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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
October 26, 1999
Date of Report (Date of earliest event reported)
Capital Re Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-10995 52-1567009
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
1325 Avenue of the Americas, New York, New York 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 974-0100
Not Applicable
(Former name or former address, if changed since last report)
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CAPITAL RE CORPORATION
Item 5. Other Events.
On October 26, 1999, Capital Re Corporation and ACE Ltd. entered into a
Stand-By Capital Commitment Agreement, a copy of which is attached as Exhibit
99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
99.1. Stand-By Capital Commitment Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAPITAL RE CORPORATION
Date: October 28, 1999 By: /s/ Alan S. Roseman
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Alan S. Roseman
Executive Vice President,
General Counsel and Secretary
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INDEX TO EXHIBITS
Exhibit
Number Exhibit Description
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99.1. Stand-By Capital Commitment Agreement.
Exhibit 99.1
STAND-BY CAPITAL COMMITMENT AGREEMENT
This Stand-By Capital Commitment Agreement (this "Agreement") is made as of
October 26, 1999 (the "Effective Date"), by and between Capital Re Corporation,
a Delaware corporation (the "Borrower"), and ACE Limited, a company incorporated
with limited liability under the Cayman Islands Companies Law (the "Lender").
Certain capitalized terms used in this Agreement are defined in Appendix A
hereto.
The parties hereto agree as follows:
1. Commitment. The Lender agrees, upon the terms and subject to the
condition set forth herein, to provide, or to cause one of its Subsidiaries to
provide, loans to the Borrower in one or more installments (each, a "Loan") in
an aggregate amount not to exceed U.S. $50,000,000 (the "Commitment") at any
time and from time to time during the period from the Effective Date to the
Termination Date (as defined below). Amounts borrowed as Loans may be repaid and
reborrowed by the Borrower in accordance with the provisions hereof.
2. The Loans. The Loans shall be made upon the Borrower's written notice
delivered to the Lender at least five business days prior to the requested
borrowing date, specifying the amount of the Loan and the requested borrowing
date, which shall be a business day (in the United States and Bermuda). The
obligation of the Lender to make Loans hereunder is subject to the condition
that no Event of Default shall be continuing at the time of the making of such
Loan. Each Loan made hereunder shall be made in United States Dollars and same
day funds and shall be paid to such account or accounts as may be directed in
writing by the Borrower. The Loans made by the Lender shall be evidenced by one
or more loan accounts or records maintained by the Lender in the ordinary course
of business. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrower hereunder to
pay any amount owing with respect to the Loans.
3. Interest. Interest shall accrue on the outstanding principal amount of
the Loans made hereunder from the applicable borrowing date until paid at a rate
per annum equal to the Applicable Rate and shall be payable quarterly in arrears
on each March 31, June 30, September 30 and December 31 and upon any repayment.
All accrued and unpaid interest shall be due and payable on the Termination
Date. The Borrower additionally agrees to pay interest after the date the Loans
become due (whether at stated maturity, by acceleration or otherwise), on the
principal balance of the Loans outstanding from
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time to time and, to the extent not prohibited by law, on accrued interest
thereon that is not paid when due, at a rate per annum equal to all times to the
sum of the Applicable Rate plus 2.0% per annum. Interest accruing after the
Loans made hereunder become due shall be due and payable on demand.
4. Payment; Event of Default. The Borrower may, at any time or from time to
time, prepay Loans in whole or in part without premium or penalty. Both
principal and interest are payable to such account or accounts as the Lender may
direct, in United States Dollars and same day funds, free and clear of, and
without deduction for, any and all taxes, levies, imposts, deductions, charges,
withholdings and liabilities with respect thereto. If any of the following
events (each, an "Event of Default") shall occur: (a) the failure of the
Borrower to pay within 30 days after the date when due any interest owed
hereunder, (b) the failure of the Borrower to observe the covenants in Section 7
hereof, (c) the Merger Agreement is terminated pursuant to Section 8.3(a) or
8.4(a) thereof, (d) after any termination of the Merger Agreement, the Borrower
merges or consolidates or there is a sale of all or substantially all assets of
the Borrower and its Subsidiaries, immediately after which merger, consolidation
or sale the stockholders of the Borrower immediately prior to consummation
thereof own less than a majority of the equity of the surviving company or the
company to which such assets shall have been transferred, (e) the Borrower shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors, or (f) any proceeding shall be instituted by or
against the Borrower seeking to adjudicate it as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
such proceeding shall remain undismissed or unstayed for a period of 60 days, or
the Borrower shall take any action to authorize any of the actions set forth
above in this clause (f); then, in the case of an Event of Default described in
clause (f), the Loans made under this Agreement shall be immediately due and
payable, whereupon all principal of and interest on all Loans made under this
Agreement shall become and be forthwith immediately due and payable; and in the
case of any other Event of Default the Lender may declare all Loans made under
this Agreement to be immediately due and payable and terminate the Commitment
(the date of such declaration and termination, the "Termination Date"),
whereupon all principal of and interest on all Loans made under this Agreement
shall become and be forthwith immediately due and payable.
5. Conversion.
(a) Optional Conversion. At any time and from time to time after the
Effective Date, subject to the required approval ("Regulatory Approval")
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of any Governmental Entity having jurisdiction over the Borrower or the Lender,
the Lender shall have the right to convert, in whole or in part, the Loans
outstanding under this Agreement into such number of shares of Common Stock as
is equal to (x) the amount of Loans outstanding (plus any accrued and unpaid
interest) divided by (y) $14.00 (the "CONVERSION PRICE"); PROVIDED, that if such
conversion is limited by applicable law, only such amount as is permitted
without Regulatory Approval shall be converted, and the Borrower and the Lender
shall use all commercially reasonable efforts to obtain Regulatory Approval to
allow conversion of any remaining portion to be converted. The Lender shall pay
to the Borrower the Conversion Price in cash for each share of Common Stock
converted from any unused portion of the Commitment.
(b) Mandatory Conversion. In the event of the termination of the Merger
Agreement (other than pursuant to Sections 8.3(a) or 8.4(a) thereof), all of the
Loans outstanding under this Agreement shall convert into such number of shares
of Common Stock as is equal to the aggregate amount of the Loans (plus and
accrued and unpaid interest) divided by the lesser of (x) the Conversion Price
or (y) the current market price per share of Common Stock (as defined in Section
5(e)(iv)) on the date of such conversion; provided, that if such conversion is
limited by applicable law, only such amount as is permitted without Regulatory
Approval shall be converted, and the Borrower and the Lender shall use all
commercially reasonable efforts to obtain Regulatory Approval to allow
conversion of the remaining portion of the Loans.
(c) Fractional Shares. The Borrower will not issue any fractional shares of
Common Stock upon conversion and, in lieu thereof, will deliver a check for the
value of any such fractional share, determined by multiplying the Conversion
Price by the fraction, rounded to the nearest cent.
(d) Company to Provide Conversion Stock. The Borrower shall reserve a
sufficient number of shares of authorized but unissued Common Stock or Common
Stock held in treasury to permit the conversion to be effected in full (the
"Conversion Shares"). Upon conversion, the Lender shall provide notice thereof
to the Borrower and the Borrower, no later than the fifth business day after
such notice has been delivered, shall issue and deliver to the Lender a
certificate for the number of full shares of Common Stock issuable upon such
conversion and a check in lieu of any fractional share. The Borrower shall
comply with all securities laws regulating the issuance and delivery of the
Conversion Shares. The holders of the Conversion Shares shall be entitled to
registration rights on the same terms as outlined in that certain Stock Option
Agreement dated as of June 10, 1999 between the Borrower and ACE Limited.
(e) Adjustment.
(i) In case at any time the Borrower shall pay or make a stock dividend or
other distribution in Common Stock on any class of
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capital stock of the Borrower, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced so that the same shall equal the price determined by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such adjustment to become effective immediately after the opening
of business on the day following the date fixed for such determination.
(ii) In case at any time the Borrower shall (A) subdivide its outstanding
Common Stock, (B) combine its outstanding Common Stock into a smaller number of
shares, or (C) issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Borrower is the surviving corporation) any shares, the Conversion Price in
effect at the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Lender shall be
entitled to receive after such time the aggregate number and kind of shares
which, if the Loans or the unused portion of the Commitment had been converted
immediately prior to such time, the Lender would have owned upon such conversion
and been entitled to receive upon such subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(iii) In case at any time the Borrower shall fix a record date for the
making of a distribution, by dividend or otherwise, to all holders of its Common
Stock, of evidences of its indebtedness or assets (including securities
(including warrant, options and rights), but excluding any dividend or
distribution referred to in Section 5(e)(i) and any regular quarterly cash
dividend), then in each such case the Conversion Price in effect after such
record date shall be determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, of which the numerator
shall be the total number of outstanding shares of Common Stock multiplied by
the current market price per share of Common Stock (as defined in Section
5(e)(iv)) on such record date, less the fair market value (as determined by the
Board of Directors of the Borrower of the portion of the assets or evidences of
indebtedness so to be distributed, and of which the denominator shall be the
total number of outstanding shares of Common Stock multiplied by such current
market price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such record date has not
been fixed.
(iv) For the purpose of any computation under Sections 5(b) and 5(e)(iii),
the current market price per share of Common Stock on
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any date shall be deemed to be the average of the closing prices on the New York
Stock Exchange Composite Transaction Reporting System, as reported in the Wall
Street Journal, for the 20 trading days immediately preceding the second trading
day prior to the day in question.
(v) If the Borrower is a party to a merger, combination or other
transaction which reclassifies or changes its outstanding Common Stock, the
successor corporation shall enter into a supplemental agreement which shall
provide that the Lender may convert into the kind and amount of securities, cash
or other assets which the Lender would have owned after such transaction if the
Lender had converted immediately prior to the consummation of such transaction.
(vi) The Borrower may make such downward adjustments in the Conversion
Price as it considers to be advisable in order that any event treated for United
States Federal income tax purposes as a dividend of stock or stock rights shall
not be taxable to the recipients.
6. Representations and Warranties.
(a) Organization, Good Standing and Qualification. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and each of its Subsidiaries is a corporation or other
entity duly organized, validly existing and in good standing under the laws of
its respective jurisdiction of organization. The Borrower and each of its
Subsidiaries has full power and authority (corporate and other) to own, lease
and operate its respective properties and assets and to carry on its business as
presently conducted and as proposed to be conducted, except where the failure to
hold such franchises, grants, licenses, certificates, permits, consents and
orders, or to have such power and authority, would not, when taken together with
all other such failures, reasonably be expected to have a Borrower Material
Adverse Effect.
(b) Corporate Authority; Approval. The Borrower has all requisite power and
authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement. This Agreement has
been duly executed and delivered by the Borrower and (assuming the due
authorization, execution and delivery hereof by the Lender) constitutes the
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms.
(c) No Violations. Neither the execution, delivery or performance of this
Agreement nor the consummation by the Borrower of the transactions contemplated
hereby nor compliance by the Borrower with any of the provisions hereof will (i)
result in any breach or violation of any provision of the certificate of
incorporation or bylaws or similar organizational documents of the
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Borrower, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation, acceleration or increase in the
rate of interest) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease,
license, contract, agreement or other instrument or obligation to which the
Borrower or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound (a "Contract") or result in the creation
of a lien upon any of the properties or assets of the Borrower or any of its
Subsidiaries or (iii) violate any order, writ, injunction, judgment, decree,
statute, rule, regulation or other Law applicable to the Borrower, any of its
Subsidiaries or any of their properties or assets, except in the case of clause
(ii) or (iii) for violations, breaches, defaults, or rights of termination,
amendment, cancellation or acceleration or liens, which would not, individually
or in the aggregate, reasonably be expected to have a Borrower Material Adverse
Effect.
(d) Conversion Shares. The Borrower has reserved a sufficient number of
shares of authorized but unissued Common Stock or Common Stock held in treasury
to permit the conversion contemplated in Section 5 hereof to be effected in
full. All of the Conversion Shares, when issued, will be validly issued, fully
paid and non-assessable.
7. Covenants. So long as there are any Loans outstanding or the Lender has
any Commitment hereunder, none of the Borrower or its Subsidiaries will (a)
declare or pay any dividends or return any capital to its stockholders or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders as such (other than (x) to the Borrower and (y) the
Borrower's regular quarterly cash dividend of $0.04 per share), or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for any
consideration, any shares of any class of capital stock of the Borrower now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any such shares) (other than management stock repurchases
required by agreements in effect on the Effective Date), or set aside any funds
for any of the foregoing purposes (all of the foregoing, "Dividends"), or (b)
merge or consolidate with or into another entity (provided that a Subsidiary of
the Borrower may merge with or into the Borrower or another Subsidiary of the
Borrower so long as no Event of Default shall have occurred and be continuing or
would result therefrom) or sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of the Borrower and its
Subsidiaries.
8. Miscellaneous. The parties hereto agree to negotiate in good faith for
any amendments to this Agreement necessary for regulatory purposes. No amendment
or waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by the Borrower and the Lender. None of the
rights, duties and obligations of any party hereunder may be assigned except
with the consent of the other party hereto; provided that the Lender may
<PAGE>
assign, in whole or in part, any Loans to any of its Subsidiaries. Any notice
required or permitted to be delivered hereunder shall be deemed to have been
given when given in writing by overnight carrier or facsimile to the address or
number listed on the signature page hereto. This Agreement may be executed in
any number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument. The illegality or
unenforceability of any provision of this Agreement shall not in any way affect
or impair the legality or enforceability of the remaining provisions of this
Agreement. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date and year first above written.
Borrower: CAPITAL RE CORPORATION
By: /s/ Jerome F. Jurschak
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Name:
Title:
Address for Notices: 1325 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
Facsimile: (212) 581-3268
Lender: ACE LIMITED
By: /s/ Donald Kramer
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Name:
Title:
Address for Notices: The ACE Building
30 Woodbourne Avenue
Hamilton, HM 08
Bermuda
<PAGE>
Appendix A
Certain Defined Terms. As used in the Agreement, the following terms shall
have the following means:
"Applicable Rate" means 6% per annum.
"Borrower Material Adverse Effect" means a material adverse effect on the
properties, business, assets, conditions (financial or otherwise), liabilities
or results of operations of the Borrower and its Subsidiaries taken as a whole,
other than effects caused by changes in general economic conditions or
conditions generally affecting the insurance or reinsurance industry.
"Common Stock" means the common stock, par value $.01 per share, of the
Borrower.
"Governmental Entity" means any United States or foreign court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority, body, commission or agency, including the Corporation of
Lloyd's.
"Law" means any applicable federal, state, local or foreign laws, statutes,
ordinances, rules, regulations, judgments, orders, injunctions, decrees,
arbitration awards, agency requirements, licenses or permits (including
insurance laws and regulations) of any Governmental Entity.
"Merger Agreement" means that certain Agreement and Plan of Merger dated as
of the date hereof among the Borrower, the Lender and CapRe Acquisition Corp.
"Subsidiary" means, with respect to any person, any entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interest having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such person or by one or more
of its respective Subsidiaries or by such person and any one or more of its
respective Subsidiaries.
