Exhibit 2
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FORM OF FORMATION AND SEPARATION AGREEMENT
between
THE ST. ▇▇▇▇ COMPANIES, INC.
and
PLATINUM UNDERWRITERS HOLDINGS, LTD.
dated as of June ___, 2002
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 ....................................................................1
SECTION 1.02 ...................................................................10
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.01 ...................................................................10
SECTION 2.02 ...................................................................11
SECTION 2.03 ...................................................................11
SECTION 2.04 ...................................................................11
SECTION 2.05 ...................................................................11
SECTION 2.06 ...................................................................12
ARTICLE III
INTERCOMPANY TRANSACTIONS
AS OF THE CLOSING DATE; CLOSING
SECTION 3.01 ...................................................................13
SECTION 3.02 ...................................................................16
SECTION 3.03 ...................................................................17
SECTION 3.04 ...................................................................17
SECTION 3.05 ...................................................................17
SECTION 3.06 ...................................................................18
ARTICLE IV
SEPARATION
SECTION 4.01 ...................................................................18
SECTION 4.02 ...................................................................19
SECTION 4.03 ...................................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ST. ▇▇▇▇
SECTION 5.01 ...................................................................19
SECTION 5.02 ...................................................................20
SECTION 5.03 ...................................................................20
SECTION 5.04 ...................................................................21
SECTION 5.05 ...................................................................21
SECTION 5.06 ...................................................................22
SECTION 5.07 ...................................................................23
SECTION 5.08 ...................................................................23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 6.01 ...................................................................23
SECTION 6.02 ...................................................................24
SECTION 6.03 ...................................................................25
SECTION 6.04 ...................................................................25
SECTION 6.05 ...................................................................25
ARTICLE VII
NON-COMPETITION; USE OF NAME; ADMINISTRATION
OF RUN-OFF CONTRACTS; INSURANCE MATTERS
SECTION 7.01 ...................................................................26
SECTION 7.02 ...................................................................28
SECTION 7.03 ...................................................................28
SECTION 7.04 ...................................................................28
ARTICLE VIII
TAX MATTERS
SECTION 8.01 ...................................................................29
SECTION 8.02 ...................................................................30
SECTION 8.03 ...................................................................30
SECTION 8.04 ...................................................................31
SECTION 8.05 ...................................................................31
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.01 ...................................................................31
ii
SECTION 9.02 ...................................................................32
SECTION 9.03 ...................................................................33
ARTICLE X
INDEMNIFICATION
SECTION 10.01 ...................................................................33
SECTION 10.02 ...................................................................34
SECTION 10.03 ...................................................................36
SECTION 10.04 ...................................................................37
SECTION 10.05 ...................................................................38
SECTION 10.06 ...................................................................39
ARTICLE XI
ACCESS TO INFORMATION; FURTHER ASSURANCES
SECTION 11.01 ...................................................................39
SECTION 11.02 ...................................................................39
SECTION 11.03 ...................................................................40
SECTION 11.04 ...................................................................40
ARTICLE XII
PRE-EMPTIVE RIGHTS; REPURCHASE
PROGRAMS; TRANSFER RESTRICTIONS
SECTION 12.01 ...................................................................41
SECTION 12.02 ...................................................................42
SECTION 12.03 ...................................................................43
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 ...................................................................43
SECTION 13.02 ...................................................................43
SECTION 13.03 ...................................................................44
SECTION 13.04 ...................................................................45
SECTION 13.05 ...................................................................45
SECTION 13.06 ...................................................................45
SECTION 13.07 ...................................................................45
SECTION 13.08 ...................................................................46
SECTION 13.09 ...................................................................46
SECTION 13.10 ...................................................................46
SECTION 13.11 ...................................................................46
SECTION 13.12 ...................................................................46
iii
SECTION 13.13 ...................................................................46
SECTION 13.14 ...................................................................46
Exhibit 3.01(a) Form of Quota Share Retrocession Agreements between
(i) St. ▇▇▇▇ Fire and Marine Insurance Company, as
retrocedent, and USF&G Family Insurance Company,
as retrocessionaire
(ii) St. ▇▇▇▇ Fire and Marine Insurance Company, as
retrocedent, and USF&G Family Insurance Company,
as retrocessionaire
(iii) United States Fidelity and Guaranty Company, as
retrocedent, and USF&G Family Insurance Company,
as retrocessionaire
(iv) St. ▇▇▇▇ Reinsurance Company, Ltd., as
retrocedent, and Platinum UK, as retrocessionaire
(v) St. ▇▇▇▇ Reinsurance Company, Ltd., as
retrocedent, and USF&G Family Insurance Company,
as retrocessionaire
(vi) St. ▇▇▇▇ Reinsurance Company, Ltd., as
retrocedent, and Platinum UK, as retrocessionaire
(vii) St. ▇▇▇▇ Reinsurance Company, Ltd., as
retrocedent, and USF&G Family Insurance Company,
as retrocessionaire
Exhibit 3.01(b)(i) Form of Master Services Agreement
Exhibit 3.01(b)(ii) Form of UK Master Services Agreement
Exhibit 3.01(c)(i) Form of Run-off Services Agreement
Exhibit 3.01(c)(ii) Form of UK Run-off Services Agreement
Exhibit 3.01(d) Form of Option Agreement
Exhibit 3.01(e) Form of Transitional Trademark License Agreement
Exhibit 3.01(f) Form of Registration Rights Agreement
Exhibit 3.01(g)(i) Form of Employee Benefits and Compensation Matters
Agreement
Exhibit 3.01(h)(i) Form of Underwriting Management Agreement
Exhibit 3.01(h)(ii) Form of UK Underwriting Management Agreement
Exhibit 3.01 Form of Sublease Agreements among
(i) Metropolitan Life Insurance Company, St. ▇▇▇▇ Re
and USF&G Family
(ii) WHCHC Real Estate Limited Partnership, St. ▇▇▇▇ Re
and USF&G Family
(iii) St. ▇▇▇▇ Reinsurance Management Corporation and
USF&G Family
(iv) [St. ▇▇▇▇ entity] and Platinum UK (London space)
(v) [St. ▇▇▇▇ entity] and the Company (Tokyo space)
Exhibit 3.01(k) Form of UK Transfer Agreement
Exhibit 3.04(c) Form of ▇▇▇▇ of Sale
Exhibit 6.04 Form of Quota Share Retrocession Agreements between
(a) USF&G Family, as retrocedent, and Platinum
Bermuda, as retrocessionaire
(b) Platinum UK, as retrocedent, and Platinum Bermuda,
as retrocessionaire
Schedule 2.01(b) Transferred Personal Property
iv
Schedule 2.01(c) Transferred Intellectual Property
Schedule 2.01(g) Renewal Rights
Schedule 2.01(i) Information in respect of Transferred Assets
Schedule 2.01(j) Information in respect of Reinsurance Agreements
Schedule 2.02 Information in respect of Renewal Rights
Schedule 3.02(a) Expenses payable by the Company
Schedule 3.02(b) Expenses payable by St. ▇▇▇▇
Schedule 4.02 Terminated Intercompany Agreements between USF&G Family
and St. ▇▇▇▇
Schedule 5.02(c) Regulatory Approvals to be Obtained by St. ▇▇▇▇ or St.
▇▇▇▇ Pre-Closing Subsidiaries Prior to the Closing
Schedule 5.03(b) Regulatory Approvals Required to be Obtained by St. ▇▇▇▇
or St. ▇▇▇▇ Pre-Closing Subsidiaries Prior to the
Closing
Schedule 5.04(a)(i) Exceptions to Title
Schedule 5.04(a)(ii) Encumbrances on Transferred Assets
Schedule 5.04(b) Encumbrances on Shares
Schedule 5.06(c) Statutory Periods of Limitation
Schedule 5.06(d) Tax-related Agreements, Pending Tax Actions Against
USF&G Family and List of Consolidated, Combined or
Unitary Tax Returns Filed on Behalf of USF&G Family
Schedule 5.06(e) Tax Deficiencies, Claims, Audits, Examinations, Actions,
Suits, Proceedings, or Investigations in Progress or
Pending
Schedule 5.06(f) USF&G Family Affiliated Group Membership for Tax Filings
Schedule 5.07 Contracts of USF&G Family
Schedule 6.02(c) Regulatory Approvals Required to be Obtained by the
Company or its Post-Closing Subsidiaries Prior to the
Closing
Schedule 7.01(a)(ii) Hiring Restrictions
Schedule 9.01(d) Consents
Schedule 9.02(e) Form of Release
Schedule 10.02(b) St. ▇▇▇▇ Information
Schedule 10.02(c) Shared Information
Schedule 11.01 Excluded Classes
v
FORMATION AND SEPARATION AGREEMENT
THIS
FORMATION AND SEPARATION AGREEMENT (this "AGREEMENT") is made and
entered into as of June __, 2002, by and between THE ST. ▇▇▇▇ COMPANIES, INC., a
Minnesota corporation ("ST. ▇▇▇▇"), and PLATINUM UNDERWRITERS HOLDINGS, LTD., a
Bermuda company (the "COMPANY").
RECITALS
WHEREAS, St. ▇▇▇▇ has sponsored the formation of the Company;
WHEREAS, the Company intends to conduct an initial public offering (the
"PUBLIC OFFERING") of its common shares, par value $0.01 per share (the "COMMON
SHARES");
WHEREAS, contingent upon the consummation of the Public Offering, at
the times specified herein and in the Reinsurance Agreements, St. ▇▇▇▇ will
cause certain of its subsidiaries to, among other things, transfer and retrocede
to certain subsidiaries of the Company assets and liabilities under the
Reinsurance Agreements and transfer the Transferred Assets to the Company and
its subsidiaries, as consideration for which the Company intends to issue to St.
▇▇▇▇ or its designee pursuant to the St. ▇▇▇▇ Investment, (i) a number of Common
Shares equal to up to approximately 24.9% of all Common Shares outstanding
following consummation of the Public Offering and (ii) options pursuant to the
Option Agreement under which St. ▇▇▇▇ or its designee will have the right to
purchase additional Common Shares of the Company for the prices and in the
circumstances set forth in the Option Agreement; and
WHEREAS, St. ▇▇▇▇ and the Company wish to provide herein for certain
transactions to be entered into in connection with the Public Offering and the
St. ▇▇▇▇ Investment and to set forth herein certain arrangements that will,
following the consummation of the Public Offering and the St. ▇▇▇▇ Investment,
govern the relationship between them and their Subsidiaries.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the sufficiency of which is acknowledged, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"ACTION" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
"AFFILIATE" of any Person or entity means any Person which, directly or
indirectly, controls, is under common control with, or is controlled by, such
Person.
"ANCILLARY AGREEMENTS" means the Option Agreement, the Registration
Rights Agreement, the Employee Benefits and Compensation Matters Agreement, the
Underwriting Management Agreement, the Master Services Agreement, the Sublease
Agreements, the Run-off Services Agreement, the Transitional Trademark License
Agreement, the Quota Share Retrocession Agreements, and the UK Agreements, in
each case as defined and described in more detail in Section 3.01 hereof.
"ARBITRATORS" has the meaning specified in Section 13.02(b).
"BENEFICIAL OWNER" and "BENEFICIALLY OWN" means, with respect to any
Person:
(i) securities that such Person or any of such Person's
Affiliates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT")), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not
in writing; PROVIDED that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," (A) securities tendered pursuant
to a tender or exchange offer made by such Person or any of such
Person's Affiliates until such tendered securities are accepted for
payment, purchase or exchange, (B) any security as a result of an oral
or written agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (1) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (2) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(ii) securities that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate thereof) with which
such Person (or any of such Person's Affiliates) has any agreement,
arrangement or understanding (whether or not in writing, but excluding
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities until
the expiration of forty days after the date of such acquisition), for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (i) above)
or disposing of any Voting Securities.
"BILLS OF SALE" means the Bills of Sale and Assignment (or other
appropriate instruments of transfer, including instruments of assignment
suitable for recording at the U.S. Patent & Trademark Office, the U.S. Copyright
Office or equivalent agencies in other relevant jurisdictions where applicable),
to be executed by St. ▇▇▇▇ or its Subsidiaries, as applicable, and to be
acknowledged by the Company or its Subsidiaries, as applicable) on the Closing
Date, substantially in the form of EXHIBIT 3.04(b).
2
"BUSINESS" means the reinsurance business of St. ▇▇▇▇, as conducted
through its division, St. ▇▇▇▇ Re.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day on
which banks in
New York,
New York, have the option by law or other governmental
action to close.
"CLOSING" has the meaning specified in Section 3.03.
"CLOSING BALANCE SHEET" has the meaning specified in Section 4.01(b).
"CLOSING DATE" has the meaning specified in Section 3.03.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON SHARES" has the meaning specified in the Recitals.
"COMPANY" has the meaning specified in the preamble of this Agreement.
"COMPANY INDEMNITEE" has the meaning specified in Section 10.01(a).
"COMPANY INFORMATION" has the meaning specified in Section 10.02(a).
"COMPANY LIABILITIES" means collectively, except as otherwise provided
for in this Agreement or the Ancillary Agreements, any and all Liabilities that
arise out of any act, omission, event or condition occurring or arising on or
after the Closing Date relating to the ownership, operation or use of the
business of the Company or any of its Post-closing Subsidiaries or the
Transferred Assets by the Company or any of its Post-closing Subsidiaries. For
the avoidance of doubt, the Company Liabilities do not include any Liabilities
under the federal or any other securities laws relating to the Public Offering
but do include all Liabilities relating to the Employment Agreements
irrespective of whether occurring or arising prior to, on or after the Closing
Date and all Liabilities relating to any Renewal Obligations.
"COMPANY REGISTRATION INDEMNITEE" has the meaning specified in Section
10.02(b).
"COMPANY SUBSIDIARY" means any Subsidiary of the Company as of the date
hereof or at any time hereafter.
"CONVERTIBLE NEW SECURITIES" has the meaning specified in Section
12.01(d)(iv).
"DILUTIVE TRANSACTION" has the meaning specified in Section 12.01(a).
"DISPUTE" has the meaning specified in Section 13.02(b)(i).
"EMPLOYEE BENEFITS AND COMPENSATION MATTERS AGREEMENT" has the meaning
specified in Section 3.01(g)(i).
3
"EMPLOYMENT AGREEMENTS" means, collectively, (i) the employment
agreement, dated as of March 3, 2002, between St. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
(ii) the agreement, dated as of March 1, 2002, between St. ▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, (iii) the consulting agreement, dated as of March 1, 2002, between St.
▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, (iv) the employment agreement, dated as of May 2,
2002, between St. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, (v) the employment agreement, dated as
of _______, 2002, between St. ▇▇▇▇ and _____________, and (vi) the employment
agreement, dated as of ___________, 2002, between St. ▇▇▇▇ and ____________.
"ENCUMBRANCE" means any security interest, pledge, hypothecation,
mortgage, lien (including, without limitation, environmental and tax liens),
violation, charge, lease, license, encumbrance, servient easement, adverse
claim, reversion, reverter, preferential arrangement, restrictive covenant,
condition or restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"FIRE AND MARINE" means St. ▇▇▇▇ Fire and Marine Insurance Company, a
Minnesota corporation and a wholly owned subsidiary of St. ▇▇▇▇.
"FIRM PUBLIC OFFERING SHARES" means the Company's Common Shares issued
in the Public Offering, other than Common Shares issued as a result of exercise
of the Over-Allotment by the underwriters of the Public Offering.
"FIRM ST. ▇▇▇▇ SHARES" has the meaning specified in Section 2.04(a)(i).
"GOVERNMENTAL AUTHORITY" means any self-regulatory organization having
jurisdiction over the parties hereto or any of the parties to any of the
Ancillary Agreements, any United States or non-United States federal, national,
supranational, state, provincial, local or similar government, governmental,
regulatory or administrative authority, legislative, agency or commission or any
court, tribunal or judicial or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"INDEMNIFYING PARTY" has the meaning specified in Section 10.03.
"INDEMNITEE" has the meaning specified in Section 10.03.
"INFORMATION" has the meaning specified in Section 11.01(b).
"INSURANCE PROCEEDS" means those monies (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustments,
retrospectively rated premium adjustments, deductibles, retentions or costs paid
by such insured.
4
"LIABILITIES" means any and all debts, liabilities and obligations,
payments, costs and expenses, whether accrued or unaccrued, absolute or
contingent, matured or unmatured, disclosed or undisclosed, known or unknown,
liquidated or unliquidated or determined or determinable, including, without
limitation, those arising under any law and regulations thereunder (including,
without limitation, any insurance law but excluding any Tax law), Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"LOSSES" means any and all losses, Liabilities, claims, damages,
obligations, payments, costs and expenses, matured or unmatured, absolute or
contingent, disclosed or undisclosed, determined or determinable, accrued or
unaccrued, liquidated or unliquidated, known or unknown (including, without
limitation, the costs and expenses of any Action, threatened Action, demand,
assessment, judgment, settlement and compromise relating thereto and attorneys'
fees and any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any such Action or threatened Action).
"MOUNTAIN RIDGE" means Mountain Ridge Insurance Company, a Vermont
insurance company.
"NEWLY HIRED EMPLOYEES" has the meaning specified in
Section 3.01(g)(i).
"NEW SECURITIES" has the meaning specified in Section 12.01(a).
"OFFERINGS" means the Public Offering and the St. ▇▇▇▇ Investment
together.
"OPTION AGREEMENT" has the meaning specified in Section 3.01(d).
"OPTIONAL PUBLIC OFFERING SHARES" means additional Common Shares
offered upon the exercise of the Over-Allotment Option.
"OPTIONAL ST. ▇▇▇▇ SHARES" has the meaning specified in Section
2.04(a)(ii).
"OVER-ALLOTMENT OPTION" means the over-allotment option that may be
exercised by the underwriters of the Public Offering pursuant to the
underwriting agreement relating to the Public Offering.
"PERMITTED ACQUIREE" has the meaning specified in Section 7.01(b)(ii).
"PERSON" includes an individual, a partnership, a joint venture, a
limited liability company, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
"PLATINUM BERMUDA" means Platinum Underwriters Bermuda, Ltd., a Bermuda
insurance company and a wholly owned subsidiary of the Company.
"PLATINUM REGENCY" means Platinum Regency Holdings, an Irish private
unlimited company and a wholly owned subsidiary of the Company.
5
"PLATINUM UK" means Platinum Re (UK) Limited, an English insurance
company and a wholly owned subsidiary of Platinum Regency.
"POST-CLOSING SUBSIDIARIES", with respect to either St. ▇▇▇▇ or the
Company, means collectively all of the Subsidiaries of such entity following the
Closing Date.
"PRE-CLOSING PERIODS" has the meaning specified in Section 8.01(a).
"PRE-CLOSING TAXES" has the meaning specified in Section 8.01(a).
"PROSPECTUS" means any preliminary prospectus, as amended and
supplemented from time to time, and any final prospectus filed pursuant to Rule
424(b) under the Securities Act, in each case relating to the Registration
Statement.
"PUBLIC OFFERING" has the meaning specified in the Recitals.
"QUOTA SHARE RETROCESSION AGREEMENTS" has the meaning specified in
Section 3.01(a).
"REGISTRATION INDEMNITEE" has the meaning specified in Section
10.02(b).
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in Section
3.01(f).
"REGISTRATION STATEMENTS" means the registration statements on Form
S-1, as amended and supplemented from time to time, to be filed with the
Commission under the Securities Act of 1933, as amended, relating to the Public
Offering.
"REGULATIONS" means the Treasury Regulations (including temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"REINSURANCE AGREEMENTS" means the reinsurance agreements retroceded to
one of the Company's Post-closing Subsidiaries pursuant to the applicable Quota
Share Retrocession Agreements.
"RENEWAL OBLIGATIONS" means any obligations of St. ▇▇▇▇ and its
Subsidiaries to write or renew reinsurance treaties, contracts and agreements
incepting on or after January 1, 2002 relating to the Transferred Lines and
arising from the operation of the reinsurance business conducted by St. ▇▇▇▇ Re
prior to the Closing.
"RENEWAL RIGHTS" means all the direct and indirect rights of St. ▇▇▇▇
and its Subsidiaries to seek to renew reinsurance treaties, contracts and
agreements underwritten by St. ▇▇▇▇ Re and in force on the Closing Date relating
to the Transferred Lines, other than treaties, contracts and agreements
identified or described in SCHEDULE 2.01(d).
"REPRESENTATIVES" has the meaning specified in Section 11.01.
"RESTRICTED PERIOD" has the meaning specified in Section 7.01(a).
6
"RUN-OFF BUSINESS" has the meaning specified in Section 7.01(b)(i).
"RUN-OFF SERVICES" has the meaning specified in Section 3.01(c)(i).
"SECOND CLOSING" has the meaning specified in Section 3.06(a).
"SECOND CLOSING DATE" has the meaning specified in Section 3.06(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"SHARED INFORMATION" has the meaning specified in Section 10.02(c).
"SHARES" means all the issued and outstanding shares of common stock,
par value $100 per share, of USF&G Family.
"ST. ▇▇▇▇" has the meaning specified in the preamble of this Agreement.
"ST. ▇▇▇▇ CONFIDENTIAL INFORMATION" has the meaning specified in
Section 11.03(a).
"ST. ▇▇▇▇ DESIGNEE" means an Affiliate of St. ▇▇▇▇ designated as a
party to the Option Agreement or the Registration Rights Agreement.
"ST. ▇▇▇▇ GROUP" means any "affiliated group" (as defined in Section
1504(a) of the Code) or any other consolidated, combined, unitary or similar
group for any other Tax purpose that includes St. ▇▇▇▇.
"ST. ▇▇▇▇ INDEMNITEE" has the meaning specified in Section 10.01(b).
"ST. ▇▇▇▇ INVESTMENT" means the private placement of Common Shares and
options to purchase Common Shares to St. ▇▇▇▇ pursuant to Section 2.05 of this
Agreement.
"ST. ▇▇▇▇ INVESTMENT OPINION" has the meaning specified in Section
9.02(d).
"ST. ▇▇▇▇ LIABILITIES" means collectively, except as otherwise provided
for in this Agreement or the Ancillary Agreements, any and all Liabilities that
arise out of any act, omission, event or condition occurring or arising prior to
the Closing Date relating to (i) the ownership, operation or use of the business
of St. ▇▇▇▇ Re or the Transferred Assets by St. ▇▇▇▇ or any of its Subsidiaries
and (ii) USF&G Family. For the avoidance of doubt, the St. ▇▇▇▇ Liabilities do
not include any Liabilities under the federal or any other securities laws
relating to the Public Offering or any Renewal Obligations. For the further
avoidance of doubt, St. ▇▇▇▇ Liabilities DO NOT include Liabilities arising out
of any act or omission occurring or arising prior to the Closing Date of any of
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇ taken in furtherance of the
organization of Platinum Holdings or its Subsidiaries, the Public Offering, this
Agreement, the Registration Statement, the Ancillary Agreements or the
transactions related
7
thereto but otherwise DO include Liabilities arising out of any act or omission
occurring or arising prior to the Closing Date of any of such individuals in
their capacities as officers of St. ▇▇▇▇ Re.
"ST. ▇▇▇▇ LICENSOR" has the meaning specified in Section 3.01(e).
"ST. ▇▇▇▇ OPTIONS" means the options to be granted to St. ▇▇▇▇ pursuant
to the Option Agreement.
"ST. ▇▇▇▇ PRE-CLOSING SUBSIDIARIES" has the meaning specified in
Article V.
"ST. ▇▇▇▇ RE" means the reinsurance operations of St. ▇▇▇▇ reported in
the Reinsurance segment of St. ▇▇▇▇, as reflected in its 2001 Annual Report on
Form 10-K.
"ST. ▇▇▇▇ RE (UK)" means St. ▇▇▇▇ Reinsurance Company Limited, a U.K.
insurance company and a wholly owned subsidiary of St. ▇▇▇▇.
"ST. ▇▇▇▇ REGISTRATION INDEMNITEE" has the meaning specified in Section
10.02(a).
"ST. ▇▇▇▇ SHARES" means the Firm St. ▇▇▇▇ Shares, the Optional St. ▇▇▇▇
Shares and any Common Shares issuable to St. ▇▇▇▇ pursuant to Section 2.04(b) of
this Agreement collectively.
"STRADDLE PERIODS" has the meaning specified in Section 8.01(a).
"SUBLEASE AGREEMENTS" means the sublease agreements and assignments of
leases between Affiliates of St. ▇▇▇▇ and Affiliates of the Company;
substantially in the forms attached to this Agreement as EXHIBITS 3.01(i)-(v).
"SUBSIDIARY" means, as to any Person, (i) any corporation more than 50%
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any other Person in which such Person
and/or one or more Subsidiaries of such Person has more than a 50% equity
interest at the time.
"TAX" means all federal, state, local and foreign income, profits,
franchise, gross receipts, premium, environmental, customs duty, capital stock,
severances, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions.
"TAX PROCEEDING" has the meaning specified in Section 8.03(a).
"TAX RETURNS" means all returns, reports or similar statements
(including any related exhibits and schedules) required to be filed with respect
to any Taxes, including any information return, claim or refund, amended return
or declaration of estimated tax.
8
"THIRD PARTY CLAIM" has the meaning specified in Section 10.04(a).
"TRANSFERRED ASSETS" has the meaning specified in Section 2.01.
"TRANSFERRED BUSINESS" means the Reinsurance Agreements and the
Transferred Assets, collectively.
"TRANSFERRED BUSINESS CONFIDENTIAL INFORMATION" means the information
set forth in Section 2.01(i), Section 2.01(j) and Section 2.02.
"TRANSFERRED LINES" are those types of reinsurance contracts
underwritten by St. ▇▇▇▇ Re and included in the list of classes of business set
forth in Schedule 1.01(a).
"UK AGREEMENTS" means the UK Transfer Agreement, the UK Services
Agreement, the UK Run-off Services Agreement, the UK Employee Matters Agreement,
the UK Underwriting Management Agreement and the UK Quota Share Retrocession
Agreements.
"UK EMPLOYEE MATTERS AGREEMENT" has the meaning specified in Section
3.01(g)(ii).
"UK NEWLY HIRED EMPLOYEES" has the meaning specified in Section
3.01(g)(ii).
"UK QUOTA SHARE RETROCESSION AGREEMENTS" means the quota share
retrocession agreements referred to in Sections 3.01(a)(v) through (viii).
"UK RUN-OFF SERVICES AGREEMENT" has the meaning specified in Section
3.01(c)(ii).
"UK SERVICES AGREEMENT" has the meaning specified in Section
3.01(b)(ii).
"UK TRANSFER AGREEMENT" has the meaning specified in Section 3.01(k).
"UK UNDERWRITING MANAGEMENT AGREEMENT" has the meaning specified in
Section 3.01(h)(ii).
"UNDERWRITING AGREEMENT" means the underwriting agreement among St.
▇▇▇▇, the Company and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and the other underwriters named
therein relating to the Public Offering.
"USF&G" has the meaning specified in Section 5.04(b).
"USF&G FAMILY" means USF&G Family Insurance Company, a Maryland
insurance company and a wholly owned indirect subsidiary of St. ▇▇▇▇ ▇▇▇▇▇ to
the Closing Date, and a wholly owned subsidiary of Platinum Regency following
the Closing. It is contemplated that USF&G Family's name will be changed to
Platinum Underwriters Reinsurance Inc. on or prior to the Closing Date or as
soon as practicable thereafter.
"VOTING SECURITIES" means the Common Shares and all other securities of
the Company of any kind or class having power generally to elect a majority of
the Company's
9
directors (irrespective of whether or not at the time stock of any class or
classes of the Company shall have or might have voting power by reason of the
happening of any contingency).
SECTION 1.02 OTHER DEFINITIONAL PROVISIONS. The words "hereof",
"hereto", "herein" and "hereunder" and words of similar import when used in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement; and references to any Article, Section, Exhibit or Schedule
are references to Articles, Sections, Exhibits or Schedules in or to this
Agreement unless otherwise specified.
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.01 TRANSFER OF ASSETS. Effective as of the Closing Date, and
immediately after the delivery of the Firm Public Offering Shares against
payment therefor, St. ▇▇▇▇ shall, and (as necessary) shall cause its
Subsidiaries to, sell, assign, transfer, convey and deliver to the Company or
its designees, which shall acquire at the Closing from St. ▇▇▇▇ or its
Subsidiaries, as the case may be, the following assets and properties together
with any related Company Liabilities (such assets and Company Liabilities are
collectively referred to as the "TRANSFERRED ASSETS"):
(a) the Shares;
(b) the furniture, fixtures, computers, equipment, machinery and other
tangible personal property, AND ALL CONTRACTS AND AGREEMENTS relating thereto
listed on SCHEDULE 2.01(b);
(c) the rights to the intellectual property listed on SCHEDULE 2.01(c)
(it being understood that certain rights may not be transferred without the
consent of a third party, and that while St. ▇▇▇▇ and its relevant Subsidiaries
will use commercially reasonable efforts to obtain such consents, they shall not
have any liability to the Company or any Subsidiary of the Company to the extent
any such consent is not obtained by the Closing Date and, for greater certainty,
none of St. ▇▇▇▇ nor any Subsidiary of St. ▇▇▇▇ shall be required to make any
payment to a third party to procure the transfer of rights to any intellectual
property);
(d) the Employment Agreements, as follows:
(i) the employment agreement, dated as of March 3, 2002,
between St. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be assigned to the Company;
(ii) the agreement, dated as of March 1, 2002, between St.
▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be assigned to the Company;
(iii) the consulting agreement, dated as of March 1, 2002,
between St. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be assigned to USF&G
Family; and
10
(iv) the employment agreement, dated as of __________, 2002,
between St. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be assigned to [the Company];
(v) the employment agreement, dated as of _________, 2002,
between St. ▇▇▇▇ and __________ shall be assigned to [the Company];
(vi) the employment agreement, dated as of ________, 2002,
between St. ▇▇▇▇ and __________ shall be assigned to [the Company];
(e) the rights to occupy the premises that are the subject of the
Sublease Agreements as specified by such Sublease Agreements;
(f) the Newly Hired Employees;
(g) the Renewal Rights set forth on SCHEDULE 2.01(g);
(h) the rights to certain intellectual property provided pursuant to
the Transitional Trademark License Agreement;
(i) Information in respect of the Transferred Assets set forth in
Section 2.01(a) through (h) set forth in Schedule 2.01(i); and
(j) Information in respect of Reinsurance Agreements set forth in
Schedule 2.01(j).
The Transferred Assets exclude any and all assets and properties of St.
▇▇▇▇ or any of its Affiliates other than the assets specifically identified
above.
SECTION 2.02 RENEWAL RIGHTS INFORMATION. Effective as of the Closing
Date, and promptly after the delivery of the Firm Public Offering Shares against
payment therefor, St. ▇▇▇▇ shall cause to be delivered to the Company or its
Subsidiaries the information in respect of Renewal Rights set forth in Schedule
2.02.
SECTION 2.03 JOINT OWNERSHIP. The parties agree that they shall be
joint owners of the [information and] records referenced in Section 2.01(i) and
(j), whether they have originals or copies of the various components thereof.
SECTION 2.04 ASSUMPTION AND RETENTION OF LIABILITIES. Effective as of
the Closing Date, the Company or one of its Post-Closing Subsidiaries shall
assume and pay, perform and discharge (when due and payable) the Company
Liabilities, and St. ▇▇▇▇ shall retain and, pay, perform and discharge (when due
and payable) the St. ▇▇▇▇ Liabilities.
SECTION 2.05 ST. ▇▇▇▇ INVESTMENT. (a) Subject to clause (b) of this
Section 2.05, the Company hereby agrees that, contingent upon the consummation
of the Public Offering, it shall sell, transfer, convey and deliver to St. ▇▇▇▇
or its designee and St. ▇▇▇▇ agrees that it shall purchase from the Company in a
transaction exempt from the registration requirements of the Securities Act:
11
(i) at the time of the delivery of the Firm Public Offering
Shares, an approximate 24.9% interest in the Common Shares (up to
13,262,300 Common Shares) (the "FIRM ST. ▇▇▇▇ SHARES"), the St. ▇▇▇▇
Options and the right to receive the Optional St. ▇▇▇▇ Shares in the
circumstances described in Section 2.05(a)(ii) in exchange for the
transfer of the Transferred Assets by St. ▇▇▇▇ pursuant to Section
2.01, and the various agreements and undertakings of St. ▇▇▇▇ herein
and of St. ▇▇▇▇ and its Subsidiaries in the Ancillary Agreements;
PROVIDED that, to the extent the price for the Firm Public Offering
Shares is less than $25.00 per Common Share, St. Paul's interest in the
Common Shares shall be reduced pro rata; and
(ii) in the event of any exercise of the Over-Allotment Option
by the underwriters in the underwriters' discretion in whole or in
part, at the time of delivery of the Optional Public Offering Shares,
such additional Common Shares (the "OPTIONAL ST. ▇▇▇▇ SHARES") as
permit St. ▇▇▇▇ to retain the proportionate initial interest at the
level it would have obtained in the absence of such exercise,
such that in each case (i) and (ii) above, as applicable, upon consummation of
the Public Offering and the St. ▇▇▇▇ Investment, St. ▇▇▇▇ will have beneficial
ownership of up to 24.9% (but in no event 25% or more) of all Common Shares
outstanding, the precise number of shares to be issued to St. ▇▇▇▇ to be rounded
down to the nearest round lot number of shares.
(b) In the event the Company and the underwriters agree to alter the
number of Firm Public Offering Shares and Optional Public Offering Shares after
the date hereof, the number of Firm St. ▇▇▇▇ Shares and Optional St. ▇▇▇▇ Shares
will be proportionately adjusted, without any further actions by either the
Company or St. ▇▇▇▇, in such amount that in each case, after giving effect to
the purchase of Common Shares pursuant to the St. ▇▇▇▇ Investment and the
issuance of the Firm Public Offering Shares and the Optional Public Offering
Shares (if applicable) pursuant to the Public Offering, St. ▇▇▇▇ will own such
number of Common Shares that results in it having beneficial ownership of up to
24.9% (but in no event 25% or more) of all of the then outstanding Common
Shares, the precise number of Common Shares to be issued to St. ▇▇▇▇ to be
rounded down to the nearest round lot number of shares PROVIDED that, to the
extent the price for the Firm Public Offering Shares is less than $25.00 per
Common Share, the number of Firm St. ▇▇▇▇ Shares shall be reduced pro rata.
SECTION 2.06 THIRD PARTY CONSENTS. (a) St. ▇▇▇▇ shall use commercially
reasonable efforts to obtain prior to the Closing Date any consent, approval or
authorization necessary for the transfer of the Transferred Assets to the
Company as contemplated by this Agreement.
(b) If St. ▇▇▇▇ has not obtained any consent, approval or authorization
necessary for the transfer of any of the Transferred Assets as contemplated by
this Agreement prior to the Closing Date, St. ▇▇▇▇, for a period of up to 12
months subsequent to the Closing Date, shall reasonably cooperate with the
Company in attempting to obtain such consents, approvals or authorizations as
promptly thereafter as practicable, PROVIDED that the Company
12
shall promptly reimburse St. ▇▇▇▇ for any reasonable legal and other expenses
incurred in connection with such cooperation as such expenses are incurred.
(c) St. ▇▇▇▇ ▇▇▇ not exercise any of its rights under any of the
Transferred Assets with respect to which such consent, approval or authorization
to the transfer thereof has not been obtained by the Closing Date except at the
direction of or on behalf of the Company or its Post-closing Subsidiaries, and
the Company and its Post-closing Subsidiaries shall be responsible for any
Company Liabilities in respect of such Transferred Assets after the Closing Date
PROVIDED that St. ▇▇▇▇ shall not be required to take any action directed by the
Company under any agreement relating to a Transferred Asset that would cause a
breach of such Agreement and St. ▇▇▇▇ or a St. ▇▇▇▇ ▇▇▇▇-closing Subsidiary
reasonably believes that it retains liability for such breach.
ARTICLE III
INTERCOMPANY TRANSACTIONS AS OF THE CLOSING DATE; CLOSING
SECTION 3.01 ANCILLARY AGREEMENTS. The parties hereto agree to enter
into, and (as necessary) shall cause their respective Subsidiaries to enter
into, the following agreements, in each case (unless otherwise specified in this
Article III) effective as of the Closing Date contingent upon and immediately
after the time of the completion of the Public Offering:
(a) the following retrocession agreements (collectively, the "QUOTA
SHARE RETROCESSION AGREEMENTS"), all of which shall go into effect as of the
later of 12:01 A.M., local time, on the Business Day immediately following the
Closing Date or July 1, 2002:
(i) a Quota Share Retrocession Agreement between Fire and
Marine and USF&G Family, substantially in the form of EXHIBIT
3.01(A)(I), pursuant to which USF&G Family will reinsure 100% of the
liabilities of Fire and Marine under the traditional reinsurance
contracts entered into by Fire and Marine incepting between January 1,
2002 and the Closing Date as specified in an exhibit thereto, and the
traditional reinsurance contracts bound pursuant to the Underwriting
Management Agreement;
(ii) a Quota Share Retrocession Agreement between Fire and
Marine and USF&G Family, substantially in the form of EXHIBIT
3.01(a)(ii), pursuant to which USF&G Family will reinsure 100% of the
liabilities of Fire and Marine under the non-traditional reinsurance
contracts incepting between January 1, 2002 and the Closing Date as
specified in an exhibit thereto, and the non-traditional reinsurance
contracts bound pursuant to the Underwriting Management Agreement;
(iii) a Quota Share Retrocession Agreement between USF&G and
USF&G Family, substantially in the form of EXHIBIT 3.01(a)(iii),
pursuant to which USF&G Family will reinsure 100% of the liabilities of
USF&G under the non-traditional reinsurance contracts incepting between
January 1, 2002 and the Closing Date as
13
specified in an exhibit thereto, and the non-traditional reinsurance
contracts bound pursuant to the Underwriting Management Agreement;
(iv) a Quota Share Retrocession Agreement between Mountain
Ridge and USF&G Family, substantially in the form of EXHIBIT
3.01(a)(iv), pursuant to which USF&G Family will reinsure 100% of the
liabilities of Mountain Ridge under the finite reinsurance contracts
incepting between January 1, 2002 and the Closing Date as specified in
an exhibit thereto, and the finite reinsurance contracts bound pursuant
to the Underwriting Management Agreement;
(v) a Quota Share Retrocession Agreement between St. ▇▇▇▇ Re
UK and Platinum UK, substantially in the form of EXHIBIT 3.01(a)(v),
pursuant to which Platinum UK will reinsure 100% of the liabilities of
St. ▇▇▇▇ Re UK under the traditional reinsurance contracts reinsuring
only UK liabilities incepting between January 1, 2002 and the Closing
Date as specified in an exhibit thereto, and the traditional
reinsurance contracts reinsuring only UK liabilities and bound pursuant
to the UK Underwriting Management Agreement;
(vi) a Quota Share Retrocession Agreement between St. ▇▇▇▇ Re
UK and USF&G Family, substantially in the form of EXHIBIT 3.01(a)(vi),
pursuant to which USF&G Family will reinsure 100% of the liabilities of
St. ▇▇▇▇ Re UK under the traditional reinsurance contracts reinsuring
only liabilities other than UK liabilities incepting between January 1,
2002 and the Closing Date as specified in an exhibit thereto, and the
traditional reinsurance contracts reinsuring only liabilities other
than UK liabilities and bound pursuant to the UK Underwriting
Management Agreement;
(vii) a Quota Share Retrocession Agreement between St. ▇▇▇▇ Re
UK and Platinum UK, substantially in the form of EXHIBIT 3.01(a)(vii),
pursuant to which Platinum UK will reinsure 100% of the liabilities of
St. ▇▇▇▇ Re UK under the non-traditional reinsurance contracts
reinsuring only UK liabilities incepting between January 1, 2002 and
the Closing Date as specified in an exhibit thereto, and the
non-traditional reinsurance contracts reinsuring UK liabilities and
bound pursuant to the UK Underwriting Management Agreements;
(viii) a Quota Share Retrocession Agreement between St. ▇▇▇▇
Re UK and USF&G Family, substantially in the form of EXHIBIT
3.01(a)(viii), pursuant to which USF&G Family will reinsure 100% of the
liabilities of St. ▇▇▇▇ Re UK under the non-traditional reinsurance
contracts reinsuring only liabilities other than UK liabilities
incepting between January 1, 2002 and the Closing Date as specified in
an exhibit thereto, and the non-traditional reinsurance contracts
reinsuring liabilities other than-UK liabilities and bound pursuant to
the UK Underwriting Management Agreement;
(b) (i) a Master Services Agreement substantially in the form of
EXHIBIT 3.01(b)(i) between St. ▇▇▇▇ and the Company pursuant to which St. ▇▇▇▇
and/or its Post-closing Subsidiaries other than St. ▇▇▇▇ Re UK will provide the
Company and its Subsidiaries other than Platinum UK the Transition Services (as
defined in the Master Services Agreement),
14
including, without limitation, payroll administration, human resources
management and electronic systems support, in each case as specified in the
applicable service schedule to the Master Services Agreement, for a specified
period of time;
(ii) a UK Master Services Agreement substantially in the form of
EXHIBIT 3.01(b)(ii) between St. ▇▇▇▇ Re UK and Platinum UK pursuant to which St.
▇▇▇▇ Re UK will provide Platinum UK with the UK Transition Services (as defined
in the UK Master Services Agreement), including, without limitation, payroll
administration, human resources management and electronic systems support, in
each case as specified in the applicable service schedule to the UK Master
Services Agreement, for a specified period of time;
(c) (i) a Run-off Services Agreement substantially in the form of
EXHIBIT 3.01(c)(i), between St. ▇▇▇▇ and the Company pursuant to which the
Company and/or its Post-closing Subsidiaries other than Platinum UK will provide
certain services (the "RUN-OFF SERVICES") to St. ▇▇▇▇ and/or its Post-closing
Subsidiaries other than St. ▇▇▇▇ Re UK for the administration of the run-off of
reinsurance contracts of St. Paul's Post-closing Subsidiaries other than St.
▇▇▇▇ Re UK that are not retroceded to the Company's Post-closing Subsidiaries
pursuant to any of the Quota Share Retrocession Agreements, for a specified
period of time;
(ii) a UK Run-off Services Agreement substantially in the form of
Exhibit 3.01(c)(ii), between St. ▇▇▇▇ Re UK and Platinum UK pursuant to which
Platinum UK will provide Run-off Services to St. ▇▇▇▇ Re UK for the
administration of the run-off of the reinsurance contracts of St. ▇▇▇▇ Re UK
that are not retroceded to Platinum UK or USF&G Family pursuant to any of the
Quota Share Retrocession Agreements, for a specified period of time;
(d) an Option Agreement, substantially in the form of EXHIBIT 3.01(d),
between St. ▇▇▇▇ or a St. ▇▇▇▇ Designee and the Company, pursuant to which St.
▇▇▇▇ or such St. ▇▇▇▇ Designee will, under the terms and conditions specified
therein, have the right to purchase additional Common Shares of the Company,
provided that St. ▇▇▇▇ or such St. ▇▇▇▇ Designee may exercise the option only to
the extent such exercise will not cause St. ▇▇▇▇ to beneficially own more than
24.9% of all of the Common Shares then outstanding;
(e) one or more Transitional Trademark License Agreements,
substantially in the form of EXHIBIT 3.01(e), between St. ▇▇▇▇ and its relevant
Subsidiaries (the "ST. ▇▇▇▇ LICENSORS") and the Company and its Post-closing
Subsidiaries pursuant to which the St. ▇▇▇▇ Licensors will grant to the Company
and/or its Post-closing Subsidiaries licenses to use service marks, trademarks
and other intellectual property rights specified in such agreement for a
specified period of time;
(f) a Registration Rights Agreement, substantially in the form of
EXHIBIT 3.01(f), between St. ▇▇▇▇ or a St. ▇▇▇▇ Designee and the Company with
respect to all Common Shares of the Company held by or optioned to St. ▇▇▇▇ or
such St. ▇▇▇▇ Designee as of the Closing Date;
(g) (i) an Employee Benefits and Compensation Matters Agreement,
substantially in the form of EXHIBIT 3.01(g)(i), between St. ▇▇▇▇ and USF&G
Family to allocate
15
assets, liabilities and responsibilities relating to the hiring of certain
employees of St. ▇▇▇▇ and its Subsidiaries other than St. ▇▇▇▇ Re UK by the
Company and its Post-closing Subsidiaries other than Platinum UK (the "NEWLY
HIRED EMPLOYEES") and the continued participation by the Newly Hired
Employees in the benefit plans, that St. ▇▇▇▇ currently sponsors and
maintains;
(ii) a UK Employee Matters Agreement, substantially in the form of
Exhibit 3.01(g)(ii), between St. ▇▇▇▇ Re UK and Platinum UK to allocate assets,
liabilities and responsibilities relating to the hiring of employees of St. ▇▇▇▇
Re UK by Platinum UK (the "UK Newly Hired Employees") and the continued
participation by the UK Newly Hired Employees in the benefit plans, including
stock plans, that St. ▇▇▇▇ Re UK currently sponsors and maintains;
(h) (i) Underwriting Management Agreements, substantially in the form
of EXHIBIT 3.01(h)(i) and (ii) pursuant to which the Company or one of its
Post-closing Subsidiaries will provide to each of Fire and Marine and USF&G
certain underwriting services, as specified in the Underwriting Management
Agreements; and
(ii) a UK Underwriting Management Agreement, substantially in the
form of Exhibit 3.01(h)(ii), between Platinum UK and St. ▇▇▇▇ Re pursuant to
which Platinum UK will provide to St. ▇▇▇▇ Re UK certain underwriting services,
as specified in the UK Underwriting Management Agreement;
(i) the following sublease agreements (collectively, the "SUBLEASE
AGREEMENTS"):
(i) a Sublease Agreement, substantially in the form of EXHIBIT
3.01(i)(i), among Metropolitan Life Insurance Company, St. ▇▇▇▇ Re and
USF&G Family;
(ii) a Sublease Agreement, substantially in the form of
EXHIBIT 3.01(i)(ii), among WHCHC Real Estate Limited Partnership, St.
▇▇▇▇ Re and USF&G Family;
(iii) a Sublease Agreement, substantially in the form of
EXHIBIT 3.01(i)(iii), between St. ▇▇▇▇ Reinsurance Management
Corporation and USF&G Family;
(iv) a Sublease Agreement, substantially in the form of
EXHIBIT 3.01(i)(iv), between [St. ▇▇▇▇ entity] and Platinum UK (London
space);
(v) a Sublease Agreement, substantially in the form of EXHIBIT
3.01(i)(v), between [St. ▇▇▇▇ entity] and the Company (Tokyo space).
(j) a U.K. Transfer Agreement, substantially in the form of EXHIBIT
3.01(j), between St. ▇▇▇▇, St. ▇▇▇▇ Re UK and Platinum UK, pursuant to which St.
▇▇▇▇ Re UK will transfer the assets specified therein to Platinum UK.
16
SECTION 3.02 PAYMENT OF EXPENSES. (a) The Company shall pay (or, to the
extent incurred by and paid for by St. ▇▇▇▇ or any Affiliate thereof prior to
the Closing Date, shall, on the Closing Date, and, if incurred on or following
the Closing Date, promptly reimburse St. ▇▇▇▇ and any such Affiliate for any and
all amounts so paid) the costs, fees, disbursements and expenses set forth in
SCHEDULE 3.02(a).
(b) St. ▇▇▇▇ shall pay (or, to the extent incurred by and paid for by
the Company or any of its Post-closing Subsidiaries on or prior to the Closing
Date shall, on the Closing Date, and, if incurred following the Closing Date,
promptly reimburse the Company and any such Post-closing Subsidiary for any and
all amounts so paid) the costs, fees, disbursements and expenses set forth in
SCHEDULE 3.02(b).
SECTION 3.03 CLOSING. Subject to the terms and conditions of this
Agreement, all transactions contemplated by this Agreement shall be consummated
at a closing (the "CLOSING") to be held at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 9:00 A.M.,
New York time, on the date of
the delivery of the Firm Public Offering Shares or at such other place (outside
the United Kingdom) or at such other time or on such other date as St. ▇▇▇▇ and
the Company may mutually agree upon in writing (the day on which the Closing
takes place being the "CLOSING DATE"); PROVIDED, HOWEVER, that except for the
Quota Share Retrocession Agreements and the Employee Benefits and Compensation
Matters Agreement, the Ancillary Agreements shall become effective immediately
after delivery of the Firm Public Offering shares and Firm St. ▇▇▇▇ Shares and
the Quota Share Retrocession Agreements and the Employee Benefits and
Compensation Matters Agreement shall become effective at 12:01 A.M. on the
Business Day immediately following the Closing Date or, if later, on July 1,
2002.
SECTION 3.04 CLOSING DELIVERIES BY ST. ▇▇▇▇. At the Closing, St. ▇▇▇▇
shall deliver and shall cause its Post-closing Subsidiaries to deliver to the
Company:
(a) executed copies of all Ancillary Agreements;
(b) executed copies of the Bills of Sale substantially in the form of
EXHIBIT 3.04(b) and such other instruments, in form and substance reasonably
satisfactory to the Company, as may be reasonably requested by the Company to
transfer, convey and assign the Transferred Assets, the Shares and the
Employment Agreements to the Company or its designee or evidence of such
transfer on the public records;
(c) a certificate representing all of the Shares, duly endorsed or
accompanied by stock powers (in form reasonably satisfactory to the Company) in
favor of Platinum Regency; and
(d) the certificate specified in Section 9.03(c);
(e) evidence reasonably satisfactory to the Company that all consents
and approvals as set forth on SCHEDULE 9.01(d) have been obtained and are in
full force and effect;
(f) The balance sheet of USF&G Family dated May 31, 2002, which shall
have been prepared in accordance with accounting
17
practices prescribed or permitted for insurance companies by the Maryland
insurance regulatory authorities, which have been applied consistent with the
financial statements of past periods and shall in all material respects fairly
present the financial condition of USF&G Family as of its date.
(g) A statement setting forth the amounts remitted to and from USF&G
Family pursuant to Section 4.01(a).
SECTION 3.05 CLOSING DELIVERIES BY THE COMPANY. At the Closing, the
Company shall deliver to St. ▇▇▇▇:
(a) executed copies of all Ancillary Agreements;
(b) certificates representing the St. ▇▇▇▇ Shares acquired by St. ▇▇▇▇
or a St. ▇▇▇▇ Designee, registered in the name of St. ▇▇▇▇ or the appropriate
St. ▇▇▇▇ Designees;
(c) the St. ▇▇▇▇ Investment Opinion;
(d) evidence reasonably satisfactory to St. ▇▇▇▇ that all consents and
approvals as set forth in SCHEDULE 9.01(d) have been obtained and are in full
force and effect; and
(e) the certificate specified in Section 9.02(c).
SECTION 3.06 SUBSEQUENT EXERCISE OF OVER-ALLOTMENT OPTION. (a) If the
Underwriters exercise their Over-Allotment Option at any time after the Closing
Date, a second closing (the "SECOND CLOSING") will be held at the offices of
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 9:00 A.M.,
New
York time, on the date of the delivery of the Optional Public Offering Shares or
at such other place (outside the United Kingdom) or such other time or on such
other date as St. ▇▇▇▇ and the Company may agree upon in writing (the day on
which the Second Closing takes place being the "SECOND CLOSING DATE").
(b) On the Second Closing Date, the Company shall deliver to St. ▇▇▇▇
(i) a certificate representing the Optional St. ▇▇▇▇ Shares acquired by St. ▇▇▇▇
or one or more St. ▇▇▇▇ Designees, registered in the name of St. ▇▇▇▇ or the
appropriate St. ▇▇▇▇ Designees, (ii) an opinion with respect to the Optional St.
▇▇▇▇ Shares in form and substance identical to the St. ▇▇▇▇ Investment Opinion
and (iii) a bring-down certificate in form and substance identical to the
certificate specified in Section 9.02(c).
(c) On the Second Closing Date, St. ▇▇▇▇ shall deliver to the Company a
bring-down certificate in form and substance identical to the certificate
specified in Section 9.03(c).
18
ARTICLE IV
SEPARATION
SECTION 4.01 SETTLEMENT OF INTERCOMPANY ACCOUNTS. (a) Shortly prior to
the Closing Date, USF&G Family shall remit to St. ▇▇▇▇ and any Post-closing
Subsidiaries of St. ▇▇▇▇, as applicable, all amounts estimated to be owing as of
the Closing Date by USF&G Family to St. ▇▇▇▇ or such Post-closing Subsidiaries,
and St. ▇▇▇▇ and all Post-closing Subsidiaries of St. ▇▇▇▇, as applicable, shall
remit to USF&G Family all amounts estimated to be owing as of the Closing Date
by St. ▇▇▇▇ or such Post-closing Subsidiaries of St. ▇▇▇▇ to USF&G Family.
(b) As soon as reasonably practicable, but in no event later than 45
days following the Closing Date, St. ▇▇▇▇ covenants that it shall prepare and
deliver to the Company a balance sheet as of the Closing Date (the "Closing
Balance Sheet"). The Closing Balance Sheet shall be prepared in accordance with
accounting practices prescribed or permitted for insurance companies by the
Maryland insurance regulatory authorities, which have been applied consistent
with the financial statements of past periods, including the May 31, 2002
balance sheet delivered pursuant to Section 3.04(f) and shall in all material
respects fairly present the financial condition of USF&G Family as of its date.
SECTION 4.02 REMOVAL OF USF&G FAMILY FROM INTERCOMPANY AGREEMENTS AND
REPRESENTATION. Except as contemplated herein, effective as of the Closing Date,
all agreements between or among St. ▇▇▇▇ and its Post-Closing Subsidiaries, on
the one hand, and USF&G Family, on the other hand, shall terminate as to USF&G
Family, and USF&G Family shall cease being a party to any of the agreements
specified on SCHEDULE 4.02. After the Closing Date, USF&G Family shall not have
any liability under any such agreement to St. ▇▇▇▇ or any Post-closing
Subsidiary of St. ▇▇▇▇ and neither St. ▇▇▇▇ nor any Post-closing Subsidiary of
St. ▇▇▇▇ shall have any liability under any such agreement to USF&G Family. St.
▇▇▇▇ represents that such agreements are the only agreements that it or any St.
▇▇▇▇ Subsidiary has with USF&G Family.
SECTION 4.03 DISCONTINUING OF INSURANCE COVERAGE. Effective as of the
Closing Date, USF&G Family will cease to be covered under any insurance policy
covering St. ▇▇▇▇ and any of its affiliates, including directors' & officers'
and errors & omissions insurance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ST. ▇▇▇▇
St. ▇▇▇▇ represents and warrants to the Company, as to itself, each of
Fire and Marine, USF&G Family, Mountain Ridge, St. ▇▇▇▇ Re (UK), each St. ▇▇▇▇
Designee and each
19
St. ▇▇▇▇ Licensor (such subsidiaries, the "ST. ▇▇▇▇ PRE-CLOSING SUBSIDIARIES"),
that the statements contained in this Article V are true and correct as of the
date of this Agreement and will be true and correct as of the Closing Date:
SECTION 5.01 ORGANIZATION, AUTHORITY AND QUALIFICATION.
(a) Each of St. ▇▇▇▇ and each of the St. ▇▇▇▇ Pre-Closing Subsidiaries
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and in good standing in all jurisdictions in
which the failure to qualify or be in good standing could materially adversely
affect the consummation or the validity of the transactions provided for in this
Agreement or any of the Ancillary Agreements.
(b) St. ▇▇▇▇ has full corporate power and authority and has taken all
corporate action necessary to execute and deliver this Agreement and will have
taken all corporate action necessary to execute and deliver the Ancillary
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. This Agreement has been, and each of the Ancillary Agreements to
which St. ▇▇▇▇ is a party will be, duly authorized, executed and delivered by
St. ▇▇▇▇; and, assuming due authorization, execution and delivery by all other
parties to such agreement, each of this Agreement and such Ancillary Agreements
constitutes or will constitute, as the case may be, the valid and legally
binding obligation of St. ▇▇▇▇, enforceable against St. ▇▇▇▇ in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles, except that no
representation or warranty is made regarding the indemnification and
contribution provisions of this Agreement or of the Registration Rights
Agreement.
(c) Each of the St. ▇▇▇▇ Pre-Closing Subsidiaries has full corporate
power and authority and will have taken all corporate action necessary to
execute and deliver each of the Ancillary Agreements to which it is a party and
to perform its obligations thereunder. Each of the Ancillary Agreements to which
any of the St. ▇▇▇▇ Pre-Closing Subsidiaries is a party will be duly authorized,
executed and delivered by the appropriate St. ▇▇▇▇ Pre-Closing Subsidiary and,
assuming due authorization, execution and delivery by all other parties to such
agreement, will constitute the valid and legally binding obligation of such St.
▇▇▇▇ Pre-Closing Subsidiary, enforceable against such St. ▇▇▇▇ Pre-Closing
Subsidiary in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
SECTION 5.02 FINANCIAL AND CONVENTION STATEMENTS. The Annual Convention
Statements required to be filed by USF&G Family for the years 2000 and 2001, and
the Quarterly Convention Statements required to be filed by USF&G Family during
the period January 1, 2002 to the date hereof, (i) have been duly filed with the
Maryland insurance regulatory authorities and with all other insurance
regulatory authorities as required, (ii) were prepared in accordance with
accounting practices prescribed or permitted for insurance companies by the
Maryland insurance regulatory authorities, which have been applied on a basis
consistent with the past periods, and (iii) present fairly, in accordance with
such practices, the
20
statutory financial position of USF&G Family as at the date of, and the results
of its operations for the period covered by, such Annual or Quarterly Convention
Statements.
SECTION 5.03 NO CONFLICT. The authorization, execution, delivery and
performance of this Agreement and the Ancillary Agreements by St. ▇▇▇▇ and the
St. ▇▇▇▇ Pre-Closing Subsidiaries, as applicable, do not and will not:
(a) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or by-laws (or similar organizational
documents) of St. ▇▇▇▇ or the St. ▇▇▇▇ Pre-Closing Subsidiaries,
(b) conflict with or violate in any material respect any law or
Governmental Order applicable to St. ▇▇▇▇ or the St. ▇▇▇▇ Pre-Closing
Subsidiaries or any of their respective assets, properties or businesses, except
that the performance of this Agreement and the execution, delivery and
performance of certain Ancillary Agreements by St. ▇▇▇▇ and certain St. ▇▇▇▇
Pre-Closing Subsidiaries may not occur until the regulatory approvals specified
in Schedule 5.03(b) are obtained, or
(c) materially conflict with, result in any material breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or require any authorization from, or
notification to, any Governmental Authority, or any consent under, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which St. ▇▇▇▇ or any of
the St. ▇▇▇▇ Pre-Closing Subsidiaries is a party or by which any of such assets
or properties is bound or affected, which would have a material adverse effect
on the ability of St. ▇▇▇▇ or any of the St. ▇▇▇▇ Pre-Closing Subsidiaries to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements, except that the performance of this Agreement and the execution,
delivery and performance of certain Ancillary Agreements by St. ▇▇▇▇ and certain
St. ▇▇▇▇ Pre-Closing Subsidiaries may not occur until the regulatory approvals
specified in Schedule 5.03(b) are obtained.
SECTION 5.04 TRANSFERRED ASSETS. (a) St. ▇▇▇▇, directly or indirectly
has, and at the Closing the Company or its designees will receive, good and
marketable title to all of the Transferred Assets (other than the Newly Hired
Employees and the Renewal Rights and the related information) except as provided
in Schedule 5.04(a)(i), in each case free and clear of any Encumbrance, except
as set forth on SCHEDULE 5.04(a)(ii).
(b) With respect to the Shares, United States Fidelity and Guaranty
Company ("USF&G"), an indirect wholly owned Subsidiary of St. ▇▇▇▇, has good and
marketable title to the Shares, free and clear of any Encumbrances [except as
set forth on SCHEDULE 5.03(b)]. Assuming Platinum Regency has the requisite
power and authority to be the lawful owner of the Shares, upon delivery to
Platinum Regency at the Closing of certificates representing the Shares, duly
endorsed by USF&G for transfer to Platinum Regency, good and marketable title to
the Shares will pass to Platinum Regency, free and clear of any Encumbrances,
other than those arising from acts of the Company or Platinum Regency. The
Shares constitute validly issued, fully paid and non-assessable shares of the
capital stock of USF&G Family and are not subject to any voting trust agreement
or other contract, agreement, arrangement, commitment or
21
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Shares and there are no options, warrants or any other
rights to acquire the Shares are outstanding.
SECTION 5.05 ST. ▇▇▇▇ INVESTMENT. (a) St. ▇▇▇▇ represents and warrants
that (i) it is capable of evaluating the merits and risks of the acquisition of
the St. ▇▇▇▇ Shares, and the St. ▇▇▇▇ Options, (ii) it is acquiring the St. ▇▇▇▇
Shares and the St. ▇▇▇▇ Options for its own account, as principal, (iii) it is
acquiring the St. ▇▇▇▇ Shares and the St. ▇▇▇▇ Options for investment and not
with a view to the resale or distribution in a public offering of all or any
part of the St. ▇▇▇▇ Shares or the St. ▇▇▇▇ Options, and (iv) it has not sought
the advice of the Company with respect to the tax, accounting, legal or other
regulatory or investment issues relating to the St. ▇▇▇▇ Shares or the St. ▇▇▇▇
Options it expects to acquire pursuant to the St. ▇▇▇▇ Investment and has relied
only on the advice of its own legal counsel and other advisors.
(b) St. ▇▇▇▇ acknowledges that (i) the sale of the St. ▇▇▇▇ Shares and
the St. ▇▇▇▇ Options and the Common Shares issuable upon exercise of the St.
▇▇▇▇ Options will not be registered under any U.S. federal or state securities
laws, (ii) the St. ▇▇▇▇ Shares and the St. ▇▇▇▇ Options will be offered and sold
in reliance upon the exemptions from registration provided by the no-action
letters regarding Black Box Incorporated (publicly available June 26, 1990) and
Squadron, Ellenoff, Pleasant & ▇▇▇▇▇▇ (publicly available February 28, 1992),
and applicable exemptions under state securities laws, and (iii) that the
certificates for the Common Shares and the St. ▇▇▇▇ Options purchased hereunder
and the Common Shares issuable upon exercise of the St. ▇▇▇▇ Options will bear a
legend noting that they may not be resold or transferred unless registered under
the U.S. Securities Act of 1933 or pursuant to a valid exemption therefrom.
SECTION 5.06 TAXES.
(a) No material Tax liens with respect to the Transferred Assets or
assets of USF&G Family have been filed.
(b) All material Tax Returns filed by or with respect to USF&G Family
have been timely filed, and all such Tax Returns are true, correct and complete
in all material respects. USF&G Family has timely paid (or there has been paid
on its behalf) all material Taxes that are due, or claimed or asserted by any
taxing authority to be due, from or with respect to it for the Pre-Closing
Periods.
(c) Except as disclosed in SCHEDULE 5.06(c), there are no outstanding
agreements, waivers, or arrangements extending the statutory period of
limitation applicable to any claim for, or the period for the collection or
assessment of, Taxes due from or with respect to USF&G Family for any taxable
period.
(d) Except as disclosed in SCHEDULE 5.06(d), USF&G Family is not a
party to, is not bound by, and has no obligation under, any Tax allocation or
sharing agreement or similar contract or arrangement. Notwithstanding any
disclosure contained in the Schedules to the Agreement, St. ▇▇▇▇ represents and
warrants that at the Closing USF&G Family shall not be a
22
party to, be bound by or have any obligation under, any Tax allocation or
sharing agreement or similar contract or arrangement.
(e) USF&G Family has materially complied with all applicable laws,
rules, and regulations relating to the payment and withholding of Taxes and has
timely withheld from employee wages and paid over to the proper governmental
authorities all material amounts required to be so withheld and paid over.
(f) Except as disclosed in SCHEDULE 5.06(e), there is no deficiency,
claim, audit, examination, action, suit, proceeding or investigation in progress
or pending or, to the knowledge of USF&G Family, threatened against or with
respect to USF&G Family in respect of any Taxes.
(g) No claim has ever been made by any taxing authority with respect to
USF&G Family in a jurisdiction where USF&G Family does not file Tax Returns that
USF&G Family is or may be subject to taxation by that jurisdiction which has not
been resolved.
(h) [Except as disclosed in SCHEDULE 5.06(h),] USF&G Family has not
been a member of an affiliated group filing consolidated, combined or unitary
Tax Returns other than a group for which St. ▇▇▇▇ was the common parent.
(i) USF&G Family has not distributed the stock of any corporation in a
transaction satisfying the requirements of Section 355 of the Code since April
16, 1997, and the stock of USF&G Family has not been distributed in a
transaction satisfying the requirements of Section 355 of the Code since April
16, 1997.
(j) USF&G Family is not a party to any agreement, contract or
arrangements that could result, directly or indirectly, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code, except for USF&G Family's consulting contract with ▇▇. ▇▇▇▇▇▇.
(k) Between the date of this Agreement and the Closing Date, without
the prior written consent of the Company (such consent not to be unreasonably
withheld), USF&G Family will not change any Tax accounting method or change any
material Tax election or settle or compromise any material Tax liability.
(l) USF&G Family has no Subsidiaries.
SECTION 5.07 CONTRACTS OF USF&G FAMILY. Except for the contracts listed
on SCHEDULE 5.07, USF&G Family is not party to any contract with any Person
other than St. ▇▇▇▇ or a St. ▇▇▇▇ Subsidiary.
SECTION 5.08 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Agreement and the Ancillary
Agreements, neither St. ▇▇▇▇ nor any other Person makes any express or implied
representation or warranty on behalf of or with respect to St. ▇▇▇▇ or the
Transferred Business, and St. ▇▇▇▇ hereby disclaims any representation or
warranty not contained herein or therein.
23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, as to itself and as to its
Post-closing Subsidiaries except as to USF&G Family, to St. ▇▇▇▇ that the
statements contained in this Article VI are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date:
SECTION 6.01 ORGANIZATION, AUTHORITY AND QUALIFICATION.
(a) The Company and each of its Post-closing Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation, and in good standing in all jurisdictions in
which the failure to qualify or be in good standing could materially adversely
affect the consummation or the validity of the transactions provided for in this
Agreement.
(b) The Company has full corporate power and authority and has taken
all corporate action necessary to execute and deliver this Agreement and will
have taken all corporate action necessary to execute and deliver the Ancillary
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. This Agreement has been, and each of the Ancillary Agreements to
which the Company is a party will be, duly authorized, executed and delivered by
the Company; and, assuming due authorization, execution and delivery by all
other parties to such agreement, each of this Agreement and such Ancillary
Agreements constitutes or will constitute, as the case may be, the valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles,
including the exercise of judicial discretion in connection therewith except
that no representation or warranty is made regarding the indemnification and
contribution provisions of this Agreement or the Registration Rights Agreement.
(c) Each of the Company's Post-closing Subsidiaries will have full
corporate power and authority and will have taken all corporate action necessary
to execute and deliver each of the Ancillary Agreements to which it is a party
and to perform its obligations thereunder. Each of the Ancillary Agreements to
which any of the Company's Post-closing Subsidiaries is a party will be duly
authorized, executed and delivered by the appropriate Post-closing Subsidiary of
the Company and, assuming due authorization, execution and delivery by all other
parties to such agreement, will constitute the valid and legally binding
obligation of such Post-closing Subsidiary of the Company, enforceable against
such Post-closing Subsidiary in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles, including the exercise of judicial discretion
in connection therewith.
24
SECTION 6.02 NO CONFLICT. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by the Company and its Post-closing
Subsidiaries, as applicable, do not and will not:
(a) violate, conflict with or result in the breach of any provision of
the certificate of incorporation, by-laws (or similar organizational documents)
of the Company and its Post-closing Subsidiaries, as applicable,
(b) conflict with or violate any law or Governmental Order applicable
to the Company or its Post-closing Subsidiaries or any of their respective
assets, properties or businesses, except that the performance of this Agreement
and the execution, delivery and performance of certain of the Ancillary
Agreements by the Company and its Post-Closing Subsidiaries may not occur until
the regulatory approvals specified in SCHEDULE 6.02(b) are obtained, or
(c) conflict with, result in any material breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or require any authorization from or
notification to, any Governmental Authority, or any consent under, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the Company and
its Post-closing Subsidiaries, as applicable, are party or by which any of
such assets or properties is bound or affected, which would have a material
adverse effect on the ability of the Company or any of its Post-closing
Subsidiaries to consummate the transactions contemplated by this Agreement
except that the performance of this Agreement and the execution, delivery and
performance of certain of the Ancillary Agreement by the Company and its
Post-Closing Subsidiaries may not occur until the regulatory approvals
specified in SCHEDULE 6.02(b) are obtained.
SECTION 6.03 ST. ▇▇▇▇ INVESTMENT. (a) The Company represents and
warrants to St. ▇▇▇▇ that, assuming St. ▇▇▇▇ has the requisite power and
authority to be the lawful owner of the St. ▇▇▇▇ Shares, upon issuance and
delivery to St. ▇▇▇▇ or its designees at the Closing of certificates
representing the Firm St. ▇▇▇▇ Shares and the Optional St. ▇▇▇▇ Shares, as
applicable, (i) good and marketable title to such St. ▇▇▇▇ Shares will pass to
St. ▇▇▇▇ or its designees free and clear of any Encumbrances other than those
arising from acts of the Company or its Post-closing Subsidiaries, and (ii) the
St. ▇▇▇▇ Shares will constitute duly and validly issued, fully paid and
non-assessable shares of the capital stock of the Company.
(b) The Company acknowledges that (i) the sale of the St. ▇▇▇▇ Shares,
the St. ▇▇▇▇ Options and any Common Shares issuable upon exercise of the St.
▇▇▇▇ Shares will not be registered under any U.S. federal or state securities
laws, (ii) the St. ▇▇▇▇ Shares will be offered and sold in reliance upon the
exemptions from registration provided by the no-action letters regarding Black
Box Incorporated (publicly available June 26, 1990) and Squadron, Ellenoff,
Pleasant & ▇▇▇▇▇▇ (publicly available February 28, 1992), and applicable
exemptions under state securities laws, and (iii) that the certificates for the
Common Shares and St. ▇▇▇▇ Options purchased hereunder, and any Common Shares
issued upon exercise of the St. ▇▇▇▇ Options, will bear a legend noting that
they may not be resold or transferred unless registered under the U.S.
Securities Act of 1933 or pursuant to a valid exemption therefrom.
25
SECTION 6.04 INTERNAL RETROCESSION AGREEMENTS. The Company represents
that it intends to cause its Post-closing Subsidiaries to enter into
(a) a Quota Share Retrocession Agreement between USF&G Family and
Platinum Bermuda, substantially in the form of Exhibit 6.04(a), pursuant to
which Platinum Bermuda will reinsure up to approximately 70% of the reinsurance
liabilities of USF&G Family under all reinsurance contracts written by USF&G
Family after the Closing Date excluding business subject to the Quota Share
Retrocession Agreements; and
(b) a Quota Share Retrocession Agreement between Platinum UK and
Platinum Bermuda, substantially in the form of EXHIBIT 6.04(b), pursuant to
which Platinum Bermuda will reinsure up to approximately 70% of the reinsurance
liabilities of Platinum UK under all reinsurance contracts written by Platinum
UK after the Closing Date, excluding business subject to the Quota Share
Retrocession Agreements.
SECTION 6.05 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Agreement and the Ancillary
Agreements, neither the Company nor any other Person make any express or implied
representation or warranty on behalf of or with respect to the Company or any of
the Post-closing Subsidiaries, and the Company hereby disclaims any
representation or warranty not contained herein or therein.
ARTICLE VII
NON-COMPETITION; USE OF NAME;
ADMINISTRATION OF RUN-OFF
CONTRACTS; INSURANCE MATTERS
SECTION 7.01 NON-COMPETITION. (a) Except as set forth in this Agreement
or any of the Ancillary Agreements, for a period of two years following the
Closing Date (the "RESTRICTED PERIOD") neither St. ▇▇▇▇ nor any of its
Post-closing Subsidiaries nor any of their respective directors, officers or
agents may
(i) offer, issue, sell, refer or promote, directly or
indirectly, any contracts, treaties or agreements of reinsurance of the
same type as the Reinsurance Agreements or of the same type as those
for which St. ▇▇▇▇ has granted Renewal Rights to the Company provided
that the Company or its Post-closing Subsidiaries continue to provide,
during the Restricted Period, reinsurance coverage of such types to
third parties;
(ii) employ, offer to employ or solicit with a view to
employment any of the individuals listed or individuals holding
positions listed on SCHEDULE 7.01(a)(ii) to this Agreement; or
(iii) use or disclose to any Person other than the Company or
its Post-closing Subsidiaries, any Transferred Business Confidential
Information except in connection with the administration of (x) the
Reinsurance Agreements, (y) the Run-Off Business or (z) any retained
Liabilities PROVIDED that St. ▇▇▇▇, its Post-Closing
26
Subsidiaries and their respective directors, officers and agents will
disclose Transferred Business Confidential Information only in the
ordinary course of business, consistent with past practice including in
connection with resolving claims and the purchase of retrocessional
coverage and PROVIDED, FURTHER, that St. ▇▇▇▇, its Post-Closing
Subsidiaries and their respective directors, officers and agents shall
use reasonable efforts to avoid providing Transferred Business
Confidential Information to a competitor of the Company under
circumstances reasonably likely to materially impair the value of the
Renewal Rights];
PROVIDED that, in the case of Transferred Business Confidential Information that
relates to the Reinsurance Agreements, the Restricted Period shall be
indefinite.
(b) Notwithstanding any other provision of this Section 7.01 to the
contrary, neither St. ▇▇▇▇ nor any of its Post-closing Subsidiaries is
prohibited from:
(i) engaging in any line of business in which it is engaged
immediately after the completion of the Public Offering and for which
Renewal Rights were not transferred hereunder, including, without
limitation, the administration of reinsurance contracts with inception
dates prior to January 1, 2002 (the "Run-off Business") and the
Reinsurance Agreements (but not including any renewals thereof),
purchasing reinsurance for its own account, reinsurance business
written through St. Paul's Discover Re operation and Lloyd's of London
operation and property catastrophe facultative reinsurance business
written by St. Paul's CATRisk Property division;
(ii) acquiring any Person or, subject to the limitation in
(iii) below, any interest in any Person engaged in any line of business
except for an acquisition of an interest of more than 49% of any Person
that generated 50% or more of its gross revenues, excluding investment
income and realized investment gains and losses, in its most recent
fiscal year for which financial statements are available, by writing
property or casualty reinsurance (a "PERMITTED ACQUIREE"), provided
that any Permitted Acquiree may not use any marks, designs, logos,
slogans, names, words or letters which include the words "St. ▇▇▇▇",
"USF&G" or "F&G" or those that are suggestive or, derivative thereof,
or any logo or ▇▇▇▇ identified with "St. ▇▇▇▇", "USF&G" or "F&G"
(except as may be required by law) in connection with its reinsurance
business, if any, PROVIDED FURTHER, HOWEVER, that St. ▇▇▇▇ and any of
its Post-Closing Subsidiaries may acquire an interest of more than 49%
of a Person that is not a Permitted Acquiree if St. ▇▇▇▇ or such
Post-closing Subsidiary promptly divests the property or casualty
reinsurance operations of such Person; or
(iii) soliciting, offering, issuing, selling, purchasing or
referring any contracts of reinsurance of any type to, from or with any
of its Affiliates or engaging in any reinsurance activities in
connection with the Run-off Business (other than renewals thereof) or
with finite business which is either covered by a Quota Share
Retrocession Agreement or which the Company and its Post-closing
Subsidiaries declines to reinsure.
27
(c) During the Restricted Period neither St. ▇▇▇▇ nor any of its
Post-closing Subsidiaries shall sponsor or assist, directly or indirectly, in
the sponsorship of a newly formed property or casualty reinsurer for so long as
St. ▇▇▇▇ continues to own 10% or more of the outstanding Common Shares.
(d) Section 7.01(a)(i) and (ii) shall not be binding upon a
Post-closing Subsidiary of St. ▇▇▇▇ after the time such Person ceases to be a
Post-closing Subsidiary of St. ▇▇▇▇. For avoidance of doubt, Section 7.01(a)
also does not apply to any Person which on or after the Closing Date becomes an
Affiliate (other than a Post-closing Subsidiary) of St. ▇▇▇▇, including any
Person that acquires all or substantially all of the capital stock or assets of
St. ▇▇▇▇ through merger, consolidation, tender offer, acquisition of assets or
otherwise, PROVIDED, HOWEVER, that Section 7.01(a)(ii) and (iii) shall apply to
such Person.
(e) Transferred Business Confidential Information shall not include
information relating to the Transferred Business which is or becomes generally
known on a non-confidential basis provided that the source of such information
was not bound by a confidentiality agreement or other obligation of
confidentiality. If St. ▇▇▇▇, any of its Post-closing Subsidiaries or any of
their respective directors, officers or agents or any Affiliate of St. ▇▇▇▇ is
legally requested or required under an order or subpoena issued by a court,
administrative agency or arbitration panel (through oral examination,
interrogatories, requests for information or documents, civil investigation
demand or other legal, administrative or arbitration processes) to disclose any
Transferred Business Confidential Information, St. ▇▇▇▇ shall provide the
Company with prompt written notice of the request, requirement, subpoena or
order to permit the Company (if it so elects) to seek an appropriate protective
order preventing or limiting disclosure. If the Company seeks such an order or
takes other steps to avoid or limit disclosure, St. ▇▇▇▇ shall cooperate with
the Company at the Company's expense. If, in the absence of such protective
order, St. ▇▇▇▇, is compelled to disclose any Transferred Business Confidential
Information, St. ▇▇▇▇ ▇▇▇ disclose such Transferred Business Confidential
Information without liability hereunder.
(f) St. ▇▇▇▇ and its Post-closing Subsidiaries shall treat any
Transferred Business Confidential Information with the same degree of care with
which it treats its own confidential information.
(g) The Company and St. ▇▇▇▇ agree that money damages would not be a
sufficient remedy for any breach of this Section 7.01 by St. ▇▇▇▇ or any of its
Post-closing Subsidiaries or any of its or such Post-Closing Subsidiaries'
directors, officers or agents, and that, in addition to all other remedies, the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach.
SECTION 7.02 USE OF NAMES; NON-DISPARAGEMENT. (a) Commencing on the
Closing Date, neither the Company nor any of its Post-closing Subsidiaries and
Affiliates may use any marks, designs, logos, slogans, names, words or letters
which include the words "United States Fidelity and Guaranty", "St. ▇▇▇▇", "Fire
and Marine" or those that are suggestive or derivative thereof, except (i) as
may be required by Law, (ii) for the purposes of historical identification in
materials not designed as advertising or solicitation, (iii) as provided under
the
28
Transitional Trademark License Agreement, and (iv) pursuant to the Underwriting
Management Agreement and the UK Underwriting Management Agreement.
(b) The Company shall not use and shall cause its Post-closing
Subsidiaries to refrain from using any printed materials or other means of
communication which state, suggest or imply any affiliation with St. ▇▇▇▇ or any
of its Subsidiaries following the Closing other than references to St. Paul's
ownership of the St. ▇▇▇▇ Shares or to this Agreement, the Reinsurance
Agreements or the Ancillary Agreements or the subject matter thereof.
(c) The Company and St. ▇▇▇▇ each agree that neither it nor any of its
Subsidiaries shall make any statement that would reasonably be viewed as
intended to be disparaging of the business, reputation or good name of the
other.
SECTION 7.03 STANDARD FOR ADMINISTRATION OF RUN-OFF Business. St. ▇▇▇▇
shall cause its Post-Closing Subsidiaries to administer the Run-off Business at
levels of care and attention and with operating procedures that are consistent
with, the practices of St. ▇▇▇▇ in respect of other business of St. ▇▇▇▇. St.
▇▇▇▇ shall maintain all licenses and authorization required for it to administer
the Run-off Business.
SECTION 7.04 QUOTATIONS FOR CERTAIN INSURANCE COVERAGE. St. ▇▇▇▇ agrees
that one or more of its Post-Closing Subsidiaries shall provide quotations to
the Company and its Subsidiaries, at normal market rates for similarly situated
Persons, for workers compensation, general liability and property insurance
coverages for the period commencing on the Closing Date and ending December 31,
2003.
ARTICLE VIII
TAX MATTERS
SECTION 8.01 TAXES OF USF&G FAMILY. (a) St. ▇▇▇▇ shall be responsible
for, shall pay or cause to be paid, and shall indemnify the Company and each of
its Post-Closing Subsidiaries against any and all Pre-Closing Taxes. "PRE
CLOSING TAXES" shall mean any and all Taxes (i) imposed on the St. ▇▇▇▇ Group
(other than USF&G Family) for any taxable year or (ii) that relate to USF&G
Family or for which USF&G Family could be liable and that in both cases are for
taxable periods or portions thereof ending on or before the Closing Date and
(iii) to the extent not covered by clauses (i) and (ii) above or Section 8.02,
directly related to the Transferred Assets and arising in taxable periods or
portions thereof ending on or before the Closing Date ("PRE-CLOSING PERIODS"),
other than Taxes covered by Section 8.02). In the case of Taxes attributable to
taxable periods beginning on or before and ending after the Closing Date
("STRADDLE PERIODS"), if any, the Taxes for the Pre-Closing Period shall be
computed as if such taxable period ended on the date of the Closing. Not later
than five Business Days before the due date for the payment (including in
connection with estimated payments) of any Pre-Closing Taxes, St. ▇▇▇▇ shall pay
to the Company or any of its Post-Closing Subsidiaries an amount equal to any
such Pre-Closing Taxes which are payable by the Company or any of its
Post-Closing Subsidiaries.
29
(b) The Company shall be responsible for (i) any and all Taxes of USF&G
Family that relate to USF&G Family or for which USF&G Family could be liable
other than Pre-Closing Taxes and (ii) any and all Taxes directly related to the
Transferred Assets and arising in taxable periods or portions thereof beginning
on or after the Closing Date. To the extent that any Taxes other than
Pre-Closing Taxes have been pre-paid on or before the Closing, the Company shall
pay to St. ▇▇▇▇ the amount of such prepaid Taxes that do not constitute
Pre-Closing Taxes.
(c) St. ▇▇▇▇ shall include the income of USF&G Family for the
Pre-Closing Period in St. Paul's federal consolidated Tax Returns and any state
consolidated, combined or unitary Tax Returns that are required and that include
(i) USF&G Family and (ii) any other member of St. Paul's affiliated group other
than USF&G Family (the "CONSOLIDATED RETURNS"), and shall file and be
responsible for remitting all Taxes reflected on such Consolidated Returns. St.
▇▇▇▇ shall file or cause to be filed all Tax Returns required to be filed by or
with respect to USF&G Family on or before the Closing Date and shall pay all
Taxes due with respect thereto. All items relating to USF&G Family and included
in Tax Returns of or with respect to USF&G Family for Pre-Closing Periods
(including the USF&G Family pro forma with respect to Consolidated Returns)
prepared by St. ▇▇▇▇ pursuant to this Section 8.01 shall be reflected in a
manner consistent with past practices. St. ▇▇▇▇ shall provide to the Company, at
least 10 days prior to the due date (including extensions) for the filing of St.
Paul's federal consolidated tax return for the taxable year 2002, a copy of the
2002 pro forma federal income tax return of USF&G Family consistent with past
practice. St. ▇▇▇▇ shall not amend any federal income tax return of USF&G Family
for a Pre-Closing Period without the consent of the Company, which shall not be
unreasonably withheld. The Company shall file or cause to be filed all other Tax
Returns required to be filed by or with respect to USF&G Family. With respect to
Tax Returns for Straddle Periods, such Tax Returns will be duly and timely filed
by the Company, and the Company will use its commercially reasonable best
efforts to assure that such Tax Returns will be correct, accurate and complete
in all material respects. The Company shall furnish a completed copy of such Tax
Returns to St. ▇▇▇▇ for St. Paul's approval (not to be unreasonably withheld or
delayed) within a reasonable time prior to the due date of such returns. Except
as required by applicable law, the Company shall not take a position with
respect to any item on any Tax Return of USF&G Family for any Straddle Period
which it is notified in writing by St. ▇▇▇▇ is inconsistent with the position
taken with respect to such item on a prior Tax Return or, if inconsistent, will
obtain St. Paul's prior written consent which shall not be unreasonably
withheld.
(d) Any refunds of Taxes with respect to USF&G Family paid for any
period ending on or before the Closing Date (treating such date as the end of a
short taxable year for this purpose) shall be for the account of St. ▇▇▇▇. The
Company shall, if St. ▇▇▇▇ so requests and at St. Paul's expense, cause the
relevant entity (the Company, USF&G Family or any successor) to file for and
obtain any refunds to which St. ▇▇▇▇ is entitled hereunder, including through
the prosecution of any administrative or judicial proceeding which St. ▇▇▇▇, in
its sole and absolute discretion, chooses to direct such entity to pursue. The
Company shall permit St. ▇▇▇▇ to control (at St. Paul's expense) the prosecution
of any such refund claimed, and when deemed appropriate by St. ▇▇▇▇, shall cause
the relevant entity to authorize by appropriate power of attorney such person as
St. ▇▇▇▇ shall designate to represent such entity with respect to such refund
claimed.
30
Without imposing any duty of investigation on the Company, the Company shall,
and shall cause USF&G Family to, notify St. ▇▇▇▇ of the existence of any facts
known to the Company that would constitute a reasonable basis for claiming a
refund of Taxes to which St. ▇▇▇▇ is entitled hereunder. The Company shall
forward to St. ▇▇▇▇ any such refund promptly after the refund is received.
SECTION 8.02 CONVEYANCE TAXES. The Company and St. ▇▇▇▇ shall each be
severally liable for one half of any real property transfer or gains, sales,
use, transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees and any similar Taxes which become
payable in connection with the transactions contemplated by this Agreement. With
the cooperation of St. ▇▇▇▇, the Company shall file such applications and
documents as shall permit any such Tax to be assessed and paid on or prior to
the Closing Date in accordance with any available pre-sale filing procedure. St.
▇▇▇▇ shall execute and deliver all instruments and certificates necessary to
enable the Company to comply with the foregoing. The Company shall complete and
execute a resale or other exemption certificate with respect to the inventory
items sold hereunder, and shall provide St. ▇▇▇▇ with executed copies thereof.
SECTION 8.03 TAX PROCEEDINGS. (a) The Company shall promptly notify St.
▇▇▇▇ in writing upon receipt by the Company or any of its Affiliates, including
USF&G Family, of notice of any pending or threatened audit, assessment, or
judicial or administrative proceeding involving Taxes ("TAX PROCEEDING") with
respect to Platinum US for which St. ▇▇▇▇ would be required to indemnify the
Company pursuant to Section 8.01, provided that the failure of the Company to
give such notice shall not relieve St. ▇▇▇▇ of its indemnification obligation
under Section 8.01, except to the extent St. ▇▇▇▇ is materially prejudiced
thereby.
(b) St. ▇▇▇▇ shall have the right to assume sole control over a Tax
Proceeding to the extent it relates to Pre-Closing Taxes which may be the
subject of indemnification by St. ▇▇▇▇ pursuant to Section 8.01 and to employ
counsel of its choice at its expense. St. ▇▇▇▇ shall not compromise or settle
any such Tax Proceeding without the prior written consent of the Company, which
consent shall not be unreasonably withheld. If St. ▇▇▇▇ shall not assume the
defense of such Tax Proceeding, then the Company may assume sole control over
such Tax Proceeding, without relieving St. ▇▇▇▇ of its indemnification
obligation under Section 8.01, provided that St. ▇▇▇▇ ▇▇▇ participate in the
defense at its own expense.
(c) St. ▇▇▇▇ shall have the right to participate in, but not control,
at its own expense, the defense of any Tax Proceeding with respect to a Straddle
Period which may be the subject of indemnification by St. ▇▇▇▇ pursuant to
Section 8.01(a) and, with the written consent of the Company, and at St. Paul's
sole expense, may assume the entire defense of such Tax Proceeding. Neither
party may agree to settle any such Tax Proceeding without the prior written
consent of the other party.
SECTION 8.04 ALLOCATION OF CONSIDERATION. St. ▇▇▇▇ shall deliver to the
Company a statement setting forth the allocation of the aggregate consideration
received by St. ▇▇▇▇ under this Agreement within [30] days of the receipt by St.
▇▇▇▇ of a third party appraisal of the Transferred Assets. Such allocation shall
be determined in accordance with Section 1060 of the Code and the Regulations
promulgated thereunder, to the extent applicable. The Company, St. ▇▇▇▇ and the
Parties each agree to prepare and file all Tax Returns in
31
respect of all affected Taxable Periods in a manner consistent with the
allocation statement prepared by St. ▇▇▇▇.
SECTION 8.05 SECTION 197 ELECTION. Upon the request of the Company, St.
▇▇▇▇ agrees to elect under Section 197(f)(9)(B)(ii) of the Code to (i) recognize
gain on the disposition of goodwill, going concern value and any other Section
197 intangible (as defined in Section 197(d) of the Code), if any, for which
depreciation and amortization would not have been allowable but for Section 197,
if such asset was held or used by St ▇▇▇▇ or any of its Subsidiaries at any time
on or after July 25, 1991 and on or before August 10, 1993, and (ii) pay tax on
such gain in accordance with Section 197(f)(9)(B)(ii)(II) of the Code to the
extent that such election is necessary to enable the Company or any of its
affiliates to claim amortization deductions with respect to such asset under
Section 197 of the Code; [PROVIDED, HOWEVER, that St. ▇▇▇▇ shall not be required
to make such election and/or comply with clause (ii) of the previous sentence if
it determines in its sole discretion that the election, or the requirements of
clause (ii), would cause a detriment to St. ▇▇▇▇ or any of its Subsidiaries].
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.01 CONDITIONS TO OBLIGATIONS OF ST. ▇▇▇▇ AND THE COMPANY. The
obligations of St. ▇▇▇▇ and the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or prior to
the Closing, of each of the following conditions:
(a) the Firm Public Offering Shares shall have been delivered;
(b) no Action shall have been commenced by any Governmental Authority,
seeking to restrain or materially and adversely alter the transactions
contemplated by this Agreement which, in the reasonable, good faith
determination of either St. ▇▇▇▇ or the Company, is likely to render it
impossible or unlawful to consummate such transactions;
(c) the parties hereto, or their Subsidiaries, as applicable, shall
have executed and delivered to each other each of the Ancillary Agreements to
which they are a party; and
(d) all consents, approvals, authorizations, registrations, licenses or
qualifications set forth on SCHEDULE 9.01(d) with any court or governmental
authority required for the consummation of the transactions contemplated by this
Agreement or any of the Ancillary Agreements shall have been obtained, shall not
contain limitations or conditions which would materially adversely affect the
ability of the Company and its Post-closing Subsidiaries to conduct the
Transferred Business after the Closing, and shall be in full force and effect.
32
SECTION 9.02 CONDITIONS TO OBLIGATIONS OF ST. ▇▇▇▇. The obligation of
St. ▇▇▇▇ to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, at or prior to the Closing, of each of the following
additional conditions:
(a) the representations and warranties of the Company contained in this
Agreement shall be true and correct, as of the date hereof and as of the Closing
Date, with the same force and effect as if made as of the Closing Date;
(b) the covenants and agreements contained in this Agreement and the
Ancillary Agreements to be complied with by the Company and its Post-closing
Subsidiaries (other than USF&G Family) on or before the Closing Date shall have
been complied with in all material respects;
(c) St. ▇▇▇▇ shall have received a certificate from the Company to the
effect of Sections 9.02(a) and (b) signed by the President and Chief Executive
Officer and the Chief Financial Officer of the Company;
(d) St. ▇▇▇▇ shall have received an opinion in form and substance
satisfactory to St. ▇▇▇▇ (the "ST. ▇▇▇▇ INVESTMENT OPINIONS") from ▇▇▇▇▇▇▇, ▇▇▇▇
& ▇▇▇▇▇▇▇, Bermuda counsel to St. ▇▇▇▇, as to the due authorization, valid
issuance and non-assessability of the St. ▇▇▇▇ Shares, as well as from ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ as to the exemption from the registration requirements of the
Securities Act of the Firm St. ▇▇▇▇ Shares and, as a condition to the Second
Closing, St. ▇▇▇▇ Investment Opinions in respect of the Optional St. ▇▇▇▇
Shares; and
(e) St. ▇▇▇▇ shall have received signed releases from ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, _____________________ and _________________ in the
form attached as Schedule 9.02(e).
(f) all of the deliveries required to be made by the Company at the
Closing pursuant to Section 3.05 shall have been made.
SECTION 9.03 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, at or prior to the Closing, of each of the following
additional conditions:
(a) The representations and warranties of St. ▇▇▇▇ contained in this
Agreement shall be true and correct as of the Closing Date, with the same force
and effect as if made as of the Closing Date;
(b) the covenants and agreements contained in this Agreement and the
Ancillary Agreements to be complied with by St. ▇▇▇▇ and its Pre-closing
Subsidiaries on or before the Closing Date shall have been complied with in all
material respects;
(c) the Company shall have received a certificate from St. ▇▇▇▇ to the
effect of Sections 9.03(a) and (b) signed by duly authorized officers thereof;
(d) all of the deliveries required to be made by St. ▇▇▇▇ at the
Closing pursuant to Section 3.04 shall have been made; and
33
(e) the Company shall have received opinions in form and substance
reasonably satisfactory to the Company from ▇▇▇▇▇▇▇▇▇ and May, A&L Goodbody and
▇▇▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇▇▇ as to the due organization, good standing, corporate
power and authority and licensing authority of the Company and each of its
Post-closing Subsidiaries other than USF&G Family.
ARTICLE X
INDEMNIFICATION
SECTION 10.01 GENERAL CROSS INDEMNIFICATION. (a) Except as otherwise
specifically set forth in any provision of this Agreement, including but not
limited to Sections 8.01, 10.02 and 10.03, or of any Ancillary Agreement, St.
▇▇▇▇ shall indemnify, defend and hold harmless the Company, its Post-closing
Subsidiaries and their respective officers, directors, employees,
representatives and agents ("COMPANY INDEMNITEES") from and against any and all
Losses of such Company Indemnitee arising out of, by reason of or otherwise in
connection with (i) the St. ▇▇▇▇ Liabilities; or (ii) any breach by St. ▇▇▇▇,
any of its Post-closing Subsidiaries or any Person acting on behalf of St. ▇▇▇▇
or any such Post-closing Subsidiary of any of their representations or
warranties in, or any covenant, commitment, obligation, agreement or undertaking
to be performed or complied with by any of them under this Agreement or any
Ancillary Agreement. For the avoidance of doubt indemnification under this
Section 10.01(a) does not apply with respect to any Liabilities relating to the
Employment Agreements or the Renewal Obligations; provided that with respect to
renewals of contracts, if any, within the Transferred Lines to be renewed which
had been previously written or renewed by St. ▇▇▇▇ Re at above market rates with
the implicit or explicit expectation or understanding between the parties that
such above market rate during such period would be compensated by below market
rates applicable to future renewals of the contract St. ▇▇▇▇ shall indemnify the
Company's affected Post-closing Subsidiaries for such differential, in such
amounts as agreed to by the parties after negotiating in good faith.
(b) Except as otherwise specifically set forth in any provision of this
Agreement or any Ancillary Agreement, the Company shall indemnify, defend and
hold harmless St. ▇▇▇▇, its Post-closing Subsidiaries and their respective
officers, directors, employees, representatives and agents ("ST. ▇▇▇▇
INDEMNITEES") from and against any and all Losses of such St. ▇▇▇▇ Indemnitees
arising out of, by reason of or otherwise in connection with (i) the Company
Liabilities; or (ii) any breach by the Company, any of its Post-closing
Subsidiaries or any Person acting on behalf of the Company or any such
Post-closing Subsidiary of any of their representations or warranties in, or any
covenant, commitment, obligation, agreement or undertaking to be performed or
complied with by any of them under, of this Agreement or any Ancillary
Agreement.
(c) The indemnity obligations contained in this Section 10.01 are
applicable whether or not any Action or the facts or transactions giving rise to
such Action arose prior to, on or subsequent to the date of this Agreement.
34
SECTION 10.02 REGISTRATION STATEMENT INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to Section 10.02(b) and Section 10.02(c), the Company shall
indemnify and hold harmless (which includes, for the avoidance of doubt, the
reimbursement to each St. ▇▇▇▇ Registration Indemnitee (as defined below) of any
expenses, including legal expenses, incurred by such St. ▇▇▇▇ Registration
Indemnitee in connection with investigating or defending against any Loss as
such expenses are incurred), to the full extent permitted by law, St. ▇▇▇▇, its
Post-closing Subsidiaries, the officers, directors, employees, representatives
and agents of each of them, each Person who controls any of them (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, employees and agents of each such controlling
Person (each, a "ST. ▇▇▇▇ REGISTRATION INDEMNITEE"), from and against any and
all Losses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the "COMPANY INFORMATION", being the
information (other than the St. ▇▇▇▇ Information and the Shared Information,
each as defined below) contained in the Registration Statement or Prospectus or
in any amendment or supplement thereto or in any preliminary or final
prospectus, or arising out of or based upon 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. The indemnity and reimbursement
obligation under this Section 10.02(a) will be in addition to any liability that
the Company may otherwise have.
(b) St. ▇▇▇▇ shall indemnify and hold harmless (which includes, for the
avoidance of doubt, the reimbursement to each Company Registration Indemnitee
(as defined below) of any expenses, including legal expenses, incurred by such
Company Registration Indemnitee in connection with investigating or defending
against any Loss), to the full extent permitted by law, the Company, its
Post-Closing Subsidiaries, the officers, directors, employees, representatives
and agents of each of them, each Person who controls any of them (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, employees, representatives and agents of each such
controlling Person (each, a "COMPANY REGISTRATION INDEMNITEE" and, together with
the St. ▇▇▇▇ Registration Indemnitees, the "REGISTRATION INDEMNITEES") from and
against any and all Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the "ST. ▇▇▇▇
INFORMATION" in the Registration Statement or Prospectus, or in any amendment or
supplement thereto or in any preliminary or final prospectus or arising out of
or based upon any omission or alleged omission to state in the St. ▇▇▇▇
Information a material fact required to be stated therein or necessary to make
the statements in the St. ▇▇▇▇ Information not misleading. The indemnity and
reimbursement obligation under this Section 10.02(b) will be in addition to any
liability that the St. ▇▇▇▇ ▇▇▇ otherwise have. For purposes of this Article X,
the St. ▇▇▇▇ Information means the information specified in Schedule10.02(b).
(c) St. ▇▇▇▇ and the Company shall indemnify and hold harmless
(which includes, for the avoidance of doubt, the reimbursement to each
Registration Indemnitee of any expenses, including legal expenses, incurred
by such Company Registration Indemnitee or St. ▇▇▇▇ Registration Indemnitee
in connection with investigating or defending against any Loss), to the full
extent permitted by law, each Company Registration Indemnitee and each St.
▇▇▇▇ Registration Indemnitee, as the case may be, from and against 50% of any
and all Losses of each thereof arising out of or based upon any untrue
statement or alleged untrue statement of a material fact in the SHARED
INFORMATION in the Registration Statement or Prospectus, or in any amendment
or supplement thereto or in any preliminary or final prospectus, or arising
out of or
35
based upon any omission or alleged omission to state a material fact required
to be stated or necessary to make the statements in the Shared Information
not misleading. "Shared Information" means the information specified in
Schedule 10.02(c) any numerical, financial, narrative or other information
contained in the Company Information that is based on or related to any pro
forma disclosure with respect to the Transferred Business described in such
Registration Statement or Prospectus or in any amendment or supplement
thereto or any preliminary or final prospectus.
(d) If for any reason the foregoing indemnification is unavailable to,
or is insufficient to hold harmless, a Registration Indemnitee in respect of any
indemnifiable Loss, the Indemnifying Party shall contribute to the amount paid
or payable by such Registration Indemnitee as a result of any Loss in such
proportion as is appropriate to reflect the relative benefit and relative fault
of the Indemnifying Party, on the one hand, and the Registration Indemnitee, on
the other, in connection with the statements or omissions in the Registration
Statement that resulted in such Loss, as well as any other relevant equitable
considerations. The relative benefit to St. ▇▇▇▇ shall be an amount equal to the
product of (1) the number of the St. ▇▇▇▇ Shares and (2) the initial public
offering price for the Public Offering Shares. The relative benefit to the
Company shall be an amount equal to the product of (1) the number of Common
Shares issued in the Public Offering and (2) the initial public offering price
of the Public Offering Shares. The relative fault of St. ▇▇▇▇ or the Company, as
the case may be, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Registration Indemnitee and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable in
respect of any Loss shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such claim. 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. For the avoidance of doubt, a St. ▇▇▇▇ Registration
Indemnitee may not demand any contribution from the Company for any Losses
arising out of or based upon any St. ▇▇▇▇ Information, and the Company may not
demand any contribution from St. ▇▇▇▇ for any Losses arising out of or based
upon any Company Information. Furthermore, any contribution between the
Registration Indemnitees with respect to any Losses arising out of or based upon
any Shared Information is limited to 50% of the amount of such Loss.
(e) Notwithstanding anything to the contrary in this Agreement or any
of the Ancillary Agreements, St. Paul's aggregate liability to the Company
Registration Indemnitees under Section 10.02 is limited to the excess of (I)
$400 million over (II) any amounts directly paid or payable by St. ▇▇▇▇ (x) to
investors in the Public Offering in respect of claims against St. ▇▇▇▇ arising
under the Registration Statements and/or (y) the underwriters of the Public
Offering pursuant to the indemnification, contribution and/or reimbursement of
expenses obligations of St. ▇▇▇▇ arising under the underwriting agreement(s) for
the Public Offering.
(f) Notwithstanding anything to the contrary in this Agreement or any
of the Ancillary Agreements, in the event of one or more Company Registration
Indemnitees make a claim for the indemnification, contribution or reimbursement
of expenses against ▇▇. ▇▇▇▇. ▇▇.
▇▇
Paul's obligation to indemnify, contribute to, or reimburse the Company
Registration Indemnitees under Section 10.02 with respect to such claim is
conditioned on, and only payable upon, the concurrent settlement or resolution
of all claims then outstanding at the time of such settlement or resolution
against St. ▇▇▇▇ (other than claims by the underwriters of the Public Offering)
which are then subject to the limitation on liability set forth in Section
10.02(e) provided St. ▇▇▇▇ continues in good faith to seek and assist in the
resolution or settlement of all such claims.
(g) Notwithstanding anything to the contrary in this Agreement or any
of the Ancillary Agreements, each St. ▇▇▇▇ Registration Indemnitee and each
Company Registration Indemnitee shall pay the costs and expenses of its own
legal counsel retained in connection with this Section 10.02, as such costs and
expenses are incurred, in each case subject to being reimbursed by the
applicable indemnifying party upon the final settlement or resolution of all
investor claims against the Company, St. ▇▇▇▇ and the Underwriters, in
accordance with this Section.
SECTION 10.03 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
In addition to the limitation set forth in Section 10.02(e) with
respect to St. Paul's aggregate liability, the amount which either party hereto
(an "INDEMNIFYING PARTY") is or may be required to pay to any other party (an
"INDEMNITEE") pursuant to Sections 10.01 and 10.02 shall be reduced (including,
without limitation, retroactively) by any Insurance Proceeds or any other
amounts actually recovered by or on behalf of such Indemnitee, in reduction of
the related Loss. If an Indemnitee has received the payment required by this
Agreement from an Indemnifying Party in respect of any Loss and has subsequently
actually received Insurance Proceeds or other amounts in respect of such Loss,
then such Indemnitee shall promptly pay to such Indemnifying Party a sum equal
to the amount of such Insurance Proceeds or other amounts actually received (up
to but not in excess of the amount of any indemnity payment made hereunder). An
insurer who would otherwise be obligated to pay any claim shall not be relieved
of the responsibility with respect thereto, or, solely by virtue of the
indemnification provisions hereof, have any subrogation rights with respect
thereto, it being expressly understood and agreed that no insurer or any other
third party shall be entitled to a "windfall" (I.E., a benefit they would not be
entitled to receive in the absence of the indemnification provisions) by virtue
of the indemnification provisions hereof.
SECTION 10.04 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
Procedures for indemnification of Third Party Claims shall be as follows:
(a) If an Indemnitee receives notice or otherwise learns of the
assertion by a Person (including, without limitation, any governmental entity)
who is not a party to this Agreement or an Affiliate thereof, of any claim or of
the commencement by any such Person of any Action (a "THIRD PARTY CLAIM") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to Section 10.01 or 10.02 of this Agreement, such
Indemnitee shall give such Indemnifying Party written notice thereof promptly
after becoming aware of such Third Party Claim; PROVIDED that the failure of any
Indemnitee to give notice as provided in this Section 10.04(a) shall not relieve
the Indemnifying Party of its obligations under this Article V, except to the
extent that such Indemnifying Party is prejudiced by such failure to
37
give notice. Such notice shall describe the Third Party Claim in as much detail
as is reasonably possible and, if ascertainable, shall indicate the amount
(estimated if necessary) of the Loss that has been or may be sustained by such
Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim. Within 30 days of the receipt of
notice from an Indemnitee in accordance with Section 10.04(a) (or sooner, if the
nature of such Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee of its election whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim, which election shall
specify any reservations or exceptions. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a Third Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article X for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED that each Indemnitee may elect to
participate in such defense, at such Indemnitee's own expense and by such
Indemnitee's own counsel (which for the avoidance of doubt shall act at the
Indemnitee's expense) but PROVIDED FURTHER that an Indemnifying Party and each
Indemnitee may agree to retain common counsel. If the defendants in any such
claim include both the Indemnifying Party and one or more Indemnitees and (i) in
any Indemnitee's reasonable judgment a conflict of interest between one or more
of such Indemnitees and such Indemnifying Party exists in respect of such claim,
(ii) if the identity of the Person that is the appropriate Indemnifying Party or
Indemnitee in respect of such claim is in dispute, (iii) if an Indemnitee
reasonably asserts that it believes that it may not be indemnified by the
Indemnifying Party for its entire exposure in respect of a Third Party Claim, or
(iv) if the Indemnifying Party shall have assumed responsibility for such claim
with reservations or exceptions that would materially prejudice such
Indemnitees, such Indemnitees shall have the right to employ separate counsel to
represent such Indemnitees and in that event the reasonable fees and expenses of
such separate counsel (but not more than one separate counsel for all such
Indemnitees reasonably satisfactory to the Indemnifying Party) shall be paid by
such Indemnifying Party subject to Section 10.02(g). If an Indemnifying Party
elects not to assume responsibility for defending a Third Party Claim, or fails
to notify an Indemnitee of its election as provided in this Section 10.04(b),
such Indemnitee may defend or (subject to the remainder of this Section 10.04(b)
and Section 10.04(d)) seek to compromise or settle such Third Party Claim at the
expense of the Indemnifying Party. Neither an Indemnifying Party nor an
Indemnitee shall consent to entry of any judgment or enter into any settlement
of any Third Party Claim which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnitee, in the case of a
consent or settlement by an Indemnifying Party, or the Indemnifying Party, in
the case of a consent or settlement by the Indemnitee, of a written release from
all liability in respect to such Third Party Claim.
(c) If an Indemnifying Party chooses to defend any Third Party Claim,
the Indemnitee shall make available at reasonable times to such Indemnifying
Party any personnel or any books, records or other documents within its control
or which it otherwise has the ability to make available that are necessary or
appropriate for such defense, settlement or compromise, and shall otherwise
cooperate in a reasonable manner in the defense, settlement or compromise of
such Third Party Claim.
38
(d) Notwithstanding anything in this Section 10.04 to the contrary, an
Indemnifying Party may not settle or compromise any claim without the prior
written consent of the Indemnitee; PROVIDED that consent to settlement or
compromise shall not be unreasonably withheld or delayed and PROVIDED FURTHER
that St. Paul's aggregate liability with respect to any such settlement or
compromise shall be subject to the provisions of Section 10.02(e) and (f). If an
Indemnifying Party notifies the Indemnitee in writing of such Indemnifying
Party's desire to settle or compromise a Third Party Claim on the basis set
forth in such notice (provided that such settlement or compromise includes as an
unconditional term thereof the giving by the claimant or plaintiff of a written
release of the Indemnitee from all liability in respect thereof) and the
Indemnitee shall notify the Indemnifying Party in writing that such Indemnitee
declines to accept any such settlement or compromise, such Indemnitee may
continue to contest such Third Party Claim, free of any participation by such
Indemnifying Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with respect to such
Third Party Claim shall be equal to (i) the costs and expenses of such
Indemnitee prior to the date such Indemnifying Party notifies such Indemnitee of
the offer to settle or compromise (to the extent such costs and expenses are
otherwise indemnifiable hereunder) PLUS (ii) the lesser of (A) the amount of any
offer of settlement or compromise which such Indemnitee declined to accept and
(B) the actual out-of-pocket amount such Indemnitee is obligated to pay
subsequent to such date as a result of such Indemnitee's continuing to pursue
such Third Party Claim.
(e) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third Party Claim against any claimant or plaintiff asserting
such Third Party Claim or against any other Person. Such Indemnitee shall
cooperate with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated right or
claim.
SECTION 10.05 REMEDIES CUMULATIVE. The remedies provided in this
Article X shall be cumulative and shall not preclude assertion by an Indemnitee
of any other rights at law or in equity or the seeking of any and all other
remedies against any Indemnifying Party.
SECTION 10.06 SURVIVAL OF INDEMNITIES. The obligations of the Company
and St. ▇▇▇▇ under this Article X shall survive indefinitely, PROVIDED, HOWEVER,
that St. Paul's obligations under Section 10.02 shall survive until the second
anniversary of the Closing Date.
ARTICLE XI
ACCESS TO INFORMATION; FURTHER ASSURANCES
SECTION 11.01 ACCESS TO INFORMATION. From and after the Closing Date,
St. ▇▇▇▇ shall afford to the Company and its Post-closing Subsidiaries and their
respective authorized accountants, counsel and other designated representatives
(collectively, "REPRESENTATIVES") [reasonably prompt] access (including using
commercially reasonable efforts to give access to Persons possessing
information) during normal
39
business hours to all data and information that is specifically described in
writing (collectively, "INFORMATION") within the possession of St. ▇▇▇▇ or
any Post-closing Subsidiary of St. ▇▇▇▇ relating to the Company or any
Post-closing Subsidiary of the Company, insofar as such Information is
reasonably required by the Company or such Post-closing Subsidiary including
in connection with its preparation of regulatory reports and filings,
PROVIDED, that St. ▇▇▇▇ shall not be obliged to provide information
concerning contracts with an inception date of prior to January 1, 2002 other
than: (i) copies of the underwriting files for contracts that were
underwritten by St. ▇▇▇▇ Re in the 1997, 1998, 1999, 2000 and 2001
underwriting years and that are within the Transferred Lines
[or the Excluded Classes as set forth in Schedule 11.01]; (ii) aggregate loss
data for contracts that are within the Transferred Lines
[or the Excluded Lines] upon the Company's representation that such
information is required in connection with its business; and (iii) St. ▇▇▇▇
will also provide access to the underwriting files (but shall not provide
copies thereof) for contracts written by St. ▇▇▇▇ Re within the Transferred
Lines in underwriting years prior to 1997 upon the Company's representation
that it requires access to such information in connection with its business.
For greater certainty, St. ▇▇▇▇ shall not be required to share any claims
information relating to any individual contract having an inception date that
is prior to January 1, 2002. Similarly, from and after the Closing Date, the
Company shall afford to St. ▇▇▇▇, any Post-closing Subsidiary of St. ▇▇▇▇ and
their respective Representatives reasonable access (including using
commercially reasonable efforts to give access to Persons possessing
information) during normal business hours to Information within the Company's
or any Post-closing Subsidiary of the Company's possession that is
specifically described in writing relating to St. ▇▇▇▇ or any Post-closing
Subsidiary of St. ▇▇▇▇, insofar as such Information is reasonably required by
St. ▇▇▇▇ or a Post-closing Subsidiary of St. ▇▇▇▇. Information may be
requested under this Article XI for, without limitation, audit, accounting,
claims, litigation (other than any claims or litigation between the parties
hereto or their Subsidiaries) and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations and for performing this
Agreement and the transactions contemplated hereby.
SECTION 11.02 RETENTION OF RECORDS. Each of St. ▇▇▇▇ and the Company and their
respective Post-closing Subsidiaries shall retain, and shall cause their
respective Post-closing Subsidiaries to retain following the Closing Date, for a
period consistent with the longer of their respective document retention
policies in effect at such time or for such longer period as may be required by
applicable law or regulations, respectively, all significant information
relating to the business of the other and the other's Subsidiaries or the
obligations of the other or the other's Subsidiaries. In addition, after the
expiration of the applicable retention periods, such information may not be
destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (a) the party proposing to destroy or otherwise dispose
of such information provides no less than 30 days' prior written notice to the
other, specifying in reasonable detail the information proposed to be destroyed
or disposed of, and (b) if a recipient of such notice shall request in writing
prior to the scheduled date for such destruction or disposal that any of the
information proposed to be destroyed or disposed of be delivered to such
recipient, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such information as was requested at the expense of
the party requesting such information.
40
SECTION 11.03 ST. ▇▇▇▇ CONFIDENTIAL INFORMATION.
(a) Neither the Company, nor any of its Post-closing Subsidiaries nor
any of their respective directors, officers and agents may disclose any
information of a confidential nature received from St. ▇▇▇▇ (the "ST. ▇▇▇▇
CONFIDENTIAL INFORMATION").
(b) St. ▇▇▇▇ Confidential Information shall not include information,
which is or becomes generally known on a non-confidential basis provided, that
the source of such information was not bound by a confidentiality agreement or
other obligation of confidentiality.
(c) If the Company, any of its Post-closing Subsidiaries or any of
their respective directors, officers or agents is legally requested or required
under an order or subpoena issued by a court, administrative agency or
arbitration panel (through oral examination, interrogatories, requests for
information or documents, civil investigation demand or other legal,
administrative or arbitration processes) to disclose any St ▇▇▇▇ Confidential
Information, the Company shall provide St. ▇▇▇▇ with prompt written notice of
the request, requirement, subpoena or order to permit St. ▇▇▇▇ (if it so elects)
to seek an appropriate protective order preventing or limiting disclosure. If St
▇▇▇▇ seeks such an order or takes other steps to avoid or limit disclosure, the
Company shall cooperate with St. ▇▇▇▇ at St. Paul's expense. If, in the absence
of such protective order, the Company is compelled to disclose St. ▇▇▇▇
Confidential Information, the Company may disclose such St. ▇▇▇▇ Confidential
Information without liability hereunder.
(d) The Company agrees that money damages would not be a sufficient
remedy for any breach of this Section 11.03 by the Company or any of its
Post-closing Subsidiaries or any of their respective directors, officers or
agents, and that, in addition to all other remedies, St. ▇▇▇▇ shall be entitled
to specific performance and injunctive or other equitable relief as a remedy for
any such breach.
SECTION 11.04 FURTHER ASSURANCES; NO AGENCY; SPECIFIC PERFORMANCE. If
at any time after the Closing Date any further action is reasonably necessary or
advisable to carry out the purposes of this Agreement or any Ancillary
Agreement, the proper officers of each party to this Agreement shall take all
such action or cause the applicable Post-closing Subsidiaries to take all such
action. Each of St. ▇▇▇▇ and its Post-closing Subsidiaries and the Company and
its Post-closing Subsidiaries shall use its commercially reasonable efforts to
obtain all consents and approvals, to enter into all amendatory agreements and
to make all filings and applications that may be required for the consummation
of the transactions contemplated by this Agreement and the Ancillary Agreements,
including, without limitation, all applicable governmental and regulatory
filings. Under no circumstances does this Agreement or any of the Ancillary
Agreements create an agency relationship between St. ▇▇▇▇ and the Company,
except to the extent specified in any such Ancillary Agreement. The parties each
agree and acknowledge that remedies at law for any breach of their obligations
under this Section 11.04 are inadequate and that in addition thereto each party,
as applicable, shall be entitled to seek equitable relief, including injunction
and specific performance, in the event of any such breach.
41
ARTICLE XII
PRE-EMPTIVE RIGHTS; REPURCHASE PROGRAMS; TRANSFER RESTRICTIONS
SECTION 12.01 PRE-EMPTIVE RIGHTS. (a) If the Company proposes to issue
(a "DILUTIVE TRANSACTION") any Common Shares or any securities into or
exchangeable for or carrying in any way the right to acquire Common Shares (the
"NEW SECURITIES"), St. ▇▇▇▇ will have the right to subscribe for up to such
number of New Securities as is necessary to maintain St. Paul's beneficial
ownership interest in the Company at the same percentage owned immediately prior
to the Dilutive Transaction (assuming conversion or exchange of the New
Securities; PROVIDED, HOWEVER, that St. ▇▇▇▇ shall not have a right to subscribe
for any New Securities if the ownership of such New Securities would cause St.
▇▇▇▇ to be a "United States 25% Shareholder" (as defined in the bye-laws of the
Company). The precise number of New Securities to be issued to St. ▇▇▇▇ will be
rounded up to the nearest round lot number.
(b) If the Company proposes to issue New Securities, it shall give St.
▇▇▇▇ [30] days written notice of its intention, describing the type and number
of New Securities and the price and terms upon which the Company proposes to
issue the same. St. ▇▇▇▇ shall have [ten] days from the date of receipt of any
such notice to agree to purchase up to St. Paul's PRO RATA share of New
Securities specified above for the same price paid to the Company in connection
with such Dilutive Transaction (i.e., less underwriting discounts and
commissions) by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
(c) In the event that St. ▇▇▇▇ fails to exercise its preemptive right
within the ten-day notice period, the Company shall have 120 days thereafter to
sell the New Securities with respect to which St. Paul's preemptive right was
not exercised, upon the same terms specified in the Company's notice to St. ▇▇▇▇
(except that underwriting discounts and commissions may be paid), PROVIDED that
the Company shall not be obligated to issue such New Securities. To the extent
the Company does not sell all the New Securities offered within such 120-day
period, the Company shall not thereafter issue or sell such New Securities
without first again offering such securities to St. ▇▇▇▇ in the manner provided
above.
(d) Notwithstanding anything in this Section 12.01 to the contrary, the
parties hereby agree that
(i) any New Securities issued pursuant to (A) any director or
employee benefit plans of the Company or (B) any acquisition
transaction engaged in by the Company are not to be deemed Dilutive
Transactions and that, consequently, no pre-emptive rights will attach
with respect to New Securities issued pursuant to clauses (A) and (B);
(ii) St. Paul's pre-emptive rights to subscribe for New
Securities will terminate without any further action by either party
hereto at such time as St. ▇▇▇▇ beneficially owns less than 10% of the
outstanding Common Shares;
42
(iii) St. ▇▇▇▇ shall have no pre-emptive rights with respect
to any proposed Dilutive Transaction (A) to the extent a proposed
Dilutive Transaction is an underwritten public offering, the
underwriters request a reduction of the number of New Securities to be
issued, or (B) prior to a Dilutive Transaction a nationally recognized
investment bank mutually agreed by the parties advises St. ▇▇▇▇ and the
Company in writing that St. ▇▇▇▇ exercising pre-emptive rights in
connection with such Dilutive Transaction would materially hinder or
interfere with such proposed Dilutive Transaction;
(iv) with respect to any New Securities that are securities
convertible into or exchangeable for or carrying in any way the right
to acquire Common Shares ("Convertible New Securities"), the terms of
such Convertible New Securities issuable to St. ▇▇▇▇ upon exercise of
the pre-emptive rights shall contain provisions which preclude
conversion into or exchange for the underlying Common Shares until such
time as St. Paul's ownership of Common Shares measured immediately
after such conversion or exchange is no more than 24.9% of the total
number of outstanding Common Shares. Ownership for this purpose will be
determined under Section 958 of the Internal Revenue Code of 1986, as
amended (the "Code"). These special limitations on conversions or
exchanges shall lapse upon a transfer of the Convertible New Securities
by St. ▇▇▇▇ to a person with which St. ▇▇▇▇ has no constructive
ownership relationship under Section 958 of the Code; and
(v) St. ▇▇▇▇ shall have no pre-emptive rights in the event of
an issuance of Common Shares upon the conversion or exchange of New
Securities with respect to the issuance of which St. ▇▇▇▇ had
pre-emptive rights.
SECTION 12.02 SHARE BUY-BACK PROGRAMS. (a) In the event that the
Company determines to effect repurchases of its Common Shares (and, if
applicable, New Securities) in a repurchase program approved by its board of
directors, then St. ▇▇▇▇ must sell to the Company, on each day which any Common
Shares are so repurchased at a price equal to the average price of repurchases
by the Company on such day, such number of Common Shares necessary to limit St.
Paul's beneficial ownership interest in the Company to no more than 24.9% of the
outstanding Common Shares (on an Unadjusted Basis (as defined in the Company's
Bye-Laws)) after all such repurchases; PROVIDED, that St. ▇▇▇▇ ▇▇▇ require that
any repurchases from it by the Company must be at the average purchase price of
any repurchases effected by the Company on such day pursuant to Rule 10b-18
under the Exchange Act. The precise number of Common Shares to be repurchased by
the Company from St. ▇▇▇▇ will be rounded up to the nearest round lot number.
(b) Notwithstanding anything in this Section 12.02 to the contrary, if
(i) St. ▇▇▇▇ beneficially owns less than 24.9% of the outstanding Common Shares
on an Unadjusted Basis other than as a result of any voluntary sale of Common
Shares by St. ▇▇▇▇, and (ii) St. ▇▇▇▇ thereafter purchases Common Shares to
maintain such beneficial ownership level at 24.9% either (A) in accordance with
its pre-emptive rights under Section 12.01 or (B) in the open market, in each
case within 60 days after suffering such dilution, then any repurchases by the
Company of its Common Shares in the period that is six months plus one day from
the trade date of any such
43
purchase by St. ▇▇▇▇ in accordance with clause (A) or (B) may only be effected
in a manner that either does not trigger St. Paul's obligation pursuant to
Section 12.02(a) to sell back Common Shares to the Company, or would not result
in any requirement by St. ▇▇▇▇ to disgorge profits pursuant to Section 16(b) of
the Exchange Act.
SECTION 12.03 TRANSFER RESTRICTIONS. St. ▇▇▇▇ ▇▇▇ not directly or
indirectly, sell, transfer or otherwise dispose of more than 9.9% of all
outstanding Common Shares owned by St. ▇▇▇▇ to any Person that generates 50% or
more of its gross revenue in its most recent fiscal year for which financial
statements are available, by writing property or casualty insurance or
reinsurance, except in the following circumstances: (i) in connection with any
tender offer or exchange offer made to all holders of outstanding Common Shares;
(ii) to any Post-closing Subsidiary of St. ▇▇▇▇ provided that such subsidiary
agrees in writing with the Company to the same transfer restrictions as are
contained in this Section 12.03; or (iii) in a transfer by operation of law upon
consummation of a merger or consolidation of St. ▇▇▇▇ into another Person.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 SURVIVAL. All representations, covenants and agreements
contained or provided for herein shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the party
benefiting from any such covenant or agreement, and shall survive the execution
of this Agreement.
SECTION 13.02 GOVERNING LAW; DISPUTE RESOLUTION.
(a) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the state of
New York, without regard to its
conflict of laws principles.
(b) DISPUTE RESOLUTION.
(i) MANDATORY ARBITRATION. The parties hereto shall promptly
submit any dispute, claim, or controversy arising out of or relating to
this Agreement, the Ancillary Agreements (unless they specifically
provide otherwise) and/or the Transactions contemplated hereunder,
including, effect, validity, breach, interpretation, performance, or
enforcement (collectively, a "DISPUTE") to binding arbitration in
New
York,
New York at the offices of Judicial Arbitration and Mediation
Services, Inc. ("JAMS") before an arbitrator (the "ARBITRATOR") in
accordance with JAMS' Arbitration Rules and Procedures and the Federal
Arbitration Act, 9 U.S.C.ss.ss.1 ET SEQ. The Arbitrator shall be a
former federal judge selected from JAMS' pool of neutrals. The parties
agree that, except as otherwise provided herein respecting temporary or
preliminary injunctive relief, binding arbitration shall be the sole
means of resolving any Dispute.
(ii) COSTS. The costs of the arbitration proceeding and any
proceeding in court to confirm or to vacate any arbitration award or to
obtain temporary or
44
preliminary injunctive relief as provided in paragraph (iii) below, as
applicable (including, without limitation, actual attorneys' fees and
costs), shall be borne by the unsuccessful party and shall be awarded
as part of the Arbitrator's decision, unless the Arbitrators shall
otherwise allocate such costs in such decision.
(iii) INJUNCTIVE RELIEF. Nothing herein prevents the parties
hereto from seeking or obtaining temporary or preliminary injunctive
relief in a court for any breach or threatened breach of any provision
hereof pending the hearing before and determination of the Arbitrator.
The parties hereby agree that they shall continue to perform, or cause
their Post-closing Subsidiaries to perform, any and all obligations
under this Agreement, and the Ancillary Agreements, including, without
limitation, the Master Services Agreement, pending the hearing before
and determination of the Arbitrator, it being agreed and understood
that the failure to so perform will cause irreparable harm to each
party and its Affiliates and that the putative breaching party has
assumed all of the commercial risks associated with such breach or
threatened breach of any provision hereof by such party.
(iv) COURTS. The parties agree that the State and Federal
courts in The City of
New York shall have jurisdiction for purposes of
enforcement of their agreement to submit Disputes to arbitration and of
any award of the Arbitrator.
SECTION 13.03 NOTICES. All notices, requests, claims, demands and other
communications hereunder and under the Ancillary Agreements shall be in writing
and shall be deemed to have been duly given if delivered by hand (with receipt
confirmed), or by certified mail, postage prepaid and return receipt requested,
or facsimile transmission addressed as follows (or to such other address as a
party may designate by written notice to the others) and shall be deemed given
on the date on which such notice is received:
If to St. ▇▇▇▇:
The St. ▇▇▇▇ Companies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
45
If to the Company:
Platinum Underwriters Holdings, Ltd.
Clarendon House
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇: Secretary
Facsimile:
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 13.04 AMENDMENT AND MODIFICATION. The parties may by written
agreement, subject to any regulatory approval as may be required, (a) extend the
time for the performance of any of the obligations or other acts of the parties
hereto; (b) waive any inaccuracies in the documents delivered pursuant to this
Agreement, and (c) waive compliance with or modify, amend or supplement any of
the agreements contained in this Agreement or waive or modify performance of any
of the obligations of any of the parties hereto. This Agreement may not be
amended or modified except by an instrument in writing duly signed on behalf of
the parties hereto.
SECTION 13.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 13.06 NO THIRD PARTY BENEFICIARIES. Except for the provisions
of Articles VIII and X relating to Indemnities, this Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
SECTION 13.07 HEADINGS. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
SECTION 13.08 SEVERABILITY. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remaining provisions of this Agreement shall be unaffected and
shall continue in full force and effect.
SECTION 13.09 WAIVER. No failure by any party to take any action or
assert any right hereunder shall be deemed to be a waiver of such right in the
event of the continuation or repetition of the circumstances giving rise to such
right, unless expressly waived in writing.
SECTION 13.10 EXPENSES. Except as otherwise specified in this Agreement
or the Ancillary Agreements, all costs and expenses, including, without
limitation, fees and
46
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing Date shall have occurred.
SECTION 13.11 PUBLIC ANNOUNCEMENT. No party to this Agreement shall
make, or cause to be made, any press release or public announcement in respect
of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the other
party and the parties shall cooperate as to the timing and contents of any such
press release or public announcement.
SECTION 13.12 ENTIRE AGREEMENT. This Agreement, the Ancillary
Agreements and any other written document executed by and between St. ▇▇▇▇ and
the Company that specifically states that such document is an Ancillary
Agreement, constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between St. ▇▇▇▇ and the Company with
respect to the subject matter hereof and thereof.
SECTION 13.13 ASSIGNMENT OF THIS AGREEMENT. Neither party may assign
this Agreement by operation of law or otherwise without the express written
consent of the other party; PROVIDED, HOWEVER, this Agreement may be assigned by
operation of law or otherwise without the express written consent of the St.
▇▇▇▇ and the Company to their respective Post-closing Subsidiaries so long as
such assignment does not relieve the assigning party of liability hereunder.
SECTION 13.14 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
47
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
THE ST. ▇▇▇▇ COMPANIES, INC.
By:
-------------------------------------
Name:
Title:
PLATINUM UNDERWRITERS HOLDINGS, LTD.
By
--------------------------------------
Name:
Title: