SECURITIES PURCHASE AGREEMENT
dated as of
May 8, 2001
among
MUTUAL RISK MANAGEMENT LTD.
and
THE INVESTORS NAMED HEREIN
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.............................................2
SECTION 1.2. Accounting Terms and Determinations....................13
SECTION 1.3. Rules of Construction..................................13
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Closing................................................14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS
SECTION 3.1. Corporate Existence and Power..........................16
SECTION 3.2. Authorization, Execution, Enforceability...............16
SECTION 3.3. Capitalization of the Company..........................17
SECTION 3.4. Subsidiaries; Other Interests..........................18
SECTION 3.5. No Contravention, Conflict, Breach, Etc................18
SECTION 3.6. Consents...............................................19
SECTION 3.7. No Existing Violation, Default, Etc....................19
SECTION 3.8. Licenses and Permits...................................20
SECTION 3.9. Title to Properties....................................20
SECTION 3.10. Taxes..................................................20
SECTION 3.11. Litigation.............................................21
SECTION 3.12. Labor Matters..........................................21
SECTION 3.13. Contracts..............................................21
SECTION 3.14. Finder's Fees..........................................22
SECTION 3.15. Financial Statements...................................22
SECTION 3.16. Compliance with ERISA..................................23
SECTION 3.17. Contingent Liabilities.................................23
SECTION 3.18. No Material Change.....................................24
SECTION 3.19. Insurance Matters......................................25
SECTION 3.20. Full Disclosure........................................27
SECTION 3.21. Solicitation...........................................27
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Page
SECTION 3.22. Governmental Regulation................................28
SECTION 3.23. Reservation of Shares..................................28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 4.1. Organization, Good Standing, Power, Authority, Etc.....29
SECTION 4.2. Investment Intent, Etc.................................29
SECTION 4.3. Accredited Investor....................................29
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Conditions to the Purchasers' Obligations..............30
SECTION 5.2. Conditions to the Company's Obligations................33
ARTICLE VI
COVENANTS
SECTION 6.1. Restructuring..........................................34
SECTION 6.2. Preemptive Rights......................................35
SECTION 6.3. Board Representation...................................35
SECTION 6.4. Information............................................37
SECTION 6.5. Use of Proceeds........................................40
SECTION 6.6. Non-Competition........................................40
SECTION 6.7. Certain Transactions...................................41
SECTION 6.8. Insurance Professional.................................41
SECTION 6.9. Purchase Option........................................41
SECTION 6.10. Employment Agreements..................................41
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Notices................................................42
SECTION 7.2. No Waivers; Powers and Remedies Cumulative; Amendments.45
SECTION 7.3. Indemnification........................................46
SECTION 7.4. Expenses; Documentary Taxes............................48
SECTION 7.5. Register...............................................48
SECTION 7.6. Termination............................................49
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Page
SECTION 7.7. Successors and Assigns.................................49
SECTION 7.8. Governing Law; Waiver of Jury Trial; Submission to
Jurisdiction; Net Payments...........................49
SECTION 7.9. Survival...............................................51
SECTION 7.10. Independence of Representations, Warranties
and Covenants........................................51
SECTION 7.11. Severability...........................................51
SECTION 7.12. Counterparts...........................................52
SECTION 7.13. Entire Agreement; Benefit..............................52
SECTION 7.14. Headings...............................................52
SECTION 7.15. Execution by Newco.....................................52
Schedule 3.3(c) Outstanding Debt
Schedule 3.4 Subsidiaries
Schedule 3.10 Taxes
Schedule 3.11 Litigation Matters
Schedule 3.13 Contracts
Schedule 3.18 Certain Material Changes
Schedule 3.19(d) Loss Experience
Schedule 3.19(e) Certain Reinsurance Collectibles
Schedule 3.19(f) Governmental Consents and Approvals
Annex I - Projected and Pro Forma Financial Statements
Exhibit A-1 - Form of Convertible Exchangeable Debenture
Exhibit A-2 - Form of Newco Debenture
Exhibit B - Form of Collateral Agreement
Exhibit C - Form of Debenture Registration Rights Agreement
Exhibit D - Form of Warrant Registration Rights Agreement
Exhibit E - Form of Subordination Agreement
Exhibit F - Form of Lock-Up Agreement
Exhibit G - Form of Voting Preferred Stock
Exhibit H - Form of Warrant
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of May 8, 2001
among MUTUAL RISK MANAGEMENT LTD., MUTUAL GROUP LTD., the ADDITIONAL GUARANTORS
NAMED HEREIN, XL INSURANCE LTD, FIRST UNION MERCHANT BANKING 2001, LLC, HIGH
RIDGE CAPITAL PARTNERS II, L.P., CENTURY CAPITAL PARTNERS II, L.P., XXXXXX X.
XXXXXXXX, TARACAY INVESTORS COMPANY AND INTREPID FUNDING MASTER TRUST.
R E C I T A L S :
WHEREAS, the parties hereto desire to enter into certain financing
arrangements pursuant to the terms and subject to the conditions hereinafter set
forth;
WHEREAS, the Purchasers (other than Intrepid), pursuant to the terms and
subject to the conditions herein, severally desire to purchase convertible
exchangeable debentures of the Company (the "Convertible Exchangeable
Debentures") in an aggregate principal amount of $112,500,000 and the Company
desires to contribute, after completion of the Restructuring, approximately
$80,000,000 of such proceeds to the statutory capital and surplus of its U.S.
Insurance Subsidiaries;
WHEREAS, the parties hereto have agreed that the remaining amount of the
net proceeds from the issuance and sale of the Convertible Exchangeable
Debentures hereunder will be held in the Collateral Account until such time as
they are released, in accordance with the terms of this Agreement and the
Collateral Agreement;
WHEREAS, Intrepid, pursuant to the terms and subject to the conditions
herein, desires to exchange $30,000,000 liquidation preference of RHINOS for
Convertible Exchangeable Debentures in an aggregate principal amount of
$30,000,000;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person (the "Subject Person"), (i)
any other Person (a "Controlling Person") that directly, or indirectly through
one or more intermediaries, Controls the Subject Person or (ii) any other Person
which is Controlled by or is under common Control with a Controlling Person;
provided, however, that the Purchasers and their respective Affiliates (other
than any officers or directors (other than any XL Designees) of the Company and
their respective Affiliates) shall not be deemed Affiliates of the Company or
any of its Subsidiaries.
"Audited Statutory Financial Statements" has the meaning set forth in
Section 3.15(a).
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Business Day" means any day except a Saturday, Sunday or other day on
which (i) commercial banks in The City of New York are authorized or required by
law to close or (ii) the New York Stock Exchange is not open for trading.
"Capital Stock" means, with respect to any Person, any and all shares,
partnership interests or equivalents (however designated and whether voting or
non-voting) of such Person's capital stock, whether outstanding on the date
hereof or hereafter issued.
"Century" means Century Capital Partners II, L.P.
"Century Warrants" means warrants to purchase initially an aggregate of
103,112 shares of Common Stock of the Company. The Century Warrants shall (i) be
immediately exercisable, initially at an exercise price of $7.00 per share of
Common Stock of the Company, (ii) be exercisable for five years from the date of
issuance, (iii) contain provisions for adjustment of the exercise price and the
number of shares of Common Stock of the Company issuable upon exercise of the
Century Warrants comparable to the antidilution provisions applicable to the
Debentures and (iv) have the benefit of registration rights comparable to the
registration rights
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applicable to the Debentures, including one demand registration right and
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unlimited piggyback registration rights. The Century Warrants shall be in the
form of Exhibit H hereto.
"Closing Date" has the meaning set forth in Section 2.1.
"Collateral Account" means the Collateral Account established and
maintained pursuant to the Collateral Agreement between the Company and the
Collateral Agent named therein.
"Collateral Agreement" means a Collateral Agreement in the form of Exhibit
B hereto between the Company and the Collateral Agent named therein.
"Common Stock" means the common stock or common shares of the referenced
Person.
"Company" means Mutual Risk Management Ltd., a company organized under the
laws of Bermuda.
"Contributed Amounts" has the meaning set forth in Section 6.5.
"Control" (including, with correlative meanings, the terms "Controlling,"
"Controlled by" and "under common Control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or interests, by contract or
otherwise.
"Convertible Exchangeable Debentures" means the 9-3/8% Convertible
Exchangeable Debentures Due 2006 of the Company in the form of Exhibit A-1
hereto.
"CRM" has the meaning set forth in the definition of "Restructuring."
"D&O Proxies" has the meaning set forth in Section 5.1(r).
"Debentures" means, collectively, the Convertible Exchangeable Debentures
and the Newco Debentures. All references to Debentures in this Agreement shall
be deemed to include the shares of Voting Preferred Stock issued in connection
therewith.
"Debenture Registration Rights Agreement" means a registration rights
agreement in the form of Exhibit C hereto.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds,
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debentures, Debentures or other similar instruments issued by such Person, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person under any Financing Lease, (v) all
reimbursement obligations of such Person in respect of letters of credit or
other similar instruments, (vi) Disqualified Capital Stock of such Person, (vii)
Preferred Stock of any Subsidiary of such Person (other than preferred shares of
the IPC (i.e., rent-a-captive) subsidiaries of the Company or Newco issued to
policyholders in connection with the CRM business), (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person, and (ix) all Debt of others Guaranteed
by such Person.
"Designees" means, collectively, the First Union and High Ridge Designee
and the XL Designees and "Designee" means any one of them.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof, or requires the payment of any dividends, in each case, at any
time that any obligation under the Transaction Documents is outstanding.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Group" means the Company and its Subsidiaries and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Bank Agreement" means the Credit Agreement dated as of September
21, 2000 among the Company, Mutual Group Ltd., Bank of America, N.A., as
Administrative Agent and a lender and the Lenders party thereto from time to
time, as in effect on the date hereof or as amended or amended and restated.
"Existing Bank Lenders" means the Lenders under the Existing Bank
Agreement.
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"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"First Union" means First Union Merchant Banking 2001, LLC.
"First Union Warrants" means warrants to purchase initially an aggregate of
263,965 shares of Common Stock of the Company. The First Union Warrants shall
(i) be immediately exercisable, initially at an exercise price of $7.00 per
share of Common Stock of the Company, (ii) be exercisable for five years from
the date of issuance, (iii) contain provisions for adjustment of the exercise
price and the number of shares of Common Stock of the Company issuable upon
exercise of the First Union Warrants comparable to the antidilution provisions
applicable to the Debentures and (iv) have the benefit of registration rights
comparable to the registration rights applicable to the Debentures, including
one demand registration right and unlimited piggyback registration rights. The
First Union Warrants shall be in the form of Exhibit H hereto.
"First Union and High Ridge Designee" has the meaning set forth in Section
6.3(b).
"Fully Diluted Basis" means after giving effect to the exercise of all
outstanding options, warrants and other rights to purchase Capital Stock of the
relevant Person and the conversion or exchange of all securities convertible or
exchangeable into Capital Stock of the relevant Person (whether or not then
exercisable, exchangeable or convertible and whether or not "in the money").
"GAAP" has the meaning set forth in Section 1.2.
"Governmental Entity" means any court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory authority or
agency, including any insurance regulatory authority or agency or Insurance
Department.
"Guarantee" by any Person means (a) any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to
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protect such holder against loss in respect thereof (in whole or in part). The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantors" means each of the Subsidiaries of the Company listed on
Schedule 3.4 (other than the Insurance Subsidiaries) and each other Subsidiary
guaranteeing the obligations hereunder and the Debentures pursuant to the terms
of the Debentures.
"High Ridge" means High Ridge Capital Partners II, L.P.
"High Ridge Warrants" means warrants to purchase initially an aggregate of
148,481 shares of Common Stock of the Company. The High Ridge Warrants shall (i)
be immediately exercisable, initially at an exercise price of $7.00 per share of
Common Stock of the Company, (ii) be exercisable for five years from the date of
issuance, (iii) contain provisions for adjustment of the exercise price and the
number of shares of Common Stock of the Company issuable upon exercise of the
High Ridge Warrants comparable to the antidilution provisions applicable to the
Debentures and (iv) have the benefit of registration rights comparable to the
registration rights applicable to the Debentures, including one demand
registration right and unlimited piggyback registration rights. The High Ridge
Warrants shall be in the form of Exhibit H hereto.
"Holders" has the meaning set forth in Section 7.5.
"Indemnified Parties" and "Indemnified Party" have the meanings set forth
in Section 7.3.
"Insurance Acts" means all applicable insurance laws and the applicable
rules and regulations thereunder.
"Insurance Departments" means the Bermuda Registrar of Companies and the
Departments of Insurance of the States of Illinois and Pennsylvania.
"Insurance License" means a license or permit from an Insurance Department
or any other department of insurance of any other jurisdiction.
"Insurance Subsidiaries" means (i) Legion Insurance Company, Legion
Indemnity Ltd. and Villanova Insurance Company and (ii) each other Subsidiary of
the Company that is a licensed insurance company.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
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"Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, advance, time deposit or otherwise.
"Intrepid" means Intrepid Funding Master Trust.
"IPC" means Insurance Profit Center.
"Judgment Currency" has the meaning set forth in Section 7.8(c).
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, voting trust agreement, assignment by way of security,
restriction on voting or transfer, agreement to sell or convey, option, claim,
title imperfection, encroachment or other survey defect, pledge, restriction,
security interest or adverse claim of any kind, whether arising by contract or
under law or otherwise (including any Financing Lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Lock-Up Agreements" means the lock-up agreements of the inside directors
and executive officers of the Company in the form of Exhibit F hereto.
"Material Adverse Effect" has the meaning set forth in Section 3.1(b).
"Multiemployer Plan" means at any time a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is
then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions, including for these purposes any
Person which ceased to be a member of the ERISA Group during such five-year
period.
"NAIC" means the National Association of Insurance Commissioners.
"Newco" has the meaning set forth in the definition of "Restructuring."
"Newco Debenture" means a 9 3/8% Convertible Debenture due 2006 of Newco
substantially in the form of Exhibit A-2 hereto; provided, however, that the
final terms of the covenants and events of default to be included in the Newco
Debenture shall be determined by XL and Newco prior to the issuance thereof.
"Newco Voting Preferred Stock" means shares of preferred stock of Newco
having a nominal liquidation preference and par value, no dividend rights and
aggregate voting rights equal to the aggregate voting rights of the Common Stock
issuable upon conversion of all Newco Debentures and otherwise substantially the
same as the Voting Preferred Stock.
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"Non-Competition Period" has the meaning set forth in Section 6.6.
"Obligors" means, collectively, the Company, Newco, the Guarantors and any
additional Person that is required to become a party to this Agreement; and
"Obligor" means any of them.
"Observer" has the meaning set forth in Section 6.3(b).
"Officers' Certificate" means a certificate executed on behalf of the
Company by the Chief Executive Officer or President and by its Chief Financial
Officer, its Treasurer or any other officer acceptable to the Purchasers;
provided, however, that the Officers' Certificate with respect to the compliance
with a condition precedent to the Closing Date shall include (i) a statement
that the signers have read such condition and any definitions or other
provisions contained in this Agreement relating thereto, (ii) a statement that
in the opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with and
(iii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means all domestic and foreign licenses, permits, consents,
franchises, orders, authorizations, clearances, certificates, Insurance Licenses
and approvals from Governmental Entities.
"Person" means an individual or a corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, government (or any agency or political subdivision
thereof) or other entity of any kind.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at the time a member of such ERISA Group for employees of any Person which
was at the time a member of the ERISA Group.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
such Person that has preferential rights over any other Capital Stock of such
Person with respect to dividends, distributions or redemptions or upon
liquidation.
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"Program Business" means the business of MRM in which it acts as a conduit
between producers of specialty books of business and reinsurers of such
business.
"Purchase Price" means the aggregate amount paid to the Company by the
Purchasers (other than Intrepid) hereunder in respect of the Convertible
Exchangeable Debentures and the Voting Preferred Stock pursuant to Section
2.1(a) of this Agreement.
"Purchasers" means XL Insurance Ltd, First Union, High Ridge, Century,
Xxxxxx X. Xxxxxxxx, Taracay, Intrepid and any other purchasers of Convertible
Exchangeable Debentures for cash approved by XL, such approval not to be
unreasonably withheld (it being understood that it is reasonable for XL to
withhold its approval of any proposed Purchaser that is a competitor of the
Company, XL or any of their respective Subsidiaries or of any proposed Purchaser
whose purchase might, in the judgment of XL, adversely affect the tax status of
MRM, Newco, XL or any of their respective Subsidiaries or shareholders);
provided, however, that XL's consent shall not be required for the issuance of
RHINOS Debentures to existing holders of RHINOS in exchange for such RHINOS.
"Qualified Offering" means the registration and sale of Common Stock of
Newco with a stated offering price of not less than $20.0 million registered
under the United States securities laws with the intent that a liquid trading
market therein develop.
"Register" has the meaning set forth in Section 7.5.
"Registration Rights Agreements" means, collectively, the Debenture
Registration Rights Agreement and the Warrant Registration Rights Agreement.
"Reinsurance Arrangements" has the meaning set forth in Section 3.19(e).
"Related Person" means any director, officer or employee of the Company or
any of its Subsidiaries who is also an equity or debt holder of the Company or
any of its Subsidiaries.
"Required Approvals" means all federal, state and local government
regulatory (including any Form A approvals and all other approvals relating to
insurance) and shareholder approvals necessary for consummation of the
Transactions, including all approvals necessary in order to remove any
restrictions or limitations on voting rights or conversion contained in any of
the Transaction Documents.
"Requisite Holders" means the Holders of a majority of the principal amount
of outstanding Debentures; provided, however, that (i) the principal amount of
Debentures that have been converted into or exchanged for Common Stock of the
Company and/or Newco shall, solely for purposes of this definition, be deemed to
be outstanding and held by
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the respective holders of such Common Stock, (ii) at any time when XL holds, or
has the right to vote, a majority of the principal amount of outstanding
Debentures (other than RHINOS Debentures), "Requisite Holders" shall mean a
majority of the principal amount of the outstanding Debentures other than the
RHINOS Debentures and (iii) so long as XL holds or has the right to vote at
least $50.0 million of the principal amount of Debentures, it will be deemed to
own a majority of the principal amount of the outstanding Debentures.
"Restructuring" means the restructuring of the operating units of the
Company into two separate holding company structures, resulting in (i) one
holding company owning the Company's U.S. insurance operations and managing
general agency entities and operating through subsidiaries as a specialty
insurer writing a selected book of Program Business and (ii) the second holding
company, a newly formed company organized under the laws of Bermuda ("Newco"),
owning (A) all of the Company's fee generating businesses that presently
comprise its Corporate Risk Management ("CRM"), Specialty Brokerage and
Financial Services business segments and all of the Company's non-U.S. insurance
operations and (B) the Company's IPC (i.e., rent-a-captive) companies, other
than Mutual Indemnity (Dublin) Limited (which will be confined solely to its
present business), that are principally dedicated to its CRM business segment.
As part of the Restructuring, (x) Newco will be entitled to receive all of the
fees attributable to the CRM business except that MRM's U.S. Insurance
Subsidiaries that write the related policies (which will only be Villanova
Insurance Company ("Villanova") where Villanova is legally entitled to write
such policies and the prospective holder of the underlying policy does not
object to the use of Villanova or a new company in the case of new or renewal
policies) may retain a portion of the premium equal to its actual costs, but not
more than 1-1/4% and (y) Newco will be given an option to purchase Villanova
and/or such new company for book value. The Restructuring shall be effected in a
manner reasonably acceptable to XL, including with respect to capitalization and
minimum capital and surplus of Newco. In addition to the foregoing, the
Restructuring shall not be deemed to have been completed until the Company has
complied with its obligations set forth in Section 6.1 hereof.
"RHINOS" means the Auction Rate Reset Preferred Securities of the Trust,
known as "RHINOS," including the related documentation.
"RHINOS Debentures" means Debentures issued to any current or former
holders of RHINOS or any of their respective Affiliates in exchange for an equal
principal amount of RHINOS.
"Securities" means the Debentures, the Voting Preferred Stock, the Newco
Voting Preferred Stock, the Common Stock of the Company and Newco issued or
issuable upon exchange or conversion of the Debentures and the Warrants.
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"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" has the meaning set forth in Section 1-02(w) of
Regulation S-X under the Securities Act.
"Statutory Accounting Principles" means generally accepted statutory
accounting principles for property and casualty insurance companies domiciled in
the States of Illinois and Pennsylvania, as applicable.
"Statutory Financial Statements" has the meaning set forth in Section
3.15(b).
"Subordination Agreement" means a subordination agreement in the form of
Exhibit E hereto.
"Subsidiary" means, with respect to any Person, (i) any corporation or
other entity of which more than 50% of the Capital Stock or other ownership
interests having ordinary voting power to elect more than 50% of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, has a greater than 50% equity interest; provided, however, that
for all purposes of this Agreement references to Subsidiaries of the Company
shall not include such entities designated by the Company that, in the
aggregate, would not constitute a Significant Subsidiary of the Company.
"Transaction Documents" means (i) the Debentures, (ii) this Agreement,
(iii) the Collateral Agreement, (iv) the Registration Rights Agreements, (v) the
Subordination Agreement, (vi) the Certificate of Designations relating to the
Voting Preferred Stock, (vii) the Voting Preferred Stock, (viii) the Newco
Voting Preferred Stock, (ix) the Warrants, (x) the Lock-Up Agreements, (xi) the
D&O Proxies and (xii) each other document executed in connection with or
pursuant to this Agreement.
"Transactions" means the issuance and sale of the Convertible Exchangeable
Debentures, the Voting Preferred Stock and the Warrants and each of the other
transactions contemplated by the Transaction Documents, both before and after
giving effect to permitted exchanges and/or conversions of the Debentures,
including the Restructuring and the exercise of all of the rights of the
Purchasers under the Transaction Documents and fulfillment of all obligations of
the Obligors under the Transaction Documents.
"Trust" means MRM Trust I, a Delaware statutory business trust, the issuer
of the RHINOS and a Subsidiary of the Company.
"Taracay" means Taracay Investors Company.
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"Taracay Warrants" means warrants to purchase initially an aggregate of
4,342 shares of Common Stock of the Company. The Taracay Warrants shall (i) be
immediately exercisable, initially at an exercise price of $7.00 per share of
Common Stock of the Company, (ii) be exercisable for five years from the date of
issuance, (iii) contain provisions for adjustment of the exercise price and the
number of shares of Common Stock of the Company issuable upon exercise of the
Taracay Warrants comparable to the antidilution provisions applicable to the
Debentures and (iv) have the benefit of registration rights comparable to the
registration rights applicable to the Debentures, including one demand
registration right and unlimited piggyback registration rights. The Taracay
Warrants shall be in the form of Exhibit H hereto.
"Unaudited Statutory Financial Statements" has the meaning set forth in
Section 3.15(b).
"U.S. Insurance Subsidiaries" means Legion Insurance Company, Legion
Indemnity Ltd. and Villanova Insurance Company.
"Voting Preferred Stock" means shares of preferred stock of the Company
having a liquidation preference and par value of U.S. $.01 per share, no
dividend rights and aggregate voting rights equal to the aggregate voting rights
of the Common Stock issuable upon conversion or exchange of all Convertible
Exchangeable Debentures. The Voting Preferred Stock shall be in the form of
Exhibit G hereto.
"Warrant Registration Rights Agreement" means a registration rights
agreement in the form of Exhibit D hereto.
"Warrants" means, collectively, the XL Warrants, the First Union Warrants,
the High Ridge Warrants, the Century Warrants and the Taracay Warrants.
"XL" means XL Insurance Ltd.
"XL Designees" has the meaning set forth in Section 6.3(a).
"XL Warrants" means warrants to purchase initially an aggregate of
1,632,043 shares of Common Stock of the Company. The XL Warrants shall (i) be
immediately exercisable, initially at an exercise price of $7.00 per share of
Common Stock of the Company, (ii) be exercisable for five years from the date of
issuance, (iii) contain provisions for adjustment of the exercise price and the
number of shares of Common Stock of the Company issuable upon exercise of the XL
Warrants comparable to the antidilution provisions applicable to the Debentures
and (iv) have the benefit of registration rights comparable to the registration
rights
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applicable to the Debentures, including one demand registration right and
unlimited piggyback registration rights. The XL Warrants shall be in the form of
Exhibit H hereto.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect in the
United States on the date hereof applied on a consistent basis ("GAAP").
SECTION 1.3. Rules of Construction. (a) The definitions in Section 1.1
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
(b) Unless the context shall otherwise require, all references herein to
(i) Articles, Sections, Exhibits, Schedules and Annexes shall be deemed
references to Articles and Sections of, and Exhibits, Schedules and Annexes to,
this Agreement, (ii) Persons include their respective permitted successors and
assigns or, in the case of governmental Persons, Persons succeeding to the
relevant functions of such Persons, (iii) agreements and other contractual
instruments include subsequent amendments, assignments, and other modifications
thereto to the date hereof and thereafter, but in the case of any amendment,
assignment or modification after the date hereof, only to the extent such
amendments, assignments or other modifications thereto are not prohibited by
their terms or the terms of any Transaction Document, (iv) statutes and related
regulations include any amendments of same and any successor statutes and
regulations, (v) time shall be deemed to be to New York City time and (vi)
"ordinary course of business" (and similar phrases) shall mean the ordinary
course of business of the Company and its Subsidiaries consistent with past
practice.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Closing. (a) Subject to the prior satisfaction of all the
terms and conditions set forth herein and unless this Agreement shall have been
earlier terminated in accordance with its terms, each Purchaser (other than
Intrepid) severally agrees to purchase from the Company and the Company agrees
to issue and sell to each Purchaser (other than Intrepid), on a date to be
mutually agreed upon by the Company and XL, which date shall be no later than
five Business Days after the date hereof (the "Closing Date"), the aggregate
prin-
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cipal amount of Convertible Exchangeable Debentures (together with the related
Voting Preferred Stock) set forth on the signature page to this Agreement for
such Purchaser, at a purchase price equal to the aggregate principal amount of
Convertible Exchangeable Debentures purchased by such Purchaser, less the
aggregate par value of the related Voting Preferred Stock issued to such
Purchaser in connection with its purchase of Convertible Exchangeable
Debentures. Subject to the prior satisfaction of all the terms and conditions
set forth herein and unless this Agreement shall have been earlier terminated in
accordance with its terms, Intrepid and the Company agree to exchange, on the
Closing Date, $30,000,000 liquidation preference of RHINOS currently owned
beneficially and of record by Intrepid for the aggregate principal amount of
Convertible Exchangeable Debentures (together with the related Voting Preferred
Stock) set forth on the signature page to this Agreement for Intrepid. The
Convertible Exchangeable Debentures shall be convertible as provided therein
into Common Stock of the Company and exchangeable as provided therein for, at
the option of the Holder thereof, Newco Debentures or Common Stock of Newco. In
connection with the purchase of the Convertible Exchangeable Debentures, the
Company shall issue to each Purchaser (other than Intrepid), for additional
consideration equal to the par value thereof, a percentage of the total number
of shares of Voting Preferred Stock equal to the percentage of the principal
amount of all Convertible Exchangeable Debentures purchased by such Purchaser.
In connection with the exchange for the Convertible Exchangeable Debentures, the
Company shall issue to Intrepid a percentage of the total number of shares of
Voting Preferred Stock equal to the percentage of the principal amount of all
Convertible Exchangeable Debentures purchased by Intrepid. The Voting Preferred
Stock will provide that it may only be transferred with a proportional amount of
the Convertible Exchangeable Debentures and the Convertible Exchangeable
Debentures will provide that they may only be transferred with a proportional
amount of Voting Preferred Stock.
(b) On the Closing Date, the Purchasers (other than Intrepid) shall deliver
the Purchase Price in immediately available funds by wire transfer to the
account of the Company (which account shall be specified by the Company in
writing no later than 9:00 a.m. on the second Business Day preceding the Closing
Date). On the Closing Date, Intrepid shall deliver to the Company for
cancellation certificates representing $30,000,000 liquidation preference of
RHINOS.
(c) On the Closing Date, against payment and delivery as set forth in
Section 2.1(b), the Company shall deliver to each Purchaser one or more
Convertible Exchangeable Debentures representing an aggregate principal amount
equal to the amount set forth on the signature page to this Agreement opposite
the name of such Purchaser and the related Voting Preferred Stock, each
registered in the name or names, and in such denominations, as shall be
designated by the applicable Purchaser by notice to the Company at least two
Business Days prior to the Closing Date.
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(d) On the Closing Date, the Company shall issue the XL Warrants to XL, the
First Union Warrants to First Union, the High Ridge Warrants to High Ridge, the
Century Warrants to Century and the Taracay Warrants to Taracay, in each case,
for no additional consideration.
(e) The Company and the Purchasers, having adverse interests and as a
result of arm's-length bargaining, agree that neither the Purchasers nor any of
their Affiliates has rendered or has agreed to render any services to the
Company in connection with this Agreement or the issuance of the Convertible
Exchangeable Debentures and the related Voting Preferred Stock to be issued on
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS
Each of the Obligors represents and warrants, as of the date hereof and the
Closing Date, to the Purchasers and to each Holder, as set forth below:
SECTION 3.1. Corporate Existence and Power. (a) The Company and each of its
Subsidiaries is a company, corporation or partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has all organizational power and authority and all Permits
required to own, lease or operate its respective properties and carry on its
respective business as now conducted and as proposed to be conducted.
(b) The Company and each of its Subsidiaries is, where applicable, duly
qualified to transact business as a foreign corporation or partnership and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership, leasing or operation of property requires such qualification, other
than any failure to be so qualified or in good standing as would not, singly or
in the aggregate, have a material adverse effect on the assets, liabilities,
business, results of operations, condition (financial or otherwise), prospects
or Permits of the Company and its Subsidiaries, taken as a whole, or of Newco
and its Subsidiaries, taken as a whole, on a pro forma basis for the
Restructuring (each, a "Material Adverse Effect").
SECTION 3.2. Authorization, Execution, Enforceability. Each Obligor has the
corporate power and authority to execute and deliver, and to perform its
obligations under, each of the Transaction Documents to which it is or is to be
a party. Subject to receipt of regulatory approval from each Insurance
Department (which approvals the Obligors hereby
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agree to use their best efforts to obtain as soon as practicable), each Obligor
has taken all action required by law, organizational documents or otherwise
required to be taken by it to authorize the execution, delivery and performance
by it of each Transaction Document to which it is or is to be a party. Each of
the Transaction Documents is, or upon execution and delivery will be, a valid
and binding obligation of each Obligor (to the extent each is a party thereto),
enforceable against each Obligor in accordance with their respective terms
except to the extent that the enforceability hereof and thereof may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws affecting the enforcement of creditors' rights and
remedies generally and by general equitable principles (regardless of whether
the issue of enforceability is considered in a proceeding in equity or at law).
True and complete copies of the organizational documents of each Obligor have
been made available by the Company to the Purchasers.
SECTION 3.3. Capitalization of the Company. (a) The authorized Capital
Stock of the Company (before giving effect to the Securities being issued and
sold hereunder) consists of 180,000,000 shares of Common Stock, of which
41,618,331 shares are issued and outstanding as of March 31, 2001, and
20,000,000 shares of Preferred Stock, of which none are outstanding as of the
date hereof. All outstanding shares of Common Stock have been duly authorized,
are validly issued, fully paid and nonassessable and have been issued in
compliance with applicable federal and state securities laws.
(b) Except for the RHINOS and the Securities, no more than $14.0 million
aggregate principal amount of Zero Coupon Convertible Exchangeable Subordinated
Debentures due 2015 of the Company and no more than $5.0 million aggregate
principal amount of convertible notes issued in connection with the Company's
acquisition of the Valmet Group Ltd., and except as disclosed in the periodic
reports filed by the Company under the Exchange Act prior to the date hereof,
there are no (i) securities or obligations of the Company convertible into or
exchangeable for any Capital Stock of the Company, (ii) warrants, options or
other rights to purchase or acquire from the Company any such Capital Stock or
any such convertible or exchangeable securities or obligations or (iii)
obligations of the Company to issue such Capital Stock, any such convertible or
exchangeable securities or obligations or any such warrants, rights or options.
No Person has any preemptive or similar rights with respect to any Capital Stock
of the Company or any rights to require registration of any securities of the
Company.
(c) Schedule 3.3(c) sets forth a complete list of all of the outstanding
Debt of the Company or any of its Subsidiaries as of the date hereof, together
with the names of the holders thereof, the principal amount, interest rate,
issue date, stated maturity date and any other material terms. Schedule 3.3(c)
also sets forth an accurate description of all Debt of the Company or any of its
Subsidiaries that was repaid since December 31, 2000.
-17-
SECTION 3.4. Subsidiaries; Other Interests. (a) Schedule 3.4 sets forth a
true, complete and correct list of each Significant Subsidiary of the Company.
Except as indicated on Schedule 3.4, each such Significant Subsidiary is wholly
owned by the Company. Schedule 3.4 sets forth the jurisdictions in which the
Company's Significant Subsidiaries are domiciled (both by incorporation and as a
"commercial domiciliary" under applicable law), which are the only jurisdictions
in which the Company's Significant Subsidiaries are required to be so licensed.
All of the outstanding Capital Stock of the Company's Subsidiaries has been duly
authorized and validly issued and is fully paid and nonassessable and owned by
the Company, directly, free and clear of all Liens (other than (x) such transfer
restrictions as may exist under federal and state securities laws, (y) arising
under the RHINOS or the documents executed in connection therewith and (z) Liens
on the shares of the Company's IPC Subsidiaries and the special purpose mutual
company Subsidiaries and the assets thereof, in each case, arising under letter
of credit facilities entered into in connection with the CRM business); and
there are no warrants, options or other rights granted to or in favor of any
third party (whether acting in an individual, fiduciary or other capacity),
other than the Company, to acquire any such Capital Stock, any additional
Capital Stock or any other securities of the Company's Subsidiaries except for
such options or rights arising under the RHINOS or the documents executed in
connection therewith and pursuant to the Company's and its Subsidiaries existing
stock option and benefit plans, as described in the Company's filings made
pursuant to the Exchange Act prior to the date hereof.
(b) Except for interests in the Subsidiaries, neither the Company nor any
of its Subsidiaries, directly or indirectly, holds, or has any contractual or
other commitment to make, any Investment in any Person, except for Investments
made by the Insurance Subsidiaries in the ordinary course of their business and
in accordance with the Company's investment policy in effect on the date hereof.
SECTION 3.5. No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of each of the Transaction Documents and the
consummation of the Transactions will not (i) conflict with, or result in a
breach or violation of, any provision of the memorandum of association, bye-laws
or other organizational documents of the Company or any of its Subsidiaries,
(ii) upon receipt of regulatory approvals from the Insurance Departments, result
in risk of loss of, or limitation on, any Insurance License or other Permit held
by the Company or any of its Subsidiaries, or the right of the Company or of any
of its Subsidiaries to conduct business in any jurisdiction as currently
conducted, or (iii) conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, or result in the
creation or imposition of any Lien upon any assets or properties of the Company
or any of its Subsidiaries under, any statute, rule, regulation, order or decree
of any Governmental Entity, or any agreement or instrument evidencing Debt or
any material lease, Permit or other material agreement or instrument to which
the Company or any of its
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Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound or to which any of their respective properties, assets or operations are
subject.
SECTION 3.6. Consents. Except for consents that have been obtained and the
consents required from the Existing Bank Lenders, the Trust and the holders of
the RHINOS as set forth in Section 5.1(a) and, with respect to the Restructuring
and the issuance of Common Stock of Newco upon exchange of the Debentures, any
Form A approvals and all other regulatory approvals and necessary shareholder
approvals, no consent, approval, authorization, order, registration, filing or
qualification of or with any (i) Governmental Entity or (ii) other third party
(whether acting in an individual, fiduciary or other capacity) is necessary for
the issuance and sale of the Debentures, the Voting Preferred Stock and the
Warrants, the execution, delivery and performance of the Transaction Documents
and the consummation of the Transactions.
SECTION 3.7. No Existing Violation, Default, Etc. (a) Neither the Company
nor any of its Subsidiaries is in violation of (i) its memorandum of
association, bye-laws or other organizational documents, (ii) any applicable
law, ordinance, administrative or governmental rule or regulation except to the
extent that any such violations, in the case of this clause (ii), would not,
singly or in the aggregate, have a Material Adverse Effect or (iii) any order,
decree or judgment of any court or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries.
(b) No event of default or event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default exists under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any material lease, Permit or other agreement or instrument to which the
Company or any of its Subsidiaries is party or by which the Company or any of
its Subsidiaries is bound or to which any of their respective properties, assets
or operations is subject.
SECTION 3.8. Licenses and Permits. Except as would not have a Material
Adverse Effect, the Company and its Subsidiaries have such Permits from
appropriate Governmental Entities (including, Insurance Licenses) as are
necessary to own, lease or operate their properties as currently owned, leased
or operated and to conduct their businesses as currently conducted and all such
Permits are valid and in full force and effect. The Company and its Subsidiaries
are in compliance in all respects with their respective obligations under such
Permits, with such exceptions as would not, singly or in the aggregate, have a
Material Adverse Effect. No event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination of such Permits and no
insurance regulatory agency or body has issued any order or decree impairing,
restricting or prohibiting the payment of dividends by the Company or any of its
Subsidiaries to their respective parent companies or shareholders.
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SECTION 3.9. Title to Properties. The Company and its Subsidiaries each
have sufficient title or right to all properties (real and personal) owned or
used by the Company and its Subsidiaries or reflected in their financial
statements which are necessary for the conduct of the business of the Company
and its Subsidiaries as currently conducted, free and clear of any Lien that may
interfere with the conduct of the business of the Company and its Subsidiaries,
taken as a whole, except for those Liens created by the Transaction Documents,
and to the best of the Company's knowledge, all properties held under lease by
the Company or any of its Subsidiaries are held under valid, subsisting and
enforceable leases.
SECTION 3.10. Taxes. Except as specifically set forth on Schedule 3.10, all
United States Federal income tax returns and all other tax returns (including
foreign tax returns) which are required to be filed by or on behalf of the
Company and its Subsidiaries have been filed and all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries have been paid. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of taxes or other governmental
charges have been established in accordance with GAAP (or, in the case of the
Insurance Subsidiaries, in accordance with Statutory Accounting Principles).
SECTION 3.11. Litigation. Other than as disclosed in the reports of the
Company filed pursuant to the Exchange Act or on Schedule 3.11, there are no
pending or, to the Company's knowledge, threatened actions, suits, proceedings,
arbitrations or investigations (including any market conduct investigations)
against or affecting the Company or any of its Subsidiaries or any of their
respective properties, assets or operations or with respect to which the Company
or any of its Subsidiaries is responsible by way of indemnity or otherwise, that
question the validity of any of the Transaction Documents, or that would, singly
or in the aggregate, if adversely determined have a Material Adverse Effect or
would have an adverse effect on the ability of the Company or any of its
Subsidiaries to perform its obligations under this Agreement or any of the other
Transaction Documents to which they are party; and the Company is not aware of
any basis for any such action, suit, proceeding or investigation.
SECTION 3.12. Labor Matters. No labor disturbance by the employees of the
Company or any of its Subsidiaries exists or is threatened. Neither the Company
nor any of its Subsidiaries is party to any collective bargaining or other union
contract. The Company is not aware of the existence of any effort to unionize
employees of either the Company or any of its Subsidiaries.
SECTION 3.13. Contracts. Except as listed on Schedule 3.13:
(a) neither the Company nor any of its Subsidiaries is party to any
(written or oral) stockholder agreement, employment agreement with executive
officers or material advisors' agreement, consulting agreement or similar
agreement;
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(b) neither the Company nor any of its Subsidiaries is a party to or bound
by (i) any agreement containing "change in control" or similar provisions
relating to change in control of the Company or any of its Subsidiaries; (ii)
any powers of attorney or binding authorities other than those made in the
ordinary course of the Insurance Subsidiaries' business; or (iii) any agreements
(other than insurance policies, leases or other similar agreements issued or
made by the Company or any of its Subsidiaries in the ordinary course of its
business) pursuant to which the Company or any of its Subsidiaries is obligated
to indemnify any other Person; and
(c) no agreement, contract or other document of the Company or any of its
Subsidiaries will require increased payments (in either amount or frequency) or
changed terms or permits the termination thereof by any of the other parties
thereto as a result of the transactions contemplated by the Transaction
Documents.
The Company has heretofore made available to the Purchaser complete and
correct copies of the contracts, agreements and instruments listed on Schedule
3.13.
Schedule 3.13 further contains a list of all insureds the gross written
premiums of which (together with the gross written premiums derived from any of
its Affiliates) represented more than (or are expected to represent more than)
2% of the Company's consolidated gross written premiums in any such fiscal year.
SECTION 3.14. Finder's Fees. Except for fees payable to Banc of America
Securities LLC and Credit Suisse First Boston Corporation, no broker, finder or
other party is entitled to receive from the Company or any of its Subsidiaries
any brokerage or finder's fee or any other fee, commission or payment as a
result of the Transactions.
SECTION 3.15. Financial Statements. (a) The audited statutory financial
statements and related schedules and notes of the U.S. Insurance Subsidiaries
for the years ended December 31, 1999 and 2000 (the "Audited Statutory Financial
Statements") fairly present the financial condition, results of operations, cash
flows and changes in capital and surplus of the U.S. Insurance Subsidiaries at
December 31, 1999 and 2000 and for the years then ended and were prepared in
accordance with Statutory Accounting Principles as permitted or prescribed by
the applicable U.S. Insurance Acts. The Statements of Actuarial Opinion with
respect to the Audited Statutory Financial Statements were determined in
accordance with generally accepted actuarial standards and met the requirements
of the Illinois and Pennsylvania Insurance Acts.
(b) The unaudited statutory financial statements and related schedules and
notes of the U.S. Insurance Subsidiaries for periods commencing subsequent to
December 31, 2000 (the "Unaudited Statutory Financial Statements", and together
with the Audited Statu-
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tory Financial Statements, the "Statutory Financial Statements") fairly present
the financial condition, results of the operations, cash flows and changes in
capital and surplus of the U.S. Insurance Subsidiaries at the dates and for the
periods presented and were prepared in accordance with Statutory Accounting
Principles prescribed or permitted by the applicable U.S. Insurance Acts,
subject to year-end audit adjustments (consisting only of normal recurring
accruals) and full footnote disclosures which have been omitted.
(c) The audited consolidated and consolidating financial statements and the
related notes of the Company and its Subsidiaries for the years ended December
31, 1999 and 2000 fairly present the financial condition, results of operations
and cash flows of the Company and its Subsidiaries at the dates and for the
periods presented and were prepared in accordance with GAAP applied on a
consistent basis.
(d) The projected and pro forma consolidated financial data attached hereto
as Annex I have been prepared by the Company in good faith and, among other
things, reflect the Transactions and the Restructuring and contain all material
assumptions relating to such projections and data. The Company believes such
projections and the assumptions upon which they are based are reasonable.
SECTION 3.16. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance, in all
material respects, with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 3.17. Contingent Liabilities. Neither the Company nor any of its
Subsidiaries have any material liabilities (including tax liabilities), absolute
or contingent, that are required to be reserved against in a financial statement
prepared in accordance with GAAP or Statutory Accounting Principles that are not
so adequately reserved against. Neither the Company nor any of its Subsidiaries
has any material reinsurance receivable that is required to be reserved against
in accordance with GAAP or Statutory Accounting Principles other than those
provided for in the reserve against reinsurance recoverables reflected in the
Financial Statements and the consolidated financial statements of the Company
and its Subsidiaries prepared in accordance with GAAP. At December 31, 2000,
neither the Company nor any of its Subsidiaries had any material liabilities
(absolute or contingent) other than those reflected
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in the Financial Statements and the consolidated financial statements prepared
in accordance with GAAP. Since December 31, 2000, the Company and its
Subsidiaries have not incurred any material liabilities (absolute or contingent)
other than with respect to claims under insurance policies written by the
Insurance Subsidiaries and reported in the ordinary course of business. The
frequency and severity of such claims within the individual lines of business of
the Company and its Subsidiaries since December 31, 2000, are consistent with
those reported for comparable periods prior to December 31, 2000.
SECTION 3.18. No Material Change. Since December 31, 2000, except as listed
on Schedule 3.18, (a) neither the Company nor any of its Subsidiaries has
relinquished or incurred any material liability or obligation (indirect, direct
or contingent), or entered into any oral or written agreement or other
transaction that is not in the ordinary course of business; (b) neither the
Company nor any of its Subsidiaries has sustained any material loss or
interference with its respective businesses or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance); (c)
there has been no material change in the Debt of the Company or any of its
Subsidiaries, and no material change in the Capital Stock of the Company (except
as contemplated hereby); (d) the Company has not permitted or allowed any of its
or its Subsidiaries' assets to be subjected to any Liens; (e) the Company has
not transferred or otherwise disposed of any of its or its Subsidiaries' assets,
except in the ordinary course of business; (f) the Company has not made any
single capital expenditure or commitment for a capital expenditure relating to
its or its Subsidiaries' assets in excess of $500,000; (g) there has not been
any change in any method of accounting or accounting practice or policy
(including any reserving method, practice or policy) by the Company or any of
its Subsidiaries; (h) there has not been, to the extent payable directly or
indirectly by the Company or any of its Subsidiaries, any (i) employment,
deferred compensation, severance, retirement or other similar agreement entered
into with any director, officer or employee (or any amendment to any such
existing agreement) outside of the ordinary course of business, (ii) grant of
any severance or termination pay to any director, officer or employee outside of
the ordinary course of business, (iii) change in compensation or other benefits
payable to any Related Person or change in compensation or other benefits
payable to any director, officer or employee outside of the ordinary course of
business or (iv) loans or advances to any directors, officers or employees
except for ordinary travel and business expenses in the ordinary course of
business and advances of salary (not exceeding one month's pay); (i) there has
been no material damage, theft or casualty loss by the Company or any of its
Subsidiaries; (j) there has not been any change by the Company or any of its
Subsidiaries in underwriting practices or standards; (k) there has not been (i)
any entering into of any facultative reinsurance contract outside of the
ordinary course of business, or (ii) any commutation of any facultative
reinsurance contract outside of the ordinary course of business, or (iii) any
entering into or any commutation of any reinsurance treaty by the Company or any
of its Subsidiaries outside of the ordinary course of business; (l) there has
not been any insurance transaction by the Company
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or any of its Subsidiaries other than in the ordinary course of business; (m)
there has not been any change by the Company or any of its Subsidiaries in the
compensation structure of, or benefits available to, any agent or with respect
to agents generally; and (n) there has been no event or circumstance causing a
Material Adverse Effect, nor any development that would, singly or in the
aggregate, result in a Material Adverse Effect.
SECTION 3.19. Insurance Matters. (a) The Company and its Subsidiaries are
each in compliance in all material respects with the requirements of all
Insurance Acts and have filed all material reports, documents or other
information required to be filed thereunder; and neither the Company nor any of
its Subsidiaries has received any notification from any insurance regulatory
authority, commission or other insurance regulatory body in the United States or
elsewhere to the effect that the Company or any of its Subsidiaries is not in
compliance in any material respect with the Insurance Acts.
(b) Neither the Company nor any of its Subsidiaries has made any change in
its insurance reserving practices, either on a gross or net of reinsurance
basis, since December 31, 2000, that would, singly or in the aggregate, have (i)
a Material Adverse Effect or (ii) a material adverse effect on the ability of
any of the Insurance Subsidiaries to pay dividends or the amount thereof.
(c) All insurance policies issued by the Company and each Insurance
Subsidiary, as now in force, are, to the extent required under applicable law,
in a form acceptable to applicable regulatory authorities or have been filed and
not objected to by such authorities within the period provided for objection
other than any failure to be in such form or to have been so filed as would not,
singly or in the aggregate, have a Material Adverse Effect. All premium rates,
rating plans and policy forms established or used by the Company or any
Insurance Subsidiary that are required to be filed with or approved by insurance
regulatory authorities have been so filed or approved, the premiums charged
conform in all respects to the premiums so filed or approved and comply in all
respects with the insurance laws applicable thereto and no such premiums are
subject to any review or investigation by any insurance regulatory authority
other than any failure to be so filed or approved or to so comply or any review
or investigation as would not, singly or in the aggregate, have a Material
Adverse Effect.
(d) Except as specifically set forth on Schedule 3.19(d), no loss
experience has developed, within any individual lines of business or on an
aggregate basis for all lines, that would require or make it appropriate for the
Company or any of its Subsidiaries to alter or modify its reserving methodology
or assumptions since December 31, 2000.
(e) All material reinsurance treaties, contracts, agreements and
arrangements ("Reinsurance Arrangements") to which the Company or any of its
Subsidiaries is a party are
-24-
in full force and effect and are valid and binding in accordance with their
terms on the insurance company party thereto. The Company believes that, except
as disclosed in its periodic reports filed with the U.S. Securities and Exchange
Commission under the Exchange Act prior to the date hereof or as disclosed on
Schedule 3.19(e), all amounts recoverable by the Company or any of its
Subsidiaries pursuant to any Reinsurance Arrangement are fully collectible in
due course. Except as disclosed in its periodic reports filed with the U.S.
Securities and Exchange Commission under the Exchange Act prior to the date
hereof, neither the Company nor any of its Subsidiaries nor any other party
thereto is in default as to any Reinsurance Arrangement and there is no reason
to believe that the financial condition of any such other party is impaired to
the extent that a default thereunder may reasonably be anticipated. None of the
Reinsurance Arrangements contains any provision that may permit the other party
thereto to terminate such Reinsurance Arrangement by reason of the transactions
contemplated by the Transaction Documents.
(f) The only Permits required under the Insurance Acts for the consummation
of the transactions contemplated by this Agreement or the Transaction Documents
are those listed on Schedule 3.19(f).
(g) All material filings required under any Insurance Act to have been made
with state insurance regulatory authorities by the Company and its Subsidiaries
have been duly and timely made, and when filed were in compliance in all
material respects with the requirements of each such Insurance Act.
(h) No Insurance Department has taken, or stated (orally or in writing)
that it intends to take or that it may take, any action to seize control of the
Company or any of its Subsidiaries through rehabilitation, liquidation or
otherwise, and has not otherwise precluded, or stated (orally or in writing)
that it intends to preclude or may preclude, the Insurance Subsidiaries from
writing.
SECTION 3.20. Full Disclosure. The information heretofore furnished by or
on behalf of any Obligor to the Purchasers for purposes of or in connection with
the consummation of the Transactions does not, and all such information
hereafter furnished by or on behalf of any Obligor to the Purchasers will not
(in each case taken together and on the date as of which such information is
furnished), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they are made, not misleading. The
Obligors have disclosed to the Purchasers any and all facts which materially and
adversely affect or may affect the business, results of operations, condition
(financial or otherwise), prospects or Permits of the Company and its
Subsidiaries or the ability of the Company and its Subsidiaries to perform their
respective obligations under the Transaction Documents to which they are party.
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SECTION 3.21. Solicitation. No form of general solicitation or general
advertising was used by the Company or any of its Subsidiaries or any other
Person acting on their behalf in respect of the Securities or in connection with
the offer and sale of the Securities. None of the Company or any of its
Subsidiaries and no Person acting on any of their behalf has, either directly or
indirectly, sold or offered for sale to any Person any of the Securities or,
within the six months prior to the date hereof, any other similar security of
the Company or any of its Subsidiaries, and none of the Company or any of its
Subsidiaries and no Person authorized to act on any of their behalf (except that
neither the Company nor any of its Subsidiaries make any representation as to
the Purchasers and their Affiliates) will sell or offer for sale any such
security to, or solicit any offers to buy any such security from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons so as
thereby to cause the issuance or sale of any of the Securities to be in
violation of any of the provisions of Section 5 of the Securities Act. Assuming
the accuracy of the representations and warranties of the Purchasers in Sections
4.2 and 4.3, it is not necessary in connection with the issuance and sale of the
Securities pursuant to this Agreement to register any of the Securities under
the Securities Act.
SECTION 3.22. Governmental Regulation. (a) Neither the Company nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce
Act or to any federal or state statute or regulation limiting its ability to
issue and perform its obligations under any Transaction Document.
(b) Neither the Company nor any of its Subsidiaries is, or will be after
giving effect to the transactions contemplated by the Transaction Documents, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(c) Neither the Company nor any of its Subsidiaries has taken or will take
any action that would cause this Agreement, the issuance and sale of the
Securities or the use of the proceeds therefrom to violate the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
SECTION 3.23. Reservation of Shares. Prior to the Closing Date, the Company
shall have duly reserved for issuance a sufficient number of shares of Common
Stock of the Company for conversion of the Convertible Exchangeable Debentures
and exercise of the Warrants.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers severally represents and warrants (as to itself
only), as of the date hereof and the Closing Date, to the Obligors as set forth
below:
SECTION 4.1. Organization, Good Standing, Power, Authority, Etc. Such
Purchaser is duly formed and registered, validly existing and in good standing
under the laws of its jurisdiction of organization and has the power and
authority (corporate or otherwise) to own, lease and operate its properties and
to conduct its business as currently owned, leased and conducted.
Such Purchaser has the power and authority (corporate or otherwise) to
execute and deliver, and to perform its obligations under, this Agreement and
each Transaction Document to which it is (or is to be) a party. Such Purchaser
has taken all action required by law, its organizational documents or otherwise
required to be taken by it to authorize the execution, delivery and performance
of this Agreement and each Transaction Document to which it is (or is to be) a
party and the consummation of the transactions contemplated to be performed by
it hereunder and thereunder.
This Agreement is, and each Transaction Document to which such Purchaser
is, or is to be, a party will be, a valid and binding agreement of such
Purchaser, enforceable in accordance with its terms except to the extent that
the enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights and remedies generally and by
general equitable principals (regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law).
SECTION 4.2. Investment Intent, Etc. Such Purchaser is purchasing or
otherwise acquiring the Securities for its own account and not with a view to,
or for a sale in connection with, any distribution in violation of the
Securities Act. Such Purchaser has had the opportunity to ask questions and
receive answers from the Obligors concerning the Securities and the business,
financial condition, operations and prospects of the Obligors and has been
furnished with all other information about the Obligors which it has requested
(it being understood that the foregoing shall not affect the Company's
representations and warranties in this Agreement or any other Transaction
Document or any of the Purchasers' rights and remedies thereunder or available
as a matter of law or otherwise). Such Purchaser will not transfer any of the
Securities except in accordance with applicable federal and state securities
laws.
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SECTION 4.3. Accredited Investor. Such Purchaser is an "Accredited
Investor" within the meaning of Rule 501(a) under the Securities Act and has
such knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of such Purchaser's investment in the
Securities, and such Purchaser is capable of bearing the economic risks of such
investment and is able to bear a complete loss of such Purchaser's investment in
the Securities.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Conditions to the Purchasers' Obligations. The Purchasers'
respective obligations to purchase or otherwise acquire the Convertible
Exchangeable Debenture to be purchased or acquired by them on the Closing Date
pursuant to Section 2.1 are subject to the prior satisfaction in full of each of
the following conditions:
(a) (i) The Existing Bank Lenders shall have consented in writing, in form
and substance satisfactory to the Purchasers, to the Transaction Documents, the
Restructuring, the other Transactions and the exercise by the Purchasers of all
of their rights under the Transaction Documents; (ii) the Trust and the holders
of the RHINOS shall have consented, in form and substance satisfactory to the
Purchasers, to the Transaction Documents, the Restructuring, the other
Transactions and the exercise by the Purchasers of all of their rights under the
Transaction Documents; (iii) the Purchasers shall have received a copy of the
Subordination Agreement duly executed by each of the parties thereto, including
each of the Existing Bank Lenders, the holder of the RHINOS, the holders of the
RHINOS Debentures, the Trust, the applicable trustees and the Obligors; (iv)
there shall have been obtained in form and substance satisfactory to the
Purchasers all other consents and waivers that are necessary in connection with
the execution of the Transaction Documents and the execution and delivery of the
Convertible Exchangeable Debentures hereunder; (v) the Bermuda Monetary
Authority and the Bermuda Registrar of Companies shall have consented in form
and substance satisfactory to the Purchasers to the Transactions, the
Restructuring and the other transactions contemplated hereby; and (vi) the
holders of the RHINOS shall have either (x) committed to exchange RHINOS for
RHINOS Debentures or (y) forfeited their rights to exchange RHINOS for RHINOS
Debentures with respect to all RHINOS, in each case on terms and conditions
satisfactory to XL.
(b) The capital and surplus of the U.S. Insurance Subsidiaries under
Statutory Accounting Principles (not including any amounts attributable to the
Purchase Price) shall not
-28-
be less than $365.0 million (without giving effect to no more than $15.0 million
of adjustments required by FASB 115).
(c) The representations and warranties of the Obligors in the Transaction
Documents shall be true and correct in all material respects at such time
(without giving effect to any qualifications as to materiality or knowledge
contained therein). The Company shall have performed and complied with all
covenants and agreements required by such Transaction Documents to be performed
or complied with by it at such time. Before and after giving effect to the use
of proceeds of the Purchase Price, no Default or Event of Default (as defined in
the Debentures) shall have occurred and be continuing. The Purchasers shall have
received an Officers' Certificate dated as of the Closing Date to the effect
that the conditions in this clause (c) and clauses (i)(i) and (j) of this
Section 5.1 have been satisfied.
(d) The Purchasers shall have received an opinion, dated the Closing Date,
of each of Xxxxx, Xxxxx & Xxxxx, special counsel to the Company, Xxxxxxx Xxxx &
Xxxxxxx, Bermuda counsel to the Company, and Xxxxxxx X'Xxxxx, General Counsel of
the Company, in each case, covering such matters as are requested by the
Purchasers and in form and substance satisfactory to the Purchasers.
(e) The Purchasers shall have received the Convertible Exchangeable
Debentures, together with the related Voting Preferred Stock, to be issued on
the Closing Date, duly executed by the Company and in the denominations and
registered in the names specified in or pursuant to Section 2.1(c).
(f) The Collateral Agreement shall have been duly executed and delivered by
the Company and the Collateral Agent thereunder.
(g) The Registration Rights Agreements shall have been duly executed and
delivered by the Company and its Subsidiaries party thereto and the Purchasers.
(h) The Company and each of its Subsidiaries shall have taken such
requisite action necessary to ensure that it will be able to comply with Section
6.3 and have implemented any requests made pursuant to Section 6.3.
(i) (i) There shall not have occurred or become known to the Purchasers any
events or changes (A) since December 31, 2000 that, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect, or (B) that have had or could reasonably be expected to have an adverse
effect on the rights or remedies of the Purchasers, or on the ability of any of
the Obligors to perform their respective obligations hereunder or under the
other Transaction Documents, (ii) the Purchasers shall not have become aware
after the date hereof of any information or other matter affecting the Company,
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any of its Subsidiaries or the transactions contemplated hereby which is
inconsistent in a material and adverse manner with any such information or other
matter disclosed to the Purchasers prior to the date hereof, (iii) trading in
securities generally on the New York Stock Exchange, American Stock Exchange or
the Nasdaq National Market shall not have been suspended or limited and minimum
or maximum prices or maximum ranges for prices shall not have been established
on any such exchange; (iv) a banking moratorium shall not have been declared by
New York or United States authorities; and (v) there shall not have been (A) an
outbreak or escalation of material hostilities between the United States and any
foreign power, (B) an outbreak or escalation of any other material insurrection
or armed conflict involving the United States or any other national or
international calamity or emergency or (C) any material change or disruption in
the general financial banking or capital markets of the United States.
(j) Since the date of this Agreement, neither A.M. Best Company nor
Standard & Poor's Ratings Services shall have downgraded the ratings ascribed to
the Company or any of its Subsidiaries on the date of this Agreement; and since
the date of this Agreement, neither A.M. Best Company nor Standard & Poor's
Ratings Services shall have issued any warning of or announced that it is
considering a possible downgrade.
(k) The Purchasers shall have received confirmation to their satisfaction
that the transactions contemplated hereby will not trigger any payments under
any of the Company's employment arrangements or loss of benefits under any of
the Company's reinsurance or other material contracts.
(l) The fees and expenses of the Purchasers' counsel, accountants and other
advisors and consultants, including, with respect to XL, Xxxxxx Xxxxxx &
Xxxxxxx, Am-Re Consultants, Inc. and PriceWaterhouseCoopers, LLP, shall have
been paid in accordance with Section 7.4 hereof.
(m) No insurance regulatory department shall have indicated that it may
take any action to seize control of the Company.
(n) The Purchasers shall have received a duly executed Lock-Up Agreement
from each of the directors (other than outside directors) and executive officers
of the Company.
(o) The Purchasers shall have received a certificate of the Secretary or
Assistant Secretary of the Company, dated as of the Closing Date, certifying (A)
(i) that attached thereto is a true, complete and correct copy of resolutions
duly adopted by the Board of Directors of the Company, authorizing (1) the
execution, delivery and performance of the Transaction Documents to which it is
a party and (2) the Transactions and (ii) that such resolutions
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have not been amended, modified, revoked or rescinded; (B) as to the incumbency
and specimen signature of each officer executing any Transaction Documents on
its behalf and (C) that attached thereto are true and complete copies of its
constituent documents; and such certificate and the resolutions attached thereto
shall be in form and substance satisfactory to the Purchasers.
(p) On the Closing Date, in addition to any Convertible Exchangeable
Debentures purchased by Century, directors and officers of the Company or their
Affiliates shall purchase Convertible Exchangeable Debentures in an aggregate
principal amount of at least $2.0 million and no more than $2.5 million;
provided, however, that no individual director or officer (or affiliate thereof)
of the Company may purchase Convertible Exchangeable Debentures in a principal
amount of less than $500,000.
(q) XL shall have received a duly executed voting proxy (the "D&O
Proxies"), in form and substance satisfactory to XL, from each of the directors
and officers of the Company that purchase Convertible Exchangeable Debentures
(other than any outside directors of the Company that purchase Convertible
Exchangeable Debentures indirectly through Century) pursuant to which such
directors and officers shall assign to XL the voting power of the Debentures,
Voting Preferred Stock, Newco Voting Preferred Stock and Common Stock of the
Company and Newco into which such Debentures are convertible or for which they
are exchangeable.
SECTION 5.2. Conditions to the Company's Obligations. The Company's
obligations to issue the Convertible Exchangeable Debentures to be purchased or
otherwise acquired by the Purchasers on the Closing Date pursuant to Section 2.1
are subject to the prior satisfaction in full of each of the following
conditions:
(a) The representations and warranties of the Purchasers in the Transaction
Documents shall be true and correct in all material respects at such time
(without giving effect to any qualifications as to materiality or knowledge
contained therein). The Purchasers shall have performed and complied with all
covenants and agreements required by such Transaction Documents to be performed
or complied with by the Purchasers at such time. The Company shall have received
an Officers' Certificate dated as of the Closing Date to the effect that the
conditions in this clause (a) of this Section 5.2 have been satisfied.
(b) Not less than $100.0 million in principal amount of Convertible
Exchangeable Debentures shall be purchased by XL, First Union and High Ridge, in
the aggregate, on the Closing Date.
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ARTICLE VI
COVENANTS
SECTION 6.1. Restructuring. The Company will use its best efforts, as
promptly as practicable after the Closing Date, to obtain all Required Approvals
and to complete the Restructuring. At such time as the Company believes that the
Restructuring has been completed, the Company shall deliver to the Purchasers
(a) an Officer Certificate certifying that (i) the Restructuring has been
completed in accordance with the description thereof in this Agreement and all
applicable laws and regulations, (ii) after giving effect to the Restructuring,
neither the Company and its Subsidiaries on the one hand nor Newco and its
Subsidiaries on the other hand will be insolvent or otherwise unable to pay
their debts as they come due and (iii) the Restructuring will not be voidable
under fraudulent conveyance, fraudulent transfer or other similar laws affecting
creditors' rights generally and (b) written opinions, in form and substance
reasonably satisfactory to the Purchasers, from an independent investment
banking or appraisal firm satisfactory to the Purchasers as to the solvency of
the Company and its Subsidiaries on the one hand and Newco and its Subsidiaries
on the other hand.
SECTION 6.2. Preemptive Rights. If, at any time or from time to time, Newco
offers or proposes to offer any equity interests or debt that is convertible
into or exercisable or exchangeable for equity interests in Newco or any of its
Subsidiaries, Newco shall offer, or shall cause to be offered (and the Company,
if then Controlling Newco, shall cause Newco to offer), to each Holder such
interests or such convertible debt on a pro rata basis in accordance with its
ownership interest in Newco on terms and conditions no less favorable than the
most favorable terms offered to others.
Newco will give the Holders at least 20 days' written notice of the
purchase right set forth in the paragraph above. Such notice shall set forth a
description of the securities, the proposed number of such securities and the
form of consideration to be paid for such securities and the other expected
terms and conditions of the offer. To the extent that the Holders have elected
to exercise such rights within such 20-day period, any sales to such Holders
shall be consummated concurrently and, in any case, within 45 days from the date
the offer is first made. To the extent that the Holders have not elected to
exercise such rights within such 20-day period, Newco shall have 180 days from
the date on which the offer is first made to consummate the transactions
contemplated by the offering on no more favorable terms to the purchasers
thereof than offered to the Holders.
The foregoing notwithstanding, this Section 6.2 shall not apply to the
offer or issuance of any Common Stock of Newco (i) upon the grant or exercise of
any options issued under a plan for employees of Newco approved by Newco's board
of directors not to exceed
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5% of Newco's outstanding Capital Stock on a Fully Diluted Basis, (ii) in a
Qualified Offering or (iii) pursuant to the Company's obligation to spin off
shares of Common Stock of Newco to its existing shareholders arising under the
Debenture Registration Rights Agreement.
SECTION 6.3. Board Representation. (a) From the Closing Date until XL no
longer owns at least 20% of the principal amount of the outstanding Debentures,
(x) the Company shall cause all of the XL Designees (as defined below) to be
nominated for election to the board of directors of the Company at the Company's
next stockholders' meeting and the Company shall support and use its best
efforts to cause the election of such individuals to the board of directors of
the Company and (y) XL shall have the right to request, and upon such request
the Company shall cause, the XL Designees to be elected to serve on the boards
of directors of each of the Company's direct and indirect Subsidiaries. In
addition, all such XL Designees will be permitted to serve on any committees,
including any executive committee of the board of directors of the Company and
each Subsidiary, unless such XL Designee is not qualified therefor under
applicable law, rule or regulation, in which event XL shall have the right to
select one individual to observe all such meetings in substitution therefor. "XL
Designees" shall mean a number of individuals designated by XL equal to the
greater of (x) two and (y) the number derived from multiplying the number of
seats on the applicable board of directors times a fraction the numerator of
which is the number of shares of Common Stock of the Company owned by XL
(assuming conversion of all Debentures held by XL) and the denominator of which
is the number of outstanding shares of Common Stock of the Company on a Fully
Diluted Basis (rounding up in the case of any fractions).
At any time while an XL Designee is not a member of the Company's and each
such Subsidiary's boards of directors, at the sole discretion of XL, XL may
appoint a representative of XL, and the Company and each such Subsidiary will
permit such representative, to attend all meetings of the boards of directors of
the Company and each such Subsidiary and any committees thereof. XL will
continue to have the right to designate the XL Designees for election or
appointment to the boards of directors of the Company and each such Subsidiary
in lieu of any representative of XL.
(b) From the Closing Date until First Union and High Ridge, in the
aggregate, no longer own at least 20% of the principal amount of the outstanding
Debentures, (x) the Company shall cause the First Union and High Ridge Designee
(as defined below) to be nominated for election to the board of directors of the
Company at the Company's next stockholders' meeting and the Company shall
support and use its best efforts to cause the election of such persons to the
board of directors of the Company and (y) First Union and High Ridge shall have
the right to request, and upon such request the Company shall cause, the First
Union and High Ridge Designee to be elected to serve on the boards of directors
of each of the Company's direct and indirect Subsidiaries. In addition, the
First Union and High Ridge
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Designee will be permitted to serve on any committees, including any executive
committee of the board of directors of the Company and each Subsidiary, unless
such First Union and High Ridge Designee is not qualified therefor under
applicable law, rule or regulation, in which event First Union and High Ridge
shall have the right to select one Person (in addition to the Observer) to
observe all such meetings in substitution therefor. "First Union and High Ridge
Designee" shall mean an individual designated by First Union and High Ridge for
nomination to the board of directors of the Company, following consultation by
First Union and High Ridge with Century. In addition, First Union and High Ridge
will together have the right to select one individual to observe all meetings of
the board of directors of the Company and each of the Company's direct and
indirect Subsidiaries and each committee thereof (the "Observer").
At any time while the First Union and High Ridge Designee is not a member
of the Company's and each such Subsidiary's boards of directors, at the sole
discretion of First Union and High Ridge, First Union and High Ridge may
together appoint a representative of First Union and High Ridge, and the Company
and each such Subsidiary will permit such representative, to attend all meetings
of the boards of directors of the Company and each such Subsidiary and any
committees thereof. First Union and High Ridge will continue to have the right
to designate the First Union and High Ridge Designee for election or appointment
to the boards of directors of the Company and each such Subsidiary in lieu of
any representative of First Union and High Ridge.
(c) At the end of the term of any Designee, the Person who designated such
Designee shall have the right to designate the same or another Designee for the
next term and the Company shall then support and use its best efforts to cause
the election of such individual to such board of directors. In the event that a
Designee shall cease to serve as a director for any reason, the vacancy
resulting therefrom shall be filled by a Designee selected by the Person that
selected the Designee whose vacancy is to be filled according to the procedures
described above. Any such director shall comply with all applicable statutory
requirements of the Insurance Departments.
(d) The Company and each Subsidiary will provide the Designees, the
Observer, any other observers selected pursuant to Sections 6.3(a) or (b) above
or any representatives of XL and First Union and High Ridge with all information
provided to such boards of directors and any committees thereof.
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SECTION 6.4. Information. Each of the Company and Newco hereby agrees for
the benefit of the Purchasers and the Holders that, from and after the date
hereof, so long as any Securities may be issued or remain outstanding and unpaid
or any other amount is owing to any of the Holders under any Transaction
Document, it will deliver or cause to be delivered the following materials and
information to the respective parties listed below:
(a) to the Holders, as soon as available and in any event within 45 days
after the end of each of the first three fiscal quarters of each fiscal year,
(i) consolidated and consolidating balance sheets of the Company and Newco and
their Subsidiaries as of the end of such quarter and the related consolidated
statements of income, cash flows and stockholders' equity (deficit) for such
quarter and for the portion of the fiscal year ended at the end of such quarter,
setting forth, in each case, in comparative form the figures for the
corresponding quarter and the corresponding portion of the previous fiscal year,
accompanied by a certificate of the chief financial officer or the chief
accounting officer of the Company and Newco, as applicable, to the effect that
they fairly present the financial condition at such dates and the results of
operations and cash flows and stockholders' equity (deficit) for such periods
and were prepared in accordance with GAAP (or, in the case of the Insurance
Subsidiaries, Statutory Accounting Principles prescribed or permitted by the
Insurance Acts), subject to year-end audit adjustments (consisting only of
normal recurring accruals), (ii) in the case of any Holder of at least 10% of
the outstanding Securities, such operating information of the Company and Newco
as may be reasonably requested by any Holder and (iii) in the case of any Holder
of at least 10% of the outstanding Securities, a comparison of the results of
such quarter against the operating plan and budget, together with an explanation
of any deviations therefrom;
(b) to the Holders, as soon as available and in any event within 90 days
after the end of each fiscal year, (i) consolidated and consolidating balance
sheets of the Company and Newco and their Subsidiaries as of the end of such
fiscal year and the related consolidated statements of income, cash flows and
stockholders' equity (deficit) for such fiscal year, setting forth, in each
case, in comparative form the figures for the previous fiscal year, accompanied
by a certificate of the chief financial officer or the chief accounting officer
of the Company and Newco, as applicable, to the effect that they fairly present
the financial condition at such dates and the results of operations and cash
flows and stockholders' equity (deficit) for such periods and were prepared in
accordance with GAAP (or, in the case of the U.S. Insurance Subsidiaries,
Statutory Accounting Principles prescribed or permitted by the Insurance Acts),
and a report (unqualified as to scope) of a firm of independent public
accountants of nationally recognized standing and, in the case of any Holder of
at least 10% of the outstanding Securities, a "management letter" from such firm
regarding the internal control structure of the Company and Newco and (ii) in
the case of any Holder of at least 10% of the outstanding Securities and in
exchange for the express agreement of such Holder to keep such information
confidential, an opinion in form and substance reasonably satisfactory to the
Purchasers as to
-35-
the loss reserves of the Insurance Subsidiaries as of the end of such fiscal
year by Xxxxxxxxxxx, Towers & Xxxxxx or another actuarial consultant selected by
the Company and acceptable to the Purchasers and the Holders;
(c) to any Holder of at least 10% of the outstanding Securities and in
exchange for the express agreement of such Holder to keep such information
confidential, as soon as available and in any event within 60 days after the end
of each fiscal quarter, the results of the "early warning" tests described in
Section 7(m) of the Debentures and any supporting documentation requested by
such Holder;
(d) to any Holder of at least 10% of the outstanding Securities, as soon as
available, prior to the beginning of each fiscal year and in exchange for the
express agreement of such Holder to keep such information confidential, an
annual budget and operating plan of the Company and Newco, including an
investment policy and plan, presented on a quarterly basis for such fiscal year;
(e) to any Holder of at least 10% of the outstanding Securities and in
exchange for the express agreement of such Holder to keep such information
confidential, as soon as available, annual financial projections (including
forecasted consolidated and consolidating balance sheets of the Company and
Newco and their Subsidiaries and the related consolidated statements of income,
cash flows and stockholders' equity (deficit)) for the fiscal years ending
December 31, 2001 through December 31, 2006 (including monthly financial
projections) containing all material assumptions relating to such projections,
accompanied by a statement by the Company and Newco that its projections are
based on assumptions believed by it in good faith to be reasonable as to the
future financial performance of the Company or Newco, as the case may be;
(f) to any Holder of at least 10% of the outstanding Securities and in
exchange for the express agreement of such Holder to keep such information
confidential, as soon as available, and in any event within 30 days after the
filing thereof, copies of annual and quarterly reports and all other filings of
the Insurance Subsidiaries filed with the Insurance Departments;
(g) to XL, so long as it continues to own at least 10% of the outstanding
Securities and in exchange for the express agreement of XL to keep such
information confidential, copies of the monthly and quarterly reports provided
to the boards of directors of the Company and Newco and the Insurance
Subsidiaries, at or about the same time such reports are distributed to such
boards;
(h) to each Holder, and in exchange for the express agreement of such
Holder to keep such information confidential, promptly following the occurrence
thereof, notice and a
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description in reasonable detail of any material adverse change in the assets,
liabilities, business, results of operations, condition (financial or
otherwise), Permits or prospects of the Company and its Subsidiaries taken as a
whole, or of Newco and its Subsidiaries taken as a whole;
(i) to any Holder of at least 10% of the outstanding Securities, and in
exchange for the express agreement of such Holder to keep such information
confidential, from time to time such additional information regarding the
financial position or business of the Company or any of its Subsidiaries or of
Newco or any of its Subsidiaries as such Holder may reasonably request;
(j) to the Holders, as soon as available, copies of all reports and
memoranda relating to the current status of the Restructuring and copies of all
related applications, agreements and other documents executed in connection with
the Restructuring; and
(k) to each Holder and in exchange for the express agreement of such Holder
to keep such information confidential, copies of any presentation made by the
Company or any of its Subsidiaries to Standard & Poor's Ratings Services,
Moody's, A.M. Best Company or any other rating agency.
SECTION 6.5. Use of Proceeds. Upon completion of the Restructuring and the
receipt by the Company of all Required Approvals, the Company will contribute
$80.0 million of the net proceeds from the issuance and sale of the Convertible
Exchangeable Debentures and the Voting Preferred Stock to the statutory capital
and surplus of the U.S. Insurance Subsidiaries (the "Contributed Amounts"). The
remainder of the net proceeds shall be deposited into the Collateral Account for
the benefit of the Holders on the Closing Date. Upon the 90th day after
consummation of the Restructuring and the receipt by the Company of all Required
Approvals, provided, however, that no Default or Event of Default (as defined in
the Debentures) shall have occurred and be continuing, all amounts in the
Collateral Account shall be released to the Company and the Company will retain
all of such proceeds and will not contribute, loan or otherwise transfer or
dispose of any such amounts disbursed from the Collateral Account to any
Insurance Subsidiary.
SECTION 6.6. Non-Competition. (a) From and after the date on which the
Restructuring is consummated until the third anniversary of the date on which
the Company ceases to own, directly or indirectly, any Common Stock or other
ownership interests of Newco (the "Non-Competition Period"), the Company will
not, and will cause each of its Affiliates not to, directly or indirectly,
engage in or own any interest in any business substantially similar to the
businesses transferred to Newco; provided, however, that (i) this Section 6.6(a)
shall not be construed to prevent or restrict the Company or any of its
Affiliates from, directly or indirectly, acquiring, owning or investing in
securities representing less than 5% of
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the outstanding voting power of the securities of a publicly traded company and
(ii) this Section 6.6(a) shall not prevent or restrict the Company from owning
Common Stock or other ownership interests of Newco.
(b) During the Non-Competition Period, the Company will not, and will not
cause or permit any of its Subsidiaries to, transfer or reassign any of its
employees who are primarily dedicated to the CRM business to any other business
or division of the Company or any of its Subsidiaries, solicit for employment or
hire any Person who, at the time of such solicitation or hiring, is employed by
Newco or any of its Subsidiaries or induce or encourage any such Person to leave
the employ of Newco or any of its Subsidiaries or to become employed by any
Person other than Newco or any of its Subsidiaries.
SECTION 6.7. Certain Transactions. The Company shall not, and shall not
cause or permit any of its Subsidiaries (other than Subsidiaries of Newco) to,
engage in any intercompany transactions outside of the ordinary course of
business with Newco or any other action that would adversely affect Newco,
without the prior written consent of XL.
SECTION 6.8. Insurance Professional. The Company shall use its best efforts
to hire an insurance professional approved by XL for the Company's specialty
insurance operations as successor to its Program Business as promptly as
practicable.
SECTION 6.9. Purchase Option. In connection with the Restructuring, the
Company shall grant to Newco an option to purchase, at book value, Villanova
Insurance Company and/or any new Insurance Subsidiary of the Company formed in
connection with the writing of new or renewal insurance policies underlying the
CRM business relating to the Company's IPC (i.e., rent-a-captive) Subsidiaries.
SECTION 6.10. Employment Agreements. The Company shall use its best efforts
to enter into written employment agreements and non-compete agreements with such
executive officers of the Company as shall be identified in writing by XL and
shall be reasonably acceptable to the Company within a reasonable time following
receipt of such request, in each case on terms reasonably acceptable to XL.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Notices. All notices, demands and other communications to any
Person shall be in writing (including telecopier or similar writing) and shall
be given to such Person at the address set forth below:
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if to any Holder, at its address set forth in the Register;
if to XL, at:
XL Insurance Ltd
c/o XL Capital Ltd.
XL Xxxxx
Xxx Xxxxxxxxxx Xxxx
Xxxxxxxx XX 00
Xxxxxxx
Xxxxxxxxx: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to First Union, at:
First Union Merchant Banking 2001, LLC
One First Union Center - 12th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to High Ridge, at:
High Ridge Capital Partners II, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Century, at :
Century Capital Partners II, L.P.
c/o Century Capital Management Inc.
Xxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxx & Dodge LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Taracay Investors Company, at :
Taracay Investors Company
000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Intrepid, at:
Intrepid Funding Master Trust
c/o Wilmington Trust Company,
as Owner-Trustee
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Obligors, at:
Mutual Risk Management Ltd.
00 Xxxxxx Xxxxxx
Xxxxxxxx XX00
Xxxxxxx
Xxxxxxxxx: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address as such Person may hereafter specify (in accordance with
this Section 7.1) for the purpose to the other parties. Each such notice, demand
or other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to such Person's telecopy number and receipt thereof is
confirmed by telephone or in writing, (ii) if given by mail, three Business Days
after such communication is deposited in the mail with first class postage
prepaid, addressed as aforesaid or (iii) if given by any other means, when
delivered at the address specified in or pursuant to this Section.
SECTION 7.2. No Waivers; Powers and Remedies Cumulative; Amendments. (a) No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
(b) No right or remedy herein conferred upon or reserved to the Purchasers
or the Holders from time to time of Securities is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. Every power and remedy given by any Transaction
Document or by law may be exercised from time to time, and as often as shall be
deemed expedient, by the Obligors, the Purchasers or the Holders from time to
time of Securities.
(c) Any provision of this Agreement may be amended, supplemented or waived
if, but only if such amendment, supplement or waiver is in writing and is signed
by the Company and the Purchasers, if such proposed amendment, supplement or
waiver is effective on or prior to the Closing Date, and the Requisite Holders,
if such proposed amendment, supplement or waiver is effective after the Closing
Date. In determining whether the Requisite Holders have concurred in any
direction, consent, or waiver as provided in any Transaction Document,
Debentures which are owned by the Company or any of its Affiliates
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shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; provided, however, that any amendment, supplement or waiver
which adversely affects the rights of any Holder hereunder shall require such
Holder's consent unless the amendment, supplement or waiver adversely affects
the rights of all Holders in the same manner.
SECTION 7.3. Indemnification. The Obligors, jointly and severally, agree to
indemnify and hold harmless the Purchasers and each Holder, their respective
Affiliates, directors, officers and employees and each Person, if any, who
controls any Purchaser and each Holder, or any of their Affiliates, within the
meaning of the Securities Act or the Exchange Act (a "Controlling Person"), and
the respective partners, agents, employees, officers and directors of the
Purchasers and each Holder, their respective Affiliates and any such Controlling
Person (each, an "Indemnified Party" and, collectively, the "Indemnified
Parties"), from and against any and all losses, claims, damages, liabilities and
expenses (including, as incurred, reasonable costs of investigating, preparing
or defending any such claim or action, whether or not such Indemnified Party is
a party thereto), that arise out of, or are in connection with (i) any breach of
representation or warranty (including any misrepresentation in, or omission
from, any certificate or other document furnished or to be furnished by it to
any Purchaser and/or the Holders hereunder) or nonfulfillment of any covenant or
agreement on the part of the Obligors under any Transaction Document (without
giving effect to any qualifications of any representation or warranty with
respect to knowledge) or (ii) any pending or threatened claims, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses incident to any
of the foregoing or to the Transaction Documents or the Transactions; provided,
however, that the Obligors will not be responsible for any losses, claims,
damages, liabilities or expenses that are determined by final judgment of a
court of competent jurisdiction to result solely from such Indemnified Party's
gross negligence or willful misconduct. The Obligors and the Purchasers also
agree that no Indemnified Party shall have any liability (except for breach of
provisions of this Agreement) for losses, claims, damages, liabilities or
expenses, including legal fees, incurred by the Obligors in connection with this
Agreement unless they are determined by final judgment of a court of competent
jurisdiction to result from such Indemnified Party's gross negligence or willful
misconduct.
In case any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Obligors under this
Agreement, such Indemnified Party shall promptly notify the Obligors in writing
and the Obligors shall, if requested by such Indemnified Party or if the
Obligors desire to do so, assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Party and payment of all
reasonable fees and expenses. The failure to so notify the Obligors shall not
affect any obligations the Obligors may have to such Indemnified Party under
this Agreement or otherwise unless the Obligors are materially adversely
affected by such failure. Such Indemnified Party shall have the right to employ
separate counsel in such action and participate in the defense
-43-
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party, unless: (i) the Obligors have failed to assume the
defense and employ counsel reasonably satisfactory to such Indemnified Party or
(ii) the named parties to any such action (including any impleaded parties)
include such Indemnified Party, and one or more of the Obligors, and such
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to such Obligor, in which case, if such Indemnified Party
notifies the Obligors in writing that it elects to employ separate counsel at
the expense of the Obligors, the Obligors shall not have the right to assume the
defense of such action or proceeding on behalf of such Indemnified Party;
provided, however, that the Obligors shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be responsible hereunder for the reasonable fees and expenses
of more than one such firm of separate counsel, in addition to any local
counsel, which counsel shall be designated by XL if XL is at such time an
Indemnified Party with respect to such matter and otherwise by such Indemnified
Party. The Obligors shall not be liable for any settlement of any such action
effected without the written consent of the Obligors (which shall not be
unreasonably withheld or delayed) and the Obligors agree to indemnify and hold
harmless each Indemnified Party from and against any loss or liability by reason
of settlement of any action effected with the consent of the Obligors. In
addition, the Obligors will not, without the prior written consent of XL, if XL
is at such time and Indemnified Party with respect to such matter and otherwise
by such Indemnified Party, settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in respect to which indemnification or contribution
may be sought hereunder (whether or not any Indemnified Party is a party
thereto) unless such settlement, compromise, consent or termination includes an
express, unconditional release of the Purchasers and the other Indemnified
Parties, satisfactory in form and substance to the Purchasers, from all
liability arising out of such action, claim, suit or proceeding.
The indemnification and expense reimbursement obligations set forth in this
Section 7.3 (i) shall be in addition to any liability the Obligors may have to
any Indemnified Party at common law or otherwise, (ii) shall survive the
termination of this Agreement and the other Transaction Documents and the
payment, conversion and/or exchange in full of the Debentures and (iii) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Purchasers or any other Indemnified Party.
SECTION 7.4. Expenses; Documentary Taxes. The Obligors, jointly and
severally, agree to pay, whether or not the closing in respect of the issuance
and sale of the Convertible Exchangeable Debenture to the Purchasers occurs, the
costs, fees and expenses of the Purchasers incurred in connection with the
Transaction Documents, including the fees and
-44-
expenses of its legal counsel, actuaries, accountants and other advisors and
consultants, including in connection with any amendments, modifications or
waivers of the provisions of any of the Transaction Documents, or any
enforcement of the rights of the Purchasers under any of the Transaction
Documents or in connection with any collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom. Furthermore, the Obligors agree to
pay any and all stamp, transfer and other similar taxes, assessments or charges
payable in connection with the execution and delivery of any Transaction
Document or the issuance of the Securities.
SECTION 7.5. Register. Each of the Company and Newco shall keep at its
principal office a register (the "Register") in which shall be entered the names
and addresses of the registered holders of the Securities issued by it and
particulars of the respective Securities held by them and of all transfers of
such Securities. References to the "Holder" or "Holders" shall mean the Person
or Persons listed in the Register as the payee of any Security. The ownership of
the Securities shall be proven by the Register.
SECTION 7.6. Termination. This Agreement may be terminated (i) by the
parties hereto by mutual agreement or (ii) if the Closing Date does not occur by
May 17, 2001, by any party by written notice to the other parties hereto.
Sections 7.3, 7.4, 7.8 and 7.9 shall survive any such termination.
SECTION 7.7. Successors and Assigns. This Agreement shall be binding upon
the Company and upon the Purchasers and their respective successors and assigns,
including, in the case of the Company, any transferee of substantially all of
the business or assets of the Company; provided, however, that the Company shall
not assign or otherwise transfer its rights or obligations under this Agreement
to any other Person without the prior written consent of the Requisite Holders.
The Company shall not be permitted to circumvent the rights of the Purchasers
under any Transaction Document by reorganization, recapitalization, transfer of
business or assets or otherwise, any attempt to do so shall be void, and any
entity or entities surviving any reorganization, recapitalization, transfer or
other similar transaction shall be deemed the Company. In the event of a
transfer of any Debenture, the rights of a Holder under this Agreement,
respectively, shall pass to such transferee.
SECTION 7.8. Governing Law; Waiver of Jury Trial; Submission to
Jurisdiction; Net Payments. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. ANY
DISPUTE UNDER THIS AGREEMENT THAT IS NOT SETTLED BY MUTUAL CONSENT SHALL BE
FINALLY ADJUDICATED BY ANY FEDERAL OR STATE COURT SITTING IN THE CITY, COUNTY
AND STATE OF NEW YORK, AND THE COMPANY CONSENTS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS (OR ANY APPELLATE COURT THEREFROM) OVER ANY SUCH DISPUTE.
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THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
FEDERAL AND NEW YORK STATE COURTS LOCATED IN NEW YORK COUNTY IN CONNECTION WITH
ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF
PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(b) By the execution and delivery of this Agreement, the Company and each
of the Guarantors (i) acknowledges that it will, by separate written instrument,
designate and appoint The CT Corporation System, Inc., 000 Xxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (and any successor entity) as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to any of the Transaction Documents that may be instituted in any Federal or
state court in the State of New York, New York County or brought under Federal
or state securities laws, and acknowledges that The CT Corporation System, Inc.
will accept such designation, (ii) waives trial by jury, (iii) agrees that
service of process upon The CT Corporation System, Inc. and written notice of
said service to the Company or such Guarantor, as the case may be, in accordance
with Section 7.1 shall be deemed in every respect effective service of process
upon the Company or such Guarantor, as the case may be, in any such suit or
proceeding and (iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law.
(c) All payments made or required to be made hereunder shall be made in
U.S. dollars. The Obligors agree to indemnify the Holder against any loss
incurred by such party as a result of any judgment or order being given or made
against the Obligors, for any U.S. dollar amount due under this Agreement and
such judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the Judgment Currency for the purpose of such judgment or order
and (ii) the spot rate of exchange in The City of New York at which such party
on the date of payment of such judgment or order is able to purchase United
States dollars with the amount of the Judgment Currency actually received by
such party if such party had utilized such amount of Judgment Currency to
purchase United States dollars as promptly as practicable upon such party's
receipt thereof. The foregoing indemnity shall continue in full force and effect
not-
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withstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, United States dollars.
All amounts paid by the Company or any Guarantor hereunder shall be paid
free and clear of, and without any deduction or withholding for or on account
of, any present or future taxes, duties, assessments or other governmental
charges of whatever nature imposed or levied by or on behalf of Bermuda or any
political subdivision thereof or by any authority therein or thereto or within
any other jurisdiction in which the Company or any of its Subsidiaries is
organized or engaged in business for tax purposes having power to tax, unless
such deduction or withholding is required by applicable law, in which event,
each of the other parties hereto agrees to pay additional amounts so that the
persons entitled to such payments will receive the amount that such persons
would otherwise have received but for such deduction or withholding.
SECTION 7.9. Survival. (a) All covenants, agreements, representations and
warranties in any Transaction Document and in the certificates or other
instruments prepared or delivered in connection with or pursuant to any
Transaction Document shall be considered to have been relied upon by the
Purchasers and shall survive the purchase of the Securities regardless of any
investigation made by or on behalf of the Purchasers, and shall continue in full
force and effect in accordance with their terms.
(b) All indemnities set forth herein, including in Section 7.3, shall
survive the execution and delivery of this Agreement, the issuance and purchase
of the Securities and the repayment and cancellation of the Debentures.
SECTION 7.10. Independence of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant (including any exception contained in a schedule hereto) shall be
deemed to be an exception to any other representation, warranty or covenant
contained herein unless expressly provided, nor shall any such exception be
deemed to permit any action or omission that would be in contravention of
applicable law.
SECTION 7.11. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
SECTION 7.12. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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SECTION 7.13. Entire Agreement; Benefit. This Agreement and the other
Transaction Documents constitute the entire agreement among the parties relating
to the subject matter hereof. Any previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Transaction Documents. Nothing in any Transaction Document is intended to
confer upon any Person (other than the parties thereto and any Indemnified
Party) any rights, remedies, obligations or liabilities under or by reason of
the Transaction Documents.
SECTION 7.14. Headings. Article and Section headings and the Table of
Contents are for convenience of reference only, are not part of this Agreement
and are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.15. Execution by Newco. Promptly after the formation of Newco,
the Company will cause Newco to execute and deliver a counterpart to this
Agreement pursuant to which Newco shall, by so executing this Agreement, become
a party to this Agreement as if Newco were an original party hereto and upon
which this Agreement shall constitute a valid and binding agreement of Newco,
enforceable in accordance with its terms. Upon execution of this Agreement by
Newco in accordance with this Section 7.15, Newco shall be deemed to have made,
as of the date of such execution, the representations and warranties contained
in Sections 3.1, 3.2, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.19, 3.20, 3.22 and
3.23 of this Agreement to the holders as if all references contained therein to
the Company were references to Xxxxx.
X-0
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers.
Executed: May 8, 2001
MUTUAL RISK MANAGEMENT LTD.
By: /s/ Xxxxxxx X. X'Xxxxx
---------------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
MUTUAL GROUP LTD.
By: /s/ Xxxxxxx X. X'Xxxxx
---------------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
LEGION FINANCIAL CORP.
By: /s/ Xxxxxxx X. X'Xxxxx
---------------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
MGL INVESTMENTS LTD.
By: /s/ Xxxxxxx X. X'Xxxxx
---------------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
MRM SECURITIES LTD.
By: /s/ Xxxxxxx X. X'Xxxxx
---------------------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
S-2
MUTUAL FINANCE LTD.
By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------------------
Name: Xxxxxxxxx X. Xxxxx
Title: Secretary
MUTUAL RISK MANAGEMENT (HOLDINGS) LTD.
By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------------------
Name: Xxxxxxxxx X. Xxxxx
Title: Secretary
S-3
PRINCIPAL AMOUNT OF
CONVERTIBLE EXCHANGEABLE
PURCHASERS: DEBENTURES PURCHASED:
XL INSURANCE LTD $52,500,000
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: President & Chief Executive Officer
FIRST UNION MERCHANT BANKING 2001, LLC $30,400,000
By: /s/ Xxxxxxxxx X. Xxxxxx XX
-------------------------------------
Name: Xxxxxxxxx X. Xxxxxx XX
Title: Partner
HIGH RIDGE CAPITAL PARTNERS II, L.P. $17,100,000
By: /s/ Xxxxx Xxxxx
--------------------------------------
Name: Xxxxx Xxxxx
Title: President, Liberty Street Corp.,
as general partner of Liberty Street Partners, LP, as member of
High Ridge XX XX LLC, as general partner of High Ridge Capital
Partners II, L.P.
S-4
CENTURY CAPITAL PARTNERS II, L.P. $10,000,000
BY: CCP CAPITAL II LLC, its general partner
By: /s/ Xxxxx Xxxxxxxxxx
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Name: Xxxxx Xxxxxxxxxx
Title: Managing Member
/s/ Xxxxxx X. Xxxxxxxx $2,000,000
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Xxxxxx X. Xxxxxxxx
TARACAY INVESTORS COMPANY $500,000
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title:
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Total for Purchasers
(other than Intrepid)......... $112,500,000
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INTREPID FUNDING MASTER TRUST $30,000,000
By: /s/ Xxxx Xxx Xxxxxxx
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Name: Xxxx Xxx Xxxxxxx
Title: Senior Financial Services Officer
