EXHIBIT 10.1
CGA GROUP, LTD.
SERIES A PREFERRED STOCK
SUBSCRIPTION AGREEMENT
Dated as of June 9, 1997
TABLE OF CONTENTS
ARTICLE I AUTHORIZATION; SUBSCRIPTION FOR SERIES A PREFERRED
STOCK................................................. 1
Section 1.1 The Series A Preferred Stock................ 1
Section 1.2 The Subscription for Series A Preferred
Stock..................................... 2
ARTICLE II CLOSING................................................. 2
ARTICLE III CONDITIONS TO OBLIGATIONS OF THE INVESTORS.............. 3
Section 3.1 Accuracy of Representations and Warranties.. 3
Section 3.2 Performance of Agreements; Regulatory
Approvals; Credit Rating.................. 3
Section 3.3 Compliance Certificate...................... 4
Section 3.4 Bye-laws.................................... 5
Section 3.5 Warrant Agreement; Other Agreements......... 5
Section 3.6 Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇........... 5
Section 3.7 Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇................. 5
Section 3.8 Aggregate Funding........................... 5
Section 3.9 St. ▇▇▇▇▇▇.................................. 5
Section 3.10 Avoidance of Conflicts...................... 6
Section 3.11 Appointment of Agent........................ 6
Section 3.12 List of Shareholders........................ 6
ARTICLE IV CONDITIONS TO THE COMPANY'S OBLIGATIONS................. 6
Section 4.1 Accuracy of Representations and Warranties.. 7
Section 4.2 Performance of Agreements................... 7
Section 4.3 Other Agreements............................ 7
Section 4.4 Letters from Placement Agents............... 7
Section 4.5 Payment for the Series A Preferred Stock.... 7
Section 4.6 Aggregate Funding........................... 7
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY............................................... 8
Section 5.1 Due Organization, Valid Existence and
Authority of the Company and the
Company's Initial Subsidiaries............ 8
Section 5.2 Authorization and Validity of Agreements.... 8
Section 5.3 Capitalization.............................. 9
Section 5.4 No Conflict with Other Instruments; No
Approvals Required Except as Have Been
Obtained.................................. 9
Section 5.5 Regulatory Filings; Compliance with Law..... 11
Section 5.6 Stamp Duties or Taxes....................... 11
Section 5.7 Private Offering of the Series A
Preferred Stock........................... 12
Section 5.8 The Private Placement Memorandum............ 13
Section 5.9 Not an "Investment Company"................. 13
Section 5.10 Business Newly Formed....................... 13
Section 5.11 Operating Company........................... 13
Section 5.12 No U.S. Trade or Business and not a
Controlled Foreign Corporation............ 14
Section 5.13 Related Person Insurance Income............. 14
Section 5.14 Operating Guidelines........................ 15
Section 5.15 Passive Foreign Investment Company.......... 15
Section 5.16 Use of Proceeds of the Offering............. 16
Section 5.17 Shareholders................................ 16
Section 5.18 St. ▇▇▇▇▇▇ Representations.................. 16
Section 5.19 Bermuda Withholding Tax..................... 16
Section 5.20 No Events of Non-Compliance................. 16
Section 5.21 Registration Rights......................... 16
Section 5.22 Letter Agreement with DCR................... 16
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTORS......... 17
Section 6.1 Due Organization, Good Standing and
Authority of the Investor................. 17
Section 6.2 Authorization and Validity of Agreements.... 17
Section 6.3 Investment Intent........................... 17
Section 6.4 No Conflict with Other Instruments; No
Approvals Required Except as Have Been
Obtained.................................. 17
Section 6.5 Investor Awareness and Suitability.......... 18
Section 6.6 Accredited Investor Status.................. 20
ARTICLE VII BUSINESS COVENANTS...................................... 21
Section 7.1 Limitation on Company Indebtedness and
Preferred Stock........................... 21
Section 7.2 Limitation on Restricted Subsidiary
Indebtedness and Preferred Stock.......... 21
Section 7.3 Limitation on Restricted Payments........... 21
Section 7.4 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted
Subsidiaries.............................. 22
Section 7.5 Limitation on Sales of Assets and Capital
Stock..................................... 23
Section 7.6 Limitation on Release of Commitments........ 24
Section 7.7 Limitation on Transactions with Affiliates.. 25
Section 7.8 Limitation on Merger, Consolidation and
Sale of Assets............................ 25
Section 7.9 Restricted and Unrestricted Subsidiaries.... 26
ARTICLE VIII EVENTS OF NON-COMPLIANCE................................ 27
ARTICLE IX REPORTING............................................... 30
Section 9.1 Reporting................................... 30
Section 9.2 Rule 144 Reporting.......................... 31
Section 9.3 Bermuda Laws................................ 31
ARTICLE X REGISTERED EXCHANGE OFFER............................... 31
Section 10.1 Exchange Offer Registration................. 31
Section 10.2 Continuity of Effectiveness................. 32
Section 10.3 Exchange by Restricted Broker-Dealers....... 32
ARTICLE XI SHELF REGISTRATION...................................... 33
Section 11.1 Shelf Obligation............................ 33
Section 11.2 Continuity of Effectiveness................. 34
Section 11.3 Compliance.................................. 34
Section 11.4 Provision by Holders of Certain
Information in Connection with the Shelf
Registration Statement.................... 35
ARTICLE XII REGISTRATION PROCEDURES................................. 35
Section 12.1 Exchange Offer Registration Statement....... 35
Section 12.2 General Provisions.......................... 37
Section 12.3 Registration Expenses....................... 41
Section 12.4 Indemnification............................. 41
ARTICLE XIII RESTRICTIONS ON TRANSFER................................ 45
Section 13.1 Restrictive Legends......................... 45
Section 13.2 Notice of Proposed Transfers................ 45
ARTICLE XIV DEFINITIONS............................................. 47
ARTICLE XV MISCELLANEOUS........................................... 60
Section 15.1 Survival of Representations, Warranties
and Covenants............................. 60
Section 15.2 Termination of Agreement.................... 60
Section 15.3 Entire Agreement............................ 60
Section 15.4 Severability................................ 61
Section 15.5 Successors and Assigns...................... 61
Section 15.6 Amendment; Waiver........................... 61
Section 15.7 Headings.................................... 61
Section 15.8 Counterparts................................ 61
Section 15.9 Applicable Law.............................. 62
Section 15.10 Notices and Payment......................... 62
Section 15.11 Full Payment................................ 62
Section 15.12 Indemnification............................. 63
Section 15.13 Submission to Jurisdiction.................. 64
Section 15.14 Payment; Transfer Agent and Registrar....... 65
Section 15.15 Expenses.................................... 66
Schedules:
Schedule 1 -- List of Investors
Schedule 2 -- List of Shareholders of the Company and Their
respective shareholdings
Schedule 3 -- Schedule of Exceptions
Annexes:
Annex I -- Form of Memorandum of Association
Annex II -- Form of Bye-laws
Annex III -- Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇
Annex IV -- Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Annex V -- List of Other Closing Documents
Annex VI -- Form of Common Stock Warrant Acquisition
Agreement
Annex VII -- Operating Guidelines
Annex VIII -- Letter Agreement with Cap Re
Annex IX -- Letter Agreement with DCR
Annex X -- Sponsoring Investors and Founders Stock
Warrant Plan and Employee Stock Warrant Plan
CGA GROUP, LTD.
SERIES A PREFERRED STOCK
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of June 9, 1997,
among CGA Group, Ltd., a company with limited liability organized under the laws
of Bermuda (together with its successors and permitted assigns, the "Company"),
and each of the Investors identified in Schedule 1 hereto (collectively,
together with their successors and permitted assigns, the "Investors").
Capitalized terms used in this Agreement, and not otherwise defined herein, have
the meanings set forth in Article XIV.
WHEREAS, the Company has offered (the "Offering") the opportunity to
purchase Series A Cumulative Voting Preference Shares of the Company ("Series A
Preferred Stock" or "Shares") to the Investors pursuant to an Amended and
Restated Confidential Private Placement Memorandum, dated June 2, 1997 (together
with any amendments, modifications or supplements thereto as may be made from
time to time prior to the Closing Date (as defined below), the "Private
Placement Memorandum");
WHEREAS, each of the Investors wishes to subscribe for and purchase,
severally and not jointly, and the Company wishes to issue and allot the number
of Shares set forth opposite such Investor's name on Schedule 1 hereto on the
terms set forth herein;
WHEREAS, the Company will use a substantial portion of the proceeds of
the Investors' subscriptions to capitalize the Company's subsidiaries,
Commercial Guaranty Assurance, Ltd. ("CGA") and CGA Investment Management, Ltd.
("CGAIM" and, together with CGA, the "Initial Subsidiaries"), as described in
the Private Placement Memorandum;
In consideration of the premises and mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
AUTHORIZATION; SUBSCRIPTION FOR SERIES A PREFERRED STOCK
Section 1.1 The Series A Preferred Stock. The Company has authorized
the issuance and sale pursuant to this Agreement of up to 2,600,000 Shares, each
having such
rights, restrictions and privileges as are contained in or accorded by (i) the
Memorandum of Association of the Company in the form attached hereto as Annex I
(the "Memorandum of Association"), (ii) the Bye-laws of the Company,
substantially in the form attached hereto as Annex II and all appendices and
exhibits thereto (the "Bye-laws") and (iii) this Agreement. Subject to the terms
and conditions hereof, the Shares will be issued on the Closing Date.
Section 1.2 The Subscription for Series A Preferred Stock. Subject to
the terms and conditions of this Agreement, each of the Investors hereby
irrevocably subscribes for and agrees to purchase, severally and not jointly,
the number of Shares set forth opposite such Investor's name on Schedule 1
hereto for the purchase price specified in Article II hereof. No Investor shall
be obligated to purchase any of the Shares unless the conditions set forth in
Article III hereof shall have been satisfied or waived by such Investor on or
prior to the Closing Date. The Company shall not be obligated to sell any of the
Shares unless the conditions set forth in Article IV hereof shall have been
satisfied or waived by the Company on or prior to the Closing Date.
ARTICLE II
CLOSING
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place as follows:
(i) On the basis of the representations, warranties and
covenants herein set forth, the Company will sell to each of the Investors,
and each of the Investors will purchase from the Company, at the Closing on
June 17, 1997 or such later date (not later than June 30, 1997) as the
Company may designate upon not less than five Business Days prior written
notice, delivered by facsimile, to the Investors (the "Closing Date"), the
number of Shares set forth opposite each such Investor's name on Schedule 1
hereto for the consideration of a cash purchase price of U.S. $25.00 per
Share, to be paid on the Closing Date. The aggregate cash purchase price
for the number of Shares set forth opposite the name of each Investor on
Schedule 1 hereto is such Investor's "Aggregate Purchase Price."
(ii) At the Closing, subject to the terms and conditions of
this Agreement and on the basis of the representations, warranties and
covenants herein set forth, the Company will deliver to each of the
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Investors, or representatives thereof, a certificate or certificates
registered in the name of such Investor (or such other name as may be
indicated in writing to the Company prior to the Closing Date) representing
the aggregate number of Shares to be purchased by such Investor, against
payment of such Investor's Aggregate Purchase Price by either such Investor
or ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, on behalf of such Investor, by wire
transfer of immediately available funds to an account specified to the
Investors and the Placement Agents (as defined below) by the Company at
least three (3) Business Days prior to the Closing Date. The Closing will
take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇ in ▇▇▇▇▇▇▇▇, Bermuda at
10:00 a.m., Bermuda time, on the Closing Date.
ARTICLE III
CONDITIONS TO OBLIGATIONS OF THE INVESTORS
The obligation of each Investor to purchase the Series A Preferred
Stock under this Agreement is subject to the satisfaction at or prior to the
Closing Date of each of the following conditions:
Section 3.1 Accuracy of Representations and Warranties. All
representations and warranties of the Company and of each other Investor
contained herein shall be true in all material respects on and as of the Closing
Date as if made on and as of the Closing Date.
Section 3.2 Performance of Agreements; Regulatory. (i) The Company
shall have performed all obligations and agreements, and complied with all
covenants and conditions contained in this Agreement to be performed or complied
with by it prior to or at the Closing Date.
(ii) The Company and CGA shall have obtained all consents and
approvals of regulatory bodies and authorities in Bermuda necessary on the
Closing Date for CGA to carry on the business of an insurer and a reinsurer, and
CGAIM shall have obtained all consents and approvals of regulatory bodies and
authorities in the United States necessary on the Closing Date for CGAIM to
carry out its businesses. (It being understood that any such consent or approval
that is conditioned solely on the capitalization of the Company or either of the
Initial Subsidiaries (as contemplated in the Private Placement Memorandum)
through the application of the net proceeds of the Closing and the closing of
the purchases of Investment Units (other than pursuant to the Commitments) under
the Investment Units
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Subscription Agreement, dated as of or prior to the Closing Date, among the
Company and the investors named therein (the "Investment Units Subscription
Agreement") and the Founders' Common Stock Subscription Agreement, dated as of
or prior to the Closing Date, among the Company and the investors named therein
(the "Founders' Common Stock Subscription Agreement") and/or the consummation of
the transactions contemplated hereby shall be considered "obtained" for the
purposes of this Agreement).
(iii) CGA shall have received a letter from Duff & ▇▇▇▇▇▇
Credit Rating Company ("DCR") dated as of the Closing Date to the effect that
CGA will receive evidence of its AAA claims paying ability rating from DCR upon
the consummation of the transactions (other than a purchase pursuant to the
Commitments) contemplated hereby, by the Founders' Common Stock Subscription
Agreement and by the Investment Units Subscription Agreement, which letter shall
be in form and substance satisfactory to the Investors and shall have no other
conditions which need to be satisfied in order for CGA to receive a AAA claims
paying ability rating from DCR. The Commitments (as defined in the Investment
Units Subscription Agreement) shall be supported by supplemental obligations to
the extent contemplated by the Private Placement Memorandum and in accordance
with the Investment Units Subscription Agreement as in effect on the date
hereof.
(iv) The Minister of Finance of Bermuda ("Minister") shall have
granted to each of CGA and the Company a tax assurance (as described in the
Private Placement Memorandum) pursuant to the Exempt Undertakings Tax Protection
Act, 1966 of Bermuda.
(v) The Minister, through the offices of the Registrar of
Companies, has delivered to CGA a written approval, dated January 23, 1997,
authorizing CGA to reduce by 15% or more its total statutory capital as set out
in its previous year's financial statements, subject to such conditions as are
attached to the approval, and the Minister's approval shall not have been
revoked, amended or supplemented and a true, correct and complete copy of such
letter shall be included in the documents provided to each Investor at the
Closing. The parties understand that such approval is not necessarily binding on
the Bermudian authorities.
Section 3.3 Compliance Certificate. The Company shall have delivered
to such Investor a certificate, dated the Closing Date, of the Chief Executive
Officer of the Company to the effect that the conditions specified in Sections
3.1 (other than with respect to the representations
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and warranties of the Investors), 3.2, 3.4, 3.5, 3.8, 3.9, 3.10 and 3.11 have
been fulfilled.
Section 3.4 Bye-laws. The Bye-laws of the Company shall have been
adopted by the Company in the form attached as Annex II hereto.
Section 3.5 Warrant Agreement; Other Agreeements. Each Investor and
the Company shall have executed and delivered, in escrow pending completion of
the Closing, a separate Warrant Acquisition Agreement (the "Warrant Acquisition
Agreement"), in the form attached as Annex VI hereto, with respect to such
number of Warrants of the Company set forth opposite each such Investor's name
on Schedule 1 hereto. Each of the closing documents listed on Annex V hereto
(the "Other Closing Documents") shall have been, where appropriate, executed and
delivered to the Company, in escrow pending completion of the Closing, by the
parties thereto in substantially the form reviewed and found reasonably
acceptable by the Investors or counsel to the Investors (it being understood
that Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ is acting as counsel to the Placement
Agents (as defined below) and the Investors, respectively).
Section 3.6 Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇,
Bermuda special counsel for the Company, shall have delivered to such Investor
an opinion dated the Closing Date in substantially the form attached as Annex
III hereto.
Section 3.7 Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, special
counsel for the Company, shall have delivered to such Investor an opinion dated
the Closing Date in substantially the form attached as Annex IV hereto.
Section 3.8 Aggregate Funding. The total number of shares of Series A
Preferred Stock purchased by the Investors shall be not less than 2,600,000
Shares, the total number of Investment Units (as defined in the Private
Placement Memorandum) and common shares of the Company (the "Common Stock")
purchased by other investors shall be not less than 1,600,000 Investment Units
and 1,272,043 shares, respectively, and the Company shall have received
Commitments and gross proceeds from the sale of the Investment Units, the Series
A Preferred Stock and the Common Stock of not less than U.S. $210,500,000. The
Shares have been duly authorized and issued to the respective Investors.
Section 3.9 St. ▇▇▇▇▇▇. Each of the St. ▇▇▇▇▇▇ Holdings, Ltd. Class
A-SG Non-Voting Ordinary Shares and Class B-SG Voting Ordinary Shares
Subscription Agreement, dated as of or prior to the Closing Date (the "St.
▇▇▇▇▇▇
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Subscription Agreement"), among St. ▇▇▇▇▇▇ Holdings, Ltd. ("St. ▇▇▇▇▇▇") and the
investors named therein (the "St. ▇▇▇▇▇▇ Investors") and the Credit Agreement,
dated as of the Closing Date (the "Credit Agreement"), among St. ▇▇▇▇▇▇
Investments I, Ltd., as borrower, Thames Asset Global Securitization No. 1,
Inc., as lender, and other parties thereto, shall have been executed by the
parties thereto and delivered in escrow pending completion of the closing in
connection therewith and the Closing. The Credit Agreement will provide, subject
to certain conditions, for the establishment on the Closing Date of a $100
million Credit Facility for the benefit of St. ▇▇▇▇▇▇ and a commercially
reasonable best efforts obligation by the lender to syndicate an additional $400
million credit facility for the benefit of St. ▇▇▇▇▇▇. The transactions
contemplated by the St. ▇▇▇▇▇▇ Subscription Agreement and the Credit Agreement,
which are transactions to be completed on or prior to the Closing Date, shall
have been completed or will be completed simultaneously with the Closing.
Section 3.10 Avoidance of Conflicts. The Company shall have adopted a
resolution restricting any future transactions between the Company or any of its
Initial Subsidiaries or affiliates and ▇▇▇ ▇▇▇▇▇▇▇, The ▇▇▇▇▇▇▇ Group, any
affiliates of The ▇▇▇▇▇▇▇ Group or any shareholders of the Company with the
right to appoint a voting member of the Board of Directors or affiliates
thereof, in order to avoid the appearance of a potential conflict of interest.
Section 3.11 Appointment of Agent. The Company shall have appointed an
agent for service of process in accordance with Section 15.13.
Section 3.12 List of Shareholders. The Company shall have provided to
such Investor a list of the shareholders of the Company and their respective
shareholdings on the Closing Date.
If at or prior to the Closing all of the conditions of this Article
III have not been satisfied, any Investor may elect to waive such conditions or
to be relieved of all further obligations hereunder.
ARTICLE IV
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Series A Preferred
Stock under this Agreement is subject to the satisfaction at the Closing Date of
each of the following conditions:
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Section 4.1 Accuracy of Representations and Warranties. All
representations and warranties of each Investor contained herein shall be true
in all material respects on and as of the Closing Date as if made on and as of
the Closing Date.
Section 4.2 Performance of Agreements. Each Investor shall have
performed all obligations and agreements, and complied with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to or at the Closing Date and each such Investor shall notify the Company.
Section 4.3 Other Agreements. The Warrant Acquisition Agreement, in
the form attached as Annex VI hereto, with respect to such number of Common
Warrants of the Company set forth opposite each such Investor's name on Schedule
1 hereto, shall have been executed and delivered in escrow pending completion of
the Closing, by the parties thereto. Each of the Other Closing Documents shall
have been executed and delivered, in escrow pending completion of the Closing,
by the parties thereto in substantially the form reviewed by the Investors or
counsel to the Investors.
Section 4.4 Letters from Placement Agents. The Company shall have
received from each of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation and
Salomon Brothers Inc (the "Placement Agents") a letter dated as of the Closing
Date reasonably satisfactory to the Company, to the effect that neither it nor
any person (other than the Company and its Affiliates) authorized to act on its
behalf has used any form of general solicitation or general advertising in
connection with the offer and sale of the Series A Preferred Stock, including,
without limitation, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
Section 4.5 Payment for the Series A Preferred Stock. Each Investor
shall have delivered to the Company and the Company shall have received, full
payment in immediately available funds of the aggregate Purchase Price of such
Investor as set forth in Schedule 1 in respect of such Investor's purchase of
the Series A Preferred Stock.
Section 4.6 Aggregate Funding. The total number of the shares of
Series A Preferred Stock purchased by the Investors shall be not less than
2,600,000 Shares, the total number of Investment Units and shares of Common
Stock of the Company purchased by other investors shall be not less than
1,600,000 Investment Units and 1,272,043 shares,
7
respectively, and the Company shall have received Commitments and gross proceeds
from the sale of the Investment Units, the Series A Preferred Stock and the
Common Stock of not less than U.S. $210,500,000.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents, warrants and covenants to each of the
Investors as of the date of this Agreement and as of the Closing Date as
follows:
Section 5.1 Due Organization, Valid Existence and Authority of the
Company and the Company's Initial Subsidiaries. (a) The Company has been duly
incorporated and is validly existing under the laws of Bermuda. Upon completion
of the Closing, the Company will have full right, power and authority to carry
on its business as conducted and as proposed to be conducted as described in the
Private Placement Memorandum. The Company has full right, power and authority to
enter into this Agreement and the Other Closing Documents to which the Company
is a party, and perform its obligations hereunder and thereunder. The Memorandum
of Association, in the form attached hereto as Annex I is a true and complete
copy of the Memorandum of Association of the Company as in effect at the date of
this Agreement, and no amendment to such Memorandum of Association has been
proposed or adopted. At the Closing, the Bye-laws of the Company will be in the
form attached hereto as Annex II. Upon completion of the Closing, the Company
will not own any interest in or control, directly or indirectly, any other
corporations, partnerships or other entities, other than the Initial
Subsidiaries.
(b) Each of the Initial Subsidiaries has been duly incorporated and is
validly existing under the laws of its jurisdiction of incorporation. Upon
completion of the Closing and the closings under the Investment Units
Subscription Agreement and the Founders' Common Stock Subscription Agreement,
and the use of the proceeds therefrom as described in the Private Placement
Memorandum, each Initial Subsidiary will have the full right, power and
authority to carry on its business as proposed to be conducted as described in
the Private Placement Memorandum.
Section 5.2 Authorization and Validity of Agreements. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance,
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reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) (together, the "Creditor and Enforceability Exceptions"). Each of the
Other Closing Documents to which the Company is a party has been duly authorized
by the Company, and, when executed and delivered by the Company at the Closing,
will constitute a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the Creditor and
Enforceability Exceptions.
Section 5.3 Capitalization. The sale and the issuance of the Shares
have been duly authorized by the Company and, upon payment for the Shares in
accordance with Article II hereof, the Shares will be validly issued, fully paid
and non-assessable (meaning that no further sums will be payable in respect of
the holding of the Shares). Except as contemplated by its Memorandum of
Association and Bye-laws, the Shareholders Agreement to be dated on or prior to
the Closing Date, among the Company and the other parties named therein (as such
agreement may be amended, supplemented, restated or otherwise modified from time
to time in accordance with its terms, the "Shareholders Agreement"), the Common
Stock Warrant Acquisition Agreement in substantially the form attached as Annex
VI hereto, the Sponsoring Investors and Founders Stock Warrant Plan and the
Employee Stock Warrant Plan in substantially the forms attached as Annex X
hereto, and this Agreement, each of the Company and its Initial Subsidiaries
does not, and on the Closing Date will not, have any outstanding or authorized
options, warrants, calls, rights, commitments or any other agreements of any
character obligating it to issue any of its Capital Stock or any securities
convertible into or exchangeable for, or evidencing the right to purchase or
obtain, any of its Capital Stock or any agreements or understandings with
respect to the voting, sale or transfer of any of its Capital Stock or any
securities convertible into or exchangeable for or evidencing the right to
purchase or obtain any of its Capital Stock. The Company shall reserve such
shares of Capital Stock as may be purchased upon drawdown on the Commitments.
The Shares shall conform in all material respects to the description of such
Shares provided in the Private Placement Memorandum.
Section 5.4 No Conflict with Other Instruments; No Aprovals Required
Except as Have Been Obtained. (i) The execution and delivery of this Agreement
and the Other Closing Documents to which the Company is a party by the Company
and compliance by the Company with the terms and conditions hereof and thereof,
will not violate, with or
9
without the giving of notice or the lapse of time, or both, or require any
registration, qualification, approval or filing under, any provision of law,
statute, ordinance or regulation applicable to the Company or any Affiliate
thereof, and will not conflict with, or require any consent or approval under,
or result in the breach or termination of any provision of, or constitute a
default under, or result in the acceleration of the performance of the
obligations of the Company or any Affiliate thereof under, or result in the
creation of any claim, lien, charge or encumbrance upon any of the properties,
assets or businesses of the Company or any Affiliate thereof pursuant to the
Memorandum of Association or Bye-laws of the Company or the organizational
documents of such Affiliate, as the case may be, or any order, judgment, decree,
law, ordinance or regulation applicable to the Company or such Affiliate, as the
case may be, or any contract, instrument, agreement or restriction to which the
Company or such Affiliate, as the case may be, is a party or by which the
Company or such Affiliate, as the case may be, or any of its assets or
properties is bound. Except where the Company is obliged to obtain Bermuda
governmental approvals that have been obtained, neither the Company or any
Affiliate thereof nor any of the Company's or any of its Affiliates' respective
assets or properties is subject to any charter, bye-law, contract or other
instrument or agreement, order, judgment, decree, law, statute, ordinance or
regulation or any other restriction of any kind or character that would prevent
the Company from entering into this Agreement or the Other Closing Documents to
which the Company is a party or from consummating the transactions contemplated
hereby or thereby in accordance with the terms hereof or thereof.
(ii) The execution and delivery of the Other Closing Documents to
which each of the Initial Subsidiaries is a party by such Initial Subsidiary and
compliance by such Initial Subsidiary with the terms and conditions thereof,
will not violate, with or without the giving of notice or the lapse of time, or
both, or require any registration, qualification, approval or filing under, any
provision of law, statute, ordinance or regulation applicable to such Initial
Subsidiary or any Affiliate thereof, and will not conflict with, or require any
consent or approval under, or result in the breach or termination of any
provision of, or constitute a default under, or result in the acceleration of
the performance of the obligations of such Initial Subsidiary or any Affiliate
thereof under, or result in the creation of any claim, lien, charge or
encumbrance upon any of the properties, assets or businesses of such Initial
Subsidiary or any Affiliate thereof pursuant to the Memorandum of Association,
Articles of Incorporation or Bye-laws, as the case may be, of such Initial
Subsidiary or the organization documents of such Affiliate, as the case
10
may be, or any order, judgment, decree, law, ordinance or regulation applicable
to the Initial Subsidiary or such Affiliate, as the case may be, or any
contract, instrument, agreement or restriction to which such Initial Subsidiary
or such Affiliate, as the case may be, is a party or by which such Initial
Subsidiary or such Affiliate, as the case may be, or any of its assets or
properties is bound. Except where such Initial Subsidiary is obliged to obtain
Bermuda governmental approvals that have been obtained, neither such Initial
Subsidiary or any Affiliate thereof nor any of such Initial Subsidiary's or its
Affiliates' respective assets or properties is subject to any charter, bye-law,
contract or other instrument or agreement, order, judgment, decree, law,
statute, ordinance or regulation or any other restriction of any kind or
character that would prevent such Initial Subsidiary from entering into the
Other Closing Documents to which such Initial Subsidiary is a party or from
consummating the transactions contemplated thereby in accordance with the terms
thereof.
Section 5.5 Regulatory Filings; Compliance with Law. Upon completion
of the Closing and the closings under the Investment Units Subscription
Agreement and the Founders' Common Stock Subscription Agreement, and the use of
the proceeds therefrom (other than from the Commitments) as described in the
Private Placement Memorandum, CGA will be authorized on the Closing Date under
Bermuda law to conduct the business of selling insurance and reinsurance as
contemplated by the Private Placement Memorandum and no further approvals of the
insurance regulatory or other authorities of Bermuda are required for the
conduct of such business. Upon completion of the Closing, and the closing under
the Investment Units Subscription Agreement and the Founders' Common Stock
Subscription Agreement, and the use of proceeds therefrom as described in the
Private Placement Memorandum, CGAIM will be authorized on the Closing Date or
immediately thereafter under the applicable United States federal and state laws
to conduct its business as contemplated by the Private Placement Memorandum and
no further approvals of regulatory or other authorities are required for the
conduct of such business. Upon completion of the Closing and the closings under
the Investment Units Subscription Agreement and the Founders' Common Stock
Subscription Agreement, and the use of proceeds therefrom (other than from the
Commitments) as described in the Private Placement Memorandum, the Company and
the Initial Subsidiaries will be in compliance with all applicable laws and
regulations.
Section 5.6 Stamp Duties or Taxes. No Bermuda stamp, transfer or
similar duties or taxes are payable in respect of the issuance and delivery of
the Shares to the Investors pursuant to this Agreement provided that any such
11
Investor is not resident in Bermuda for exchange control purposes and if any
such taxes arise in connection with the execution of this Agreement, the Other
Closing Documents, or the consummation of any of the transactions contemplated
hereby or thereby, then the Company will pay such taxes.
Section 5.7 Private Offering of the Series A Preferred Stock
(a) The offer and sale and the issuance and delivery of the
Shares are intended to be exempt from the provisions of Section 5 of the United
States Securities Act of 1933, as amended (the "Securities Act"), and from the
registration provisions of the applicable state securities laws. Neither the
Company nor anyone acting on its behalf has taken, or omitted to take, any
action, with respect to the Shares or any securities similar to the Shares, or
otherwise, that would bring the sale and issuance of the Shares within the
provisions of Section 5 of the Securities Act or that would violate any blue sky
laws of a state of the United States or securities law of any foreign
jurisdiction (including Bermuda).
(b) In the case of each offer or sale of the Shares, no form of
general solicitation or general advertising was used by the Company or any
person authorized to act on behalf of the Company, including, without
limitation, any advertisement, article, notice or other communication published
in any newspaper, magazine or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(c) Neither the Company nor anyone acting on its behalf has
taken, or omitted to take, any action, with respect to any other shares of the
Company issued and sold by the Company that would bring the issuance and sale of
such shares within the provisions of Section 5 of the Securities Act or that
would violate any blue sky laws of a state of the United States or securities
law of a foreign jurisdiction (including Bermuda).
(d) Except for (i) the issuance of shares of capital stock of
the Company in connection with the initial organization of the Company (such
shares shall be redeemed by the Company at the Closing) and (ii) the issuance of
shares of capital stock by the Initial Subsidiaries to the Company, neither the
Company nor any Initial Subsidiary has issued or sold, or agreed to issue or
sell, any shares in the Company or any Initial Subsidiary to any persons other
than to the Investors pursuant hereto and to the other investors pursuant to the
subscription agreements contained in the Other Closing Documents.
12
Section 5.8 The Private Placement Memorandum. The Private Placement
Memorandum does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. There
is no fact which the Company has not disclosed herein or in the Private
Placement Memorandum or any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date that, so far
as the Company can foresee, is reasonably likely to have a material adverse
effect on the performance of obligations hereunder and under the other Closing
Documents by the Company and its Initial Subsidiaries, considered as a whole, or
on the business operations, financial condition, assets, liabilities or
prospects of the Company and its Initial Subsidiaries taken as a whole.
Section 5.9 Not an "Investment Company". Each of the Company and the
Initial Subsidiaries is not, and when conducting business as contemplated by the
Private Placement Memorandum will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the United
States Investment Company Act of 1940, as amended.
Section 5.10 Business Newly Formed. Each of the Company and its
Initial Subsidiaries is newly formed, has neither conducted any business nor
incurred any liabilities (other than organizational expenses with respect to the
Company and the Initial Subsidiaries, expenses associated with establishing the
businesses of the Subsidiaries and expenses in connection with the offering and
issuance of the securities of the Company and the Subsidiaries), has entered
into no material agreements and incurred no liens or encumbrances on present or
future assets or revenues, and has no proceedings pending against, or to the
Company's knowledge, threatened against or affecting it before any court,
governmental authority, arbitration board or tribunal, in each of the foregoing
cases, other than as disclosed in the Private Placement Memorandum or referred
to herein or in an attachment hereto.
Section 5.11 Operating Company. At the time the Company issues any
Shares, the Company shall be an "operating company" as defined in United States
Department of Labor Regulation section 2510.3-101(c) issued under the United
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Company shall at all times thereafter conduct its activities so that it
will continue to qualify as such an "operating company." As a result, pursuant
to United States Department of Labor Regulation section 2510.3-101(a)(2)(i), at
no time shall the assets of the Company constitute the assets of any Investor
13
or Member of the Company for purposes of Title I of ERISA or Section 4975 of the
United States Internal Revenue Code of 1986 (the "Code").
Section 5.12 No U.S. Trade or Business and not a Controlled Foreign
Corporation. The Company shall use its best efforts not to take, and to cause
CGA not to take, any action which the Company has reason to believe could cause
it or CGA to be considered engaged in the conduct of a trade or business in the
United States (within the meaning of Code Section 864) or to become a controlled
foreign corporation (within the meaning of Code Section 957) ("CFC"); provided,
however, that this Section 5.12 shall not apply to any action which affects the
election of directors pursuant to Section 12 of the Bye-laws; provided, further,
that it is hereby understood that the Company shall not be considered to violate
this Section 5.12 in the event that (x) the board of directors of the Company
(the "Board") shall, in its sole discretion, request the advice of counsel with
respect to a proposed action and counsel determines that such action will more
likely than not cause the Company or CGA to be engaged in the conduct of a trade
or business in the United States or become a CFC and (y) such proposed action to
be taken by the Company receives the prior approval of 75% of the members of the
Board then in office (for the sake of clarity, the foregoing imposes no
obligation on the Company or the Board to seek the advice of counsel prior to
taking any action unless the Company wishes to take advantage of this second
proviso to this Section 5.12). It is hereby understood that this Section 5.12
does not alter any provision in the Company's Bye-laws and all actions taken in
connection herewith must comply with such Bye-laws.
Section 5.13 Related Person Insurance Income. (a) The Company shall
use its best efforts to cause CGA not to sell insurance or reinsurance to a U.S.
person which is a shareholder of the Company ("U.S. Shareholder") or a related
person (within the meaning of Section 953(c)(6) of the Code) to a U.S.
Shareholder ("Related Person") and which would therefore generate related person
insurance income (within the meaning of Section 953(c)(2) of the Code) ("RPII")
if the Company knows that (i) 20% or more of CGA's gross insurance income in any
taxable year will be RPII and (ii) persons which are directly or indirectly
insured or reinsured by CGA ("Insureds") or Related Persons to Insureds own 20
percent or more of the stock of CGA ("Excess RPII"); provided, however, that it
is hereby understood that the Company shall not be considered to violate this
Section 5.13(a) by virtue of such sale which the Company has reason to believe
will generate Excess RPII if the Company receives the prior approval of 100% of
the members of the Board then in office, provided, further, that it is hereby
understood that this Section 5.13(a) does not alter any provision in
14
the Company's Bye-laws and all actions taken in connection herewith must comply
with such Bye-laws.
(b) In the event that the Board shall have given prior authorization
(as provided in subsection (a) of this Section 5.13) for CGA to sell insurance
or reinsurance which the Company has reason to believe will generate Excess RPII
for any tax year, unless a U.S. statute, a final regulation of the U.S. Treasury
or a published ruling of the U.S. Internal Revenue Service issued after the
Closing Date provides or establishes that subpart F insurance income (as defined
in Code Section 953) does not constitute unrelated business taxable income (as
defined in Code Section 512), the Company shall so notify any U.S. Shareholder
which is subject, pursuant to Code Section 511, to tax on its unrelated business
taxable income not later than June 30 of the tax year in which the Company
proposes that CGA generate Excess RPII.
Section 5.14 Operating Guidelines. Attached hereto as Annex VII is a
true, correct and complete copy of the operating guidelines of the Company and
the Initial Subsidiaries (the "Operating Guidelines"), which were adopted by all
necessary corporate action of the Board at a duly called and convened meeting of
the Board. The resolution(s) pursuant to which the Operating Guidelines were
adopted provides that the Operating Guidelines may be amended or revoked only
pursuant to a resolution adopted by a two-thirds vote of the Board at a duly
called and convened meeting of the Board. To the extent the Operating Guidelines
are followed by the Company and the Initial Subsidiaries, (i) neither the
Company nor CGA will be considered to be engaged in the conduct of a trade or
business in the United States through a U.S. "permanent establishment" as
defined in Article 3 of the Convention between the Government of the United
States of America and the Government of the United Kingdom of Great Britain and
Northern Ireland (on behalf of the Government of Bermuda) relating to the
Taxation of Insurance Enterprises and Mutual Assistance in Tax Matters and (ii)
neither the Company nor any Initial Subsidiaries will be considered to be
transacting the business of insurance in any state of the United States without
appropriate licenses or approvals. The Company knows of no reason why it and the
Initial Subsidiaries cannot now and will not in the future be able to
continuously comply with the Operating Guidelines. The Company knows of no
reason why compliance with the Operating Guidelines would result in the
company's inability to meet the projections set forth in the Private Placement
Memorandum.
Section 5.15 Passive Foreign Investment Company. The Company shall use
its best efforts to operate its
15
business in such manner that neither the Company nor CGA will be considered a
passive foreign investment company under Section 1296 of the Code.
Section 5.16 Use of Proceeds of the Offering. The Company shall use
the net proceeds of this subscription (after payment of placement agent fees and
other fees and expenses incurred by the Company in connection with the Offering,
the offering of the Investment Units and the Common Stock to other investors and
the organization and establishment of the Company and the Initial Subsidiaries,
which fees and expenses shall be substantially as described in the Private
Placement Memorandum) as capital to engage in the financial guarantee insurance
business as described in the Private Placement Memorandum. On the Closing Date,
CGA will be capitalized with $125,000,000 and will have received Acknowledgments
with respect to each investor's obligation under Section 1.3 of the Investment
Units Subscription Agreement.
Section 5.17 Shareholders. Schedule 2 to this Agreement represents a
true and complete list of the shareholders of the Company upon completion of the
Closing and their respective shareholdings on the Closing Date.
Section 5.18 St. ▇▇▇▇▇▇ Representations. The Company has no reason to
believe that the representations and warranties given by St. ▇▇▇▇▇▇ to the St.
▇▇▇▇▇▇ Investors pursuant to the St. ▇▇▇▇▇▇ Subscription Agreement are not true
and complete as of the date made thereunder and as of the Closing Date.
Section 5.19 Bermuda Withholding Tax. The payment of dividends on or
the making of distributions or redemption payments to any holder of the Series A
Preferred Stock will not be subject to any tax withholding requirement under
current Bermuda tax law.
Section 5.20 No Events of Non-Compliance. No event has occurred and no
condition exists which, upon the consummation of transactions under this
Agreement or any Other Closing Document would constitute an Event of
Non-Compliance under Article VIII with or without notice or lapse of time or
both.
Section 5.21 Registration Rights. Other than as provided in this
Agreement and the Shareholders Agreement, the Company has not agreed to register
any of its Capital Stock under the Securities Act.
Section 5.22 Letter Agreement with DCR. In connection with obtaining
its AAA rating from DCR, the Company will enter into a letter agreement with
DCR, dated
16
as of the Closing Date, in substantially the form attached as Annex IX hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
THE INVESTORS
Each of the Investors, severally and not jointly, hereby represents
and warrants to the Company as of the date of this Agreement and as of the
Closing Date as follows:
Section 6.1 Due Organization, Good Standing and Authority of the
Investor. Such Investor is a corporation, partnership, limited liability
company, trust or other legal entity and is duly organized, validly existing and
in good standing under the laws of such Investor's jurisdiction of organization
and not resident in Bermuda for Bermuda foreign exchange control purposes.
Section 6.2 Authorization and Validity of Agreements. This Agreement
has been duly authorized, executed and delivered by such Investor and, assuming
the due authorization, execution and delivery by the other parties hereto,
constitutes a valid and binding obligation of such Investor enforceable against
such Investor in accordance with its terms subject to the "Creditor and
Enforceability Exceptions".
Section 6.3 Investment Intent. Such Investor is acquiring the Shares
for its own account as principal or for one or more separate accounts maintained
by such Investor or for the account of one or more pension or trust funds of
which such Investor is trustee, in each case, for investment purposes only, and
not with a view to, or for, the resale or other distribution thereof, in whole
or in part, other than pursuant to the Exchange Offer Registration Statement or
the Shelf Registration Statement (as defined herein) pursuant to this Agreement;
provided that, subject to the terms hereof, the disposition of such Investor's
or their property shall at all times be within such Investor's or their control.
Section 6.4 No Conflict with Other Instruments; No Approvals Required
Except as Have Been Obtained. The execution and delivery of this Agreement, by
such Investor and the compliance by such Investor with the terms and conditions
hereof will not violate, with or without the giving of notice or the lapse of
time, or both, or require any registration, qualification, approval or filing
under, any provision of law, statute, ordinance or regulation applicable to such
Investor, and will not conflict with, or require any consent or approval under,
or result in the
17
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of such
Investor under, or result in the creation of any claim, lien, charge or
encumbrance upon any of the properties, assets or businesses of such Investor
pursuant to the articles of incorporation or by-laws of such Investor (if such
Investor is a corporation) or equivalent organizational documents (if such
Investor is not a corporation) or any order, judgment, decree, law, statute,
ordinance or regulation applicable to such Investor or any contract, instrument,
agreement or restriction to which such Investor is a party or by which such
Investor or any of its assets or properties is bound, other than any such (i)
violation, (ii) failure to register, qualify, obtain approval or file, (iii)
conflict, (iv) breach, termination or default, (v) acceleration or (vi) creation
of claim, lien, charge or encumbrance that would not, individually or in the
aggregate, have a material adverse effect on such Investor's ability to
consummate the transactions contemplated hereby. Neither such Investor nor any
of its assets or properties is subject to any charter, by-law, contract or other
instrument or agreement, order, judgment, decree, law, statute, ordinance or
regulation or any other restriction of any kind or character that would prevent
such Investor from entering into this Agreement or from consummating the
transactions contemplated hereby in accordance with the terms hereof other than
that which would not, individually or in the aggregate, have a material adverse
effect on such Investor's ability to consummate the transactions contemplated
hereby in accordance with the terms hereof. Notwithstanding anything in this
Agreement to the contrary, no representation or warranty is made by any Investor
regarding compliance with ERISA or Section 4975 of the Code, or the effect under
ERISA or Section 4975 of the Code of the execution and delivery of this
Agreement, and the compliance by such Investor with the terms and conditions
hereof.
Section 6.5 Investor Awareness and Suitability. Such Investor
acknowledges, agrees and is aware that:ility
(i) An investment in the Shares involves a high degree of risk,
including, without limitation, the risks identified under the caption "Risk
Factors" in the Private Placement Memorandum, and such Investor may lose
the entire amount of its investment and such Investor has the knowledge and
experience in financial affairs that it is capable of evaluating the merits
and risks of purchasing the Shares;
(ii) The Company has only recently been organized and has no
financial or operating history;
18
(iii) The Private Placement Memorandum contains a summary of
certain United States and Bermuda tax consequences under current laws
relating to (i) the United States federal income taxation of the Company
and of U.S. Persons (as defined below) and non-U.S. Persons that own Shares
of the Company and (ii) the Bermuda taxation of persons or entities not
resident in Bermuda for exchange control purposes that own Shares of the
Company. Positions of, and developments in rulings of, the United States
Internal Revenue Service, court decisions or legislative or administrative
actions may have an adverse effect on one or more of the tax benefits
sought by the Company. Moreover, the Company retains the right to alter the
conduct of its affairs in such a manner as to subject its business to
United States federal and/or state taxation. The Private Placement
Memorandum does not address the Bermuda taxation of Investors that are
resident in Bermuda for exchange control purposes or the taxation of
Investors by any jurisdiction other than the United States or Bermuda,
which tax consequences may be significantly different from the tax
consequences discussed in the Private Placement Memorandum. (For purposes
of this Section 6.5, "U.S. Person" means an individual who is a citizen or
resident of the United States, a corporation or partnership created or
organized under the laws of the United States or any state thereof, an
estate, the income of which, from non-U.S. sources and not effectively
connected with the conduct of a trade or business in the United States, is
includable in gross income for United States federal income tax purposes,
or a trust, if (i) a court within the United States may exercise primary
supervision of the trust, and (ii) one or more United States fiduciaries
have the authority to control all substantial decisions of the trust);
(iv) No Bermuda or United States federal or state regulatory
authority or any foreign agency has passed upon the accuracy, adequacy,
validity or completeness of the Private Placement Memorandum or this
Agreement or made any finding or determination as to the fairness of an
investment in the Shares;
(v) The Bye-laws and this Agreement contain substantial
restrictions on the transferability of the Shares;
(vi) The Shares have not been registered under the Securities
Act or under the securities laws of any other jurisdiction, including the
states of the United States and, except as otherwise provided with respect
to the Exchange Offer Registration Statement or
19
the Shelf Registration Statement as set forth herein, the Company is under
no obligation to, and currently does not intend to, register or qualify the
Shares for resale by such Investor or assist such Investor in complying
with any exemption under such securities laws or the securities laws of any
such jurisdiction or any other jurisdiction;
(vii) Such Investor shall hold the Shares subject to this
Agreement and the Bye-laws of the Company from time to time in effect and
shall have voting rights with respect to the Shares as specified in the
Bye-laws of the Company from time to time in effect;
(viii) It is intended that no person or entity may acquire or
own, directly, indirectly or by attribution (within the meaning of Section
958 of Code) 10% or more of the total combined voting power of the Common
Stock, the Series A Preferred Stock and the Series B Preferred Stock as
such voting power is described in the Bye-laws.
Section 6.6 Accredited Investor Status. Such Investor hereby
represents and warrants to the Company that it qualifies as an "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3), (7) or (8) of
Regulation D under the Securities Act.
Section 6.7 Series A Preferred Stock Ownership Limitations. To such
Investor's knowledge, such Investor's purchase on the Closing Date of Shares
pursuant to this Agreement will not cause any person or entity to own on the
Closing Date directly, indirectly or by attribution (within the meaning of
Section 958 of the Code) 10% or more of the total combined voting power of the
Common Stock, the Series A Preferred Stock and the Series B Preferred Stock as
such voting power is described in the Bye-laws, or to be treated by virtue of
its ownership of stock in the Company as indirectly or constructively owning on
the Closing Date 10% or more of the voting power of all classes of capital stock
of CGA entitled to vote. Such Investor may rely on the list of anticipated
shareholders of the Company and their respective anticipated shareholdings set
forth in Schedule 2 hereto for purposes of making this representation and
warranty.
20
ARTICLE VII
BUSINESS COVENANTS
The Company covenants and agrees that so long as any Shares shall be
issued and outstanding:
Section 7.1 Limitation on Company Indebtedness and Preferred Stock.
The Company will not, directly or indirectly, Incur any Indebtedness or any
Preferred Stock unless (i) no Event of Non-Compliance (and no event that, with
notice, lapse of time or both, would be an Event of Non-Compliance) shall have
occurred and be continuing at the time or would occur as a consequence of the
Incurrence of such Indebtedness or issuance of such Preferred Stock and (ii)
such Indebtedness or Preferred Stock constitutes Permitted Company Indebtedness
And Preferred Stock; provided, however, that this Section 7.1 shall not (i)
restrict the Company's ability to Incur Insurance Obligations, directly or
indirectly or (ii) to issue the Series B Preferred Stock pursuant to the
Commitments.
Section 7.2 Limitation on Restricted Subsidiary Indebtedness and
Preferred Stock. The Company will not permit any of its Restricted Subsidiaries
to Incur, directly or indirectly, any Indebtedness or to issue any Preferred
Stock unless (i) no Event of Non-Compliance (and no event that, with notice or
lapse of time or both, would be an Event of Non-Compliance) shall have occurred
and be continuing at the time or would occur as a consequence of the Incurrence
of such Indebtedness or issuance of such Preferred Stock and (ii) such
Indebtedness or Preferred Stock is Permitted Restricted Subsidiary Indebtedness
And Preferred Stock; provided, however, that this Section 7.2 shall not restrict
any Restricted Subsidiary's ability to Incur, directly or indirectly, Insurance
Obligations.
Section 7.3 Limitation on Restricted Payments. The Company will not,
and will not permit any of its Restricted Subsidiaries to make, directly or
indirectly, any Restricted Payment if, at the time of or after giving effect to
the proposed Restricted Payment, (i) any Event of Non-Compliance (or any event
that, with notice or lapse of time or both, would be an Event of Non-Compliance)
shall have occurred and be continuing at such time or (ii) the aggregate amount
expended or declared for all Restricted Payments after the Closing Date exceeds
the sum of (A) 50% of the Consolidated Net Income of the Company (or, if
Consolidated Net Income shall be a deficit, minus 100% of such deficit)
beginning on the Closing Date and ending on the last day of the fiscal quarter
immediately preceding the date of such Restricted Payment plus (B) 100% of the
aggregate net cash proceeds received by the Company
21
subsequent to the Closing Date from (without duplication) (1) capital
contributions from stockholders (other than pursuant to the Commitments) and (2)
the issuance or sale (other than to a Subsidiary) of Capital Stock (other than
pursuant to the Commitments), including Capital Stock issued upon conversion of
convertible debt and from the exercise of options, warrants or rights to
purchase Capital Stock, but excluding Redeemable Stock; provided, however, that
this Section 7.3 shall not prevent (i) the Company from paying any dividend on
its Capital Stock within 60 days after the declaration thereof if, on the
declaration date, the Company could have paid such dividend in compliance with
the preceding paragraph, (ii) the making of any dividend or redemption payments
in respect of the Series A Preferred Stock and (iii) the making of Permitted
Investments.
Section 7.4 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, cause to exist or become
effective or enter into any encumbrance or restriction (other than pursuant to
applicable laws or regulations) on the ability of any Restricted Subsidiary (i)
to pay dividends, make redemption payments or make any other distributions in
respect of its Capital Stock, or repay any Indebtedness or other obligation owed
to the Company or any other Restricted Subsidiary of the Company, (ii) to make
loans or advances to the Company or any other Restricted Subsidiary of the
Company, or (iii) to transfer any of its property or assets to the Company or
any other Restricted Subsidiary of the Company, except for:
(a) any encumbrance or restriction pursuant to an agreement relating
to an acquisition of assets or property, so long as the encumbrances or
restrictions in any such agreement relate solely to the assets or property so
acquired;
(b) any encumbrance or restriction relating to any Restricted
Subsidiary's Indebtedness in effect as of the date on which such Restricted
Subsidiary was acquired by the Company or any other Restricted Subsidiary of the
Company (other than Indebtedness Incurred by such Restricted Subsidiary in
connection with or in anticipation of such acquisition);
(c) any encumbrance (i) by direct lien on assets, through a trust or
otherwise, to the extent such lien has not been foreclosed upon, or (ii)
securing obligations to reimburse letters of credit and similar instruments,
permitted by clause (b) of the defined term "Insurance Obligations" in Article
XIV, in either case, securing
22
insurance, reinsurance or retrocessional obligations entered into in the
ordinary course of business;
(d) any encumbrance or restriction in respect of Permitted Company
Indebtedness And Preferred Stock or Permitted Restricted Subsidiary Indebtedness
And Preferred Stock;
(e) any encumbrance under employee pension plans (provided that any
such benefits granted to employees are in compliance with the standards set
forth in clauses (i) through (iv) of Section 7.7), employee health insurance
plans (provided that any such benefits granted to employees are in compliance
with the standards set forth in clauses (i) through (iv) of Section 7.7),
workmen's compensation laws, unemployment insurance laws or similar legislation,
or good faith encumbrances Incurred in connection with bids, tenders or
contracts, excluding contracts for the payment of Indebtedness, but including
insurance and reinsurance contracts, or with or for the benefit of regulatory
authorities, insureds or reinsureds, in each case Incurred in the ordinary
course of business;
(f) any encumbrance to secure public or statutory obligations
(including under insurance regulations) or contested taxes and import duties, in
each case Incurred in the ordinary course of business;
(g) any encumbrance or restriction securing a refinancing of
Indebtedness secured pursuant to an encumbrance or restriction referred to in
the foregoing clauses so long as the encumbrances and restrictions securing such
refinancing are no more restrictive and are with respect to no greater principal
amount than the encumbrances and restrictions securing the Indebtedness being
refinanced;
(h) customary provisions restricting subletting or assignment of any
lease of the Company or any Restricted Subsidiary or provisions in agreements
that restrict the assignment of such agreement or any rights thereunder; and
(i) such restriction set forth in the Company's and its Initial
Subsidiaries' undertakings in the letter to DCR in substantially the form of
Annex IX hereto.
Section 7.5 Limitation on Sales of Assets and Capital Stock.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, consummate any Specified Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of
23
such Specified Asset Sale at least equal to the Fair Market Value (as evidenced
by a Certified Resolution of the Board of Directors of the Company) of the
property sold or otherwise disposed of, (ii) at least 85% of the consideration
received by the Company or such Restricted Subsidiary, as the case may be, for
such property consists of cash and cash equivalents and (iii) the Company or
such Restricted Subsidiary, as the case may be, uses the Net Cash Proceeds in
the manner set forth in this Section 7.5, if permissible under applicable laws
or regulations.
(b) Within 270 calendar days after any Specified Asset Sale, the
Company or such Restricted Subsidiary, as the case may be, may at its option (i)
reinvest up to an amount equal to the Net Cash Proceeds from such disposition in
additional assets related to the Company's principal lines of business
("Replacement Assets") and/or (ii) apply up to an amount equal to such Net Cash
Proceeds to the reduction of the Indebtedness of the Company or of any
Restricted Subsidiaries of the Company. Any Net Cash Proceeds from any Specified
Asset Sale that are not used either to reinvest in Replacement Assets or repay
Indebtedness of the Company or of the Company's Restricted Subsidiaries will
constitute "Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds exceeds U.S.$5
million, the Company shall make an offer to repurchase in exchange for a cash
amount equal to the Excess Proceeds, on a pro rata basis from all holders of the
Series A Preferred Stock, an aggregate number of Shares with respect to which
100% of the Series A Preferred Stated Value, together with accrued and unpaid
dividends thereon through the repurchase date, if any, equals, as nearly as
practicable, the aggregate amount of Excess Proceeds. To the extent that any
amount of Excess Proceeds remains after completion of such offer to repurchase,
the Company or such Restricted Subsidiary shall use such remaining amount for
general corporate purposes and the amount of Excess Proceeds for purposes of
this Section 7.5 shall be reset to zero.
Section 7.6 Limitation on Release of Commitments. The Company shall
not amend, modify, fail to comply with, waive or fail to enforce any provision
of, or assign (other than with respect to a Restricted Subsidiary which shall
comply with this covenant) any of its rights or obligations in respect of any
provision of, Section 1.3 of the Investment Units Subscription Agreement or any
Acknowledgment (as defined in the Investment Units Subscription Agreement)
without the written consent of 90% of the issued and outstanding shares of
Series A Preferred Stock.
24
Section 7.7 Limitation on Transactions with Affiliates. Except for
reinsurance agreements entered into with Capital liates Reinsurance Company or
its Affiliates pursuant to the letter agreement as in effect on the date hereof,
a copy of which is attached as Annex VIII hereto, the Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
conduct any business or enter into any transaction or series or transactions,
with or for the benefit of any Affiliate of the Company, unless (i) such
transaction or series of transactions is in the best interest of the Company or
such Restricted Subsidiary, (ii) such transaction or series of transactions is
on terms no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained in a comparable arms-length transaction with an
unrelated third party, (iii) with respect to a transaction or series of
transactions involving aggregate payments or value in excess of U.S.$1 million
(other than transactions in the ordinary course of business (A) involving the
insurance or reinsurance of risks, (B) involving the brokering of insurance or
reinsurance, or (C) as otherwise contemplated in the Private Placement
Memorandum), the Company's Board of Directors (including a majority of the
disinterested directors thereof) approves such transaction or series of
transactions and in its good faith judgment believes that such transaction or
series of transactions complies with clauses (i) and (ii) of this paragraph, as
evidenced by a Certified Resolution, and (iv) with respect to a transaction or
series of transactions involving aggregate payments or value in excess of U.S.$3
million (other than transactions in the ordinary course of business (A)
involving the insurance or reinsurance of risks, (B) involving the brokering of
insurance or reinsurance, or (C) as otherwise contemplated in the Private
Placement Memorandum), the Company, in addition to complying with clause (iii)
of this paragraph, obtains an opinion from an internationally recognized expert
with experience in appraising the terms and conditions of the relevant type of
transaction stating that the transaction is fair from a financial point of view
to the Company or such Restricted Subsidiary. In addition, the Company will not
and will not permit the Restricted Subsidiaries to enter into any transaction or
series of transactions (other than the agreements with Capital Reinsurance
Company or its Affiliates referred to above) with any Person who holds the right
to designate only one voting member of the Company's Board of Directors or any
Affiliate of such a Person, unless such transaction or series of transactions is
(1) in the best interests of the Company as determined by the disinterested
members of the Board and (2) entered into on an arms-length basis.
Section 7.8 Limitation on Merger, Consolidation and Sale of Assets.
The Company will not, and will not permit any Restricted Subsidiary to, merge,
amalgamate or
25
consolidate with any other entity (other than a merger or amalgamation of a
Restricted Subsidiary into the Company or a merger or amalgamation of a
Restricted Subsidiary with another Restricted Subsidiary) or, sell, convey,
assign, transfer, lease or otherwise dispose of all or substantially all of its
assets unless (a) if the Company is a party to the transaction and is not the
surviving entity, the entity formed by or surviving any such consolidation,
amalgamation or merger or to which such sale, transfer or conveyance is made
shall be a corporation organized and existing under the laws of Bermuda, the
United States of America or a State thereof or the District of Columbia and such
corporation expressly agrees to be bound by this Agreement; (b) immediately
before and after giving effect to such transaction or series of transactions on
a pro forma basis, no Event of Non-Compliance (and no event that, after notice
or lapse of time, or both, would become an Event of Non-Compliance) shall have
occurred and be continuing; and (c) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness Incurred or anticipated to be Incurred, or
Preferred Stock issued or anticipated to be issued in connection with such
transaction or series of transactions), the Company or the surviving entity, as
the case may be, would have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to the transaction
or series of transactions giving rise to the need to calculate Consolidated Net
Worth.
Section 7.9 Restricted and Unrestricted Subsidiaries.
(a) As of the Closing Date, each of the Initial Subsidiaries shall be
classified as a "Restricted Subsidiary". Except as provided in Section 7.9(b)
and in compliance with Section 7.9(e), any Person that is or becomes a
Subsidiary of the Company or any of its Restricted Subsidiaries shall be
classified as a "Restricted Subsidiary". A Restricted Subsidiary may not be
redesignated as an "Unrestricted Subsidiary" except as provided in Section
7.9(b).
(b) For the purposes of this Agreement, the Company may designate a
Subsidiary (including a newly formed or newly acquired Subsidiary, but excluding
any of the Initial Subsidiaries) of either the Company or any of its Restricted
Subsidiaries as an "Unrestricted Subsidiary" if (i) both (a) such Subsidiary
does not have any obligations which, if an event of default occurred thereunder,
would result, with notice or lapse of time or both, in a cross-default on
Indebtedness of any of the Company's Restricted Subsidiaries and (b) such
Subsidiary has less
26
than U.S.$1,000 of assets or (ii) such designation is effective immediately upon
such Person becoming a Subsidiary of either the Company or any of its Restricted
Subsidiaries.
(c) The Company may redesignate, at any time, an Unrestricted
Subsidiary as a Restricted Subsidiary if, after giving effect to such an action,
the Company is in compliance with Section 7.9(e).
(d) The designation of an Unrestricted Subsidiary pursuant to Section
7.9(b) or the removal of such designation pursuant to Section 7.9(c) shall be
made by the Company's Board of Directors pursuant to a Certified Resolution and
shall be effective as of the date specified in such Certified Resolution, which
shall not be prior to the date of such Certified Resolution.
(e) Notwithstanding any other provision of this Section 7.9, the
Company will not, and will not permit any of its Restricted Subsidiaries to,
take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition, the redesignation of an Unrestricted Subsidiary or otherwise)
unless, after giving effect to such action, transaction or series of
transactions, on a pro forma basis, the Company would have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company prior
to the transaction giving rise to the need to make such calculation.
(f) At all times the Company or a Wholly-Owned Restricted Subsidiary
thereof shall own all of the Capital Stock of the Restricted Subsidiaries of the
Company.
ARTICLE VIII
EVENTS OF NON-COMPLIANCE
An "Event of Non-Compliance" shall exist if any of the following
occurs and is continuing:
(a) failure by the Company to pay (i) prior to the fifth anniversary
of the Closing Date, a quarterly dividend in the form of Series A Preferred
Stock or (ii) from the fifth anniversary of the Closing Date, a quarterly cash
dividend at the applicable Series A Preferred Dividend Rate (as defined in the
Bye-laws) (A) in the case of (i) and (ii), on each share of Series A Preferred
Stock then outstanding and (B) in the case of (i) and (ii), in the event that
there are any undistributed dividends payable in the form of Series A Preferred
Stock, on each such undistributed share of Series A Preferred Stock; provided,
27
however, that there shall not be an "Event of Non-Compliance" under this clause
(a) unless the sum of the aggregate Series A Preferred Stated Value (as defined
in the Bye-laws of the Company) for the unpaid stock dividends under clause (i)
and the aggregate unpaid cash amount under clause (ii) is, in the aggregate, in
excess of U.S. $5 million;
(b) failure of the Company to pay the redemption price and premium, if
any, in respect of any of the shares of Series A Preferred Stock when due,
notwithstanding the legal restrictions on redemption payments described in
paragraph (f) of Section 5 of Appendix A to the Bye-laws as in effect on the
Closing Date, upon mandatory or optional redemption, required purchase or
otherwise;
(c) failure by the Company or any Restricted Subsidiary of the Company
to comply with any of the applicable restrictions and limitations and covenants
and agreements described in Article VII and Section 9.1 for a period of 60 days
following notice of such failure from the holders of 25% or more of the
outstanding aggregate Liquidation Value of the Series A Preferred Stock unless
such compliance has been waived by the holders of a majority of the outstanding
aggregate Liquidation Value of the Series A Preferred Stock;
(d) failure by the Company or any Restricted Subsidiary of the Company
to pay any amounts in respect of Indebtedness or Preferred Stock when due (after
giving effect to any applicable grace period) or the acceleration of any such
payment obligations and, in either case, the total amount of such unpaid or
accelerated amount exceeds, individually or in the aggregate, U.S.$5 million;
(e) any default (other than under clauses (a), (b), (c) and (d) of
this Section 8.1) in the performance of or compliance with any obligation, or
any defined event of default, which is not cured or waived by all relevant
parties within the applicable cure period (if any) and arises under the terms of
contracts and instruments pursuant to which the Company or any Restricted
Subsidiary of the Company has Incurred any Indebtedness or issued any Preferred
Stock to any Person under which the amount unpaid, individually or in the
aggregate, exceeds U.S.$5 million;
(f) the entry by a court of competent jurisdiction of one or more
judgments or orders against the Company or any of its Restricted Subsidiaries in
an uninsured aggregate amount in excess of U.S.$10 million and such judgment or
order is (i) not discharged, waived, stayed or satisfied for a period of 45
consecutive days or (ii) the
28
subject of an ongoing appeal and the Company is not obligated to pay such amount
while such appeal is pending.
(g) the Company or any Restricted Subsidiary shall
(i) make a general assignment for the benefit of, or enter into
any composition or arrangement with, creditors;
(ii) apply for, or consent (by admission of material
allegations of a petition or otherwise) to the appointment of a receiver,
trustee, custodian, liquidator (or similar official) of the Company or any
Restricted Subsidiary or of a substantial part of any of such corporation's
assets, or authorize such application or consent;
(iii) file a petition under Title 11 of the United States Code
(or similar law of the United States or any other jurisdiction which
relates to the liquidation or reorganization of companies or to the
modification or alteration of the rights of creditors); or
(iv) permit or suffer all or any substantial part of its
property to be sequestered or attached by court order and such order shall
remain undismissed for 60 days; or
(h) there shall have been entered an order or decree for relief in a
case under Title 11 of the United States Code (or similar law of the United
States or any other jurisdiction which relates to liquidation or reorganization
of companies or the modification or alteration of the rights of creditors)
commenced by the filing of a petition against the Company or a Restricted
Subsidiary or for appointment of a receiver, trustee, custodian, liquidator (or
similar official) of the Company or a Restricted Subsidiary, or of a substantial
part of any of such corporation's assets obtained without the consent of the
Company or such Restricted Subsidiary, or for the winding-up or liquidation of
the Company or a Restricted Subsidiary, and such order or decree shall have
continued unstayed or undismissed and in effect for a period of 60 days; or
(i) CGA's claims paying ability rating is downgraded below a AA-
rating by DCR (or the then-equivalent rating by DCR in the event such rating
agency changes its rating designations after the date hereof) for a period of 45
consecutive days.
29
ARTICLE IX
REPORTING
Section 9.1 Reporting. (a) So long as the Company is neither subject
to Section 13 or 15(d) of the Exchange Act nor exempt from reporting pursuant to
Rule 12g3-2(b) under the Exchange Act, the Company will furnish to the holders
of the Series A Preferred Stock, to prospective investors, and to securities
analysts the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
(b) Prior to the effectiveness of a registration statement relating to
the Series A Preferred Stock, the Company will furnish to the holders of the
Series A Preferred Stock the quarterly and annual financial statements and
related notes, an accompanying Management's Discussion and Analysis of Financial
Condition and Results of Operations and the information, documents and other
reports in the format that would be required to be included in the Company's
periodic reports filed with the United States Securities and Exchange Commission
(the "Commission") if the Company were required to file such reports with the
Commission. The Company will furnish such information to the holders of the
Series A Preferred Stock within 15 days after the date on which the Company
would have been required to file such reports with the Commission.
(c) Following the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement, the Company will furnish to the
holders of the Series A Preferred Stock, within 15 days after it files them with
the Commission, copies of the annual and quarterly reports and the information,
documents and other reports that the Company is required to file with the
Commission pursuant to Sections 13 and 15(d) of the Exchange Act.
Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 and 15(d) of the Exchange Act, to the
extent permitted by the Exchange Act, the Company shall continue to file with
the Commission and provide the holders of the Series A Preferred Stock with the
annual reports and the information, documents and other reports that are
specified in Section 13 and 15(d) of the Exchange Act. In the event that the
Company is not permitted to file such reports, documents and information with
the Commission, the Company will provide substantially similar information with
respect to itself and its Subsidiaries to the holders of the Series A Preferred
Stock as if the Company were subject to the reporting requirements of the
Section 13 and 15(d) of the Exchange Act.
30
Section 9.2 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the restricted securities to the public without registration, the
Company agrees to:
(A) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to
the general public;
(B) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act at any time after it has become
subject to such reporting requirements; and
(C) furnish to each holder of the Series A Preferred Stock upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 under the Securities Act (at any time
from and after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as such holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing such holder to sell
any such securities without registration.
Section 9.3 Bermuda Laws. The Company has and will maintain all
necessary consents and approvals for the Shares to be traded without restriction
under Bermuda law.
ARTICLE X
REGISTERED EXCHANGE OFFER
Section 10.1 Exchange Offer Registration. Unless the Exchange Offer
shall not be permitted by applicable United States law (after the procedures set
forth in Section 12.1(a) below have been complied with), the Company shall use
its best efforts to cause the Exchange Offer Registration Statement to become
effective at the earliest possible time, but in no event later than 180 days
after the Closing Date, and in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer
31
Registration Statement as may be necessary to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Securities Act and (C) cause all necessary filings, if
any, in connection with the registration and qualification of the New Shares to
be made under the Blue Sky laws of such jurisdictions and the laws of Bermuda
and any other applicable jurisdictions as are necessary to permit Consummation
of the Exchange Offer, and (D) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting registration of the New Shares
to be offered in exchange for the Shares and to permit sales of Broker-Dealer
New Shares by Restricted Broker-Dealers as contemplated by Section 10.3 below.
Section 10.2 Continuity of Effectiveness. The Company shall use its
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 30 Business Days. The Company shall cause the Exchange
Offer to comply with all applicable federal and state securities laws. No
securities other than the New Shares shall be included in the Exchange Offer
Registration Statement. The Company shall use its best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 days thereafter.
Section 10.3 Exchange by Restricted Broker-Dealers.
(a) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Shares that were acquired
for the account of such Broker-Dealer as a result of market-making activities or
other trading activities, may exchange such Shares (other than Shares acquired
directly from the Company or any Affiliate of the Company) pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Securities Act and must, therefore, deliver a
prospectus meeting the requirements of the Securities Act in connection with its
initial sale of each New Share received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
32
such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer New Shares by
Restricted Broker-Dealers that the Commission may require in order to permit
such sales pursuant thereto, but such "Plan of Distribution" shall not name any
such Broker-Dealer, except to the extent required by the Commission as a result
of a change in policy after the date of this Agreement.
(b) The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended to the
extent necessary to ensure that it is available for sales of Broker-Dealer New
Shares by Restricted Broker-Dealers, and to ensure that such Exchange Offer
Registration Statement conforms with the requirements of this Agreement, the
Securities Act (including, without limitation, the standard set forth in Section
11.3(b)) and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the Exchange
Offer is Consummated.
(c) The Company shall as promptly as practicable after request,
provide sufficient copies of the latest version of such Prospectus to such
Restricted Broker-Dealers promptly upon request, and in no event later than one
day after such request, at any time during such one-year period in order to
facilitate such sales.
ARTICLE XI
SHELF REGISTRATION
Section 11.1 Shelf Obligation. If (a) the Company is not required to
file an Exchange Offer Registration Statement with respect to the New Shares
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 12.1(a) below have been complied with) or (b) if
(i) any holder of Shares was prohibited by law or Commission policy from
participating in the Exchange Offer or (ii) any holder may not resell the New
Shares acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such holder or
(iii) any holder is a Broker-Dealer and holds Shares acquired directly from the
Company or one of its Affiliates, then the Company shall use its best efforts to
cause a shelf registration statement pursuant to Rule 415 under the Securities
Act (which may be an amendment to the
33
Exchange Offer Registration Statement (in either event, the "Shelf Registration
Statement")), relating to all Shares the holders of which shall have provided
the information required pursuant to Section 11.4 hereof to become effective on
or prior to 210 days after the Closing Date.
Section 11.2 Continuity of Effectiveness. The Company shall use best
efforts to keep the Shelf Registration Statement continuously effective in order
to permit the Prospectus included therein to be usable by the holders of the
Shares for a period of three years from the date the Shelf Registration
Statement is declared effective or such shorter period that will terminate when
all the Shares covered by the Shelf Registration Statement have been sold
pursuant to such Shelf Registration Statement or are salable pursuant to Rule
144 under the Securities Act; provided, that the Company shall be deemed not to
have used best efforts to keep the Shelf Registration Statement effective during
the requisite period if it voluntarily takes or omits to take any action that it
knows would result in holders of Shares covered thereby not being able to offer
and sell such securities during that period, unless, in the case of periods not
in excess of 90 days and which occur no more than once in any 12-month period,
such action or omission is required by applicable law, including, but not
limited to, reasonable periods necessary to prepare appropriate disclosure. The
foregoing proviso shall not apply to actions taken (or contemplated to be taken)
by the Company in good faith and for business reasons (a "Suspension Event"),
including, without limitation, the acquisition or divestiture of assets or the
offering or sale of securities, so long as the Company promptly thereafter
complies with the requirements of Section 12.2(g), if applicable. Any such
period, not in excess of 90 days and occurring no more than once in any 12-month
period, during which the Company fails to keep the Shelf Registration Statement
effective and usable for offers and sales of Shares is referred to as a
"Suspension Period." A Suspension Period shall commence on and include the date
that the Company gives notice that the Shelf Registration Statement is no longer
effective or the Prospectus included therein is no longer usable for offers and
sales of Shares and shall end on the date, when each seller of Shares covered by
such Shelf Registration Statement either receives the copies of the supplemented
or amended Prospectus contemplated by Section 12.2(g) or is advised in writing
by the Company that use of the Prospectus may be resumed, provided, that such
period shall not be in excess of 90 days and shall occur no more than once in a
12-month period.
Section 11.3 Compliance. The Company shall cause the Shelf
Registration Statement and the related Prospectus and any amendment or
supplement thereto, as of the effective
34
date of such Shelf Registration Statement, amendment or supplement, (a) to
comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission and (b) not to
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading other than statements or omissions made in reliance upon and in
conformity with information furnished to the Company in writing by the holders
of the Shares expressly for use in such Shelf Registration Statement and the
related Prospectus and any amendment or supplement thereto.
Section 11.4 Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No holder of Shares may include any of
its Shares in any Shelf Registration Statement pursuant to this Agreement unless
and until such holder furnishes to the Company in writing, within 20 days after
receipt of a request therefor, such information specified in item 507 of
Regulation S-K under the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. Each holder
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such holder under
the preceding sentence not materially misleading.
ARTICLE XII
REGISTRATION PROCEDURES
Section 12.1 Exchange Offer Registration Statement. In connection with
the Exchange Offer contemplated by Article X hereof, the Company shall comply
with all applicable provisions of Section 12.3 below, shall use its best efforts
to effect such exchange and to permit the sale of Broker-Dealer New Shares being
sold in accordance with the intended method or methods of distribution thereof,
and shall comply with all of the following provisions:
(a) If, following the date hereof there has been published or
otherwise announced a change in Commission policy with respect to exchange
offers such as the Exchange Offer, such that in the reasonable opinion of
counsel to the Company there is a substantial question as to whether the
Exchange Offer is permitted by applicable federal law, the Company hereby
agrees to seek a no-action letter or other favorable decision from the
Commission allowing the Company to Consummate
35
an Exchange Offer for such Shares, unless, in the reasonable written
opinion of counsel to the Company, it is not reasonably likely that such
letter or decision will be obtained. The Company hereby agrees to pursue
the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company hereby agrees to take all such
other actions as are requested by the Commission or otherwise required in
connection with the issuance of such decision, including without limitation
(i) participating in telephonic conferences with the Commission, (ii)
delivering to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (iii)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff of such submission.
(b) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each holder of Shares shall furnish, upon
the request of the Company, prior to the Consummation of the Exchange
Offer, a written representation to the Company (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (i) it is not an Affiliate of the Company,
(ii) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the New Shares to be issued in the Exchange Offer and (iii)
it is acquiring the New Shares in its ordinary course of business. Each
holder hereby acknowledges and agrees that any Broker-Dealer and any such
holder using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (A) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (a) above),
and (B) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of New Shares obtained by such holder in exchange for
Shares acquired
36
by such holder directly from the Company or an Affiliate thereof.
(c) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (i) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and Co., Inc.
(available June 5, 1991), K-III Communication Corporation (available May
14, 1993) and, if applicable, any no-action letter obtained pursuant to
clause (a) above, (ii) including a representation that the Company has not
entered into any arrangement or understanding with any Person to distribute
the New Shares to be received in the Exchange Offer and that, to the best
of the Company's information and belief, each holder participating in the
Exchange Offer is acquiring the New Shares in its ordinary course of
business and has no arrangement or understanding with any Person to
participate in the distribution of the New Shares received in the Exchange
Offer and (iii) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to clause
(a) above.
Section 12.2 General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Shares (including, without limitation, any Exchange Offer
Registration Statement and the related Prospectus, to the extent that the same
are required to be available to permit sales of Broker-Dealer New Shares by
Restricted Broker-Dealers), the following provisions shall apply:
(a) The Company shall advise the holders of the Shares as promptly as
practicable:
(i) when the Registration Statement and any amendment thereto has been
filed with the Commission (provided, that before any filing with the
Commission, the Company will furnish one counsel designated by the holders
of the securities required to be covered by such registration a copy
thereof for review and comments) and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information;
37
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event (other than a Suspension Event, in
which case the Company need only notify the holders of the Shares that a
Suspension Event exists) that requires the Company to make changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading (which advice shall be accompanied by an instruction
that such notice constitutes material nonpublic information, and to suspend
the use of the Prospectus until the requisite changes have been made, and
which instruction shall require that such holders shall not communicate
such material nonpublic information to any third party and shall not sell
or purchase, or offer to sell or purchase, any securities of the Company
after receipt of such advice and prior to the effectiveness of any action
required to be taken by the Company pursuant to Section 12.2(g)).
(b) The Company shall use best efforts to prevent the issuance or
obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible time.
(c) The Company shall furnish to each holder of Shares included within
the coverage of the Registration, without charge, one copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the holder so requests in writing, all
exhibits (including those incorporated by reference).
(d) The Company shall deliver to each holder of Shares included within
the coverage of the Registration and each underwriter (which shall be selected
by the Company and be reasonably acceptable to such holders), if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus)
included in the Registration Statement with respect to the Registration and any
amendment or supplement thereto as such persons may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the use of the
Prospectus or any amendment or supplement thereto by each of the selling
38
holders of Shares or, as provided in Section 10.3, New Shares and each
underwriter (which shall be selected by the Company and be reasonably acceptable
to such holders) in connection with the offering and sale of the Shares or, as
provided in Section 10.3, New Shares covered by the Prospectus, or any amendment
or supplement thereto, included in such Registration Statement.
(e) Prior to any public offering of Shares pursuant to the
Registration, the Company shall register or qualify or cooperate with the
holders of securities included therein and their respective counsel in
connection with the registration or qualification of such Shares for offer and
sale under the securities or blue sky laws of such jurisdictions in the United
States, Bermuda and any other applicable jurisdiction as any holder of Shares
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the
securities covered by the Registration; provided that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it is
not then so qualified, (ii) take any action that would subject it to the service
of process in suits, other than as to matters and transactions relating to the
Registration, in any jurisdiction where it is not now subject or (iii) take any
action which would subject it to general service of process or to taxation in
any jurisdiction where it is not then so subject.
(f) The Company shall cooperate with the holders of the Shares to
facilitate the timely preparation and delivery of certificates representing
Shares to be sold in the Registration free of any restrictive legends and in
such number and registered in such names as the holders may request a reasonable
period of time prior to sales of Shares or, as provided in Section 10.3, New
Shares pursuant to the Registration.
(g) Upon the occurrence of any event contemplated by Section
12.2(a)(v) above (including, without limitation, any Suspension Event) or any
other event that causes the Registration Statement to contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, the
Company shall immediately notify each holder and, as promptly as reasonably
practicable, prepare a post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Shares or, in the case of
Section 10.3, the New Shares, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material
39
fact required to be stated therein or necessary to make the statements therein
not misleading.
(h) The Company will use best efforts to comply with all rules and
regulations of, and conditions imposed by, the Commission and Bermuda
governmental authorities to the extent and so long as they are applicable to the
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the Registration,
which statement shall cover such 12-month period.
(i) The Company shall require each holder of Shares to be sold
pursuant to the Registration to furnish to the Company, and each such holder
agrees to so furnish, such information regarding the holder and the distribution
of such Shares as the Company may from time to time reasonably require for
inclusion in the Registration Statement. Each holder agrees by acquisition of
Shares that, upon receipt of any notice from the Company of the existence of any
fact of the kind described in Section 12.2(a)(v) hereof, such holder will
immediately discontinue disposition of Shares until such holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 12.2(g)
hereof, or until it is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings with respect to the Prospectus. If so directed by the
Company, each holder will deliver to the Company all copies, other than
permanent file copies then in such holder's possession, of the Prospectus
covering such Shares current at the time of receipt of such notice.
(j) In the case of a Shelf Registration Statement, the Company will
enter into such customary agreements (including an underwriting agreement or
qualified independent underwriting agreement, in each case, in customary form)
and take all such other actions as the holders of a majority of the Shares being
covered by such registration statement or the underwriters retained by such
holders, if any, reasonably request in order to expedite or facilitate the
disposition of such Shares, including customary representations, warranties,
indemnities and agreements.
(k) In the case of a Shelf Registration Statement or Section 10.3, the
Company will make available for
40
inspection, during business hours of the Company, by any holder of Shares or, in
the case of Section 10.3, New Shares covered by such registration statement, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
holder or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, "Records"), if any, as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees, and those of the Company's
Affiliates, if any, to supply all information and respond to all inquiries
reasonably requested by any such Inspector in connection with such registration
statement.
(l) In the case of a Shelf Registration Statement or Section 10.3, the
Company will use its best efforts to obtain a "cold comfort" letter from the
Company's appointed auditors in customary form and covering such matters of the
type customarily covered by "cold comfort" letters as the holders of a majority
in interest of the Shares or, in the case of Section 10.3, New Shares being sold
reasonably request.
Section 12.3 Registration Expenses. The Company shall pay all expenses
in connection with the performance of its obligations under Articles X and XI
and Sections 12.1 and 12.2 (other than underwriting discounts and commissions)
and pay or reimburse the holders of the Shares or, the case of Section 10.3, New
Shares for the reasonable fees and disbursements of one firm of counsel
designated by the holders of a majority of the Shares or, in the case of Section
10.3, New Shares to act as counsel for the holders of the Shares in connection
therewith.
Section 12.4 Indemnification. (a) In the event of the registration of
the Shares under the Securities Act pursuant to this Article XII, the Company
shall enter into an agreement or agreements with the underwriters selected by
the Company (which underwriters must be reasonably acceptable to the holders),
if any, participating in such registration obligating the Company to provide
indemnification and reimbursement to the extent provided to each holder (a
"Holder") participating in such Registration hereunder.
(b) The Company agrees to indemnify and hold harmless (i) each Holder,
their respective directors and officers, general partners, limited partners and
managing directors, (ii) each other Person who participates as an underwriter in
the offering or sale of such securities, and
41
their respective directors and officers, general partners, limited partners and
managing directors (iii) each Person, if any, who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) any Holder or any
such underwriter (any of the persons referred to in this clause (iii) being
hereinafter referred to as a "controlling person") and (iv) the respective
officers, directors, partners, employees, representatives and agents of any such
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as a "Non-Company Indemnitee"), to the fullest
extent lawful, from and against any and all losses, claims, damages, liabilities
and judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus (or any
amendments or supplements thereto) hereunder, including any document
incorporated by reference therein, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except, with respect to any
Non-Company Indemnitee, insofar as such losses, claims, damages, liabilities or
judgments (1) are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished in writing to the
Company by such Non-Company Indemnitee expressly for use therein or (2) with
respect to any preliminary prospectus, result from the fact that such
Non-Company Indemnitee sold Shares to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus, as amended or supplemented, if required under the Securities Act and
if the Company shall have previously furnished copies thereof to such
Non-Company Indemnitee in accordance with this Agreement and the final
prospectus, as amended or supplemented, would have corrected such untrue
statement or omission.
(c) In case any action shall be brought against any Non-Company
Indemnitee based upon any registration statement or prospectus, or any amendment
or supplement thereto, and with respect to which indemnity may be sought against
the Company, such Non-Company Indemnitee shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Non-Company Indemnitee and
payment of all fees and expenses. Such Non-Company Indemnitee shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of counsel shall be paid by such
Non-Company Indemnitee, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) the named parties
to any such action (including any impleaded parties)
42
include both such Non-Company Indemnitee and the Company and such Non-Company
Indemnitee shall have been advised by counsel that it would be inappropriate for
the same counsel to represent such Non-Company Indemnitee and the Company (in
which case the Company shall not have the right to assume the defense of such
action on behalf of such Non-Company Indemnitee, it being understood, however,
that the Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for the Non-Company Indemnitees, which firm shall be designated in
writing by the Non-Company Indemnitees and whose fees and expenses reasonably
incurred shall be reimbursed as they are incurred). The Company shall not be
liable for any settlement of any such action effected without the written
consent of the Company, but if settled with the written consent of the Company,
the Company agrees to indemnify and hold harmless any Non-Company Indemnitee
from and against any amounts payable pursuant to such written consent in
connection with such settlement. The Company shall not, without the prior
written consent of such Non-Company Indemnitee, effect any settlement of any
pending or threatened proceeding in respect of which such Non-Company Indemnitee
is or could have been a party and indemnity could have been sought hereunder by
such Non-Company Indemnitee, unless such settlement includes an unconditional
release of such Non-Company Indemnitee from all liability on claims that are the
subject matter of such proceeding.
(d) Each Holder agrees to indemnify and hold harmless (i) the Company,
(ii) each other Holder, (iii) any person controlling (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Company and each
other Holder and (iv) the respective officers, directors, partners, employees,
representatives and agents of each of the parties referred to in clauses (i),
(ii) and (iii), to the same extent as the foregoing indemnity from the Company
to each of the Non-Company Indemnitees, but only with respect to information
relating to such Holder that was furnished in writing by such Holder expressly
for use in any registration statement (or any amendment or supplement thereto)
prepared in accordance with this Agreement. In no event shall the liability of
any Holder hereunder be greater in amount than the dollar amount of the proceeds
received by such holder upon the sales of the Shares giving rise to such
indemnification obligation.
(e) In order to provide for just and equitable contribution in
circumstances in which the foregoing indemnity agreements provided for in this
Section 12.4 are
43
for any reason held to be unenforceable although applicable in accordance with
its terms, the Company and the Holders shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect (A)
the relative benefits received by the Company, on the one hand, and the Holders
on the other hand, from the offering under the Registration Statement and any
other securities included in such offering, and (B) the relative fault of the
Company, on the one hand, and the Holders included in the offering, on the
other, with respect to the statements or omissions that resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Holders, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 12.4 where to be determined by pro rata allocation or
by any other method of allocation that does not take into account the equitable
considerations referred to herein. Notwithstanding anything to the contrary
contained herein, the Company and the Holders agree that any contribution
required to be made by a Holder pursuant to this Section 12.4 shall not exceed
the net proceeds from the registered offering (before deducting expenses)
received by such Holder with respect to such offering. For purposes of this
Section 12.4, each Person, if any, who controls a Holder within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
such Holder, and each director of the Company, each officer of the Company who
signed the registration statement, and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Company. Notwithstanding the foregoing, no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(f) Notwithstanding the foregoing, to the extent that the provisions
on indemnification contained in the underwriting agreement (to which the Company
and the Holders have consented) entered into in connection with any underwritten
public offering contemplated by this Agreement are in conflict with the
foregoing provisions, the
44
provisions in such underwriting agreement shall be controlling.
ARTICLE XIII
RESTRICTIONS ON TRANSFER
The Series A Preferred Stock shall not be transferable except upon the
conditions specified in this Article XIII, which are intended to insure
compliance with the provisions of the Securities Act, applicable securities laws
of other jurisdictions and Bermuda law in respect of the transfer of any Shares
and are in addition to the conditions relating to the transfer of shares set
forth in the Company's Bye-laws.
Section 13.1. In addition to any other legend required by the
Company's Bye-laws or applicable law, each certificate representing the Shares
shall (unless otherwise permitted by the provisions of this Article XIII) be
stamped or otherwise imprinted with a legend in substantially the following
form:
"ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE TERMS AND
CONDITIONS CONTAINED IN THE BYE-LAWS OF CGA GROUP, LTD. (THE "COMPANY")
WHICH ARE AVAILABLE FOR EXAMINATION BY HOLDERS OF THESE SECURITIES AT THE
REGISTERED OFFICE OF THE COMPANY. IN ADDITION TO THE FOREGOING
RESTRICTIONS, THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER THE
SECURITIES LAWS OF ANY JURISDICTION AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF UNLESS A REGISTRATION STATEMENT IS IN EFFECT UNDER
THE SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH
SECURITIES OR A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY IS
PROVIDED TO THE COMPANY TO THE EFFECT THAT NO SUCH REGISTRATIONS ARE
REQUIRED UNDER SUCH LAWS. THE PRIOR APPROVAL OF THE BERMUDA MONETARY
AUTHORITY IS NOT REQUIRED FOR ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
PROVIDED THAT ANY SUCH SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION IS BETWEEN PERSONS WHO ARE DESIGNATED AS NON-RESIDENTS OF
BERMUDA FOR THE PURPOSES OF THE EXCHANGE CONTROL ACT, 1972.
Section 13.2. (a) The holder of any Shares bearing the entire
restrictive
45
legend set forth in Section 13.1 above ("Restricted Shares"), by acceptance
thereof, agrees that, unless a registration statement is in effect under the
Securities Act and under applicable securities laws with respect to such
Restricted Shares, prior to any transfer or attempted transfer of such
Restricted Shares, such holder will give the Company (i) unless the transferee
is an Affiliate of the transferor, written notice describing the proposed
transfer of any Restricted Shares in reasonable detail only to the extent
necessary to evaluate whether such transfer is in compliance with applicable
securities laws and the Bye-laws sections 61 through 63, (ii) unless the
transferee is an Affiliate of the transferor, such other information about the
proposed transfer of such Restricted Shares or the proposed transferee of such
Restricted Shares as the Company may reasonably request only to the extent
necessary to evaluate whether such transfer is in compliance with applicable
securities laws and the Bye-laws sections 61 through 63, and (iii) an opinion of
counsel (both counsel and opinion reasonably satisfactory to the Company (it
being understood that in-house counsel for such holder shall be considered
satisfactory to the Company) to the effect that the proposed transfer of such
Restricted Shares may be effected without registration of such Restricted Shares
under the Securities Act and under other applicable securities laws. The Company
hereby acknowledges that no prior approval of the Bermuda Monetary Authority is
necessary for any transfer of Restricted Shares between persons who are
designated as non-residents of Bermuda for the purposes of the Exchange Control
Act, 1972.
(b) If (i) the holder of the Restricted Shares delivers to the Company
an opinion of counsel that subsequent transfers of such Restricted Shares will
not require registration or qualification under the Securities Act or under
other applicable securities laws or (ii) such Restricted Shares are being
transferred under a Registration Statement, the Company will, or will cause the
transfer agent for such shares, promptly after such contemplated transfer to
deliver new certificates for such Restricted Shares that do not bear that
section of the restrictive legend set forth in Section 13.1 above imposed by the
Securities Act and under other applicable securities laws of any other
jurisdictions. If the foregoing conditions entitling the holder to effect a
proposed transfer of such Restricted Shares without registration under the
Securities Act and under other applicable securities laws have not been
satisfied, the holder shall not transfer the Restricted Shares, and the Company
will cause the transfer agent not to transfer such Restricted Shares on its
books or issue any certificates representing such Restricted Shares. Any
purported transfer of Restricted Shares not in accordance with applicable
securities laws shall be void.
46
(c) The restrictions imposed by this Agreement with respect to the
Securities Act and under other applicable securities laws of any other
jurisdictions upon the transferability of any particular Restricted Shares shall
cease and terminate when such Restricted Shares have been sold pursuant to an
effective registration statement under the Securities Act and under other
applicable securities laws or transferred pursuant to Rule 144 promulgated under
the Securities Act. The holder of any Restricted Shares as to which such
restrictions shall have terminated shall be entitled to receive from the
Company, without expense, a new certificate representing such Shares that does
not bear the restrictive legend set forth above imposed by the Securities Act
and under other applicable securities laws of any other jurisdictions but shall
retain the restrictive legend set forth above imposed by the requirements of the
Bye-laws.
(d) As used in this Agreement, the term "transfer" encompasses any
sale, transfer, pledge or other disposition of any Shares referred to herein.
ARTICLE XIV
DEFINITIONS
Capitalized terms used in this Agreement, but not otherwise defined
herein, have the meanings set forth in this Article XIV.
"AAA Investment" means any investment in: (i) U.S. Government
Obligations or securities that would be U.S. Governmental Obligations if such
securities were not callable or redeemable at the option of the issuer thereof;
(ii) debt securities or debt instruments or Redeemable Stock with a rating of
AAA or higher by S&P, AAA or higher by Moody's or the equivalent of such rating
by S&P and Moody's or the equivalent of such rating by any other nationally
recognized securities rating agency; or (iii) debt securities or debt
instruments or Redeemable Stock with a rating of Class 1 or higher by the NAIC
and issued or guaranteed by the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Governmental National Mortgage
Association, the Student Loan Marketing Association or the Federal Home Loan
Bank.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person; (ii) any other Person who is a
director or officer (a) of such specified Person, (b) of any Subsidiary of such
specified Person or (c) of any Person
47
described in clause (i) above; or (iii) any beneficial owner of shares
representing 10% or more of the total voting power of the Voting Stock of the
Company or of rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first clause hereof. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. Notwithstanding the foregoing, in the case of Articles X, XI and XII,
"Affiliate" shall have the meaning assigned to such term under the Securities
Act and Exchange Act. A Person shall not be deemed to be an Affiliate of the
Company solely through possession of the right to elect one director.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such amount of such
Indebtedness or redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (ii) the sum of all such
payments.
"Board of Directors" means the board of directors of the Company.
"Broker-Dealer" means any broker or dealer registered under the
Exchange Act.
"Broker-Dealer New Shares" means New Shares that are acquired by a
Broker-Dealer in the Exchange Offer in exchange for Shares that such
Broker-Dealer acquired for its own account as a result of market-making
activities or other trading activities (other than Shares acquired directly from
the Company or any of its Affiliates).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York or Bermuda are authorized by law
or executive order to close.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP; and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with
48
GAAP; and the stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible or exchangeable into such
equity.
"Certified Resolution" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such by the Secretary or an Assistant Secretary of the Company.
"Commission" means the United States Securities and Exchange
Commission.
"Commitments" means those certain commitments by certain investors,
severally and not jointly, in the Company to purchase shares of Series B Stock
for an aggregate purchase price of $60,000,000 pursuant to Section 1.3 of that
Investment Units Subscription Agreement.
"Consummate", "Consummation" and "Consummated" with respect to the
Exchange Offer, shall refer to the occurrence of (a) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the New Shares to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 10.2 hereof and (c) the delivery of New Shares by
the Company to holders in the same number as the number of Shares tendered by
such holders pursuant to the Exchange Offer.
"Consolidated Net Income" of the Company means, for any period, the
net income or loss of the Company and its consolidated Subsidiaries as
determined in accordance with GAAP; provided, that there shall not be included
in such Consolidated Net Income (i) any net income of any Person if such Person
is not a Restricted Subsidiary, except that, subject to the limitations
contained in (iv) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations
49
contained in clause (iii) below), (ii) any net income or loss of any Person
acquired by the Company or a Subsidiary in a pooling of interests transaction
for any period prior to the date of such acquisition, (iii) any net income or
loss of any Restricted Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that subject to the limitations contained in (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash that could have been distributed (whether or not actually
distributed) by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to another Restricted Subsidiary,
to the limitation contained in this clause), (iv) any gain or loss realized upon
the sale or other disposition of any asset of the Company or its consolidated
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not
sold or otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of any
Person, (v) any extraordinary gain or loss and (vi) the cumulative effect of a
change in accounting principles.
"Consolidated Net Worth" of the Company means the total of the amounts
shown on the balance sheet of the Company and its Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending at least 45 days prior to the
taking of any action for the purpose of which the determination is being made,
as (i) the par or stated value of all outstanding Capital Stock of the Company
plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Redeemable Stock of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the registration by the Company under the
Securities Act of the New Shares pursuant to the Exchange Offer Registration
Statement pursuant to which the Company shall offer the holders of all
outstanding Shares the opportunity to exchange all such outstanding Shares for
New Shares in a number equal to the number of Shares tendered in such exchange
offer by such holders.
50
"Exchange Offer Registration Statement" means the Registration
Statement relating to the Exchange Offer, including the related Prospectus
covering all of the New Shares.
"Fair Market Value" means, with respect to any asset or property, the
price that could be negotiated in an arms-length free market transaction, for
cash, between an informed and willing seller and an informed and willing buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction.
"GAAP" means the generally accepted accounting principles (including
the methods of application of such principles) so described and promulgated by
the U.S. Financial Accounting Standards Board (FASB) which are applicable as at
the date on which any calculation or determination made hereunder is to be
effective or as at the date of any financial statement referred to herein, as
the case may be.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person,
including any such 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 Indebtedness or other obligation of such other Person
(whether arising by agreement to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided, that
the term "Guarantee" shall not include guarantees or indemnities required to be
given in connection with obtaining services in the ordinary course of business,
endorsements for collection or deposit in the ordinary course of business or
guarantees of lease obligations not exceeding U.S.$1 million in the aggregate.
The terms "Guarantee," "Guaranteed," "Guaranteeing" and "Guarantor" shall each
have a correlative meaning.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary; provided, further, that neither
the accrual of interest, the accrual of dividends nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness. The terms
"Incurrable," "Incurred,"
51
"Incurrence" and "Incurring" shall each have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
i) the principal (accreted value in the case of Indebtedness Incurred
with original issue discount) of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
ii) the principal of and premium (if any) in respect of obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments;
iii) all Capitalized Lease Obligations of such Person;
iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables),
which purchase price is due more than one year after the date of
placing such property in service or taking delivery and title
thereto or the completion of such services;
v) all obligations of such Person in respect of letters of credit,
bankers' acceptances or other similar instruments or credit
transactions (including reimbursement obligations with respect
thereto);
vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock of
such Person or any Redeemable Stock or Preferred Stock of such
Person's Subsidiaries (but excluding, in each case, any accrued
dividends);
vii) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such
Person; provided, that if such Indebtedness is not assumed by such
Person, the amount of such Indebtedness shall be the lesser of (a)
the Fair Market Value of such asset at such date of determination
and (b) the amount of such Indebtedness of such other Person;
viii) all Indebtedness of other Persons to the extent Guaranteed
by such Person; and
ix) to the extent not otherwise included in this definition, net payment
obligations in respect of
52
interest rate agreements and currency exchange protection
agreements.
For purposes of this definition, the maximum fixed redemption,
repayment or repurchase price of any Redeemable Stock that does not have a fixed
redemption, repayment or repurchase price shall be calculated in accordance with
the terms of such Redeemable Stock as if such Redeemable Stock were redeemed,
repaid or repurchased on any date on which Indebtedness shall be required to be
determined; provided, that if such Redeemable Stock is not then permitted to be
redeemed, repaid or repurchased, the redemption, repayment or repurchase price
shall be the book value of such Redeemable Stock as reflected in the most recent
financial statements of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
This definition is not meant to include the commitment of the Company
to acquire equity securities of CGA with the proceeds of the sale of any Series
B Preferred Stock pursuant to Section 1.3 of the Investment Units Subscription
Agreement.
"Insurance Obligations" means: (a) obligations under insurance,
reinsurance or retrocession contracts or other arrangements by which a person
guarantees financial or credit risks in each case entered into in the ordinary
course of business and (b) obligations with respect to letters of credit or
similar instruments or credit facilities for the purpose of securing or
providing funds to pay insurance, reinsurance or retrocessional obligations
entered into in the ordinary course of business, to the extent that such letters
of credit or similar instruments or credit facilities are not drawn upon, or if
and to the extent drawn upon, such drawing is reimbursed not later than the 30th
Business Day following a demand for reimbursement (it being understood that such
obligations shall no longer be deemed Insurance Obligations upon such 30th
Business Day). (For the avoidance of doubt, a stand-by credit facility within
the meaning of Commitment Termination Event (as defined in the Investment Units
Subscription Agreement) that meets the requirements of clause (b) of this
definition shall be included within this definition).
"Invested Assets" means: (i) with respect to any Person which is an
insurance company that files statutory financial statements with a governmental
agency or authority, the amount shown as the line item "Cash and Invested
Assets" (or any equivalent line item(s) setting
53
forth the type of assets which would be reflected in the line item "Cash and
Invested Assets" on the Closing Date) in such insurance company's balance sheet
included in its most recent statutory financial statements filed with such
governmental agency or authority; and (ii) with respect to any other Person, the
amount on a consolidated basis of its cash and investments as reflected on such
Person's most recent balance sheet.
"Investment Grade Securities" means: (i) U.S. Government
Obligations; (ii) any certificate of deposit, maturing not more than 270 days
after the date of acquisition, issued by, or time deposit of, a commercial
banking institution that has combined capital and surplus of not less than
U.S.$100 million or its equivalent in foreign currency, whose debt is rated, at
the time as of which any investment therein is made, "A" (or higher) according
to S&P or Moody's, or the equivalent of such rating by any other nationally
recognized securities rating agency; (iii) commercial paper, maturing not more
than 270 days after the date of acquisition, issued by a corporation with a
rating, at the time as of which any investment therein is made, of "A-1" (or
higher) according to S&P or "P-1" (or higher) according to Moody's, or the
equivalent of such rating by any other nationally recognized securities rating
agency; (iv) any bankers acceptances or any money market deposit accounts, in
each case, issued or offered by any commercial bank having capital and surplus
in excess of U.S.$100 million or its equivalent in foreign currency, whose debt
is rated, at the time as of which any investment therein is made, "A" (or
higher) according to S&P or Moody's, or the equivalent of such rating by any
other nationally recognized securities rating agency; (v) any other debt
securities or debt instruments or Redeemable Stock with a rating of "BBB--" or
higher by S&P, "Baa3" or higher by Moody's, "Class 2" or higher by the NAIC or
the equivalent of such rating by S&P, Moody's or the NAIC, or the equivalent of
such rating by any other nationally recognized securities rating agency; and
(vi) any fund investing exclusively in investments of the types described in
clauses (i) through (v) above.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Liquidation Value" for each outstanding share of Series A Preferred
Stock has the meaning ascribed to such term in Appendix A to the Company's
Bye-laws.
"Majority Controlled Affiliate" of any specified Person means (A) any
other Person (i) who beneficially owns a majority of the Voting Stock of such
specified Person or
54
(ii) a majority of whose Voting Stock is beneficially owned by (a) such
specified Person or (b) a Person that beneficially owns a majority of such
specified Person's Voting Stock or (B) in the case of specified Persons who are
natural Persons, any relatives, or structures for the benefit of the relatives,
of such specified Person.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and its successors.
"NAIC" means the National Association of Insurance Commissioners and
its successors.
"Net Cash Proceeds" of a Specified Asset Sale means the cash proceeds
of such sale net of broker, accountant and attorney's fees and other fees
actually incurred in connection with such sale and net of taxes paid or payable
as a result thereof.
"New Shares" means Series A Cumulative Voting Preference Shares of the
Company to be issued in the Exchange Offer; it being understood that New Shares
shall be identical in all respects to the Shares issued hereunder (including,
without limitation, with respect to a holder's rights, preferences, immunities
and obligations hereunder and under the Bye-laws of the Company), except that
the New Shares shall contain no restrictive legend thereon other than with
respect to transfer restrictions set forth in the Bye-laws and, except in the
case of Section 10.3 of the Agreement, Section 2(a)(ii)(B) of Appendix A to the
Bye-laws shall not apply to such New Shares.
"Permitted Company Indebtedness And Preferred Stock" means (a)
Preferred Stock issued as of the Closing Date under the Investment Units
Subscription Agreement and this Agreement, each as in effect on the Closing Date
and not as amended thereafter, Preferred Stock issued pursuant to the
Commitments and Preferred Stock issued in payment of dividends in respect of
such Preferred Stock's terms as in effect on the Closing Date and not as amended
thereafter (for the avoidance of doubt, the foregoing includes, without
limitation, Preferred Stock issued as dividends on such dividends); (b)
Indebtedness or Preferred Stock Incurred in exchange for, or the proceeds of
which are used to, redeem Preferred Stock referred to in clause (a) of this
definition or refinance the Indebtedness or redeem Preferred Stock referred to
in this clause (b), provided that (i) the aggregate principal amount of such
Indebtedness or the aggregate stated value of such Preferred Stock is not in
excess of the aggregate stated value of Preferred Stock being redeemed or the
aggregate principal amount of the Indebtedness being refinanced, (ii) such
Indebtedness or Preferred Stock has a final maturity or redemption no
55
earlier than the Indebtedness being refinanced or Preferred Stock being
redeemed, and (iii) such Indebtedness or Preferred Stock has an Average Life at
the time such Indebtedness or Preferred Stock is Incurred that is equal to or
greater than the Average life of the Indebtedness being refinanced or Preferred
Stock being redeemed, provided, further, that, in the case of Preferred Stock,
such Preferred Stock is at least as subordinated to the Series A Preferred Stock
as the Preferred Stock being redeemed and, in the case of both Preferred Stock
and Indebtedness, the covenants relating to such Indebtedness or Preferred Stock
are no more restrictive in the aggregate than those of the Preferred Stock being
redeemed or the Indebtedness being refinanced; (c) Permitted Restricted
Subsidiary Indebtedness And Preferred Stock Incurred indirectly through a
Restricted Subsidiary and Guarantees of Permitted Restricted Subsidiary
Indebtedness And Preferred Stock; (d) Insurance Obligations; (e) Indebtedness of
the Company (other than pursuant to the foregoing clauses) in an amount which,
together with the amount of outstanding Indebtedness under clause (e) of
"Permitted Restricted Subsidiary Indebtedness And Preferred Stock", is less than
or equal to $12.5 million.
"Permitted Investment" means (i) any investment in or contribution to
any Person that is a Restricted Subsidiary of the Company at the time, or
becomes a Restricted Subsidiary as a result of, such investment; (ii) any
investment in Investment Grade Securities; (iii) any investment not permitted
under Clauses (i), (ii) and (iv), provided that at the date such investment
under this clause (iii) is made and after giving effect thereto, such investment
together with all other investments under this clause (iii), does not exceed 5%
of the total Invested Assets of the Company and its Restricted Subsidiaries
under clauses (ii) and (iii); and (iv) receivables owing to any Restricted
Subsidiary or the Company in the ordinary course of business.
"Permitted Restricted Subsidiary Indebtedness And Preferred Stock"
means (a) Indebtedness under interest rate or currency exchange protection
agreements, provided that (i) the obligations under such agreements are related
to payment obligations on Indebtedness permitted under Section 7.2, (ii) such
agreements are entered into in the ordinary course of business and not for
speculative purposes and (iii) the notional amount of any such agreement does
not exceed the principal amount of the Indebtedness to which such agreement
relates; (b) Indebtedness and Preferred Stock issued to and held by the Company
or a Restricted Subsidiary of the Company (but only so long as such Indebtedness
and Preferred Stock are held or owned by the Company or a Restricted Subsidiary
of the Company); (c) Insurance Obligations; (d) Indebtedness Incurred by CGA
through the
56
sale of a promissory note to St. ▇▇▇▇▇▇ in exchange for the cash proceeds of the
issuance of Preferred Stock by St. ▇▇▇▇▇▇, provided that (i) such cash proceeds
consist of an amount equal to the principal amount of such promissory note and
(ii) CGA invests such cash proceeds in Investment Grade Securities; and (e)
Indebtedness of Restricted Subsidiaries (other than pursuant to the foregoing
clauses) in an amount which, together with the amount of outstanding
Indebtedness under clause (e) of "Permitted Company Indebtedness And Preferred
Stock", is less than or equal to $12.5 million.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated association, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Prospectus" means the prospectus included in a Registration Statement
at the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
"Redeemable Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness (other than
Preferred Stock) or (iii) is redeemable at the option of the holder thereof, in
whole or in part.
"Registration" or "registration" means the registration pursuant to
the Exchange Offer Registration Statement or the Shelf Registration Statement.
"Registration Statement" means any registration statement of the
Company relating to (a) offering of New Shares pursuant to an Exchange Offer or
(b) the registration for resale of Shares pursuant to the Shelf Registration
Statement, in each case, (i) which is filed pursuant to the provisions of this
Agreement and (ii) including the Prospectus included therein, all amendments and
supplements
57
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
"Restricted Broker-Dealer" means any Broker-Dealer which holds
Broker-Dealer New Shares.
"Restricted Payment" by the Company or any Restricted Subsidiary means
(i) any declaration or payment of any dividend or making of any distribution on
or in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company or any Restricted Subsidiary
thereof) except dividends or distributions payable solely in Capital Stock
(other than Redeemable Stock) of the Company or in options, warrants or other
rights to purchase such Capital Stock and except dividends or distributions
payable solely to the Company or a Restricted Subsidiary thereof, (ii) any
purchase, repurchase, redemption, retirement or other acquisition for value of
any Capital Stock of the Company or any Restricted Subsidiary thereof held by
Persons other than the Company or a Restricted Subsidiary thereof, or (iii)
making of any investment other than a Permitted Investment in any Person.
"Restricted Subsidiaries" means those subsidiaries designated or
classified as Restricted Subsidiaries pursuant to Section 7.9.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"Series A Preferred Stated Value" shall have the meaning ascribed to
such term in the Company's Bye-laws.
"Shareholders Agreement" means that certain Shareholders Agreement,
dated as of the Closing Date, among the Company and certain holders of Capital
Stock of the Company, as such agreement may be amended, supplemented or
modified.
"Shelf Registration Statement" shall have the meaning ascribed to such
term in Article XI.
"S&P" means Standard & Poor's and its successors.
"Specified Asset Sale" means any sale, lease, transfer, issuance or
other disposition of shares of Capital Stock of the Company or any Restricted
Subsidiary of the Company (other than (i) Capital Stock of the Company issued as
dividends pursuant to the terms of the appendices to the
58
Bye-laws and (ii) Common Stock issued in connection with stock option plans
established by the Company pursuant to the Common Stock Warrant Acquisition
Agreement, the Sponsoring Investors and Founders Stock Warrant Plan and the
Employee Stock Warrant Plan, which number of shares of Common Stock shall not
exceed ten percent (10%) in the aggregate of the number of shares of Common
Stock issued and outstanding on the Closing Date), property or assets (each
referred to for purposes of this definition as a "disposition") by the Company
or any of its Restricted Subsidiaries (including any disposition by means of a
merger, amalgamation, consolidation or similar transaction) other than (i) a
disposition to a Restricted Subsidiary, (ii) a disposition of property or assets
(including Permitted Investments) in the ordinary course or (iii) a disposition
that is permitted by the provisions of Section 7.8.
"Specified Holders" means the holders of Capital Stock of the Company
as of the Closing Date and their Majority Controlled Affiliates.
"St. ▇▇▇▇▇▇" means St. ▇▇▇▇▇▇, Ltd., a company with limited liability
incorporated under the laws of the Cayman Islands.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Trade Payables" means, with respect to any Person, any accounts
payable or any Indebtedness or monetary obligation to trade or service creditors
created, assumed or Guaranteed by such Person arising in the ordinary course of
business of such Person in connection with the acquisition of goods or services.
"Unrestricted Subsidiaries" means those Subsidiaries designated as
Unrestricted Subsidiaries pursuant to Section 7.9.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality
59
of the United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt; provided, that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"Voting Stock" of any Person means all classes of Capital Stock of
such Person then outstanding and entitled to vote in the election of directors.
"Wholly-Owned Restricted Subsidiary" means a Restricted Subsidiary of
the Company, all the Capital Stock of which is owned by the Company or another
Wholly-Owned Restricted Subsidiary of the Company.
ARTICLE XV
MISCELLANEOUS
Section XV.1 Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants of the parties contained in this
Agreement and in any document delivered or to be delivered pursuant to this
Agreement and in connection with the Closing hereunder shall survive the
Closing. The parties have made no representations or warranties other than those
that are expressly set forth in this Agreement, any document delivered in
connection herewith (including the certificate referred to in Section 3.3
hereof) and the Other Closing Documents.
Section 15.2 Termination of Agreement. This Agreement (a) may be
terminated and the transactions contemplated herein abandoned by the written
agreement of the Company and each Investor and (b) shall terminate upon the
redemption in full of all the outstanding shares of Series A Preferred Stock or
if the Closing Date has not occurred within 45 days from the date hereof.
Section 15.3 Entire Agreement. This Agreement (including the
Schedules, Exhibits and Annexes hereto), together with the Other Closing
Documents to which the
60
parties hereto are parties, constitutes the entire agreement among the parties
hereto and supersede all prior agreements and understandings, oral and written,
among the parties hereto with respect to the subject matter hereof.
Section 15.4 Severability. Any provision of this Agreement that is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or lack of authorization without invalidating the remaining
provisions hereof or affecting the validity, unenforceability or legality of
such provision in any other jurisdiction.
Section 15.5 Successors and Assigns. All covenants, agreements,
representations and warranties made herein by the Investors shall bind and inure
to the benefit of the Company and the successors and assigns of the Company,
whether so expressed or not (provided that the Company may not transfer any of
its obligations hereunder without each Series A Preferred Stock holder's prior
consent and any transfer in violation of this proviso shall be null and void),
and all such covenants, agreements, representations and warranties by the
Company shall bind and inure to the benefit of each Investor and such Investor's
successors and assigns, and in the case of Section 15.12, such Investor's
Affiliates' successors and assigns. All provisions of this Agreement are
intended to be for the benefit of all holders, from time to time, of the Shares
and New Shares issued pursuant hereto (or as dividends in kind with respect to
such Shares or New Shares) as if such holders were Investors, and shall be
enforceable by any such holder, whether or not an express assignment to such
holder of rights under this Agreement has been made by the Investor, or any of
its successors or assigns.
Section 15.6 Amendment; Waiver. Except as provided in the last
paragraph of Article III, no provision of this Agreement may be amended, waived
or otherwise modified except by an instrument in writing executed by the Company
and the holders of ninety percent (90%) of the shares of Series A Preferred
Stock.
Section 15.7 Headings. The Articles and Section headings contained in
this Agreement are for convenience only and shall not affect the meaning or
interpretation of this Agreement.
Section 15.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
61
Section 15.9 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of New York without giving effect to the
principles of conflicts of laws thereof.
Section 15.10 Notices and Payment. (a) All notices, requests, demands
and other communications hereunder shall be in writing and, except to the extent
otherwise provided in this Agreement, shall be deemed to have been duly given if
delivered by same day or next day courier or mailed, registered mail, return
receipt requested, or transmitted by telegram, telex or facsimile (i) if to an
Investor, at such Investor's address appearing on Schedule 1 hereto or at any
other address such Investor may have provided in writing to the Company and (ii)
if to the Company, at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇: Secretary, or such other address as the Company may have furnished to
the Investors in writing. A notice hereunder shall be deemed to have been given
on the day such notice is sent or transmitted; provided, however, that if such
notice is sent by next-day courier it shall be deemed to have been given the day
following sending and, if by registered mail, five days following sending.
(b) Unless otherwise provided in this Agreement, payments hereunder
shall be made by wire transfer of immediately available funds.
Section 15.11 Full Payment. (a) All payments in respect of the Series
A Preferred Stock (including, without limitation, dividend, redemption and
liquidation payments, and payments under Section 15.11(b), but excluding
dividends permitted to be made in kind), shall be made in immediately available
U.S. dollar funds. Each reference in this Agreement and the Other Closing
Documents to U.S. dollars (the "relevant currency") is of the essence. To the
fullest extent permitted by law, the obligation of the Company in respect of any
amount due under this Agreement, the Bye-laws and the Other Closing Documents
will, notwithstanding any payment in any other currency (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in the
relevant currency that the party entitled to receive such payment may, in
accordance with its normal procedures, purchase with the sum paid in such other
currency (after any premium and costs of exchange) on the Business Day
immediately following the day on which such party receives such payment. If the
amount in the relevant currency that may be so purchased for any reason falls
short of the amount originally due, the Company will pay such additional
amounts, in the relevant currency, as may be necessary to compensate for the
shortfall. Any obligation of the Company not discharged by such payment will, to
the fullest extent permitted by applicable law, be due as a
62
separate and independent obligation and, until discharged as provided herein,
will continue in full force and effect.
(b) The Company will make all dividend, redemption, and liquidation
payments to the holders of Series A Preferred Stock in respect of this Agreement
and the Bye-laws free and clear of and without deductions or withholding for or
on account of any present or future taxes, duties, assessments, fees or other
governmental charges imposed or levied by or on behalf of Bermuda or any other
jurisdiction from or through which such payment is made to the holders of Series
A Preferred Stock (all such taxes, duties, assessments, fees or other
governmental charges being referred to herein as "Taxes"), unless such
withholding or deduction is required by law. In that event, the Company will pay
to the holders of Series A Preferred Stock such additional amounts as may be
necessary in order that every net dividend and redemption payment made by the
Company after deduction or withholding for or on account of any such present or
future Taxes will not be less than the amount then due and payable in respect of
this Agreement and the Bye-laws.
Section 15.12 Indemnification. (a) The Company shall defend, hold
harmless and indemnify each Investor and its Affiliates from and against all
damages, losses, costs and expenses (including reasonable legal expenses) to
which any of such Persons becomes subject as a result of any inaccuracy in any
representation or warranty of the Company contained in this Agreement or any
document delivered in connection herewith (including the certificate referred to
in Section 3.3) or the breach of any covenant or agreement of the Company
contained in this Agreement or the Company's Bye-laws.
(b) In the event a party entitled to indemnification under this
Agreement (an "Indemnified Party") becomes aware of a claim, liability, expense
or other event with respect to which such party is entitled to indemnification
(an "Indemnification Event"), such Indemnified Party shall promptly give notice
of such Indemnification Event to the Company. The failure by any Indemnified
Party to give such notice to the Company within a reasonable period of time
shall relieve the Company of its obligations under this Section 15.12, if and to
the extent that it has been prejudiced by a lack of timely and adequate notice.
The Company shall have the right to defend, contest, settle or otherwise resolve
any Indemnification Event involving a third-party claim (a "Third-Party
Indemnification Event") as long as the Indemnification Event may not possibly
give rise to a non-monetary liability, including, without limitation,
injunctions and criminal liability; provided, however, that the Company shall
not
63
settle or compromise any Third-Party Indemnification Event without the
Indemnified Party's prior written consent thereto, unless the terms of such
settlement or compromise provide for an unconditional release of the Indemnified
Parties. Notwithstanding the foregoing, any Indemnified Party shall have the
right to employ separate counsel (including local counsel), and the Company
shall bear the reasonable costs, fees and expenses of such separate counsel if
(i) the use of counsel chosen by the Company to represent such Indemnified Party
would present such counsel with any actual or potential conflict of interest,
(ii) the actual or potential defendants in, or targets of, any Third-Party
Indemnification Event include both such Indemnified Party and the Company or any
Affiliate thereof and such Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to the Company or any Affiliate thereof which is
an actual or potential defendant in, or target of, such Third-Party
Indemnification Event, (iii) the Indemnification Event may give rise to a
non-monetary liability including without limitation injunctions and criminal
liability, or (iv) the Company has authorized such Indemnified Party to employ
separate counsel. The Indemnified Parties and the Company shall cooperate fully
in defending any Third-Party Indemnification Event, and the Company shall have
reasonable access to the books and records and personnel of the Indemnified
Parties that are relevant hereto.
(c) The indemnification provisions of this Article XV shall be in
addition to any rights each Indemnified Party may otherwise have.
Section 15.13 Submission to Jurisdiction. The Company irrevocably
submits to the non-exclusive jurisdiction of any New York State or federal
courts sitting in The City of New York and any court sitting in Bermuda, and any
appellate court from any thereof, in any suit, action or proceeding arising out
of or relating to this Agreement or any of the Other Closing Documents or the
transactions contemplated hereby or thereby (a "Related Proceeding"), and the
Company hereby irrevocably agrees that all claims in respect of any Related
Proceeding may be heard and determined in such New York State or federal court
or any court sitting in Bermuda. The Company hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of any Related Proceeding and any objection to any Related
Proceeding whether on the grounds of venue, residence or domicile. A final
judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or any other manner
provided by law.
64
The Company hereby irrevocably appoints the CT Corporation System (the
"Process Agent"), with an office on the date hereof at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, as its agent to receive on behalf of the
Company and its property service of copies of the summons and complaint and any
other process that may be served in any Related Proceeding in such New York
State or federal court sitting in The City of New York. Service may be made by
U.S. registered mail or other comparable means or by delivering by hand a copy
of such process to the Company in care of the Process Agent at the address
specified above for the Process Agent (such service to be effective upon the
mailing or delivery by hand of such process to the office of the Process Agent),
and the Company hereby irrevocably authorizes and directs the Process Agent to
accept on its behalf such service. Failure of the Process Agent to give notice
to the Company, or failure of the Company to receive notice of such service of
process, shall not affect in any way the validity of such service on the Process
Agent or the Company. As an alternative method of service, the Company also
irrevocably consents to the service of any and all process in any Related
Proceeding in a New York State or federal court sitting in The City of New York
by sending by U.S. registered mail or other comparable means copies of such
process to the Company at its address under Section 15.10 (such service to be
effective seven days after mailing thereof). The Company covenants and agrees
that it shall take any and all reasonable action, including the execution and
filing of any and all documents, that may be necessary to continue the
designation of the Process Agent in full force and effect, and to cause the
Process Agent to continue to act as such. Nothing herein shall affect the right
of any party to serve legal process in any other manner permitted by law or
affect the right of any party to bring any suit, action or proceeding against
any other party or its property in the courts of other jurisdictions.
To the extent that the Company has or hereafter may acquire any
immunity from any legal action, suit or proceeding, from jurisdiction of any
court or from setoff or any legal process (whether through service or notice,
attachment in aid of execution or otherwise) with respect to itself or any of
its property, the Company hereby irrevocably waives and agrees not to plead or
claim such immunity in respect of its obligations under this Agreement and the
other Closing Documents.
Section 15.14 Payment; Transfer Agent and Registrar. (a) The Company
shall pay all cash amounts payable with respect to the Shares held by each
holder of shares by wire transfer of immediately available U.S. dollar funds to
the account of such holder in any bank in the United States as may be designated
in writing by such
65
holder, or in such other manner or to such other address as may be designated in
writing by such holder.
(b) The Company shall provide from and after the Closing Date for a
transfer agent and registrar (collectively, the "Agent") for the Shares issued
hereunder. The Agent shall keep a register for the registration and transfer of
the Shares.
(c) Upon surrender of any Share certificate at the office of the
Agent, the Company, at the request of the holder thereof, will deliver at the
Company's expense, new Share certificates in exchange therefor, in denominations
as requested by such holder.
Section 15.15 Expenses. The Company shall pay the reasonable fees and
expenses of Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Investors.
66
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CGA GROUP, LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. PRICE
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Price
Title: President & CEO
MUTUAL DISCOVERY FUND
BY: FRANKLIN MUTUAL ADVISERS, INC.
By: /s/ E.N. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: E.N. ▇▇▇▇▇▇▇▇▇
Title: V.P., General Counsel &
Asst. Secretary
MUTUAL QUALIFIED FUND
BY: FRANKLIN MUTUAL ADVISERS, INC.
By: /s/ E.N. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: E.N. ▇▇▇▇▇▇▇▇▇
Title: V.P., General Counsel &
Asst. Secretary
▇▇▇▇▇▇▇▇▇▇▇ CHAMPION INCOME FUND
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇▇▇ HIGH YIELD FUND
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇▇▇ MULTI-SECTOR INCOME TRUST
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇▇▇ STRATEGIC INCOME FUND
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇▇▇ VARIABLE ACCOUNT FUNDS
FOR THE ACCOUNT OF ▇▇▇▇▇▇▇▇▇▇▇ HIGH
INCOME FUND
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇▇▇ VARIABLE ACCOUNT FUNDS
FOR THE ACCOUNT OF STRATEGIC BOND FUND
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
THE ▇▇▇▇▇▇ FIDUCIARY TRUST COMPANY ON
BEHALF OF:
▇▇▇▇▇▇ HIGH YIELD FIXED INCOME
TRUST (DBT)
▇▇▇▇▇▇ HIGH YIELD MANAGED TRUST
By: /s/ ▇▇▇▇ ▇. ▇'▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇'▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ DIVERSIFIED INCOME TRUST
▇▇▇▇▇▇ DIVERSIFIED INCOME TRUST II
▇▇▇▇▇▇ FUNDS TRUST-▇▇▇▇▇▇ HIGH
YIELD TOTAL RETURN FUND
▇▇▇▇▇▇ HIGH YIELD ADVANTAGE FUND
▇▇▇▇▇▇ HIGH YIELD TRUST
PUTNAM MANAGED HIGH YIELD TRUST
PUTNAM VARIABLE TRUST-▇▇▇▇▇▇ VT
DIVERSIFIED INCOME FUND
▇▇▇▇▇▇ VARIABLE TRUST-▇▇▇▇▇▇ VT
HIGH YIELD FUND
By: /s/ ▇▇▇▇ ▇. ▇'▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇'▇▇▇▇
Title: Vice President
ACE LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: E.V.P. & General Counsel
THIRD AVENUE TRUST, on behalf of the
THIRD AVENUE VALUE FUND SERIES
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
LENNAR FINANCIAL SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Assistant Vice Presdient
PM GROUP LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇ ▇. CARD
--------------------------------------
Name: ▇▇▇▇▇ ▇. Card
Title: Vice President
CAPITAL REINSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President & Treasurer
▇▇▇▇▇▇▇▇▇, LUFKIN & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director