FOX PAINE & COMPANY, LLC 3500 Alameda de las Pulgas, Suite 150 Menlo Park, California 94025 March 16, 2011
Exhibit 10.26
FOX XXXXX & COMPANY, LLC
0000 Xxxxxxx xx xxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
0000 Xxxxxxx xx xxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
March 16, 0000
Xxxxxx Xxxxxxx Indemnity, Ltd.
Global Indemnity (Cayman) Limited
c/o Global Indemnity Group, Inc.
Three Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxxxx 00000
Global Indemnity (Cayman) Limited
c/o Global Indemnity Group, Inc.
Three Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxxxx 00000
Ladies and Gentlemen:
We refer to the Management Agreement (the “Original Agreement”), dated September 5, 2003, by and
between United America Indemnity, Ltd., formerly Vigilant International, Ltd., an exempted company
formed with limited liability under the laws of the Cayman Islands (“UAIL”), Fox Xxxxx & Company,
LLC, a Delaware limited liability company (“Fox Xxxxx”), as amended by Amendment No. 1 thereto,
dated May 25, 2006 (the “Amendment” and together with the Original Agreement, the “Management
Agreement”). Capitalized terms used but not defined herein shall have the meanings given to them
in the Amendment.
Management Services
Effective as of the date first set forth above, UAIL hereby assigns and transfers the Management
Agreement and the Indemnification Letter and all of its rights and obligations thereunder to Global
Indemnity (Cayman) Limited (the “Global Indemnity Cayman”), and Global Indemnity Cayman hereby
accepts such assignment and transfer and agrees to perform the obligations of Global Indemnity
Cayman under the Management Agreement and the Indemnification Letter. Fox Xxxxx hereby consents to
such assignment and transfer. For the avoidance of doubt, unless the Management Agreement, as
amended hereby, is terminated in accordance with its terms, Global Indemnity Cayman will hereafter
be obligated to make payments of the Annual Service Fees, with the next such Annual Service Fee
being due September 5, 2011 and payable on or before November 1, 2011. In connection
with such assignment, Global Indemnity Cayman agrees to pay to (or settle by intercompany account
with) UAIL $710,958.90, representing the remainder of the current year’s prepaid Annual Service
Fee.
In addition, upon the consummation of a Change of Control (as defined herein), Global Indemnity
Cayman will immediately pay Fox Xxxxx a lump sum payment of $10,000,000 million (the “Termination
Fee”), and upon receipt of the Termination Fee, Global Indemnity Cayman and Fox Xxxxx agree that
Fox Xxxxx’x obligation to provide the Services and Global Indemnity Cayman’s obligation to pay the
Annual Service Fee shall thereupon immediately terminate. Nothing herein shall affect the
obligation of Global
Indemnity Cayman to reimburse Fox Xxxxx for its and its affiliates’ out-of-pocket expenses in
connection with the provision of Services pursuant to the Management Agreement in respect of
periods prior to the consummation of a Change of Control, and nothing herein shall affect the
obligations of Global Indemnity Cayman under the Indemnification Letter.
Notwithstanding anything in the Management Agreement to the contrary, no Annual Service Fee payable
in respect of any year shall be paid on an applicable Payment Date if Global Indemnity Group, Inc.
(“GIGI”), and UAIL and Global Indemnity Cayman, as guarantors, fail to make payment in full on any
amounts due on the Senior Notes. Any Annual Service Fees not paid as a result of the preceding
sentence, together with interest thereon accruing from the applicable Payment Date at the “base” or
“prime” rate from time to time announced by Citibank, N.A., in New York, New York shall be deferred
and shall be payable from time to time in accordance with the following sentence. Any such
deferred Annual Service Fee shall be paid at such times as GIGI, UAIL and/or Global Indemnity
Cayman makes payment in full, inclusive of any late payment charges and/or fees on the Senior
Notes.
As used herein, the term “Change of Control” shall mean, whether effected directly or
indirectly or in one or a series of transactions, in each case other than to or with Fox Xxxxx and
its affiliates or the Funds (as defined in the Original Agreement) (Fox Xxxxx and its affiliates
and the Funds, collectively, the “Fox Xxxxx Entities”):
(a) any sale of all or substantially all of the consolidated assets of Global Indemnity plc
(“Global Indemnity”) taken together with its consolidated subsidiaries;
(b) any sale of the outstanding shares of voting stock of Global Indemnity which
immediately following thereof (i) the Fox Xxxxx Entities, directly or indirectly, together
with the shareholders of Global Indemnity immediately prior to such transaction or series of
transactions not affiliated with the Fox Xxxxx Entities, cease to own shares of voting stock
of Global Indemnity representing at least a majority of the voting power of Global
Indemnity, (ii) the voting power of the Fox Xxxxx Entities in Global Indemnity relative to
the voting power in Global Indemnity of the shareholders immediately prior to such
transaction or series of transactions not affiliated with the Fox Xxxxx Entities is no
greater than the relative voting power of the Fox Xxxxx Entities in Global Indemnity as
compared to the voting power of such shareholders not affiliated with the Fox Xxxxx
Entities immediately prior to such transaction or series of transactions, (iii) the Fox
Xxxxx Entities, directly or indirectly, together with the shareholders of Global Indemnity
immediately prior to such transaction or series of transactions not affiliated with the Fox
Xxxxx Entities, cease to own at least a majority of the outstanding shares of voting stock
of Global Indemnity, and (iv) the shareholders of Global Indemnity not affiliated with the
Fox Xxxxx Entities immediately prior to such transaction or series of transactions
participate on a proportional basis with and are entitled to receive at least the same
consideration as the Fox Xxxxx Entities (without regard to class or series of shares owned)
in such transaction or series of transactions; or
2
(c) any other transaction or series of transactions in which immediately following thereof
either:
(i) (A) the Fox Xxxxx Entities, directly or indirectly, together with the
shareholders of Global Indemnity immediately prior to such transaction or series of
transactions not affiliated with the Fox Xxxxx Entities, cease to own shares of
voting stock of Global Indemnity representing at least a majority of the voting
power of Global Indemnity, (B) the voting power of the Fox Xxxxx Entities in Global
Indemnity relative to the voting power in Global Indemnity of the shareholders
immediately prior to such transaction or series of transactions not affiliated with
the Fox Xxxxx Entities is no greater than the relative voting power of the Fox Xxxxx
Entities in Global Indemnity as compared to the voting power of such shareholders
not affiliated with the Fox Xxxxx Entities immediately prior to such transaction or
series of transactions, (C) the Fox Xxxxx Entities, directly or indirectly, together
with the shareholders of Global Indemnity immediately prior to such transaction or
series of transactions not affiliated with the Fox Xxxxx Entities, cease to own at
least a majority of the outstanding shares of voting stock of Global Indemnity and
(D) the shareholders of Global Indemnity not affiliated with the Fox Xxxxx Entities
immediately prior to such transaction or series of transactions participate on a
proportional basis with and are entitled to receive at least the same consideration
as the Fox Xxxxx Entities (without regard to class or series of shares owned) in
such transaction or series of transactions; or
(ii) Global Indemnity no longer holds a majority of the outstanding shares of voting
stock of subsidiaries that together own substantially all of the consolidated assets
of Global Indemnity taken together with its consolidated subsidiaries,
in each case, including, without limitation, by means of a merger, amalgamation,
scheme of arrangement, consolidation or other business combination, a tender or
exchange offer, a leveraged buy-out, lease or license, the formation of a
partnership, joint or collaborative venture or similar arrangement.
In the event a transaction or a series of transactions is consummated that would otherwise have
been a “Change of Control” (as such term is defined above), but for any such transaction or series
of transactions being to or with one or more of the Fox Xxxxx Entities (and thus no Termination Fee
or Transaction Fee (as defined below) being then due and payable), notwithstanding anything to the
contrary in the Management Agreement, as amended hereby, (a) the parties agree that the
consummation of any such transaction or series of transactions shall not terminate the terms of the
Management Agreement, as amended hereby, including the right of Fox Xxxxx to receive the Annual
Service Fee and (b) the Annual Service Fee shall continue until the earlier of (i) such time as the
Fox Xxxxx Entities no longer hold an indirect equity investment in Global Indemnity or any
successor thereto and (ii) such time as Fox Xxxxx and the Company agree in writing to modify or
terminate the arrangements contemplated hereby.
For purposes of interpreting the definition of “Change of Control”, the phrase “series of
transactions” shall mean and refer to a plan of disposition adopted and approved by the Board of
Directors of Global Indemnity or the applicable company.
Except as expressly amended, modified or supplemented herein, all other provisions of the
Management Agreement shall remain in full force and effect.
3
Advisory Services
In addition, Global Indemnity Cayman also confirms the arrangements under which Fox Xxxxx agrees to
provide to Global Indemnity Cayman and its affiliates financial advice and assistance in the event
of a possible Change of Control transaction, including, as appropriate, advice and assistance with
respect to defining objectives, performing valuation analyses and structuring, planning and
negotiating any such transaction (the “Advisory Services”). Global Indemnity Cayman understands
that Fox Xxxxx would not be providing (nor would Global Indemnity Cayman and its affiliates be
relying on it for) tax, regulatory, legal or accounting advice in connection with a Change of
Control and that Fox Xxxxx is not rendering any formal opinions to Global Indemnity Cayman with
respect to the Advisory Services.
If a Change of Control is consummated, Global Indemnity Cayman agrees to pay Fox Xxxxx, upon the
consummation of the Change of Control an amount in cash equal to the product of (a) 1.0% times (b)
the Transaction Value (the “Transaction Fee”). “Transaction Value” means with respect to a Change
of Control involving (i) the voting stock of Global Indemnity, the total value of (A) the
consideration paid per Global Indemnity voting share of each class multiplied by the total number
of Global Indemnity voting shares of each class outstanding (including the number of voting shares
that would be outstanding upon exercise, conversion, redemption or exchange of any in-the-money
securities, including options, warrants, convertible debt and convertible preferred stock) of
Global Indemnity but net of any proceeds received by Global Indemnity upon the exercise of any
options or warrants and (B) any capital distribution to the shareholders of Global Indemnity,
including extraordinary dividends, share repurchases, self tender offers or other forms of
returning capital to shareholders, that is expressly provided for in the Change of Control
documentation and is conditioned upon the consummation of the Change of Control (or, conversely,
the Change of Control is conditioned upon completion of such return of capital), and (ii) any sale
of assets or any other transaction not involving the voting stock of Global Indemnity, the total
value of (A) all cash, securities, assets and other property paid, directly or indirectly, by a
buyer to Global Indemnity or, if applicable, a subsidiary of Global Indemnity in connection with a
Change of Control or, in the case of a partnership, joint or collaborative venture or similar
arrangement, the total value of all cash, securities, assets and other property, directly or
indirectly, paid or contributed by Global Indemnity or, if applicable, a subsidiary of Global
Indemnity to such venture, excluding any subsequent capital contributions to fund such venture’s
operations and (B) any capital distribution to the shareholder(s) of Global Indemnity or, if
applicable, a subsidiary of Global Indemnity, including extraordinary dividends, share repurchases,
self tender offers or other forms of returning capital to shareholders, that is expressly provided
for in the Change of Control documentation and is conditioned upon the completion of the Change of
Control (or, conversely, the Change of Control is conditioned upon completion of such return of
capital). For purposes of
determining the Transaction Fee, the Audit Committee of the Board of Directors of Global Indemnity
shall reasonably determine the Transaction Value so as not to “double count” the proceeds of any
transaction or series of transactions that has been consummated prior to the consummation of a
Change of Control transaction. Notwithstanding anything in this letter agreement to the contrary,
in no event shall more than one Change of Control Fee be payable under the terms of this letter
agreement.
The provisions of the Indemnification Letter shall apply to the Advisory Services. Except as may
be required by applicable law or regulation or in connection with any proceeding, inquiry or
request by or before, or a filing with or submission to, a court, governmental or judicial
authority, regulatory or administrative body or securities exchange, none of Global Indemnity
Cayman, Global Indemnity or
4
any of their respective subsidiaries will disclose to any third party,
or publicly refer to, any written or oral advice provided by Fox Xxxxx pursuant to this letter
agreement, without the prior written consent of Fox Xxxxx. The Advisory Services provided by Fox
Xxxxx hereunder are intended solely for the benefit and use of the senior management and the Board
of Directors of each of Global Indemnity Cayman, Global Indemnity and their respective
subsidiaries, are not on behalf of, and are not intended to confer rights or remedies upon, any
shareholder of Global Indemnity, any employee or creditor of Global Indemnity Cayman, Global
Indemnity
or any of their respective subsidiaries or any other person, and may not be used or
relied upon for any other purpose.
All amounts payable to Fox Xxxxx hereunder shall be paid free and clear of all deductions or
withholdings unless the deduction or withholding is required by applicable law, in which event
Global Indemnity Cayman shall pay such additional amounts as shall be necessary to ensure that the
net amount received by Fox Xxxxx will equal the full amount that would otherwise have been received
by Fox Xxxxx had no such deduction or withholding been made. Payments made by Global Indemnity
Cayman pursuant to this letter agreement shall be made by wire transfer of immediately available
funds to such account as Fox Xxxxx shall designate to Global Indemnity Cayman in writing from time
to time.
Concurrently herewith, each of GIGI, Wind River Reinsurance Company, Ltd., and UAIL are executing a
separate Guaranty in favor of Fox Xxxxx with respect to the Management Agreement, as amended
hereby, and the Indemnification Letter.
[Remainder of page intentionally left blank]
5
Please confirm the foregoing is in accordance with your understanding and agreement with Fox
Xxxxx by signing a copy of this letter agreement in the space provided below.
| Very truly yours, FOX XXXXX & COMPANY, LLC |
||||
| By: | /s/ Xxxx X. Xxx | |||
| Name: | Xxxx X. Xxx | |||
| Title: | Managing Member | |||
Agreed and accepted:
| UNITED AMERICA INDEMNITY, LTD. | GLOBAL INDEMNITY (CAYMAN) LIMITED | |||||||||
By:
|
/s/ Xxxxx X. Xxxxxx
|
By: | /s/ Xxxxxx X. XxXxxxxx
|
|||||||
| Title: Director | Title: Director | |||||||||
