<PAGE> 1
Exhibit 2.1
SHAREHOLDERS AGREEMENT
dated as of
July 3, 2000
among
B.H. ACQUISITION LIMITED
and
THE SHAREHOLDERS LISTED ON THE SIGNATURE PAGES HEREOF
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
1.1. Definitions 1
ARTICLE II CORPORATE GOVERNANCE
2.1. The Board of Directors of the Company 9
2.2. The Boards of Directors of the Subsidiaries 10
2.3. Shareholder Action; Removal of Directors 10
2.4. Vacancies 10
2.5. Action by the Board 11
2.6. Significant Actions Requiring Supermajority Vote
of the Board 11
2.7. Memorandum of Association and Bye-Laws of the
Company 13
2.8. Shareholder Action 13
ARTICLE III RESTRICTIONS ON TRANSFER
3.1. General 13
3.2. Legends 15
3.3. Permitted Transferees 16
ARTICLE IV RIGHTS OF FIRST OFFER; RIGHTS TO COMPEL PARTICIPATION IN
CERTAIN TRANSFERS; RIGHTS TO PARTICIPATE IN CERTAIN TRANSFERS
4.1. Rights of First Offer 16
4.2. Rights to Compel Participation in Certain Transfers 19
4.3. Rights to Participate in Certain Transfers 20
4.4. Change of Control 22
4.5. Good Faith 24
4.6. Agreement to be Bound 24
ARTICLE V CERTAIN COVENANTS
5.1. Confidentiality 24
5.2. Information and Discussion of Affairs 25
5.3. Information Required to be Provided Pursuant to
Bye-Law 46 27
5.4. Conflicts among Shareholders and the Company 27
5.5. Future Transactions 28
5.6. Future Capitalization 28
5.7. Dividends 28
<PAGE> 3
ARTICLE VI MISCELLANEOUS
6.1. Entire Agreement 28
6.2. Effectiveness; Binding Effect; Benefit 28
6.3. Assignability 28
6.4. Amendment; Waiver 29
6.5. Notices 29
6.6. Headings 31
6.7. Counterparts 31
6.8. Applicable Law 31
6.9. Specific Enforcement 31
6.10. Consent to Jurisdiction 31
6.11. Directions to Nominee 31
Exhibit A Shareholder Ownership of Shares
Exhibit B Memorandum of Association of the Company
Exhibit C Bye-Laws of the Company
<PAGE> 4
SHAREHOLDERS AGREEMENT, dated as of July 3, 2000, among B.H.
Acquisition Limited, a Bermuda company (the "Company"), and each of Castlewood
Ltd., a Bermuda company ("Castlewood"), The Enstar Group, Inc., a Georgia
corporation ("Enstar") and Martine Ltd., a British Virgin Islands company
("Martine") (collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, on the date hereof, the Company has acquired all the issued
and outstanding capital stock of each of Compagnie Europeenne D'Assurances
Industrielles, S.A., a Belgium corporation, and Brittany Insurance Company
Limited, a Bermuda company;
WHEREAS, the Company has issued shares of its capital stock to a
nominee for the Shareholders as set forth on Exhibit A hereto, in exchange for
the consideration required to consummate the acquisitions described in the
previous recital; and
WHEREAS, the parties hereto desire to enter into this Shareholders
Agreement ("Agreement") to govern certain of their rights, duties and
obligations after consummation of the transactions referred to in the first
recital hereof.
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" of any Person means any Person or group of Persons acting
in concert in respect of the Person in question that, directly or indirectly,
controls or is controlled by or is under common control with such Person;
provided that no Shareholder of the Company shall be deemed to be an Affiliate
of any other Shareholder solely by reason of any investment in the Company. For
the purpose of this definition, the term "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
<PAGE> 5
"Agreement" means this Agreement, as amended from time to time.
"Alternate Director" means a person chosen by the Shareholders to
serve as an alternate member of the Board in accordance with Section 2.1(b).
"Appraised Value" has the meaning set forth in Section 4.4(c).
"Board" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York, in the United States are
authorized or obligated by law or executive order to close.
"Change of Control" means, (x) with respect to Enstar, (a) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Exchange Act), other than a
Person or group that owns, directly or indirectly, beneficially or of record,
at least 5% of the outstanding shares of Enstar on the Closing Date, of shares
representing more than 50% of the aggregate ordinary voting power represented
by the issued and outstanding capital stock of Enstar or (b) the occupation of
a majority of the seats (other than vacant seats) on the board of directors of
Enstar by Persons who were neither (i) nominated by the board of directors of
Enstar nor (ii) appointed by directors so nominated; (y) with respect to
Martine, the occurrence of any of the following events: (a) the beneficial
ownership (within the meaning of the Exchange Act) by any Person or group
(within the meaning of the Exchange Act) other than Trident or an entity that
is eligible to be a Permitted Transferee of Martine of more than 50% of the
issued and outstanding Class C Shares or (b) the beneficial ownership by any
Person or group (within the meaning of the Exchange Act) other than Trident of
a greater economic or voting interest in Martine for so long as Martine owns
Class C Shares (or in a Permitted Transferee if Martine has transferred such
Shares to such Permitted Transferee) than Trident; and (z) with respect to
Castlewood Dominic Silvester, Paul O'Shea or Nicholas Packer shall (a) directly
or indirectly beneficially own shares of Castlewood representing, in the
aggregate, less than 51% of the aggregate ordinary voting power representing
the issued and outstanding capital stock of Castlewood or (b) not have the
power, in the aggregate, by contract or otherwise, to elect or cause the
election of a majority of the board of directors of Castlewood.
"Class A Alternates" has the meaning set forth in Section 2.1(b).
"Class B Alternates" has the meaning set forth in Section 2.1(b).
"Class C Alternate" has the meaning set forth in Section 2.1(b).
2
<PAGE> 6
"Class A Directors" has the meaning set forth in Section 2.1(a).
"Class B Directors" has the meaning set forth in Section 2.1(a).
"Class C Director" has the meaning set forth in Section 2.1 (a).
"Class A Shares" means the Class A Ordinary Shares, par value US$0.01
per share, of the Company.
"Class B Shares" means the Class B Ordinary Shares, par value US$0.01
per share, of the Company.
"Class C Shares" means the Class C Ordinary Shares, par value US$0.01
per share, of the Company.
"Closing Date" has the meaning set forth in the Investment Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time, or any federal statute from time to time in effect
that has replaced such statute, and any reference in this Agreement to a
provision of the Code or a rule or regulation promulgated thereunder means such
provision, rule or regulation as amended from time to time or any provision of
a federal law, or any federal rule or regulation, from time to time in effect
that has replaced such provision, rule or regulation.
"Company" means B.H. Acquisition Limited, a Bermuda corporation, or
any successor thereto.
"Confidential Information" has the meaning set forth in Section
5.1(c).
"Continuing Shareholders" has the meaning set forth in Section 4.4(a).
"Controlled Shares" of any Person means all Voting Shares owned,
directly, indirectly or constructively, within the meaning of Section 958 of
the Code, by such Person.
"Designated Section 4.3 Seller" has the meaning set forth in Section
4.3(a).
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended from time to time or any federal statute from time to time in
effect that has
3
<PAGE> 7
replaced such statute, and any reference in this Agreement to a provision of
the Exchange Act or a rule or regulation promulgated thereunder means such
provision, rule or regulation as amended from time to time or any provision of
a federal law, or any federal rule or regulation, from time to time in effect
that has replaced such provision, rule or regulation.
"Initial Order Period" has the meaning set forth in Section 4.1(b).
"Initial Ownership" means, as to any Shareholder, its ownership of
Shares as of the Closing Date.
"Initial Section 4.1 Offer" has the meaning set forth in Section
4.1(b).
"Initial Section 4.1 Offer Notice" has the meaning set forth in
Section 4.1(a).
"Investment Agreement" means the Investment Agreement, dated as of
July 3, 2000, among the Company and each of the Shareholders.
"Management Services Agreement" means the Management Services
Agreement, dated the Closing Date, between Castlewood and the Company.
"Marketable Securities" means any debt or equity securities that are
(i) regularly traded on any securities exchange registered with the SEC under
the Exchange Act or any comparable securities exchange outside the United
States, (ii) reported through the National Association of Securities Dealers,
Inc. Automated Quotation System, or (iii) otherwise traded over-the-counter and
for which quotations of market prices are readily available and which
securities are, in each case, not subject to restrictions on Transfer as a
result of applicable contract provisions or the provisions of the Securities
Act.
"Nominee" has the meaning set forth in Section 2.4(a).
"Number of Shares" has the meaning set forth in Section 4.3(a).
"Other Shareholders" has the meaning set forth in Section 4.2(a).
"Oversubscribing Shareholder" has the meaning set forth in Section
4.1(b).
"Participating Tagging Shareholder" has the meaning set forth in
Section 4.3(a).
4
<PAGE> 8
"Permitted Transferee", with respect to any Shareholder, means any (w)
Subsidiary of such Shareholder, at least 80% of the beneficial ownership of
which is owned, directly or indirectly, by such Shareholder, (x) Person which
owns, directly or indirectly, at least 80% of the beneficial ownership of such
Shareholder (a "Parent Corporation"), (y) Subsidiary of a Parent Corporation of
such Shareholder, at least 80% of the beneficial ownership of which is owned,
directly or indirectly, by such Parent Corporation and (z) in the case of
Trident, upon the termination of Trident pursuant to its Limited Partnership
Agreement, Trident's limited partners at such time, provided, however, that
Trident shall have used its commercially reasonable efforts to sell its Shares
pursuant to the terms of this Agreement prior to any such Transfer to such
Persons.
"Person" means any individual, company, corporation, firm,
partnership, trust or any other business, entity or person, whether or not
recognized as constituting a separate legal entity.
"Principal U.S. Shareholder" means Enstar.
"Pro Rata Portion" means:
A x (B/C), where
A = The number of Section 4.1 Subject Shares or Section 4.4 Subject
Shares, as the case may be.
B = The number of Shares owned by such Shareholder immediately
prior to the Initial Section 4.1 Offer or the Section 4.4 Offer,
as the case may be.
C = The total number of Shares owned by all Shareholders (other
than the Section 4.1 Seller or the Section 4.4 Shareholder, as
the case may be) immediately prior to the Initial Section 4.1
Offer or the Section 4.4 Offer, as applicable.
"Remaining Shares" has the meaning set forth in Section 4.1(b).
"Reporting Shareholder" has the meaning set forth in Section 5.1(b).
"Representatives" has the meaning set forth in Section 5.1(c).
5
<PAGE> 9
"Requested Shares" has the meaning set forth in Section 4.1(b).
"Restricted Securities" means Shares that are "restricted securities"
within the meaning of Rule 144.
"Rule 144" means Rule 144 promulgated under the Securities Act as
amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Second Order Period" has the meaning set forth in Section 4.1(c).
"Section 4.4 Commencement Date" has the meaning set forth in Section
4.4(a).
"Section 4.4 Order Period" has the meaning set forth in Section
4.4(b).
"Section 4.4 Offer" has the meaning set forth in Section 4.4(a).
"Section 4.4 Oversubscribing Shareholder" has the meaning set forth in
Section 4.4(d).
"Section 4.4 Purchaser" has the meaning set forth in Section 4.4(d).
"Section 4.4 Requested Shares" has the meaning set forth in Section
4.4(d).
"Section 4.4 Seller" has the meaning set forth in Section 4.4(a).
"Section 4.4 Subject Shares" has the meaning set forth in Section
4.4(a).
"Second Section 4.1 Offer" has the meaning set forth in Section
4.1(c).
"Second Section 4.1 Offer Notice" has the meaning set forth in Section
4.1(b).
"Section 4.1 Rejection" has the meaning set forth in Section 4.1(c).
"Section 4.1 Sale" has the meaning set forth in Section 4.1(a).
"Section 4.1 Sale Price" has the meaning set forth in Section 4.1(a).
"Section 4.1 Seller" has the meaning set forth in Section 4.1(a).
6
<PAGE> 10
"Section 4.1 Subject Shares" has the meaning set forth in Section
4.1(a).
"Section 4.3 Notice" has the meaning set forth in Section 4.3(a).
"Section 4.3 Order" has the meaning set forth in Section 4.3(a).
"Section 4.3 Order Period" has the meaning set forth in Section
4.3(a).
"Section 4.3 Sale" has the meaning set forth in Section 4.3(a).
"Section 4.3 Sale Price" has the meaning set forth in Section 4.3(a).
"Section 4.3 Seller" has the meaning set forth in Section 4.3(a).
"Section 4.2 Closing Date" has the meaning set forth in Section
4.2(b).
"Section 4.2 Notice" has the meaning set forth in Section 4.2(b).
"Section 4.2 Sale" has the meaning set forth in Section 4.2(a).
"Section 4.2 Sale Price" has the meaning set forth in Section 4.2(b).
"Section 4.2 Seller" has the meaning set forth in Section 4.2(a).
"Securities Act" means the United States Securities Act of 1933 as
amended from time to time or any federal statute from time to time in effect
that has replaced such statute, and any reference in this Agreement to a
provision of the Securities Act or a rule or regulation promulgated thereunder
means such provision, rule or regulation as amended from time to time or any
provision of a federal law, or any federal rule or regulation, from time to
time in effect that has replaced such provision, rule or regulation.
"Shareholder" means each Person (other than the Company) who shall be
a party to or otherwise subject to this Agreement, whether in connection with
the execution and delivery hereof, pursuant to Section 6.3 or otherwise, so
long as such Person shall "beneficially own" (as such term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, any Shares.
"Shares" means the Class A Shares, the Class B Shares and the Class C
Shares, including any fraction thereof.
7
<PAGE> 11
"Subject Shares" has the meaning set forth in Section 4.2(b).
"Subsidiary", with respect to any Person, means a Person more than 50%
(or, in the case of a wholly-owned Subsidiary, 100%) of the outstanding equity
securities of which is owned, directly or indirectly, by such Person or by one
or more other Subsidiaries of such Person, or any such Person and one or more
other Subsidiaries of such Person.
"Tagging Shareholders" has the meaning set forth in Section 4.3(a).
"10% Shareholder" means a U.S. Person whose Controlled Shares have
attached voting rights representing more than 9.9% of the total number of votes
attaching to all the issued Voting Shares of the Company or any of its
Subsidiaries, in each case determined on an Unadjusted Basis.
"Termination Date" has the meaning set forth in Section 4.1(e).
"Third Party" means a prospective purchaser of Shares in an
arm's-length transaction from the Company or a Transferring Shareholder where
such purchaser is not a Shareholder or a Permitted Transferee of such
Transferring Shareholder.
"Transfer" has the meaning set forth in Section 3.1(a).
"Transferee" means any Person that acquires a Share through a
Transfer.
"Trident" means Trident II, L.P., a limited partnership organized
under the laws of the Cayman Islands.
"Unadjusted Basis", when used with respect to the aggregate number of
votes attaching to any shares of the Company, refers to the determination of
such votes without reference to the provisions relating to adjustment of voting
rights contained in Bye-Law 46 of the Bye-Laws of the Company.
"United States" means the United States of America or any state
thereof or the District of Columbia.
"U.S. GAAP" has the meaning set forth in Section 5.2(a)(i).
"U.S. Person" means (a) an individual who is a citizen or resident of
the United States, (b) a corporation or partnership that is created or
organized in the United States or under the laws of the United States or any
state thereof or the District of
8
<PAGE> 12
Columbia and (c) an estate or trust that is subject to United States Federal
income tax on its income regardless of its source.
"Voting Share" of any Person means any issued shares in such Person
conferring voting rights on the holder thereof (other than such voting rights
as would exist solely in relation to a proposal to alter or vary the rights
attaching to such shares or solely upon the future occurrence of a
contingency). For this purpose, any Voting Shares that may be acquired upon
conversion or exchange of another security or that are subject to a purchase
option shall be treated as issued to the extent the holder of the security or
the option would be treated as owning such Voting Shares pursuant to Section
958(b) of the Code.
ARTICLE II
CORPORATE GOVERNANCE
2.1 (a) The Board of Directors of the Company. The Board shall
consist of six members, elected by holders of the Shares as set forth in this
Article 2 and the Bye-Laws of the Company. With respect to each annual election
of the members of the Board, the holders of a majority of the issued and
outstanding Class A Shares shall be entitled to nominate two members of the
Board (the "Class A Directors"), the holders of a majority of the issued and
outstanding Class B Shares shall be entitled to nominate three members of the
Board (the "Class B Directors") and the holders of a majority of the issued and
outstanding Class C Shares shall be entitled to nominate one member of the
Board (the "Class C Director").
(b) Pursuant to Bye-Law 15 of the Bye-Laws of the Company,
the number of Alternate Directors of the Company is and shall remain at 6. The
Alternate Directors shall be elected by holders of the Shares as set forth in
this Article II and the Bye-Laws of the Company, and shall serve as members of
the Board on the terms and in the circumstances set forth in Bye-Law 15 of the
Bye-Laws of the Company. With respect to each annual election of Alternate
Directors, the holders of a majority of the issued and outstanding Class A
Shares shall be entitled to nominate two Alternate Directors (the "Class A
Alternates); the holders of a majority of the issued and outstanding Class B
Shares shall be entitled to nominate 3 Alternate Directors (the "Class B
Alternates"); and the holders of a majority of the issued and outstanding Class
C Shares shall be entitled to nominate one Alternate Director (the "Class C
Alternate").
(c) The initial members of the Board at the Closing Date
shall be as agreed upon in writing by the parties.
9
<PAGE> 13
(d) The initial Alternate Directors of the Board at the
Closing Date shall be as agreed upon in writing by the parties.
2.2. The Boards of Directors of the Subsidiaries. The composition
of the board of directors of each of the Company's Subsidiaries shall be as
determined by the Board, in compliance with Section 2.6 hereof.
2.3 Shareholder Action; Removal of Directors. (a) Each
Shareholder agrees that it will vote its Shares or execute consents, as the
case may be, and take all other necessary or desirable actions within such
Shareholder's control (which may include giving instructions to such
Shareholder's nominee or nominees to the Board), including, without limitation,
causing the Company to call a special meeting of Shareholders, attendance at
such meetings in person or by proxy and execution of written consents in lieu
of meetings) in order to ensure that the composition of the Board, the identity
of the Alternate Directors and the board of directors of each Subsidiary of the
Company are as provided for in this Article II.
(b) Each Shareholder agrees that it will not vote any of its
Shares in favor of the removal of any member of the Board or Alternate Director
who shall have been designated or nominated pursuant to Article II hereof
unless the Shareholder that nominated such member of the Board or Alternate
Director shall have consented to such removal in writing. Each Shareholder that
has nominated a member of the Board or Alternate Director pursuant to Section
2.1 shall be entitled to cause the removal of such member of the Board or
Alternate Director at any time (with or without cause) by giving written notice
thereof to each of the other Shareholders. Each Shareholder agrees that if at
any time, any Shareholder that has nominated a member of the Board or Alternate
Director pursuant to Section 2.1 so requests the removal thereof, it will vote
all of its Shares in favor of the removal of such member of the Board or
Alternate Director.
2.4. Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without cause) or otherwise, there shall exist or
occur any vacancy on the Board:
(a) Within 30 days of the occurrence of such vacancy, the
Shareholder who nominated such member of the Board whose death, disability,
retirement, resignation or removal resulted in such vacancy, and only such
Shareholder, shall nominate another individual (the "Nominee") to fill such
vacancy and serve as a director of the Company. Such Nominee need not be an
Alternate Director. If such Shareholder has not so nominated a Person within
such 30 day period, one of such Shareholder's Alternate Directors shall attend
any meeting of the Board until an individual has been so chosen by such
Shareholder.
10
<PAGE> 14
(b) Each Shareholder agrees that it will vote its Shares, or
execute a written consent, as the case may be, in order to elect the applicable
Nominee to the Board.
2.5. Action by the Board. A quorum of the Board shall consist of
one Class A Director, one Class B Director and one Class C Director, provided
that in the event a quorum is not present at a duly called meeting of the
Board, the meeting shall be adjourned to the same time and place on the next
Business Day or such other time, place and date as the directors present at
such meeting determine and all members of the Board shall be notified in
writing of such adjournment. If a quorum is not present at such adjourned
meeting in accordance with the first sentence of this Section 2.5, a majority
of the directors then in office shall constitute a quorum for such adjourned
meeting. Subject to Section 2.6, all actions of the Board shall require the
affirmative vote of at least a majority of the votes cast (in person or by
telephone) at a meeting of the Board, duly convened in accordance with the
notice and other provisions of the Bye-Laws of the Company and Bermuda law, at
which a quorum is present, or the unanimous written consent of the Board in
accordance with the Bye-Laws of the Company and Bermuda law.
2.6. Significant Actions Requiring Supermajority Vote of the Board.
In addition to the affirmative vote of the Board as required pursuant to
Section 2.5 and Bye-Law 18 of the Bye-Laws of the Company, the affirmative vote
of (x) a majority of the Class A Directors present at the applicable meeting
(which shall not be fewer than one), (y) a majority of the Class B Directors
present at the applicable meeting (which shall not be fewer than one) and (z)
the Class C Director shall be required in connection with (a) the amendment,
alteration or revocation of any provision of, or addition of any provision to,
the Memorandum of Association of the Company or the Bye-Laws; (b) the issuance
of any equity securities of the Company, or rights, options, warrants or
agreements for the purchase or acquisition of any equity securities of the
Company; (c) the reclassification of any of the Shares, whether by
recapitalization or otherwise, into shares of any other class of equity
securities of the Company; (d) the approval of the annual operating budget and
business plan for the Company and its Subsidiaries or any material deviations
from such budget or business plan; (e) any transaction between the Company or
any Subsidiary of the Company, on the one hand, and any Shareholder or any
Affiliate of any Shareholder, on the other hand including, without limitation,
any waiver, amendment or other modification of any existing arrangement between
or among any such Persons, provided, however, that notwithstanding anything in
Section 2.5 or 2.6 of this Agreement to the contrary, any action with respect
to the Company's (or any of its Subsidiary's) enforcement of its rights under
any such arrangement, shall only require the affirmative vote of a majority of
each of the two classes of directors not nominated by the Shareholder who is
(or whose Affiliate is) a party to such arrangement with the Company
11
<PAGE> 15
or such Subsidiary, and provided further, that the decision by the Company to
purchase Shares from a Shareholder pursuant to a Second Section 4.1 Offer shall
not require any such additional affirmative vote of the director or directors,
as the case may be, nominated by the Section 4.1 Seller; (f) the engagement of
auditors and appointment of actuaries for the Company and its Subsidiaries; (g)
the application of any of the Company's or its Subsidiaries' assets to the
redemption, retirement, purchase or other acquisition, directly or indirectly,
through Subsidiaries of the Company or otherwise, of any shares of the capital
stock of the Company provided, however, that the decision by the Company (or
any of its Subsidiaries) to purchase Shares from a Shareholder pursuant to a
Second Section 4.1 Offer shall not require any such additional affirmative vote
of the director or directors, as the case may be, nominated by the Section 4.1
Seller; (h) the approval of the liquidation, dissolution or winding up of the
affairs of the Company; (i) the payment or declaration of any dividend or
distribution on any equity securities of the Company, except for dividends
declared and paid or distributions made in accordance with the provisions
relating to dividends and distributions in the business plan of the Company
approved in accordance with Section 2.6(d); (j) the sale of all or
substantially all of the Company's or any Subsidiary's property and assets or
the approval of the acquisition of the Company or any Subsidiary by another
entity by means of merger, consolidation, amalgamation, recapitalization, or
otherwise, provided, however, that notwithstanding anything in Section 2.5 or
2.6 of this Agreement to the contrary, after the fifth anniversary of the
Closing Date, only the affirmative majority vote of all of the directors of any
two classes of directors shall be required to approve any such transaction; (k)
the appointment of the members of the board of directors of any Subsidiary of
the Company or the creation of any committee of the Board or any committee of
the board of directors of any Subsidiary of the Company; (l) the permission,
acknowledgment or registration of any Transfer of Shares if such Transfer would
result in any U.S. Person other than the Principal U.S. Shareholder becoming a
10% Shareholder, determined without giving effect to Bye-Law 46 of the
Company's Bye-Laws (it being understood and agreed that provided all of the
other applicable provisions of this Agreement have been complied with, the
Board shall grant such permission, acknowledgment and registration if it
reasonably concludes, based on advice of counsel, that such Transfer would not
subject the Company to the status of a "controlled foreign corporation"
pursuant to the Code); (m) the acquisition by the Company or any Subsidiary of
the Company (in one of any series of related transactions) of any Person or the
entering into by the Company or any Subsidiary of the Company of any joint
venture with any other Person; (n) the incurrence by the Company or any
Subsidiary of the Company of any indebtedness for borrowed money if, after
giving effect to such incurrence, the aggregate indebtedness for borrowed money
of the Company and all its Subsidiaries shall exceed US$1,000,000; (o) the
appointment of any executive officers of the Company or any of its
Subsidiaries, and (p) the taking or refraining from taking of any action by the
Company or any Subsidiary of the Company (other than any action contemplated by
Sections 2.6(a) through 2.6(o)) to the extent such action or lack thereof would
have a
12
<PAGE> 16
material effect on the regulatory status of the Company or any of its
Subsidiaries, provided, that if such action or lack thereof is routine and is a
matter contemplated by the Company's annual business plan, no such additional
affirmative vote shall be required.
2.7. Memorandum of Association and Bye-Laws of the Company.
(a) The Memorandum of Association and Bye-Laws of the
Company, as to be in effect on the Closing Date, are attached hereto as
Exhibits B and C, respectively.
(b) As requested by the Board, each Shareholder shall vote
its Shares, as appropriate, and shall take all other actions necessary or
appropriate as reasonably requested by the Company, to ensure that the
Company's Memorandum of Association and Bye-Laws do not at any time conflict
with any provision of this Agreement. In the event of any conflict between this
Agreement and the Company's Memorandum of Association or Bye-Laws, the
provisions of this Agreement shall prevail.
2.8. Shareholder Action. As set forth in Bye-Law 42 of the
Bye-Laws of the Company, the Shareholders acting in their capacity as
Shareholders, shall not have the right to compel the Company to act, or to
refrain from acting, unless and until the Board has resolved (in accordance
with Section 2.6, if applicable), that the Company so act or refrain from
acting.
ARTICLE III
RESTRICTIONS ON TRANSFER
3.1 General. (a) Each Shareholder understands and agrees that the
Shares have not been registered under the Securities Act and are Restricted
Securities. Each Shareholder agrees that it will not, directly or indirectly,
sell, assign, transfer, grant a participation in, pledge or otherwise dispose
of ("Transfer") any Shares (or solicit any offers to buy or otherwise acquire,
or take a pledge of any Shares), except in compliance with the Securities Act
and the Laws of any other applicable jurisdictions with respect to the transfer
or registration of securities, the Bye-Laws of the Company and the terms and
conditions of this Agreement.
(b) All Transfers of any Shares shall be subject, if
required, to prior approval (or lack of objection) of all applicable regulatory
and other legal authorities. Prior to any proposed Transfer, the Shareholder
proposing such Transfer shall provide the Company with written notice of the
proposed Transfer and shall identify the proposed Transferee and include in
such notice all information reasonably requested by the
13
<PAGE> 17
Company or required to be provided pursuant to the applicable regulatory or
legal requirements in connection with such Transferee becoming a Shareholder of
the Company or such transferor ceasing to be a Shareholder of the Company. In
connection with any Transfer, conversion or exchange of Shares or otherwise,
each Shareholder hereby agrees to comply, to the extent required, with all
applicable requirements of all applicable regulatory and other legal
authorities.
(c) Notwithstanding anything else to the contrary contained
in this Agreement, (i) unless there has been the requisite affirmative vote of
the Board pursuant to Section 2.6(l), the Board shall not permit, acknowledge
or register any Transfer of Shares if such Transfer would result in any U.S.
Person other than the Principal U.S. Shareholder becoming a 10% Shareholder,
determined without giving effect to Bye-Law 46 of the Company's Bye-Laws, (it
being understood and agreed that provided all of the other applicable
provisions of this Agreement have been complied with, the Board shall grant
such permission, acknowledgment and registration if it reasonably concludes,
based on advice of counsel, that such Transfer would not subject the Company to
the status of a "controlled foreign corporation" pursuant to the Code), (ii)
the Board may, in its absolute and unfettered discretion, decline to permit,
acknowledge or register any Transfer of Shares if the Board determines that (x)
approval or consent to such Transfer of all applicable regulatory and other
legal authorities is required and such approval or consent has not been duly
granted, (y) such Transfer has not been effected in compliance with this
Agreement or any other agreement relating to such Shares, or (z) registration
of such Transfer under the Securities Act or under any blue sky or other U.S.
state securities laws or under the laws of any other jurisdiction is required
and such registration has not been duly effected, it being understood that the
Board shall be entitled to request and rely on an opinion of counsel to the
transferor or the Transferee, in form and substance satisfactory to the Board,
that no such approval or consent is required and no such violation would occur,
and the Board shall not be obligated to register any Transfer absent the
receipt of such an opinion, and (iii) without limiting the foregoing, the Board
shall not permit, acknowledge or register any Transfer of Shares unless all
applicable consents, authorizations, permissions or approvals of any
governmental body or agency or self-regulatory agency in Bermuda, Belgium or
any other applicable jurisdiction required to be obtained prior to such
Transfer shall have been obtained, it being understood that the Board shall be
entitled to request and rely on an opinion of counsel to the transferor or the
Transferee, in form and substance satisfactory to the Board, that no such
consents, authorizations, permissions or approvals are required, and the Board
shall not be obligated to register any Transfer absent the receipt of such an
opinion.
(d) The Board may require any Shareholder, or any Person
proposing to acquire Shares of the Company, to certify or otherwise provide
information in writing as to such matters as the Board may reasonably request,
including as to such Person's status as a U.S. Person, its Controlled Shares
and other matters of the kind contemplated
14
<PAGE> 18
by this Section 3.1. Such request shall be made by written notice and the
certification or other information requested shall be provided to such place
and within such period (not less than ten Business Days after such notice is
given unless the Board and such Shareholder or proposed acquiror otherwise
agree) as the Board may designate in such request. If any Shareholder or
proposed acquiror does not respond to any such request by the Board, or if the
Board has reason to believe that any certification or other information
provided pursuant to any such request is inaccurate or incomplete, the Board
may decline to register any Transfer or to effect any issuance or purchase of
Shares to which such request relates.
(e) Prior to the termination of this Agreement, no
Shareholder shall Transfer any Shares without the consent of each of the other
Shareholders, except as permitted or required by any of Section 3.3, 4.1, 4.2,
4.3 or 4.4 of this Agreement. Any such Transfer shall comply with all the other
terms and provisions of this Article III.
(f) Any attempt to Transfer any Shares not in compliance with
this Agreement shall be null and void and neither the Board nor any transfer
agent shall give any effect in the Register of Members (as such term is defined
in the Bye-Laws) or in the applicable stock records to such attempted Transfer.
3.2 Legends. (a) In addition to any other legend that may be
required, each certificate for Shares shall bear a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH."
(b) In addition to any other legend that may be required,
each certificate for Shares held by any Shareholder shall bear a legend in
substantially the following form:
15
<PAGE> 19
"THIS SECURITY IS SUBJECT TO RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE SHAREHOLDERS AGREEMENT DATED AS
OF JULY 3, 2000 AND THE COMPANY'S BYE-LAWS, COPIES OF WHICH
MAY BE OBTAINED UPON REQUEST FROM B.H. ACQUISITION LIMITED OR
ANY SUCCESSOR THERETO."
(c) If any Shares held by any Shareholder cease to be subject
to any restrictions on Transfer set forth in this Agreement, the Company shall,
upon the written request of the holder thereof, issue to such holder a new
certificate evidencing such Shares without the legend required by Section
3.2(b) endorsed thereon.
3.3. Permitted Transferees. Any Shareholder may at any time
Transfer any or all of its Shares to one or more of its Permitted Transferees
without the consent of the Board or any other Shareholder or group of
Shareholders and without compliance with Article IV; provided that (i) such
Permitted Transferee shall have agreed in writing to be bound by the terms and
conditions of this Agreement pursuant to an instrument of assumption reasonably
satisfactory in substance and form to the Company; (ii) the Transfer to such
Permitted Transferee is not in violation of any applicable regulatory or
securities laws (and, if requested by the Company, such Shareholder shall have
provided to the Company such information as the Board may reasonably request to
satisfy it to such effect) and (iii) the Transfer does not require the
affirmative vote of a supermajority of the Board for approval pursuant to
Section 2.6(l).
ARTICLE IV
RIGHTS OF FIRST OFFER;
RIGHTS TO COMPEL PARTICIPATION IN CERTAIN TRANSFERS;
RIGHTS TO PARTICIPATE IN CERTAIN TRANSFERS
4.1 Rights of First Offer. (a) If after the fifth anniversary of
the Closing Date, a Shareholder desires to Transfer any Shares to any Third
Party, such Shareholder (the "Section 4.1 Seller") shall give written notice
(an "Initial Section 4.1 Offer Notice") to the non-transferring Shareholders
(with a copy to the Company) that the Section 4.1 Seller desires to effect such
a Transfer (a "Section 4.1 Sale") and setting forth the identity of the
proposed transferee, the number of Shares proposed to be transferred by the
Section 4.1 Seller (the "Section 4.1 Subject Shares") and the cash price per
share that the Section 4.1 Seller proposes to be paid for the Section 4.1
Subject Shares (the "Section 4.1 Sale Price").
(b) The receipt of an Initial Section 4.1 Offer Notice by
each non-transferring Shareholder shall constitute an offer (the "Initial
Section 4.1 Offer") by
16
<PAGE> 20
the Section 4.1 Seller to sell to such Shareholder for cash on the terms set
forth in the Initial Section 4.1 Offer Notice the Section 4.1 Subject Shares at
the Section 4.1 Sale Price. Each Shareholder receiving an Initial Section 4.1
Offer shall have 30 days (the "Initial Order Period") in which to accept such
offer by giving to the Section 4.1 Seller prior to the expiration of such
period a written irrevocable notice of acceptance identifying the number of
Section 4.1 Subject Shares which such Shareholder intends to purchase (the
"Requested Shares"); provided that if the aggregate number of Requested Shares
of all Shareholders who have accepted the Initial Section 4.1 Offer exceeds the
total number of Section 4.1 Subject Shares, then (i) each Shareholder whose
number of Requested Shares is equal to or less than such Shareholder's Pro Rata
Portion (as defined below), shall be entitled to purchase all of its Requested
Shares and (ii) each Shareholder whose number of Requested Shares exceeds such
Shareholder's Pro Rata Portion (each such Shareholder being referred to as an
"Oversubscribing Shareholder"), shall be entitled to purchase the portion of
its Requested Shares equal to the sum of (x) such Shareholder's Pro Rata
Portion plus (y) the aggregate number of all Section 4.1 Subject Shares not
accepted by the Shareholders referred to in clause (i) of this Section 4.1(b)
multiplied by a fraction, the numerator of which is such Shareholder's Pro Rata
Portion and the denominator of which is the aggregate Pro Rata Portions of all
Oversubscribing Shareholders, it being understood that if not all Section 4.1
Subject Shares have been subscribed for following the application of this
proviso, each Oversubscribing Shareholder shall have an additional opportunity
to subscribe for any remaining Section 4.1 Subject Shares prior to the Second
Section 4.1 Offer Notice (defined below); and provided further that if the
total number of Section 4.1 Subject Shares exceeds the aggregate number of
Requested Shares of all Shareholders who have accepted the Initial Section 4.1
Offer, then the Section 4.1 Seller shall, within five Business Days after the
expiration of the Initial Order Period, provide written notice (a "Second
Section 4.1 Offer Notice") to the Company that the Section 4.1 Seller desires
to effect a Section 4.1 Sale and setting forth the total number of Section 4.1
Subject Shares and the number of remaining Section 4.1 Subject Shares not
accepted pursuant to the Initial Section 4.1 Offer (such remaining number of
Shares being referred to as the "Remaining Shares") at a price in cash equal to
the Section 4.1 Sale Price.
(c) The receipt of a Second Section 4.1 Offer Notice by the
Company shall constitute an offer (the "Second Section 4.1 Offer") by the
Section 4.1 Seller to sell to the Company for cash on the terms set forth in
the Second Section 4.1 Offer Notice the Remaining Shares at the Section 4.1
Sale Price. The Company shall have ten days (the "Second Order Period") to
irrevocably accept such offer as to all, but not less than all, of the
Remaining Shares by giving a written notice of acceptance to the Section 4.1
Seller prior to the expiration of such ten-day period. If the Company does not
elect to purchase all of the Remaining Shares, the Section 4.1 Seller shall not
be required to give effect to the sale of any Shares accepted pursuant to the
Initial Section 4.1 Offer or the Second Section 4.1 Offer, and the right of
first offer pursuant to this Section 4.1 shall be deemed
17
<PAGE> 21
to have been rejected by all Shareholders and the Company (a "Section 4.1
Rejection") for all purposes of this Agreement.
(d) The Shareholders and/or the Company, as the case may be,
exercising its or their rights of first offer as to all of the Section 4.1
Subject Shares shall purchase and pay for all such Shares within ten Business
Days following the date on which all such Shares have been accepted; provided
that (i) subject to Section 4.1(e), if the purchase and sale of such Shares is
subject to any prior regulatory approval, the time period during which such
purchase and sale may be consummated shall be extended until the expiration of
five Business Days after all such approvals shall have been received, (ii) if
any Shareholder or the Company fails to consummate the purchase of the
applicable number of Section 4.1 Subject Shares, the other Shareholders (other
than the Section 4.1 Seller) shall have the pro rata right, within five
Business Days of such failure, to purchase the Section 4.1 Subject Shares not
so purchased and (iii) if the Section 4.1 Seller has complied with the
foregoing clause (ii) and all other provisions of this Section 4.1, but at the
closing of the purchase and sale of the Section 4.1 Subject Shares less than
all of the Section 4.1 Subject Shares would be so purchased and sold for any
reason (except as a result of the application of Section 4.3 to such sale as
provided in Section 4.1(f)), then there shall be deemed to have been a Section
4.1 Rejection for all purposes of this Agreement.
(e) Upon the earlier to occur of (i) a Section 4.1 Rejection
or (ii) the failure by the Shareholders and/or the Company to consummate the
purchase of the Subject Shares within the time period described in Section
4.1(d) or, if applicable, the failure to obtain any required consent or
regulatory approval for the purchase of all of the Section 4.1 Subject Shares
within 90 days of full acceptance of all such Shares (the "Termination Date"),
the Section 4.1 Seller shall, subject to Section 4.3, have a 90-day period
during which to effect a Transfer to the Third Party set forth in the Initial
Section 4.1 Offer Notice of all of the Section 4.1 Subject Shares at a price in
cash or Marketable Securities (valued at the closing date of such sale) not
less than the Section 4.1 Sale Price and otherwise on substantially the same
terms and conditions as were set forth in the Initial Section 4.1 Offer Notice;
provided that if the Transfer is subject to regulatory approval, the 90-day
period in which it may be consummated shall be extended until the expiration of
the earlier of (x) five Business Days after all such approvals shall have been
received or (y) 45 days after the expiration of the 90-day period.
(f) Notwithstanding anything in this Agreement to the
contrary, in the event that a Shareholder or Shareholders (as the case may be)
and/or the Company has agreed to purchase all the Section 4.1 Subject Shares,
the other Shareholders (other than the Section 4.1 Seller) shall be entitled to
exercise their respective rights under Section 4.3 with respect to the Section
4.1 Sale.
18
<PAGE> 22
4.2 Rights to Compel Participation in Certain Transfers. (a) The
following action (a "Section 4.2 Sale") shall require the Shareholders (the
"Other Shareholders") to participate in the Section 4.2 Sale with the Section
4.2 Sellers (as defined below) with respect to all Shares then owned by such
Other Shareholders in accordance with the terms set forth in this Section 4.2:
after the fifth anniversary of the Closing Date, Shareholders
owning all the outstanding Shares of any two of the Class A
Shares, the Class B Shares or Class C Shares (the "Section
4.2 Sellers") have offered all their Shares pursuant to
Section 4.1, there has been a Section 4.1 Rejection and the
Section 4.2 Sellers propose to Transfer all of such Shares in
a bona fide sale to any Third Party, whether in one
transaction or in a series of related transactions, for
consideration in cash or Marketable Securities, at a price
equal to or greater than the Section 4.1 Sale Price.
(b) The Section 4.2 Sellers shall provide written notice of
such proposed Section 4.2 Sale to the Other Shareholders (a "Section 4.2
Notice") not less than 20 days nor more than 60 days prior to the proposed
consummation of the Section 4.2 Sale, which notice shall identify the
Transferee, the per share consideration (Marketable Securities to be valued as
at the Section 4.2 Closing Date) for which a Transfer of Shares is proposed to
be made (the "Section 4.2 Sale Price"), the scheduled date of the proposed
consummation of the Section 4.2 Sale (the "Section 4.2 Closing Date") and all
other material terms and conditions of the Section 4.2 Sale and shall include a
certification by the Section 4.2 Sellers that such Shareholders have complied
in full with Section 4.1 hereof. Each Other Shareholder shall be required to
participate in the Section 4.2 Sale on the terms and conditions set forth in
the Section 4.2 Notice (or, subject to Section 4.1, if the terms of the
transaction between such Transferee and the Section 4.2 Sellers have changed,
on such changed terms) and to tender a number of Shares (the "Subject Shares")
equal to the number of Shares then owned by such Other Shareholder. Within ten
Business Days following receipt of the Section 4.2 Notice, each Other
Shareholder shall deliver to a representative of the Section 4.2 Sellers
designated in the Section 4.2 Notice certificates representing all Subject
Shares held by such Other Shareholder, duly endorsed, together with all other
documents required to be executed in connection with such Section 4.2 Sale (it
being understood that in no event will any Other Shareholder be obligated to
provide any indemnities that could subject such Other Shareholder to make
payments pursuant thereto in amounts greater than the consideration paid to
such Other Shareholder in connection with such Section 4.2 Sale). In the event
that any Other Shareholder should fail to deliver such certificates to the
representative of the Section 4.2 Sellers, the Company shall cause the books
and records of the Company to show that such Subject Shares are bound by the
provisions of paragraphs (a) and (b) of this Section 4.2 and that such Subject
Shares shall be transferred to the Transferee in the Section 4.2
19
<PAGE> 23
Sale or such Transferee's Affiliates immediately upon surrender for Transfer by
the Other Shareholder thereof.
(c) If, 90 days after the scheduled Section 4.2 Closing Date,
the Section 4.2 Sellers have not completed the Transfer of all the Shares
subject to the Section 4.2 Sale, the Section 4.2 Sellers shall return to each
of the Other Shareholders all certificates representing Subject Shares that
such Other Shareholders delivered for Transfer pursuant hereto, and all the
restrictions on Transfer contained in this Agreement with respect to Shares
owned by all Shareholders shall again be in effect, provided that if the
Transfer is subject to regulatory approval, the 90-day period in which it may
be consummated shall be extended until the expiration of the earlier of (i)
five Business Days after all such approvals have been received or (ii) 45 days
after the 90-day period.
(d) Concurrently with the consummation of the Transfer of
Shares of the Section 4.2 Sellers and the Other Shareholders pursuant to this
Section 4.2, the Section 4.2 Sellers shall give notice thereof to the Other
Shareholders, shall remit to each of the Other Shareholders who have
surrendered their certificates the Section 4.2 Sale Price for each of the
Shares of such Other Shareholders transferred pursuant thereto and shall,
promptly after consummation of such sale, furnish such other evidence of the
completion and time of completion of such Transfer and the terms thereof as may
be reasonably requested by such Other Shareholders.
4.3 Rights to Participate in Certain Transfers. (a) If after the
fifth anniversary of the Closing Date, any Shareholder (a "Section 4.3 Seller")
has complied with the provisions of Section 4.1, and such Shareholder (alone or
together with another Shareholder that is a Section 4.3 Seller) proposes to
Transfer, in one bona fide transaction or a series of related bona fide
transactions, any Shares to a Third Party (including, without limitation, the
Company or a Shareholder as provided in Section 4.1(f)) (a "Section 4.3 Sale"),
the Section 4.3 Seller (or if there are two such Section 4.3 Sellers, only one
such Shareholder (the "Designated Section 4.3 Seller")) shall provide written
notice of such proposed Section 4.3 Sale (a "Section 4.3 Notice") to each other
Shareholder (other than to any Shareholder who is purchasing such Shares
pursuant to Section 4.1) (a "Tagging Shareholder"). The Section 4.3 Notice
shall identify the number of Shares subject to the Section 4.3 Sale (the
"Number of Shares"), the per share consideration for which a Transfer is
proposed to be made (which shall be equal to or greater than the applicable
Section 4.1 Sale Price) (the "Section 4.3 Sale Price"), the scheduled closing
date of such sale and all other material terms and conditions of the proposed
Section 4.3 Sale and shall include a certification by each Section 4.3 Seller
that such Shareholder has complied with Section 4.1 hereof. Each Tagging
Shareholder shall, as to Shares held by it, have the right and option,
exercisable as set forth below, upon written notice given to the Designated
Section 4.3 Seller (the "Section 4.3 Order") within
20
<PAGE> 24
15 days after receipt of the Section 4.3 Notice (the "Section 4.3 Order
Period") to request the Section 4.3 Seller or Sellers to include in the
proposed Transfer at the Section 4.3 Sale Price the number of Shares held by
such Tagging Shareholders specified in the Section 4.3 Order; provided that (i)
the Section 4.3 Seller (or Sellers) shall be required only to include in the
proposed Transfer a number of Shares held by any such Tagging Shareholder equal
to not more than the number of Shares proposed to be sold by the Section 4.3
Seller (or Sellers) multiplied by a fraction, the numerator of which is the
number of Shares owned by such Tagging Shareholder immediately prior to the
Section 4.3 Sale, and the denominator of which is the total number of Shares
owned by all Shareholders immediately prior to the Section 4.3 Sale and (ii)
the number of Shares of the Section 4.3 Seller (or Sellers) to be sold under
the proposed Transfer shall be reduced by the number of Shares of the Tagging
Shareholders or Shareholders, as the case may be, required to be so included in
the proposed Section 4.3 Sale. If any Tagging Shareholder (a "Participating
Tagging Shareholder") exercises its Section 4.3 right hereunder, it shall
deliver to the Designated Section 4.3 Seller with the Section 4.3 Order the
certificate or certificates representing the Shares to be included in the
Section 4.3 Sale, together with a limited power-of-attorney authorizing the
Designated Section 4.3 Seller to Transfer such Shares at the Section 4.3 Sale
Price and on the terms set forth in the Section 4.3 Notice. Delivery of such
certificate or certificates representing the Shares to be transferred and the
limited power-of-attorney authorizing the Designated Section 4.3 Seller to
Transfer such Shares shall constitute an irrevocable acceptance of the Section
4.3 Sale by such Participating Tagging Shareholder.
(b) If, at the end of a 90-day period after expiration of the
Section 4.3 Order Period, the Section 4.3 Seller (or the Section 4.3 Sellers,
as the case may be) has not completed the Transfer of all such Shares, the
Designated Section 4.3 Seller shall return to each Participating Tagging
Shareholder the limited power-of-attorney (and all copies thereof) together
with all certificates representing the Shares which such Participating Tagging
Shareholder delivered for Transfer pursuant to this Section 4.3, and all the
restrictions on Transfer or other rights contained in this Agreement with
respect to such Shares shall again be in effect, provided that if the Transfer
is subject to regulatory approval, the 90-day period in which it may be
consummated shall be extended until the expiration of the earlier of (i) five
Business Days after all such approvals have been received or (ii) 45 days after
the 90-day period.
(c) Concurrently with the consummation of the Section 4.3
Sale, the Designated Section 4.3 Seller shall notify each Participating Tagging
Shareholder of the sale, shall remit to such Participating Tagging Shareholder
the total consideration for its Shares transferred pursuant thereto, and shall,
promptly after the consummation of such Section 4.3 Sale, furnish such other
evidence of the completion and time of completion of such Transfer and the
terms thereof as may be reasonably requested by such Participating Tagging
Shareholder.
21
<PAGE> 25
(d) If at the termination of the Section 4.3 Order Period any
Tagging Shareholder shall not have elected to participate in the Section 4.3
Sale or have failed to deliver the requisite certificate or certificates and
power of attorney in accordance with Section 4.3(a), such Tagging Shareholder
will be deemed to have waived its rights under this Section 4.3 with respect to
the Transfer of its Shares pursuant to such Section 4.3 Sale. The Section 4.3
Seller or Section 4.3 Sellers, as the case may be, shall have 90 days following
such termination of the Section 4.3 Order Period in which to Transfer the
relevant Shares at a consideration not higher than that contained in the
Section 4.3 Notice and on substantially the same terms and conditions as were
set forth in the Section 4.3 Notice; provided that if the Transfer is subject
to regulatory approval, the 90-day period in which it may be consummated shall
be extended until the expiration of the earlier of (i) five Business Days after
all such approvals have been received or (ii) 45 days after the 90-day period.
(e) Notwithstanding anything contained in this Section 4.3
and subject to compliance by the Section 4.3 Seller or Section 4.3 Sellers, as
the case may be, with the provisions of this Section 4.3, there shall be no
liability on the part of any Section 4.3 Seller to any Participating Tagging
Shareholder if the Transfer of Shares pursuant to this Section 4.3 is not
consummated for whatever reason. Any decision as to whether to consummate a
Section 4.3 Sale shall be at each Section 4.3 Seller's sole and absolute
discretion.
4.4. Change of Control. (a). Upon a Change of Control of any
Shareholder (a "Section 4.4 Seller"), the Section 4.4 Seller shall promptly
notify the Company and the other Shareholders (the "Continuing Shareholders")
of such Change of Control, and the Section 4.4 Seller shall irrevocably offer
to the Continuing Shareholders the right to purchase all, but not less than
all, of such Section 4.4 Seller's Shares (the "Section 4.4 Subject Shares") at
the Appraised Value (as defined below) of such Shares (the "Section 4.4
Offer").
(b) The Section 4.4 Offer shall be and remain irrevocable for
a period ending at the later of (i) 11:59 P.M., Bermuda time on the 90th day
following the date on which each Continuing Shareholder has learned of the
Change of Control of the Section 4.4 Seller (the "Section 4.4 Commencement
Date") and (ii) the 45th day following the determination of the Appraised Value
(the "Section 4.4 Order Period").
(c) Upon the written request of any Continuing Shareholder
within 30 days of the Section 4.4 Commencement Date, the Company shall (at the
expense of the Section 4.4 Seller) engage an impartial, internationally
recognized appraiser with substantial experience in the insurance industry who
shall determine a price per share a willing buyer would pay to a willing seller
for all of the Company in a transaction in
22
<PAGE> 26
which control is transferred (the "Appraised Value").
(d) Each Continuing Shareholder shall have the right, but not
the obligation, to purchase the Section 4.4 Subject Shares by giving the
Section 4.4 Seller prior to the expiration of the Section 4.4 Order Period a
written notice of irrevocable acceptance of the Section 4.4 Offer identifying
the number of Section 4.4 Subject Shares which such Continuing Shareholder (a
"Section 4.4 Purchaser") intends to purchase (the "Section 4.4 Requested
Shares"), provided that if the aggregate number of Section 4.4 Requested Shares
of all Section 4.4 Purchasers exceeds the total number of Section 4.4 Subject
Shares, then (i) each Section 4.4 Purchaser whose number of Section 4.4
Requested Shares is equal to or less than such Shareholder's Pro Rata Portion
of Section 4.4 Subject Shares shall be entitled to purchase all of its Section
4.4 Requested Shares and (ii) each Section 4.4 Purchaser whose number of
Section 4.4 Requested Shares exceeds such Shareholder's Pro Rata Portion of
Section 4.4 Subject Shares (each such Shareholder being referred to as a
"Section 4.4 Oversubscribing Shareholder"), shall be entitled to purchase the
portion of its Requested Shares equal to the sum of (x) such Section 4.4
Purchaser's Pro Rata Portion of the Section 4.4 Subject Shares plus (y) the
aggregate number of all Section 4.4 Subject Shares not accepted by the
Continuing Shareholders referred to in clause (i) of this Section 4.4(d),
multiplied by a fraction, the numerator of which is such Section 4.4
Purchaser's Pro Rata Portion of Section 4.4 Subject Shares and the denominator
of which is the aggregate Pro Rata Portions of Section 4.4 Subject Shares of
all Section 4.4 Oversubscribing Shareholders, it being understood that if not
all Section 4.4 Subject Shares have been subscribed for following the
application of this proviso, each Section 4.4 Oversubscribing Shareholder shall
have an additional opportunity to subscribe for any remaining Section 4.4
Subject Shares;
(e) The Section 4.4 Purchasers (if any) shall purchase from
the Section 4.4 Seller, and the Section 4.4 Seller shall sell to such Section
4.4 Purchasers, all of the Section 4.4 Subject Shares subscribed for pursuant
to Section 4.4(d) within ten Business Days following the date on which such
Shares have been accepted by the Section 4.4 Purchasers at the Appraised Value
of such Shares; provided that (i) if the purchase and sale of such Shares is
subject to any prior regulatory approval, the time period during which such
purchase and sale may be consummated shall be extended until the expiration of
five Business Days after all such approvals shall have been received, and (ii)
if any Shareholder fails to consummate the purchase of the applicable number of
Section 4.4 Subject Shares, the other Shareholders (other than the Section 4.4
Seller) shall have the pro rata right, within five Business Days of such
failure, to purchase the Section 4.4 Subject Shares not so purchased.
(f) Any purchase by a Shareholder pursuant to this Section
4.4 shall not be subject to the requirements of Section 4.3 hereof.
23
<PAGE> 27
4.5. Good Faith. Notwithstanding anything contained in this
Article IV, no Person shall be entitled to enforce any of the time limits
contained in this Article IV with respect to the failure to obtain regulatory
consents or approvals if such Person has not acted in good faith and diligently
pursued such consents or approvals.
4.6. Agreement to be Bound. Notwithstanding anything contained in
this Article IV, any Transfer of Shares to a Third Party pursuant to Sections
4.1 or 4.3 (or any issuance of Shares by the Company to a Third Party) shall be
permitted under the terms of this Agreement only if such Third Party shall
agree in writing to be bound by the terms and conditions of this Agreement as
if such Third Party were a Shareholder pursuant to an instrument of assumption
reasonably satisfactory in substance and form to the Company. In the event of
any such permitted Transfer or issuance, the defined term "Shareholders" shall
from and after such Transfer include such Third Party purchasing Shares.
ARTICLE V
CERTAIN COVENANTS
5.1 Confidentiality. (a) Each Shareholder hereby agrees that
Confidential Information (as defined below) furnished and to be furnished to it
was and will be made available in connection with such Shareholder's investment
in the Company. Each Shareholder agrees that it will not use the Confidential
Information in any way to the competitive disadvantage of the Company. Each
Shareholder further acknowledges and agrees that it will not disclose any
Confidential Information to any Person; provided that Confidential Information
may be disclosed (i) to such Shareholder's Representatives (as defined below)
in the normal course of the performance of their duties, (ii) to the extent
required by applicable law, rule or regulation (including the Exchange Act, the
Securities Act, any similar statute in a country other than the United States
or any insurance or insurance brokerage laws or regulations) or any obligations
pursuant to any listing agreement with any securities exchange on which such
Shareholders' securities are listed, (iii) complying with any oral or written
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process to which a Shareholder is
subject, (iv) to any Person to whom such Shareholder is contemplating a
Transfer of its Shares (provided that such Transfer would not be in violation
of the provisions of this Agreement and as long as the potential Transferee is
advised of the confidential nature of such information and agrees to be bound
by the provisions hereof and a confidentiality agreement in form and substance
reasonably satisfactory to the Company), or (v) if the prior written consent of
the Board shall have been obtained. Nothing contained herein shall prevent the
use of Confidential
24
<PAGE> 28
Information in connection with the assertion or defense of any claim by or
against the Company or any Shareholder.
(b) Notwithstanding Section 5.1(a) above, in the event that
any Shareholder that is subject to the reporting requirements of the Exchange
Act or any similar statute, or that is in the process of registering such
Shareholder's securities under the Securities Act or any similar statute (any
such Shareholder, a "Reporting Shareholder"), determines that it is necessary
or appropriate for it to disclose Confidential Information in connection with
its disclosure obligations under the Securities Act, the Exchange Act (or any
similar statutes) or any listing agreement with any securities exchange on
which such Shareholder's securities are listed, such Reporting Shareholder may
disclose such Confidential Information as it deems necessary or appropriate
(which may include the filing of this Agreement as an exhibit to any public
filings of such Reporting Shareholder).
(c) "Confidential Information" means any information
concerning the Company or any of its Subsidiaries, or the financial condition,
business, operations or prospects of each such entity, in the possession of or
to be furnished to any Shareholder in its capacity as a shareholder of the
Company or by virtue of its present or former right to designate a director of
the Company; provided that the term "Confidential Information" does not include
information which (i) becomes generally available to the public other than as a
result of a disclosure by a Shareholder or its partners, directors, officers,
employees, agents, counsel, investment advisers or representatives (all such
persons being collectively referred to as "Representatives") in violation of
this Agreement or the Subscription Agreement, (ii) is or was available to such
Shareholder on a nonconfidential basis prior to its disclosure to such
Shareholder or its Representatives by the Company or (iii) was or becomes
available to such Shareholder on a nonconfidential basis from a source other
than the Company, provided that such source is or was (at the time of receipt
of the relevant information) not, to the best of such Shareholder's knowledge,
bound by a confidentiality agreement with (or other confidentiality obligation
to) the Company or another Person.
5.2 Information and Discussion of Affairs. (a) The Company shall
deliver to each Shareholder:
(i) as soon as available and in any event within 20
days after the end of each month ending after the Closing Date other
than a month which is the last day of a fiscal quarter of the Company,
(x) financial information with respect to revenues and expenses for
such month and for the period from the beginning of the then current
fiscal year of the Company to the end of such month, and except for
the first fiscal year after the Closing Date, setting forth in
comparative form the figures for the corresponding month and the
corresponding portion of the
25
<PAGE> 29
previous fiscal year, each presented in accordance with United States
Generally Accepted Accounting Principles ("U.S. GAAP") and (y) a brief
informal narrative description of material business and financial
trends and developments and significant transactions that have
occurred in such month;
(ii) as soon as available and in any event within 30
days after the end of each of the first three quarterly accounting
periods in each fiscal year of the Company, unaudited consolidated
balance sheets of the Company and its Subsidiaries as at the end of
such period and the related consolidated statements of operations,
shareholders equity and cash flows for the fiscal quarter then ended
and (in the case of the second and third quarterly periods) from the
beginning of the current fiscal year to the end of such quarterly
period), and except for the first fiscal year after the Closing Date,
setting forth in comparable form the figures for the corresponding
periods of the previous fiscal year and prepared in accordance with
U.S. GAAP.
(iii) as soon as available and in any event within 60
days after the end of each fiscal year of the Company, consolidated
balance sheets of the Company and its Subsidiaries as at the end of
such fiscal year and the related consolidated statements of
operations, shareholders equity and cash flows for such fiscal year,
setting forth in comparable form the figures for the previous fiscal
year and prepared in accordance with U.S. GAAP, all in reasonable
detail and accompanied by the report and opinion thereon of an
independent public accountant of recognized international standing
selected by the Company; and
(iv) upon the request of any Shareholder, any
information desired by such Shareholder in connection with such
Shareholder's preparation of its tax return.
(v) upon request by such Shareholder, copies of all
periodic financial statements of the Company and the Company's
operating insurance Subsidiaries filed with insurance regulatory
authorities.
(b) The Company shall deliver to each member of the Board:
(i) as soon as available, the annual management
letter received by the Company in connection with the audit of the
Company's financial statements from the Company's auditors, together
with all responses thereto;
(ii) as soon as available, any notification of a
material default under any material agreement to which the Company or
any of its Subsidiaries is a party or is otherwise bound;
26
<PAGE> 30
(iii) as soon as available, any notification of
material litigation involving the Company or any of its Subsidiaries
or a material adverse change to the business of the Company or any of
its Subsidiaries;
(iv) as soon as available, all material correspondence
between the Company or any of its Subsidiaries and insurance
regulatory authorities; and
(v) as soon as available, annual reports of qualified
actuaries appointed by the Board with respect to the loss reserves of
the Company and the Company's insurance operating Subsidiaries.
(c) Upon reasonable advance notice to the Chief Executive
Officer of the Company, the Company will permit any Shareholder owning at least
1,000 Shares (as constituted on the date of this Agreement, subject to
appropriate adjustments for stock splits, stock dividends, stock subdivisions
or other capital reorganization or reclassification of Shares) or such
Shareholder's authorized representative designated by such Shareholder, during
normal business hours and at such Shareholders expense, to visit the Company
for purposes of discussing the affairs, finances and prospects of the Company
with its directors, officers and senior employees.
5.3. Information Required to be Provided Pursuant to Bye-Law 46.
Each Shareholder shall provide such information to the Company as the Board
requests pursuant to Bye-Law 46 of the Company's Bye-Laws, and shall exercise
due care and conduct a reasonable investigation in preparing any such
information. Each Shareholder shall indemnify and hold harmless the Company and
the other Shareholders from and against any losses attributable to the
inaccuracy of any information so provided to the Company as a result of any
knowing misrepresentation by such Shareholder or as a result of the failure of
such Shareholder to conduct a reasonable investigation in preparing such
information.
5.4. Conflicts among Shareholders and the Company. Each
Shareholder shall promptly inform the Board of any potential conflicts between
such Shareholder and the Company. The parties hereto agree to negotiate in good
faith and with a view towards enhancing the equity value of the Company any
potential conflicts between run-off assignments of Affiliates of Castlewood and
the run-off assignments of the Company. Nothing in this Agreement, express or
implied, shall (i) require the Company to waive, amend or otherwise modify any
provision of the Management Services Agreement and (ii) relieve any officer or
director of the Company or any of its Subsidiaries, or any Shareholder, of any
fiduciary or other duties or obligations it may have to the Company or the
Shareholders.
27
<PAGE> 31
5.5. Future Transactions. To the extent that such opportunities
arise after the date hereof, each of the Shareholders will endeavor in good
faith to present to the Company or each of the other Shareholders the
opportunity to participate in similar "run-off" transactions. Neither the
Company nor any Shareholder shall be obligated by virtue of this Section 5.5 or
by any other provision of this Agreement to participate in any such
opportunities.
5.6. Future Capitalization. To the extent that the Company enters
into transactions in which a Shareholder, in its sole and absolute discretion,
provides additional equity capital to the Company, the Shareholders hereby agree
to negotiate in good faith the economic terms of the ownership of the Company in
order to reflect the relative equity contribution to the Company of each
Shareholder.
5.7. Dividends. The Shareholders agree that the financial matters
of the Company shall be managed in a manner to maximize dividends paid to the
Shareholders, at all times consistent with prudent business practice and in
compliance with applicable laws and regulatory requirements.
ARTICLE VI
MISCELLANEOUS
6.1. Entire Agreement. This Agreement, the Investment Agreement
and the Bye-Laws constitute the entire agreement between the parties with
respect to the subject matter of this Agreement, the Bye-Laws and the
Investment Agreement and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter
thereof.
6.2. Effectiveness; Binding Effect; Benefit. This Agreement shall
become effective with respect to the Company and each Shareholder upon
execution of a counterpart hereof by such party. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto, and their respective heirs, successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
6.3. Assignability. This Agreement shall not be assignable or
otherwise transferable by any party hereto, except that any Person acquiring
Shares who is required by the terms of this Agreement to become a party hereto
or who is otherwise required to become party to this Agreement shall execute
and deliver to the Company an
28
<PAGE> 32
agreement to be bound by this Agreement and shall thenceforth be a Shareholder
hereunder, and any Shareholder who ceases to beneficially own any Shares shall
cease to be bound by the terms hereof (other than Section 5.1).
6.4. Amendment; Waiver. No provision of this Agreement may be
waived except by an instrument in writing executed by the party against whom
the waiver is to be effective. No provision of this Agreement may be amended or
otherwise modified at any time except by an instrument in writing executed by
the Company with the approval of the Board and Shareholders holding Shares
representing at least 66% of each of the issued and outstanding Class A
Shares, Class B Shares and Class C Shares, and if so approved, then such
amendment or modification shall be binding on all the parties;
6.5. Notices. All notices and other communications given or made
pursuant hereto or pursuant to any other agreement among the parties, unless
otherwise specified, shall be in writing and shall be deemed to have been duly
given or made if sent by fax (with confirmation in writing), delivered
personally or sent by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made
upon receipt:
If to the Company, to:
B.H. Acquisition Limited
c/o Conyers Dill & Pearman
Clarendon House
Church Street
Hamilton HM CH, Bermuda
Attention: Graham Collis, Esq.
Telecopier: (441) 292-4720
If to Martine, to:
Zephyr House
Mary Street
P.O. Box 2681
George Town
Grand Cayman, B.W.I.
Attention: Board of Directors
Telecopier: (345) 939-1048
29
<PAGE> 33
With a copy (which shall not constitute notice) to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attn: Michael A. Becker, Esq.
Telecopier: (212) 269-5420
and
Marsh & McClennan Capital Inc.
20 Horseneck Lane
Greenwich, CT 06830
Attention: David J. Wermuth, Esq.
Telecopier: (202) 862-2925
If to Enstar, to:
The Thompson House
401 Madison Avenue
Montgomery, AL 36104
Attn: Ms. Cheryl D. Davis
Telecopier: (334) 834-2530
With a copy (which shall not constitute notice) to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Wolcott B. Dunham, Jr., Esq.
Fax: 212-909-6836
If to Castlewood, to:
Windsor Place, 3rd Floor
18 Queen Street
Hamilton HM JX, Bermuda
Attn: Mr. Paul O'Shea
Telecopier: (441) 296-0895
Any Person who becomes a Shareholder shall provide its address and fax number
to the Company, which shall promptly provide such information to each other
Shareholder.
30
<PAGE> 34
6.6. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
6.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
6.8. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
except that, to the extent applicable, all matters relating specifically to the
rights and privileges of the Shares shall be governed by the laws of Bermuda.
6.9. Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the
form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available.
6.10. Consent to Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby
shall only be brought in the United States District Court for the Southern
District of New York or any other New York State court sitting in New York
City, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in any such court has been brought
in an inconvenient form. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 6.5 shall
be deemed effective service of process on such party.
6.11. Directions to Nominee. Each Shareholder agrees to take any
and all action required to instruct its shareholder nominee to comply with the
terms of this Agreement.
31
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
[the remainder of this page intentionally left blank]
32
<PAGE> 36
B.H. ACQUISITION LIMITED
By:
Name: John J. Oros
Title: President
33
<PAGE> 37
CASTLEWOOD LTD.
By:
Name:
Title:
34
<PAGE> 38
THE ENSTAR GROUP, INC.
By:
Name:
Title:
35
<PAGE> 39
MARTINE LTD.
By:
Name:
Title:
36
