EXHIBIT III
EXECUTION COPY
ARCH CAPITAL GROUP LTD.
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November 20, 2001
Orbital Holdings, Ltd. Warburg Pincus Private Equity VIII, L.P.
(the "GE Orbital Holdings Purchaser") Warburg Pincus International Partners, ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Netherlands International
c/o GE Capital Partners I, C.V.
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Stamford, CT 06927 Partners II, C.V.
(collectively, "Warburg")
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HFCP IV (Bermuda), L.P. ("H&F")
c/▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLC
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Ladies and Gentlemen:
This letter agreement (this "Agreement") confirms the agreement reached
today among each of the parties signatories hereto regarding the participation
of the GE Orbital Holdings Purchaser in the purchase of a portion of the
Securities, as contemplated by, and on the terms set forth in, this Agreement
and the Subscription Agreement dated as of October 24, 2001, as amended (the
"Subscription Agreement") by and among Arch Capital Group Ltd. ("Arch"), ▇▇▇▇▇▇▇
and H&F (the "Original Signatories"), and certain other matters in connection
therewith. Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Subscription Agreement.
1. Investment by GE Orbital Holdings Purchaser. Warburg hereby assigns,
without recourse or warranty by it, to the GE Orbital Holdings Purchaser (as set
forth in Schedule 1 hereto) the right, and obligation, to purchase an aggregate
of $10,000,000 of the Securities on the terms and conditions set forth in the
Subscription Agreement (except as explicitly modified hereby), as a Purchaser
(as defined in the Subscription Agreement). The GE Orbital Holdings Purchaser
acknowledges that its investment will be required to be made
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on the Closing Date, simultaneously with the investments being made by the
Original Signatories. The GE Orbital Holdings Purchaser shall become a
"Purchaser" under the Subscription Agreement and an "Investor" under the
Shareholders Agreement (solely for purposes of Sections 3.4, 5.1, 5.2 and 5.3
and Articles II, IV and VIII thereof, and the provisions implementing the
provisions described in paragraph 2 below); provided that:
(a) Warburg and H&F shall jointly have the sole right (on behalf of
themselves and all other Purchasers) to make any and all determinations
with respect to, or to take any and all actions necessary to effectuate the
provisions of, Section B of the Subscription Agreement (including the right
to approve any amendment or acceleration of, or to waive compliance by Arch
with, any of the terms thereof), provided that the consequences of such
determinations and actions by ▇▇▇▇▇▇▇ and H&F do not apply differently to
the GE Orbital Holdings Purchaser than to Warburg and H&F (or, if they
apply differently, it is because of differences in the treatment of Warburg
and H&F as opposed to other Purchasers existing in the Subscription
Agreement (as modified by this Agreement) and such differences are not made
more adverse to the GE Orbital Holdings Purchaser or more favorable to
Warburg and H&F as a result of such determination or action);
(b) ▇▇▇▇▇▇▇ and H&F shall have the sole right to determine whether
each condition for the Purchasers contained in Section C of the
Subscription Agreement is satisfied;
(c) the failure of the conditions set forth in Section C.2 of the
Subscription Agreement due to any breach by the GE Orbital Holdings
Purchaser of any representation, warranty or covenant shall not affect the
obligation of the Company to sell the Securities on the Closing Date to
either Warburg or H&F
(d) the GE Orbital Holdings Purchaser shall be subject to Section D.1
and D.2 of the Subscription Agreement, including the covenants thereunder;
(e) the GE Orbital Holdings Purchaser shall have no rights (including
no right to consent to any action proposed to be taken by Arch under, or
any right to waive compliance by Arch with, any covenant or agreement) as a
"Purchaser" under Section D.4 of the Subscription Agreement, it being
acknowledged that each GE Orbital Holdings Purchaser shall, however, have
the obligations of a "Purchaser" under Sections D.4(d), (g) and (i)
thereof; provided that any information provided to the Company pursuant to
Section D.4(g) shall be held confidentially and not used for any purpose
other than as set forth in Section D.4(g);
(f) the GE Orbital Holdings Purchaser shall not be considered an
"original signatory" to the Subscription Agreement for purposes of Section
E.6 thereof, provided that no amendment, modification or waiver of Section
E of the
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Subscription Agreement shall affect the GE Orbital Holdings Purchaser
differently than Warburg and H&F (or, if they affect them differently, it
is because of differences in the treatment of Warburg and H&F as opposed to
other Purchasers existing in the Subscription Agreement (as modified by
this Agreement) and such differences are not made more adverse to the GE
Orbital Holdings Purchaser or more favorable to Warburg and H&F as a result
of such determination or action);
(g) no consent of the GE Orbital Holdings Purchaser shall be required
to effect any modification or amendment to the Subscription Agreement
(including, without limitation, Schedules A and B, and Exhibits I, II and
III thereto), unless such amendment or modification affects the GE Orbital
Holdings Purchaser differently than Warburg and H&F (or, if they affect
them differently, it is because of differences in the treatment of Warburg
and H&F as opposed to other Purchasers existing in the Subscription
Agreement (as modified by this Agreement) and such differences are not made
more adverse to the GE Orbital Holdings Purchaser or more favorable to
Warburg and H&F as a result of such determination or action);
(h) the GE Orbital Holdings Purchaser shall have no rights under
Section F.2 (except the right to be reimbursed by the Company, together
with the other GE Orbital Holdings Purchaser, for up to an aggregate of up
to $50,000 in counsel fees), and no right to assign under Section F.4, of
the Subscription Agreement (except that the GE Orbital Holdings Purchaser
may assign its rights and obligations under the Subscription Agreement in
connection with a transfer of Securities to (i) any person or entity that
directly or indirectly through one or more intermediaries controls, or is
controlled by or under common control with, such GE Orbital Holdings
Purchaser, (ii) an entity over which such GE Orbital Holdings Purchaser has
management rights, or (iii) if such GE Orbital Holdings Purchaser is
affiliated with a trustee of a pension trust, to a successor trustee or
trust, in each case so long as such transferee becomes a party to, and
bound by, this Agreement, Amendment No. 1 to the Subscription Agreement and
the Shareholders Agreement (a "Permitted Transferee");
(i) Amendment No. 1 to the Subscription Agreement will contain a
covenant by the Company to conduct its business in compliance with law
including, without limitation, the Foreign Corrupt Practices Act;
(j) so long as the GE Orbital Holdings Purchaser owns any equity
interest in the Company, the Company agrees to furnish to the GE Orbital
Holdings Purchaser a copy of its annual and quarterly reports filed under the
Securities and Exchange Act of 1934; and
(k) for the avoidance of doubt, the GE Orbital Holdings Purchaser
shall become parties to the Shareholders Agreement as an "Investor" solely for
purposes of Sections 3.4, 5.1, 5.2 and 5.3 and Articles II, IV and VIII thereof
and the provisions thereof implementing the provisions of paragraph 2 below; it
being further understood that ▇▇▇▇▇▇▇ and H&F can
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consent on behalf of all other Investors to (A) any amendment or modification
whatsoever of the Sections of the Shareholders Agreement that do not apply to
the GE Orbital Holdings Purchaser and (B) any amendment or modification of the
Sections of the Shareholders Agreement that do apply to the GE Orbital Holdings
Purchaser, so long as in the case of clause (B), such amendment or modification
does not affect the GE Orbital Holdings Purchaser differently than Warburg and
H&F (or, if it affects them differently, it is because of differences in the
treatment of Warburg and H&F as opposed to other Purchasers existing in the
Subscription Agreement or the Shareholders Agreement (as modified by this
Agreement) and such differences are not made more adverse to the GE Orbital
Holdings Purchaser or more favorable to Warburg and H&F as a result of such
determination or action).
2. Registration; Tag-Along.
Arch, the Original Signatories and the GE Orbital Holdings
Purchaser agree that the Shareholders Agreement will be amended and restated to
provide that:
(a) if the GE Orbital Holdings Purchaser exercises
its right under Section 4.3 thereof, any cutback pursuant to Section
4.4 thereof will treat the GE Orbital Holdings Purchaser at least as
favorably as Warburg and H&F (i.e., the GE Orbital Holdings Purchaser
will have priority under clause (b), and not under clause (c),
thereof);
(b) ▇▇▇▇▇▇▇ and H&F agree that in the case of a
Warburg Demand or an H&F Demand involving an underwritten public
offering, when selecting an underwriter, the consent of the General
Electric Pension Trust will be required for the selection of any
underwriter in which the General Electric Company has a direct or
indirect interest of 5% or more if the GE Orbital Holdings Purchaser
will be a participating seller in the offering;
(c) the GE Orbital Holdings Purchasers will have the
obligations of a Selling Investor (considered together for the purpose of
determining whether the Selling Investor has met the $50 million threshold), and
the rights of a Tag-Along Investor, under Section 5.1 thereof; provided that (1)
each Investor participating in a transaction under Section 5.1 shall only be
responsible for its pro rata portion of any indemnification (except in respect
of representations specifically relating to such Investor) and (2) in the event
that H&F is a Selling Investor, the GE Orbital Holdings Purchasers shall only be
permitted to elect to participate as a Tag-Along Investor if Warburg so elects;
(c) the GE Orbital Holdings Purchaser shall be
subject to the restrictions of Section 5.2 of the Shareholders
Agreement with respect to the Securities acquired by it under the
Subscription Agreement and any securities acquired in respect thereof,
to the same extent that Warburg and H&F are restricted with respect to
the Securities acquired by them under the Subscription Agreement and
any securities
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acquired in respect thereof, provided that the GE Orbital Holdings
Purchaser will be permitted to transfer Securities to a Permitted
Transferee.
"Tag-Along Investor," "Third Party Sale" and "Selling Investor" have the
meanings given to them in the Shareholders Agreement and to the extent necessary
the term "Tag-Along Investor" shall be deemed to include more than one party.
3. Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary or desirable under applicable legal requirements, to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date, any further action is necessary or
desirable to carry out the purposes of this Agreement, the parties hereto shall
use their reasonable best efforts to take or cause to be taken all such
necessary or desirable action and execute, and deliver and file, or cause to be
executed, delivered and filed, all necessary or desirable documentation. The GE
Orbital Holdings Purchaser agrees (to the full extent of their current or future
ownership of securities of Arch) to vote in favor of all matters to be submitted
to shareholders of Arch in connection with the foregoing or the transactions
contemplated by the Subscription Agreement (and the grants of any shares or
options contemplated thereby or in connection therewith). Each of the parties
will consult with each other with respect to the issuance of any press release
or public announcement with respect to the foregoing.
4. Notices. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, or mailed by registered or certified
mail, return receipt requested, postage prepaid, to, the addresses (and shall be
deemed effective at the time of receipt thereof):
(a) If to Arch:
Arch Capital Group Ltd.
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Attention: ▇▇▇▇▇ ▇▇▇▇▇, President and Chief
Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the GE Orbital Holdings Purchaser:
c/o GE Capital
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
Stamford, CT 06927
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or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above. A notice hereunder shall not be deemed given until copies thereof are
given as contemplated above. Notices to all other parties hereto shall be given
in accordance with the Subscription Agreement.
5. Entire Agreement; Amendment. This Agreement, together
with the Subscription Agreement, Amendment No. 1 to the Subscription Agreement
(including the exhibits thereto) the Shareholders Agreement contains all of the
terms agreed upon by the parties with respect to the subject matter hereof. This
Agreement may be amended or the provisions thereof waived only by a written
instrument signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
6. Headings. The headings of the sections of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
7. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
without the prior written consent of the other party; provided that this
Agreement may be assigned by a Purchaser consistent with an assignment in
accordance with Section F.4 of the Subscription Agreement and Section 1(h) of
this Agreement, so long as the assignee executes an agreement in the form of
this Agreement.
8. Severability. In the event that any provision or any part
of this Agreement is held to be illegal, invalid or unenforceable, such
illegality, invalidity or unenforceability shall not effect the validity or
enforceability of any other provision or part thereof.
9. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the substantive laws
of the State of New York, without giving effect to principles of conflicts of
laws.
10. Counterparts. This Agreement and any instrument
delivered in connection herewith may be executed in any number of counterparts
with the same effect as if the signatures on all counterparts are upon the same
instrument.
[Signature pages follow]
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Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the duplicate enclosed copy of this
Agreement.
Very truly yours,
ARCH CAPITAL GROUP LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Secretary
Agreed to and Accepted
As of the Date First Above Written:
ORBITAL HOLDINGS, LTD.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Attorney-in-fact
Notice Information for Orbital
Holdings, Ltd.:
c/o GE Capital
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
Stamford, CT 06927
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HFCP IV (BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda) Ltd.
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Authorized Signatory
WARBURG PINCUS PRIVATE EQUITY VIII, ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ INTERNATIONAL PARTNERS, ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ NETHERLANDS INTERNATIONAL PARTNERS I, ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ NETHERLANDS INTERNATIONAL PARTNERS II, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇
Title: Partner
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SCHEDULE 1
Amount
Warburg Purchaser Assigned
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Warburg Pincus Private Equity VIII, L.P. $5,000,000
Warburg Pincus International Partners, L.P. $4,800,000
Warburg Pincus Netherlands International Partners I, C.V. $120,000
Warburg Pincus Netherlands International Partners II, C.V. $80,000
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Total $10,000,000