SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CAPITAL RE CORPORATION
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
140432 10 5
(CUSIP Number of Class of Securities)
Edward S. Best
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
(312) 782-0600
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 11, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule 13D,
and filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ]
Check the following box if a fee is being paid with this statement |X|.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
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CUSIP NO.: 140432 10 5
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
ACE Limited (#98-0091805)
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
WC
(5) CHECK BOX OF DISCLOSURE IF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF SHARES (7) SOLE VOTING POWER - 0 -
BENEFICIALLY OWNED (8) SHARED VOTING POWER 4,499,279
BY EACH REPORTING (9) SOLE DISPOSITIVE POWER - 0 -
PERSON WITH (10) SHARED DISPOSITIVE POWER 4,499,279
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,499,279
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.04%
(14) TYPE OF REPORTING PERSON
HC; CO
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CUSIP NO.: 140432 10 5
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
ACE Bermuda Insurance, Ltd. (N/A)
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
WC
(5) CHECK BOX OF DISCLOSURE IF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
NUMBER OF SHARES (7) SOLE VOTING POWER -0-
BENEFICIALLY OWNED (8) SHARED VOTING POWER 4,498,779
BY EACH REPORTING (9) SOLE DISPOSITIVE POWER -0-
PERSON WITH (10) SHARED DISPOSITIVE POWER 4,498,779
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,498,779
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.04%
(14) TYPE OF REPORTING PERSON
IC
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SCHEDULE 13D
Item 1. Security and Issuer
This statement relates to the common stock, par value $.01 per
share (the "Common Stock"), of Capital Re Corporation ("Capital Re"), a
Delaware corporation, the principal executive offices of which are located
at 1325 Avenue of the Americas, 18th Floor, New York, New York, 10019.
Item 2. Identity and Background
(a) - (c) This statement is being filed by ACE Limited, a company
organized under the laws of the Cayman Islands ("ACE"). ACE's principal
offices are located at The ACE Building, 30 Woodbourne Avenue, Hamilton HM
08 Bermuda. ACE, through its subsidiaries, provides insurance and
reinsurance to a diverse group of companies throughout the world. The
names, business addresses and principal occupation or employment (and the
name, principal business and address of any corporation or other
organization in which such employment is conducted) of each of the persons
specified by Instruction C of the Schedule 13D is set forth on Schedule 1
hereto. All executive officers and directors of ACE and ACE Bermuda are
citizens of the United States except for Glen M. Renfrew who is a citizen
of Australia, Christopher Z. Marshall and Larry P. Lombardo who are
citizens of Bermuda, John Burville, John C. Charmin, Andrew Gibbs and Keith
P. White who are citizens of England, Dermot Smurfit who is a citizen of
Ireland and John Engestrom who is a citizen of Sweden.
This statement is also being filed by ACE Bermuda Insurance, Ltd.,
a company organized under the laws of Bermuda ("ACE Bermuda"). ACE Bermuda
is a wholly owned subsidiary of ACE. ACE Bermuda's principal offices are
located at The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda.
ACE Bermuda provides insurance and reinsurance to a diverse group of
companies throughout the world. The names, business addresses and principal
occupation or employment (and the name, principal business and address of
any corporation or other organization in which such employment is
conducted) of each of the persons specified by Instruction C of the
Schedule 13D is set forth on Schedule 1 hereto.
(d) - (e) To the knowledge of ACE and ACE Bermuda, neither ACE, ACE
Bermuda nor any of the persons specified in Schedule 1 has, during the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree
or final order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
(f) See (a) - (c) above.
Item 3. Source and Amount of Funds or Other Consideration
The aggregate purchase price for the 4,424,779 shares of Common
Stock purchased under the Stock Purchase Agreement, between ACE Bermuda
Insurance, Ltd. and Capital Re Corporation, as amended (the "Stock Purchase
Agreement") was $75,000,000. Between March 30, 1999 and April 15, 1999, ACE
Bermuda purchased an aggregate of 74,500 shares of Common Stock in the open
market for an aggregate purchase price of $1,207,891.25. The source for
such funds was the working capital of ACE Bermuda.
In addition to shares of Common Stock previously purchased, on
June 10, 1999, Capital Re, ACE and CapRe Acquisition Corp. ("CapRe
Acquisition"), a wholly owned subsidiary of ACE, entered into an agreement
and plan of merger (the "Merger Agreement") pursuant to which CapRe
Acquisition will be merged with and into Capital Re and Capital Re will
become a wholly owned subsidiary of ACE. In the merger, Capital Re
stockholders will receive 0.6 ordinary shares, par value $0.041666667 per
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share (the "Ordinary Shares"), of ACE, subject to a maximum value of $22.00
per share of Common Stock (based upon the average closing price of ACE's
ordinary shares as reported on the New York Stock Exchange ("NYSE") for the
twenty consecutive trading days ending three trading days prior to the
completion of the merger).
Item 4. Purpose of Transaction
Pursuant to the Stock Purchase Agreement, ACE agreed to purchase
$75 million of Common Stock at a purchase price equal to $16.95 per share.
In addition, pursuant to the Stock Purchase Agreement, Capital Re agreed
that, so long as ACE Bermuda and its affiliates hold at least 8% of the
total voting power of all sharesof capital stock of Capital Re, it would
nominate to its board of directors two individuals designated by ACE
Bermuda. While the original stock purchase agreement contained a provision
prohibiting ACE Bermuda or its affiliates from acquiring shares of Common
Stock, such provision was eliminated in the first amendment to the stock
purchase agreement. The purchase of the shares of Common Stock pursuant to
the Stock Purchase Agreement was subject to a number of conditions,
including receipt of regulatory approvals. The approval of the Maryland
Insurance Administration was received on June 3, 1999. The approval of the
New York Stet Insurance Department was received on June 11, 1999. The
purchase of the shares of Common Stock pursuant to the Stock Purchase
Agreement was completed on June 15, 1999.
On June 10, 1999, Capital Re, ACE and CapRe Acquisition entered
into the Merger Agreement. Consummation of the merger is subject to receipt
of customary conditions, including receipt of regulatory approvals and
approval of the merger by Capital Re's stockholders.
In connection with the Merger Agreement, Cap Re and ACE entered
into a stock option agreement, dated as of June 10, 1999 (the"Stock Option
Agreement"), pursuant to which Capital Re granted ACE an option to purchase
up to 9.9% of Capital Re's Common Stock upon the occurrence of certain
specified events.
Item 5. Interest in Securities of the Issuer
(a) ACE and ACE Bermuda are the beneficial owner of 4,498,779
shares of Common Stock. Such shares represent 14.04% of the total
outstanding shares of Common Stock.
(b) ACE and ACE Bermuda share the power to vote and to dispose of
all 4,498,779 of the shares of Common Stock beneficially owned by them
(c) Other than the execution of the second amendment to the stock
purchase agreement and the execution of the Merger Agreement, neither ACE
nor ACE Bermuda has effected any transactions in the Common Stock in the
past 60 days.
(d) - (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
Stock Purchase Agreement
Stock Purchase
Under the terms of the Stock Purchase Agreement, ACE Bermuda
agreed to purchase a number of shares of Common Stock equal to $75,000,000
divided by the lesser per share price of: (a) the fully diluted book value
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per share of the Common Stock at December 31, 1998 ($18.87) and (b) the
average of the five highest consecutive closing prices of the Common Stock
between March 12, 1999 and April 15, 1999 inclusive, as reported on the New
York Stock Exchange composite tape ($16.95).
Board Representation
Capital Re has agreed that it will nominate and recommend as a
candidate for election to the its board of directors, so long as ACE
Bermuda (and/or its affiliates) holds at least 8% of the total voting power
of all shares of voting stock of Capital Re, two individuals, in each case
such individuals to be reasonably acceptable to the then current board of
directors of Capital Re, to be designated in writing by an executive
officer of the ACE Bermuda, provided that any executive officer of ACE
Bermuda shall be presumed to be acceptable. In addition, at least one ACE
Bermuda nominee will serve, if qualified under applicable law and the rules
of the New York Stock Exchange, as a member of the Audit Committee and
Executive Committee of the board of directors, if any, of Capital Re.
If at any time ACE Bermuda is entitled to designate any individual
but such individual is not a member of the board of directors of Capital
Re, Capital Re will notify such individual, concurrently with notice given
to members of its board of directors, of all meetings of the board of
directors and, as soon as available, will provide to such individual all
reports, financial statements or other information distributed to the board
of directors of Capital Re. Capital Re will permit such individual to
attend all such meetings of the board of directors as an observer and to
participate in advising and consulting with the board, without voting.
Restrictions on Transfer
Until the date that is 270 days after June 15, 1999, ACE Bermuda
may not, directly or indirectly, sell, transfer, pledge, encumber or
otherwise dispose of (collectively, "Transfers") any Shares except for: (a)
Transfers of Shares with the approval of a majority of Capital Re's board
of directors; (b) Transfers of Shares to any affiliate of ACE Bermuda which
agrees to be bound by the restrictions described in this paragraph or (c)
Transfers of Shares pursuant to any bona fide tender or exchange offer to
acquire Shares which is not opposed by a majority of Capital Re's board of
directors.
Registraiion Rights
Capital Re has agreed to, within 90 days after June 15, 1999, file
with the Securities and Echange Commission (the "Commission") a shelf
registration statement relating to the offer and sale of the Shares from
time to time and, thereafter, to use its best efforts to cause such shelf
registration statement to be declared effective under the Securities Act of
1933, as amended (the "Securities Act"), within 270 days following June 15,
1999. Capital Re has agreed to use its reasonable best efforts to keep the
shelf registration statement continuously effective for a period of three
years from the June 15, 1999 or such shorter period that will terminate
upon the earlier of the following: (a) when all the securities covered by
the shelf registration statement have been sold pursuant to the shelf
registration statement or (b) when, in the written opinion of counsel to
Capital Re, all outstanding registrable securities may be resold without
registration under the Securities Act pursuant to Rule 144(k) under the
Securities Act.
Capital Re may suspend sales under the shelf registration
statement or defer the updating of the shelf registration statement and
suspend sales thereunder for a reasonable period of time (not exceeding 75
days at a time or 105 days in any twelve-month period) if Capital Re, in
its good faith judgment, determines that maintaining the effectiveness of
the shelf registration statement and permitting offers and sales thereunder
would require Capital Re to make public disclosure of information not
otherwise required to be publicly disclosed at such time, the public
disclosure of which would have a material adverse effect upon Capital Re or
would adversely affect the ability of Capital Re to consummate a material
financing, acquisition, disposition of assets or stock, merger or other
comparable transaction.
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Merger Agreement
The Merger
Pursuant to the Merger Agreement, at the Effective Time of the
Merger, CapRe Acquisition will be merged with and into Capital Re and
Capital Re will be the surviving corporation in the Merger. The Merger will
become effective at the time a Certificate of Merger is filed with the
Secretary of State of the State of Delaware or at such later time as may be
agreed to by Capital Re and ACE and set forth in the Certificate of Merger
(the "Effective Time").
Merger Consideration
At the Effective Time and as a result of the Merger, each share of
Common Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Common Stock owned by ACE, Capital Re or any
direct or indirect subsidiary of ACE or Capital Re) will be converted into,
and become exchangeable for the right to receive the "Merger
Consideration," consisting of 0.60 Ordinary Shares; (including any related
preferred stock purchase rights); provided that if the average closing
price (the "Average Closing Price") of the Ordinary Shares as reported on
the New York Stock Exchange ("NYSE") for the twenty consecutive trading
days ending three trading days prior to the Effective Time is equal to or
greater than $36.67 per share, the exchange ratio will be equal to 22
divided by the Average Closing Price.
Interim Operations of the Company.
Except as expressly contemplated by the Merger Agreement or the
Stock Option Agreement or consented to in writing by ACE (in its sole
discretion), during the period from the date of the Merger Agreement to the
Effective Time, Capital Re and its subsidiaries will conduct their
operations only in, and neither Capital Re nor any of its subsidiaries
shall take any action except in, the ordinary and usual course of business
and consistent with past practice, and Capital Re and its subsidiaries will
use their best efforts to preserve intact their business organization, to
keep available the services of their officers and key employees and to
maintain advantageous relationships with ceding companies, customers,
licensors, licensees, suppliers, contractors, distributors, business
partners and others having business relationships with Capital Re or its
subsidiaries, as the case may be. Without limiting the generality of the
foregoing, prior to the Effective Time, neither Capital Re nor any of its
subsidiaries will, without the prior written consent of ACE (such consent
to be given or withheld in ACE's sole discretion): (i) change its
capitalization or declare or pay any dividend other than regular quarterly
cash dividends paid by Capital Re not in excess of $0.04 per share; (ii)
issue, sell or transfer, directly or indirectly, any capital stock of
Capital Re or any subsidiary; (iii) incur any material indebtedness not
previously approved by ACE, incur any other indebtedness except in the
ordinary course of business or mortgage or pledge any of its material
assets, tangible or intangible, or create any lien thereupon; (iv) except
as may be required by law or as contemplated by the Merger Agreement, enter
into, adopt, amend or terminate any employee benefit plan; or enter into or
amend any employment or severance agreement with, increase in any material
manner the salary or benefits of any director or executive officer of
Capital Re or any of its subsidiaries; (v) acquire or make any material
investments in any persons; (vi) except as expressly required in the Merger
Agreement, pay, discharge or satisfy any claims, liabilities or
obligations, other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against on the consolidated balance sheet
of the Company dated March 31, 1999 or incurred in connection with the
transactions contemplated by the Merger Agreement or in the ordinary course
of business and consistent with past practice; (vii) amend the certificate
of incorporation or any similar document of Capital Re or any of its
subsidiaries; (viii) adopt a plan of complete or partial liquidation; (ix)
enter into any new lines of business (whether or not part of the insurance
or reinsurance business), change any policy forms, change the pricing
formula for insurance policies, change its investment policies or
guidelines or otherwise make material changes to the operation of its
business or change its loss reserve methodology other than as expressly
provided in the Merger Agreement; (ix) invest any investment securities of
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Capital Re in investments that are not rated in one of the four highest
categories by a "nationally recognized statistical rating agency," as
defined in the rules or regulations of the Commission; (x) sell lease,
encumber, transfer or dispose of any assets outside the ordinary course of
business consistent with past practices or any assets that are material to
Capital Re or any of its subsidiaries, or enter into any material
commitment or transaction outside the ordinary course of business
consistent with past practices (provided that with respect to any
disposition of RGB Underwriting Agencies, Ltd., such consent of ACE shall
not be unreasonably withheld); (xi) authorize or make or commit to make any
capital expenditures, except for transactions in the ordinary course of
business consistent with past practice (but in no event in excess of
$100,000 in the aggregate) or pursuant to agreements or commitments entered
into by Capital Re or any of its subsidiaries prior to the date hereof,
unless otherwise reserved against in the latest balance sheet, it being
understood that without the prior written consent of ACE, no such
settlement or compromise shall be entered into involving non-monetary
obligations; (xii) make any tax elections or settle or compromise any
material United States federal, state, local or other foreign income tax
liability, or waive or extend the statute of limitations in respect of any
such taxes; (xiii) pay or agree to pay in settlement or compromise of any
suits or claims of liability against Capital Re or any of its subsidiaries,
its directors, officers, employees or agents more than an aggregate of
$50,000 for all such suits and claims; (xiv) take any action likely to
materially decrease or diminish the assets or net worth of Capital Re or
any of its subsidiaries; (xv) except as may be required as a result of a
change in law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it; (xvi) enter into any
agreement providing for the acceleration or payment or performance or other
consequence as a result of a change in control of Capital Re or any of its
subsidiaries; or (xvii) take any action or agree, in writing or otherwise,
to take any of the foregoing actions or any action that would make any
representation or warranty of Capital Re materially untrue or incorrect.
No Solicitation
From and after the date of the Merger Agreement, neither Capital
Re nor any of its subsidiaries shall (whether directly or indirectly
through its or their officers, directors, agents, representatives, advisors
or other intermediaries (collectively, "Representatives")), nor shall
Capital Re or any of its subsidiaries authorize or permit any of its or
their Representatives to, (a) solicit, initiate, encourage (including by
way of furnishing information) or take any action knowingly to facilitate
the submission of any inquiries, proposals or offers (whether or not in
writing) from any person relating to, other than the transactions
contemplated by the Merger Agreement and the Stock Option Agreement, (i)
any acquisition or purchase of 15% or more of the consolidated assets of
Capital Re and its subsidiaries or of 15% or more of any class of equity
securities of Capital Re or any of its subsidiaries, (ii) any tender offer
(including a self tender offer) or exchange offer that if consummated would
result in any person beneficially owning 15% or more of any class of equity
securities of Capital Re or any of its material subsidiaries (including
through the ownership of securities convertible or exercisable into or
exchangeable for equity securities of Capital Re), (iii) any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any of its subsidiaries whose assets, individually or in the
aggregate, constitute 15% or more of the consolidated assets of Capital Re
or (iv) any other transaction the consummation of which would or would
reasonably be expected to impede, interfere with, prevent or materially
delay the Merger (any of the foregoing, a "Transaction Proposal"), or agree
to or endorse any Transaction Proposal, or (b) enter into or participate in
any discussions or negotiations regarding any of the foregoing, or furnish
to any other person any information with respect to its business,
properties or assets in connection with any of the foregoing, or otherwise
cooperate in any way with, or knowingly assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or
seek any of the foregoing; provided, however, that the foregoing shall not
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prohibit Capital Re, prior to the receipt of approval of the Merger
Agreement and the Merger form its stockholders, (A) from complying with
Rule 14e-2 and Rule 14d-9 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") with regard to a bona fide tender offer or
exchange offer or (B) from participating in negotiations or discussions
with or furnishing information to any person in connection with an
unsolicited bona fide Transaction Proposal which is submitted in writing by
such person to the Board of Directors of Capital Re after the date of the
Merger Agreement and prior to the Company Stockholder Approval; provided
further, however, that prior to participating in any such discussions or
negotiations or furnishing any information, (i) Capital Re receives from
such person an executed confidentiality agreement on terms not less
favorable to Capital Re than the Confidentiality Agreement, a copy of which
shall be provided only for informational purposes to ACE, and (ii) the
Board of Directors of Capital Re shall have concluded in good faith, based
on the advice of its outside financial advisors, that such Transaction
Proposal is reasonably likely to be or to result in a Superior Proposal,
and based on the written advice of its outside legal counsel, that
participating in such negotiations or discussions or furnishing such
information is required in order to prevent the Board of Directors of the
Company from breaching its fiduciary duties to its stockholders under the
Delaware General Corporation Law; and provided, further, that the Board of
Directors of Capital Re shall not take any of the foregoing actions unless
it provides ACE with contemporaneous notice thereof. If the Board of
Directors of Capital Re receives a Transaction Proposal, then Capital Re
shall promptly inform ACE in writing of the terms and conditions of such
proposal and the identity of the person making it. The Company agrees that
it will keep ACE informed, on a current basis, of the terms of any such
proposals or offers and, to the extent disclosure is not prohibited by the
terms of any confidentiality agreement with the party making such
Transaction Proposal, the status of any such material discussions or
negotiations. Capital Re agrees to immediately cease and cause its
Representatives to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing, and shall use its reasonable best efforts to cause any such
parties in possession of confidential information about Capital Re that was
furnished by or on behalf of Capital Re to return or destroy all such
information in the possession of any such party or in the possession of any
agent or advisor of any such party. Capital Re agrees not to release any
third party from, or waive any provisions of, any confidentiality or
standstill agreement to which such party or its subsidiaries is a party.
"Superior Proposal" means any of the transactions described in
clause (i), (ii) or (iii) of the definition of Transaction Proposal (with
all of the percentages included in the definition of such term raised to
51% for purposes of this definition) with respect to which any required
financing is committed or, in the good faith judgment of the Board of
Directors of Capital Re, based on the written advice of its outside
financial advisors, is reasonably capable of being financed by the person
making the proposal, and with respect to which the Board of Directors of
Capital Re shall have concluded in good faith, based on the written advice
of its outside legal counsel and financial advisors, is reasonably capable
of being completed, taking into account all legal, financial, regulatory
and other aspects of the Transaction Proposal and the person making the
proposal, and would, if consummated, result in a transaction more favorable
to Capital Re's stockholders from a financial point of view than the
transactions contemplated by the Merger Agreement.
Coordination of Dividends
ACE and Capital Re have agreed to coordinate with each other
regarding the declaration of dividends in respect of ACE's Ordinary Shares
and Capital Re's Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties that holders of
ACE's Ordinary Shares and Capital Re's Common Stock will not receive two
dividends, or receive no dividends, for any single calendar quarter with
respect to their shares of Capital Re's Common Stock and/or ACE's Ordinary
Shares any such holder receives in exchange therefor in the Merger.
Conditions to Closing
The obligations of each of ACE and Capital Re to effect the Merger
is subject to the satisfaction or waiver at or prior to the Effective Time
of each of the following conditions: (i) the Merger shall have been
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approved by holders of a majority of the Common Stock; (ii) the Ordinary
Shares issuable pursuant to the Merger Agreement shall have been authorized
for listing on the NYSE upon official notice of issuance; (iii) the waiting
period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Act shall have expired or been terminated and regulatory
approvals and other actions or approvals by any governmental entity
required to permit the consummation of the Merger shall have been obtained
(provided that any such governmental consents shall have been obtained
without any conditions, restrictions or limitations which would reasonably
be expected to materially limit or diminish the benefits to be derived from
the Merger by ACE) and such approvals shall be in full force and effect;
(iv) no court or governmental entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger and no
governmental entity shall have instituted any proceeding which continues to
be pending seeking any such order; (v) the Registration Statement on Form
S-4 shall have become effective under the Securities Act, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued, and no proceeding for that purpose shall have been initiated or be
threatened by the Commission.
ACE's obligation to effect the Merger are also subject to the
satisfaction or waiver by ACE at or prior to the Effective Time of the
following conditions: (i) the representations and warranties of Capital Re
shall have been true and accurate as of the Effective Time as if made at
and as of such time; (ii) since the date of the Merger Agreement, there
shall not have occurred any event, change or effect having, or that would
reasonably likely have, individually or in the aggregate, a material
adverse effect on the properties, business, assets, conditions (financial
or otherwise), liabilities or results of operations of Capital Re 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; (iii) Capital Re shall have performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the closing date; (iv) Capital Re shall
have obtained the consent or approval of each person whose consent or
approval shall be required under any contract to which Capital Re or any of
its subsidiaries is a party, except those for which the failure to obtain
such consents or approvals, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on Capital Re or is not
reasonably likely to prevent or materially impair the ability of Capital Re
to consummate the transactions contemplated by the Agreement; (v) ACE shall
have received the opinion of Mayer, Brown & Platt, counsel to ACE, dated
the Closing Date, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that each of ACE, CapRe Acquisition and Capital Re will be a party to that
reorganization within the meaning of Section 368(b) of the Code; (vi) each
of the employment agreements agreed upon between ACE and Capital Re shall
be in full force and effect.; and (vi) there shall not have occurred any
downgrading of the financial strength rating of Capital Reinsurance Company
below Aa3 by Moody's Investor Services, Inc. ("Moody's") or below AAA by
Standard & Poor's Rating Services, a division of The McGraw-Hill Companies,
Inc. ("S&P"), nor the current financial strength ratings of Capital
Mortgage Reinsurance Company and KRE Reinsurance Ltd. below the double AA
category by the S&P; provided that (i) announcement of a credit watch or
credit review action with respect to the foregoing ratings by either such
rating agency shall be considered a downgrade if ACE reasonably believes,
based upon discussions with any such rating agency, that immediately
subsequent to the consummation of the Merger or as a result thereof there
shall occur any such downgrade and (ii) each such rating agency may
condition maintenance of ratings upon consummation of the Merger. At the
Closing Date, Capital Re shall not have received any notification from
Moody's of its determination not to provide to Capital Reinsurance
Company's financial guaranty ceding companies at least 85% capital credit
in respect of Capital Re's reinsurance.
-10-
<PAGE>
Capital Re's obligation to effect the Merger are also subject to
the satisfaction or waiver by Capital Re at or prior to the Effective Time
of the following conditions: (i) the representations and warranties of ACE
shall have been true and accurate as of the Effective Time as if made at
and as of such time; (ii) since the date of the Merger Agreement, there
shall not have occurred any event, change or effect having, or that would
reasonably likely have, individually or in the aggregate, a material
adverse effect on the properties, business, assets, conditions (financial
or otherwise), liabilities or results of operations of ACE 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; (iii) ACE shall have performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the closing date; (iv) Capital Re shall have
received the opinion of Hogan & Hartson LLP, counsel to capital Re, dated
the Closing Date, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that each of ACE, CapRe Acquisition and Capital Re
will be a party to that reorganization within the meaning of Section 368(b)
of the Code.
Termination
The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
the approval by stockholders of Capital Re, by the mutual consent of ACE
and Capital Re,
The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time by either Capital Re or
ACE if (i) the Merger shall not have been consummated by February 28, 2000,
whether such date is before or after the date of approval by the
stockholders of Capital Re (the "Termination Date"), provided, however,
that the Termination Date shall be extended by 60 days if the sole reason
for the failure to consummate the Merger is the failure to obtain certain
government consents (ii) the approval of Capital Re's stockholders shall
not have been obtained at a meeting duly convened therefor or at any
adjournment or postponement thereof; or (iii) any order permanently
restraining, enjoining or otherwise prohibiting consummation of the Merger
shall become final and non-appealable; provided, that the right to
terminate the Merger Agreement pursuant to clause (i) or (ii) above shall
not be available to any party that has breached in any material respect its
obligations under the Merger Agreement in any manner that shall have caused
the occurrence of the failure of the Merger to be consummated or the
stockholder approval to be obtained.
The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time by Capital Re (i) (a) if
Capital Re is not in material breach of any of the terms of the Merger
Agreement, (b) the Merger shall not have been approved by the Capital Re's
stockholders, (c) the Board of Directors of Capital Re authorizes Capital
Re, subject to complying with the terms of the Merger Agreement, to enter
into a binding written agreement concerning a transaction that constitutes
a Superior Proposal and Capital Re notifies ACE in writing that it intends
to enter into such an agreement, attaching the most current version of such
agreement to such notice, (d) ACE does not make, prior to five business
days after receipt of Capital Re's written notification of its intention to
enter into a binding agreement for a Superior Proposal (the "Alternative
Transaction Notice"), an offer that the Board of Directors of Capital Re
determines, in good faith after consultation with its financial advisors,
is at least as favorable, as the Superior Proposal, taking into account the
long term prospects and interests of Capital Re and its stockholders and
(e) Capital Re prior to such termination pays to ACE a termination fee of
$25 million or (ii) there is a breach by ACE of any representation,
warranty, covenant or agreement contained in the Merger Agreement that (a)
is not curable or, if curable, is not cured within 20 days after written
notice of such breach is given by Capital Re to ACE and (ii) would cause a
closing condition to be incapable of being satisfied.
-11-
<PAGE>
The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time by ACE if (i) Capital Re
enters into a binding agreement for a Superior Proposal, (ii) there is a
breach by Capital Re of any representation, warranty, covenant or agreement
contained in the Merger Agreement that (a) is not curable or, if curable,
is not cured within 20 days after written notice of such breach is given by
ACE to Capital Re and (ii) would cause a closing condition to be incapable
of being satisfied; or (iii) Capital Re or its Board of Directors shall
have (a) withdrawn, modified or amended in any respect adverse to ACE its
recommendation of the adoption of the Merger Agreement or failed to
reconfirm its recommendation of the Merger Agreement or the Merger within
five business days after a written request by ACE to do so, (ii) failed as
promptly as practicable after the Registration Statement on Form S-4 is
declared effective to mail the Proxy Statement/Prospectus to its
stockholders, unless such failure was caused by the actions or inactions of
ACE or its representatives, or failed to include in such statement Capital
Re Board Recommendation, (iii) approved, recommended or entered into an
agreement with respect to, or consummated, any Transaction Proposal from a
person other than ACE or any of its affiliates, (iv) resolved to do any of
the foregoing or (v) in response to the commencement of any tender offer or
exchange offer for 10% or more of the outstanding Common Stock, not
recommended rejection of such tender offer or exchange offer within ten
business days after the commencement thereof (as such term is defined in
Rule 14d-2 under the Exchange Act).
In the event that the Merger Agreement is terminated (i) by
Capital Re or ACE under certain specified circumstances, Capital Re will
promptly, but in no event later than two days after the date of such
termination or date of entrance into an agreement concerning a transaction
that constitutes an Acquisition Proposal pay to ACE a termination fee of
$25 million payable by wire transfer of same day funds.
Stock Option Agreement
Pursuant to the Stock Option Agreement, Capital Re granted to ACE
an irrevocable option (the "Option") to purchase up to 3,220,135 shares of
Common Stock at a cash purchase price equal to $17.40 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares for which the Option is exercisable exceed 9.9% of the shares of
Common Stock issued and outstanding at the time of exercise. The number of
shares of Common Stock purchasable upon exercise of the Option and the
Option Price are subject to adjustment under the circumstances set forth in
the Option Agreement.
Exercise of Option
ACE may exercise the Option within 180 days following the
occurrence of a Triggering Event (as defined in Section 2(b)) unless prior
to such Triggering Event the Merger has been consummated. A "Triggering
Event" shall have occurred if the Merger Agreement is terminated and ACE
then or thereafter becomes entitled to receive the Termination Fee pursuant
to Section 8.5(b) or (c) of the Merger Agreement. If no notice is delivered
prior to such 180th day, the Option shall terminate upon either (i) the
consummation of the Merger or (ii) the close of business on the earlier of
(x) the day 180 days after the date that ACE becomes entitled to receive
the Termination Fee (as defined in the Merger Agreement) under Section
8.5(b) or (c) of the Merger Agreement and (y) the date that ACE is no
longer potentially entitled to receive the Termination Fee under Section
8.5(b) or (c) of the Merger Agreement for a reason other than that ACE has
already received the Termination Fee.
-12-
<PAGE>
Registration of Option Shares
Capital Re has agreed that upon the occurrence of a Triggering
Event, it will, at the request of ACE delivered in the written notice of
exercise of the Option, as promptly as practicable prepare, file and keep
current a shelf registration statement under the Securities Act covering
any or all shares issued and issuable pursuant to the Option and shall use
all commercially reasonable efforts to cause such registration statement to
become effective and remain current; provided that Capital Re may postpone
filing the registration statement for a period of time (not in excess of 60
days) if in its judgment such filing would require the disclosure of
material information that Capital Re has a bona fide business purpose for
preserving as confidential.
Repurchase of Option/Option Shares
Upon the occurrence of a Triggering Event and subject to
applicable laws and regulations, (i) at the request of ACE delivered within
180 days of such occurrence, Capital Re must repurchase the Option from ACE
at a price equal to the number of shares of Common Stock then purchasable
upon exercise of the Option (or such lesser number of shares as ACE may
designate) multiplied by the amount by which the market/offer price (as
defined below) exceeds the Option Price and (ii) at the request of ACE
delivered in writing within 180 days of such occurrence, Capital Re must
repurchase such number of Option Shares from ACE as ACE may designate at a
price equal to the number of shares designated multiplied by the
market/offer price. The term "market/offer price" shall mean the highest of
(x) the price per share of Common Stock at which a tender or exchange offer
for Common Stock has been made, (y) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Capital Re and (z)
the highest trading price for shares of Common Stock on the NYSE (or, if
the Common Stock is not then listed on the NYSE, any other national
securities exchange or automated quotation system on which the Common Stock
is then listed or quoted) within the six-month period immediately preceding
the delivery of the repurchase notice.
Limitation of Holder Profit
In no event shall ACE's Total Profit (as defined below) exceed
$25,000,000, exclusive of any reimbursement of expenses pursuant to Section
8.5(e) of the Merger Agreement (the "Maximum Profit"), and, if it otherwise
would exceed such amount, ACE, at its sole discretion, will either (1)
reduce the number of shares subject to the Option, (2) deliver to Capital
Re for cancellation shares of Common Stock (or other securities into which
such Option Shares are converted or exchanged), (3) pay cash to Capital Re
or (4) any combination of the foregoing, so that ACE's actually realized
Total Profit shall not exceed the Maximum Profit after taking into account
the foregoing actions. "Total Profit" means: (1) the aggregate amount of
(a) the excess of (x) the net cash amounts received by ACE pursuant to a
sale of Option Shares (or securities into which such shares are converted
or exchanged) to any unaffiliated third party within 12 months after the
exercise of the Option, over (y) ACE's aggregate purchase price for such
Option Shares (or other securities), plus (b) all amounts received by ACE
on the transfer of the Option, plus (c) all amounts received by ACE
pursuant to Section 8.5(b) or (c) of the Merger Agreement (other than
reimbursement in respect of expenses), minus (2) all amounts of cash
previously paid to Capital Re pursuant to the Option Agreement plus the
value of the Option Shares (or other securities) previously delivered to
Capital Re for cancellation.
-13-
<PAGE>
Assignment
Neither party may assign any of its rights or obligations under
the Option Agreement or the Option to any other person without the express
written consent of the other party except that, (i) ACE may assign the
Option Agreement to a wholly-owned subsidiary of ACE and (ii) in the event
that a Triggering Event shall have occurred, ACE may assign the Option, in
whole or in part to any third party.
Item 7. Material to Be Filed as Exhibits
Exhibit Number Description
- -------------- -----------
99.1 Stock Purchase Agreement, dated as of February 19,
1999 between ACE Bermuda Insurance, Ltd. and
Capital Re Corporation (Incorporated by
Reference to Exhibit 10.19 to the Annual Report
on Form 10-K for the year ended December 31,
1998 of Capital Re Corporation (1-10995))
99.2 First Amendment to Stock Purchase Agreement
dated as of March 16, 1999 between ACE Bermuda
Insurance, Ltd. and Capital Re Corporation
(Incorporated by Reference to Exhibit 10.20 to
the Annual Report on Form 10-K for the year
ended December 31, 1998 of Capital Re
Corporation (1-10995))
99.3 Second Amendment to Stock Purchase Agreement
dated as of May 26, 1999 between ACE Bermuda
Insurance, Ltd. and Capital Re Corporation
(Incorporated by Reference to Exhibit 10.21 to
the Current Report on Form 8-K (Date of Earliest
Event Reported: may 26, 1999) of Capital Re
Corporation (1-10995))
99.4 Agreement and Plan of Merger, dated as of June 10,
1999, among Capital Re Corporation, ACE Limited and
CapRe Acquisition Corp. (Incorporated by Reference
to Exhibit 2.1 to the Current Report on Form 8-K
(Date of Earliest Event Reported: May 26, 1999) of
Capital Re Corporation (1-10995))
99.5 Stock Option Agreement, dated as of June 10, 1999,
between Capital Re Corporation and ACE Limited
(Incorporated by Reference to Exhibit 2.2 to the
Current Report on Form 8-K (Date of Earliest Event
Reported: May 26, 1999) of Capital Re Corporation
(1- 10995))
99.6 Agreement among ACE Limited and ACE Bermuda Insurance,
Ltd. pursuant to Rule 13d-1(f)(1).
-14-
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: June 23, 1999 ACE LIMITED
By: /s/ Christopher Z. Marshall
---------------------------
Name: Christopher Z. Marshall
Title: Chief Financial Officer
ACE BERMUDA INSURANCE, LTD.
By: /s/ Christopher Z. Marshall
---------------------------
Name: Christopher Z. Marshall
Title: Director
15
Exhibit 99.6
AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of
1934, as amended, ACE Limited and ACE Bermuda Insurance, Lrd. hereby agree
that the Schedule 13D, together with any amendments thereto, relating to
shares of common stock, $.01 par value per share, of Capital Re
Corporation, is filed on behalf of each of them.
Dated: June 21, 1999 ACE Limited
By: /s/ Christopher Z. Marshall
-------------------------------
Name: Christopher Z. Marshall
Title: Chief Financial Officer
ACE Bermuda Insurance, Ltd.
By: /s/ Christopher Z. Marshall
-------------------------------
Name: Christopher Z. Marshall
Title: Chief Financial Officer
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF ACE LIMITED
The name and present principal occupation or employment of each of the
directors and executive officers of ACE Limited ("ACE") are set forth
below. Unless otherwise indicated, the director's or officer's business
address is The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda.
Except as set forth below, each occupation set forth opposite an
individual's name refers to ACE.
<TABLE>
<CAPTION>
Present Principal Occupation
Name or Employment
---- ----------------------------
<S> <C>
Michael G. Atieh Vice President - U.S. Human Health Division, Merck & Company, Inc.
Merck & Company, Inc.
770 Sumneytown Pike
West Point, PA 19486
John Burville Chief Actuary
John C. Charmin Chief Executive Officer, ACE Global Markets
ACE Global Markets
Crosby Court
38 Bishopsgate
London EC2N 4DL England
Bruce L. Crockett Retired President & CEO, COMSAT Corporation
906 Frome Lane
McLean, VA 22102-2106
Brian Duperreault Chairman, President and Chief Executive Officer
John Engestrom President and Chief Executive Officer,Tempest Reinsurance Company
Tempest Reinsurance Company Limited Limited (a subsidiary of ACE)
Wessex House
45 Reid Street
Hamilton HM 12 Bermuda
Dominic J. Frederico President, ACE Bermuda Insurance, Ltd.
Jeffrey W. Greenberg President, Marsh & McLennan Companies
Marsh & McLennan Companies
1166 Avenue of the Americas
New York, New York 10036
Meryl D. Hartzband Principal - Investment Director, Marsh & McLennan Capital Inc.
Marsh & McLennan Capital Inc.
20 Horseneck Lane
Greenwich, CT 06830
Robert M. Hernandez Vice Chairman & Chief Financial Officer, USX Corporation
USX Corporation
600 Grant Street
Room 6105
Pittsburgh, PA 15219-4776
<PAGE>
<CAPTION>
<S> <C>
Donald Kramer Vice Chairman
ACE Strategic Advisors
2 Greenwich Plaza - Suite 100
Greenwich, CT 06830
William J. Loschert Chairman, ACE Global Markets
ACE Global Markets
Crosby Court
38 Bishopsgate
London EC2N 4DL England
Christopher Z. Marshall Chief Financial Officer
Robin J.W. Masters Chief Investment Officer
Peter Mear General Counsel and Secretary
Peter Menikoff Former President & CEO, CONEMSCO, Inc.
3 Willowick Circle
Houston, TX 77024
Thomas J. Neff Chairman, Spencer Stuart & Associates
Spencer Stuart & Associates
277 Park Avenue
New York, NY 10172
Dennis B. Reding President and Chief Executive Officer, ACE USA Inc.
ACE USA Inc.
Six Concourse Parkway
Suite 2500
Atlanta, Georgia 30328
Glen M. Renfrew Retired Managing Director & CEO, Reuters Holdings plc
Suite 618
48 Par-La-Ville Road
Hamilton HM 12 Bermuda
Robert Ripp Retired Chairman & CEO, AMP Incorporated
21 Old Logging Road
Bedford, NY 10506
Walter A. Scott Retired Chairman of ACE Limited
Fairview
Under the Mountain Road
R.R. Box 17
So. Londonderry, VT 05155
Dermot Smurfit Joint Deputy Chairman, Jefferson Smurfit Group
Jefferson Smurfit Group plc
Beech Hill
Clonskeagh
Dublin 4 Ireland
<PAGE>
<CAPTION>
<S> <C>
Robert W. Staley Vice Chairman, Emerson Electric Co.
Emerson Electric Co.
8000 W. Florissant Avenue
St. Louis, MO 63136
Gary M. Stuart Executive Vice President - Finance, Union Pacific Corporation
Union Pacific Corporation
1416 Dodge Street
Omaha, NE 68179
Sidney F. Wentz Chairman -- Board of Trustees, Robert Wood Johnson Foundation
Robert Wood Johnson Foundation
Route 1 & College Road East
Princeton, NJ 08543-2316
Keith P. White Chief Administrative Officer
</TABLE>
The name and present principal occupation or employment of each of the
directors and executive officers of ACE Bermuda Insurance, Ltd. are set
forth below. The business address for each director and officer is The ACE
Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda. Except as set forth
below, each occupation set forth opposite an individual's name refers to
ACE Bermuda.
Present Principal Occupation
Name or Employment
---- ----------------------------
John Burville Chief Actuary, ACE Limited
Randi Cigelnik Senior Vice President, General Counsel
and Secretary
Brian Duperreault Chairman, President and Chief Executive
Officer, ACE Limited
Dominic J. Frederico President, ACE Bermuda Insurance, Ltd.
Andrew Gibbs Senior Vice President and Chief Financial
Officer
Larry P. Lombardo Executive Vice President, Operations
Christopher Z. Marshall Chief Financial Officer, ACE Limited
Peter Mear General Counsel and Secretary, ACE Limited
Keith P. White Chief Administrative Officer, ACE Limited
