the Companies Act of
1981 of Bermuda and the regulations promulgated thereunder, all major accounting
policies and principles shall be determined by the Board in accordance with U.S.
GAAP.
(b) Financial Information.
The Company shall prepare annual consolidated balance sheets and statements
of operations, shareholders' equity and cash flows of the Company and its
subsidiaries, which shall be prepared in accordance with U.S. GAAP, and setting
forth in each case in comparative form the figures for the previous year, and
audited by the auditors referred to in Section 4(a) hereof. The Company shall
also prepare quarterly unaudited, consolidated balance sheets and statements of
operations, shareholders' equity and cash flows of the Company and its
subsidiaries, certified by the Chief Financial Officer and the Chief Executive
Officer of the Company and prepared in accordance with U.S. GAAP and setting
forth in each case in comparative form the same figures for the previous year
and, in addition, year-to-date figures. The Company will furnish to all Common
Holders the following information within the time specified: (i) as soon as
practicable after the end of each fiscal quarter and, in any event within 45
days thereafter, all of the quarterly financial information referred to herein,
and (ii) as soon as practicable after the end of each fiscal year, and in any
event within 110 days thereafter, all of the annual financial information
referred to herein.
(c) Business Report.
The Company shall prepare and deliver to each Common Holder within 45 days
after the end of each calendar quarter a report as to the implementation of the
Company's business plan during such quarter, which report shall be accompanied
by a certificate signed by the Chief Executive Officer and the Chief Financial
Officer of the Company as to the Company's compliance with its operating
guidelines during such quarter; provided, however, that in lieu of providing
such certified report to those Common Holders whose names are set forth on
Schedule I hereto (each a "Sponsoring Investor" and, collectively, the
"Sponsoring Investors") on a quarterly basis, the Company need only furnish to
the Sponsoring Investor such report, accompanied by the certificate referred to
above, within 45 days after the end of each calendar year, as to the Company's
compliance with its operating guidelines during such year.
(d) Inspection.
From and after the date hereof, the Company will permit each Common Holder,
its nominee, assignee or its representative, to visit and inspect any of the
properties of the Company, to examine all its books of account, records, reports
and other papers not contractually required of the Company to be kept
confidential or secret, to make copies and extracts therefrom, and to discuss
its affairs, finances and accounts with its officers, directors, key employees
and independent public accountants or any of them (and by this provision the
Company authorizes said accountants to discuss with said Common Holder, its
nominee, assign and representatives the finances and affairs of the Company and
its Subsidiaries), all at such reasonable times and as often as may be
reasonably requested.
(e) The provisions of Section 4(a)-(d) shall expire upon the closing of the
Qualified Public Offering.
5. DEFINITIONS
(a) Terms Defined.
As used in this Agreement, the following terms have the respective meaning
set forth below:
$: means United States dollars.
Affiliate: means (i) with respect to a Person, any other Person
directly or indirectly controlling, controlled by or under common control
with such Person and, in the case of an individual Common Holder, means
members of his or her immediate family or a trust for their benefit, (ii) a
nominee(s) of a Person or a principal of a nominee Person, (iii) a trustee
of a trust, or (iv) such Person's shareholders, partners, beneficiaries or
members.
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Board: means the board of directors of the Company.
Business Day: means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York or Bermuda are authorized by
law or executive order to close.
Commission: means the United States Securities and Exchange
Commission.
Exchange Act: means the United States Securities Exchange Act of
1934, as amended.
The terms "hold" and "holder": mean with reference to any Common
Stock, the Person whose name appears in the register of Members of the
Company.
Person: means an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, limited liability
company, or a government or agency or political subdivision thereof or any
other entity.
Qualified Public Offering: means the completion of an underwritten
public offering of Common Stock pursuant to a registration statement under
the Securities Act resulting in net proceeds to the Company of at least
$50,000,000.
Related Person: means any Person who bears a relationship to an
Excess Investor as described in Section 958 of the Code.
Securities Act: means the United States Securities Act of 1933, as
amended.
Stock Warrant Plans: means (i) the Employee Stock Warrant Plan of the
Company dated June 17, 1997, (ii) the Sponsoring Investors' and Founders'
Stock Warrant Plan of the Company dated June 17, 1997 and (iii) any
employee stock warrant, stock option or similar plan approved by the Board
and the Shareholders of the Company.
Super-Majority Board Action: means a vote of three-quarters ( 3/4) of
the directors serving on the Board at the time of such vote.
10% Investor: means a U.S. Person that (i) owns directly, indirectly
or by attribution (within the meaning of Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx
Internal Revenue Code of 1986, as amended) 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote or (ii) by virtue of such ownership is treated as owning indirectly or
constructively 10% or more of the total combined voting power of all
classes of the stock entitled to vote of Commercial Guaranty Assurance,
Ltd., a Bermuda company with limited liability (and its successors).
Transfer: means any sale, assignment, pledge, hypothecation, or other
disposition or encumbrance of any interest.
Trigger Event: means (a) the closing of a Qualified Public Offering,
(b) the consummation of an acquisition of a majority of the issued and
outstanding shares of Common Stock at the time of such acquisition by one
or more purchasers acting in concert in a single transaction or in a Series
of related transactions (including, without limitation, acquisitions
pursuant to an amalgamation, exchange offer, business combination,
consolidation, or corporate reorganization) resulting in the ultimate
beneficial ownership of such acquired shares of Common Stock being
different than before such acquisition or (c) the sale of all or
substantially all of the assets of the Company unless the ultimate
beneficial owners of a majority of the ownership interests in the acquiror
of such assets were the ultimate beneficial owners of a majority of the
issued and outstanding shares of Common Stock at the time of or immediately
before such sale. It is expressly acknowledged and agreed by the parties to
this Agreement that the Subsequent Offering (as defined in Section 1(e) of
this Agreement) shall not be a Trigger Event.
U.S. Person: means an individual who is a citizen or resident of the
United States, a company, corporation or partnership created or organized
under the laws of the United States or any state thereof, an estate, the
income of which, from non-United States sources and not effectively
connected with the conduct of a trade or business in the United States, is
includable in gross income for United States federal income tax purposes,
or a trust, if (i) a court within the United States may exercise primary
supervision
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of the trust, and (ii) one or more United States fiduciaries have the
authority to control all substantial decisions of the trust.
6. MISCELLANEOUS
(a) Legends.
In addition to any other legends required by applicable law, the Company's
Amended and Restated Bye-laws or any other agreement restricting the Transfer of
the Company Stock or Investment Units, as the case may be, each certificate
evidencing the Common Stock or Investment Units, as the case may be, acquired by
the Common Holders will bear a legend reflecting the restrictions on the
transfer of such shares contained in this Agreement and in the Investment Units
Subscription Agreement, the Warrant Acquisition Agreement or the Founders'
Subscription Agreement, as the case may be.
(b) Waiver; Amendments.
Except as expressly provided otherwise herein, neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the Company and each of the
Common Holders and Series C Holders at the time who are party to this Agreement;
provided, however, that any provision hereof other than Section 4 may be
amended, which amendment shall be effective as to all parties hereto, with the
consent of the Company and the parties hereto that at the time just prior to the
amendment hold at least seventy-five percent (75%) of the Common Stock (it being
understood that for the purposes of such calculation, the Series C Preferred
Stock shall be deemed to have been converted into shares of Common Stock at the
then applicable conversion rate for such shares, as set forth in the Company's
Amended and Restated Bye-laws (the "Assumed Conversion")); provided, further,
however, that any amendment to Section 4 shall require the consent of the
Company and the parties hereto that at the time just prior to the amendment hold
at least ninety percent (90%) of the Common Stock, taking into account the
Assumed Conversion.
(c) Amendment of Schedules I and II to this Agreement.
The Secretary of the Company shall, from time to time in the ordinary
course of business as reasonably necessary, amend Schedules I and II to this
Agreement to reflect accurately the addition or deletion of parties to this
Agreement by virtue of the succession, assignment, or other transfer of shares
of Company Stock in accordance with this Agreement, or exercise of Warrants
pursuant to the Warrant Acquisition Agreement or otherwise, and applicable law.
(d) Recapitalization, Exchanges, Etc.
The provisions of this Agreement shall apply to the full extent set forth
herein with respect to shares or other securities of the Company that may be
issued in respect of, in exchange for, or in substitution of the Common Stock.
The Company agrees not to enter into any transaction with any Person pursuant to
which shares or other securities of such Person will be exchanged or substituted
for the Common Stock unless it is a condition to such transaction that such
Person and the Common Holders execute an agreement substantially in the form of
this Agreement (or the surviving provisions hereof).
(e) Specific Performance.
Each of the parties hereto acknowledges and agrees that, in the event of
any breach of this Agreement, the non-breaching parties would be irreparably
harmed and could not be made whole by monetary damages. Accordingly, each of the
parties hereto agrees that the other parties, in addition to any other remedy to
which they may be entitled at law or in equity, shall be entitled to compel
specific performance of this Agreement.
(f) Notices.
All notices, requests, demands and other communications hereunder shall be
in writing and, except to the extent otherwise provided in this Agreement, shall
be deemed to have been duly given if delivered by same day or next day courier
or mailed, registered mail, return receipt requested, or transmitted by
telegram, telex or facsimile (i) if to a Common Holder or Series C Holder, at
such holder's address appearing on the applicable
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Schedule attached hereto or at any other address such holder may have provided
in writing to the Company and (ii) if to the Company, at Xxxxx Appin House, 2nd
Floor, 0 Xxxxxx Xxxxxx, Xxxxxxxx HMFX, Bermuda, Attention: Secretary, or such
other address as the Company may have furnished to such holders in writing. A
notice hereunder shall be deemed to have been given on the day such notice is
sent or transmitted; provided, however, that if such notice is sent by next-day
courier it shall be deemed to have been given the day following sending and, if
by registered mail, five days following sending.
(g) Successors and Assigns.
Except as otherwise provided herein, this Agreement shall inure to the
benefit of, and be binding upon, the successors and assigns of each of the
parties; provided, however, that this Agreement may not be assigned by any party
hereto other than in compliance with the terms hereof, including the
restrictions on transfers of Company Stock as set forth in Sections 1 and 2
hereof.
(h) Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall be considered one
and the same agreement.
(i) Entire Agreement.
This Agreement, the Founders' Subscription Agreement and the Series C
Subscription Agreement constitute the entire understanding of the parties hereto
and supersede all prior understandings among such parties.
(j) Applicable Law.
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder, shall be determined under,
governed by and construed in accordance with the laws of New York without giving
effect to the principles of conflicts of laws thereof. Each party hereto agrees
that any suit, action or other proceeding arising out of this Agreement shall be
brought and litigated in the courts of New York (or if a suit, action or other
proceeding arising out of this Agreement is unable to be brought or is dismissed
for jurisdictional reasons in the courts of New York, then the suit, action or
proceeding arising out of this Agreement shall be brought in the courts of
Bermuda) and each party hereto hereby irrevocably consents to personal
jurisdiction and venue in any such court and hereby waives any claim it may have
that such court is an inconvenient forum for the purposes of any such suit,
action or other proceeding.
(k) Section Headings.
The headings of the sections and subsections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part thereof.
(l) Holders of Warrant Shares.
Each of the parties hereto hereby consents and agrees that any holder of
the Warrant Shares not already a party hereto may become a party to this
Agreement upon exercise of the Warrant by executing a counterpart signature page
hereto and such holder shall then be reflected on Schedule I hereto as a Common
Holder. Each of the parties hereto hereby agrees that each of the holders of the
Warrants are third party beneficiaries of this Section 6(l).
(m) Series B Holders.
The holders of Common Stock who also hold shares of Series B Preferred
Stock expressly acknowledge and agree that upon the Series B Conversion, such
holders shall become bound by the provisions of this Agreement with respect to
the Series B Conversion Shares received by them as a result of such conversion.
(n) Series C Holders.
The holders of Common Stock who subscribe for shares of Series C Preferred
Stock pursuant to the Series C Subscription Agreement expressly acknowledge and
agree that upon the conversion of any such
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shares of Series C Preferred Stock, such holders shall become bound by the
provisions of this Agreement with respect to the Series C Conversion Shares
received by them as a result of such conversion.
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders
Agreement as of the date first above written.
COMPANY:
CGA GROUP, LTD.
By: /s/ XXXXXXX X. PRICE
--------------------------------------
Name: Xxxxxxx X. Price
Title: Chief Executive Officer
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