EXECUTION VERSION

 

FIRST AMENDMENT TO THE

STOCK PURCHASE AGREEMENT

 

            This FIRST AMENDMENT TO THE STOCK PURCHASE AGREEMENT, dated December
29, 2016 (this “Amendment”), is made by and between AMERICAN INTERNATIONAL
GROUP, INC., a Delaware corporation (“Parent”), and ARCH CAPITAL GROUP LTD., an
exempted company with limited liability registered under the laws of Bermuda
(the “Acquiror”).  Capitalized terms not defined herein shall have the meanings
set forth in the Stock Purchase Agreement, dated as of August 15, 2016 (as
amended, modified or supplemented from time to time in accordance with its
terms, the “Purchase Agreement”), by and between the Parent and the Acquiror.

            WHEREAS, the Acquiror and the Parent have entered into the Purchase
Agreement, pursuant to which the Parent has agreed to sell, convey, assign,
transfer and deliver to the Acquiror, and the Acquiror has agreed to purchase,
acquire and accept from the Parent, all of the outstanding shares of common
stock, par value $1.00 per share, in United Guaranty Corporation, a North
Carolina corporation, and all of the outstanding shares in AIG United Guaranty
Insurance (Asia) Limited, a Hong Kong limited company;

WHEREAS, concurrently with the execution of this Amendment, the Acquiror and
Arch U.S. MI Holdings, Inc., a Delaware corporation (“Arch MI”), are entering
into that certain assignment agreement (the “Assignment Agreement”), pursuant to
which the Acquiror has assigned to Arch MI, and Arch MI has assumed from the
Acquiror, all of the Acquiror’s rights to acquire the outstanding shares of
common stock, par value $1.00 per share, of United Guaranty Corporation, a North
Carolina corporation, pursuant to the Purchase Agreement;

            WHEREAS, concurrently with the execution of this Amendment, the
Parent, for itself and in its capacity as the Parent Escrow Agent, on the one
hand, and the Acquiror and Arch MI, for itself and in its capacity as the
Acquiror Escrow Agent, on the other hand, are entering into the Escrow
Agreement, dated as of the date hereof (the “Escrow Agreement”); and

            WHEREAS, the parties desire to amend the Purchase Agreement in
accordance with Section 11.08 thereof, as hereinafter provided.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.                  AGREEMENTS AND AMENDMENTS

.

A.                   SECTION 2.02 OF THE PURCHASE AGREEMENT IS HEREBY AMENDED BY
ADDING THE FOLLOWING AFTER THE LAST SENTENCE IN SUCH SECTION:

“Notwithstanding anything to the contrary in this Section 2.02, if the last
Business Day of the first month during which all the conditions set forth in
Article VIII have been satisfied or waived (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions at the Closing) is December 30, 2016, (i) the
Closing Date shall be

 

 

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December 31, 2016, (ii) the Closing shall take place at 11:59 p.m., New York
City time, on the Closing Date and (iii) upon the occurrence of the Closing, the
time and date that the purchase and sale described in Section 2.01 of the Shares
becomes effective shall be 11:59 p.m., New York City time, on the Closing Date.”

  

B.                  SECTION 2.05(A)(I) OF THE PURCHASE AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:

“SUBJECT TO SECTION 2.05(D), EVIDENCE OF THE SHARES, DULY ENDORSED IN BLANK OR
ACCOMPANIED BY STOCK POWERS DULY EXECUTED IN PROPER FORM FOR TRANSFER;”

C.                   SECTION 2.05(A)(III) OF THE PURCHASE AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:

“written resignations of (A) each director and officer of the Company and
(B) each director of each of the Transferred Subsidiaries (other than Bob
Gagliardi as a director of United Guaranty Partners Insurance Company), in each
of (A) and (B), who is an employee of the Parent, but not an employee of the
Company or a Transferred Subsidiary;”

 

D.                  SECTION 2.05(B)(I) OF THE PURCHASE AGREEMENT IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:

“subject to Section 2.05(d), (A) subject to Section 2.06, the Cash
Consideration, (B) evidence of the Convertible Preferred Stock Consideration in
book entry form on the records of the Acquiror’s transfer agent, (C) evidence of
the Perpetual Preferred Stock Consideration in book entry form on the records of
the Acquiror’s transfer agent and (D) the cash payment provided for in Section
6.01(l);” 

 

E.                   THE PURCHASE AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING AS A NEW SECTION 2.05(D): 

“Notwithstanding Section 2.05(a)(i) and Section 2.05(b)(i), if the Closing Date
shall be December 31, 2016:

(I)                 ON DECEMBER 30, 2016, THE PARENT SHALL DELIVER, OR CAUSE TO
BE DELIVERED, TO THE ACQUIROR ESCROW AGENT EVIDENCE OF THE SHARES, DULY ENDORSED
IN BLANK OR ACCOMPANIED BY STOCK POWERS DULY EXECUTED IN PROPER FORM FOR
TRANSFER TO BE HELD BY THE ACQUIROR ESCROW AGENT IN THE ACQUIROR ESCROW ACCOUNT
IN ACCORDANCE WITH, AND SUBJECT TO THE TERMS OF, THE ESCROW AGREEMENT AND THIS
AGREEMENT;

(II)               ON DECEMBER 30, 2016, THE ACQUIROR SHALL DELIVER, OR CAUSE TO
BE DELIVERED, TO THE PARENT ESCROW AGENT (X) SUBJECT TO SECTION 2.06, THE CASH
CONSIDERATION, (Y) CONFIRMATION OF A BOOK-ENTRY TRANSFER OF THE CONVERTIBLE
PREFERRED STOCK CONSIDERATION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE PARENT AND THE ACQUIROR AND (Z) THE CASH PAYMENT PROVIDED FOR IN
SECTION 6.01(L), IN EACH OF CASES (X) THROUGH (Z), TO BE HELD BY THE PARENT
ESCROW

                                                                            
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AGENT IN THE PARENT ESCROW ACCOUNT SUBJECT TO THE TERMS OF THIS AGREEMENT AND
THE ESCROW AGREEMENT; AND

(III)             UNLESS OTHERWISE AGREED IN WRITING BY THE PARTIES, AT 11:59
P.M., NEW YORK CITY TIME, ON THE CLOSING DATE, (A) THE ACQUIROR ESCROW AGENT
SHALL RELEASE ALL ASSETS IN THE ACQUIROR ESCROW ACCOUNT TO ARCH MI AND (B) THE
PARENT ESCROW AGENT SHALL RELEASE ALL ASSETS IN THE PARENT ESCROW ACCOUNT TO THE
PARENT, IN EACH CASE, IN ACCORDANCE WITH, AND SUBJECT TO THE TERMS OF, THE
ESCROW AGREEMENT AND THIS AGREEMENT.”

F.                   THE PENULTIMATE SENTENCE OF SECTION 2.06 OF THE PURCHASE
AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:

“If the UG Asia Shares are not transferred to the Acquiror on the Closing Date,
(A) the Parent and the Acquiror shall continue to take the efforts consistent
with Section 5.06 to obtain any required approvals to transfer the UG Asia
Shares to Acquiror and (B) the Parent will continue to own and operate UG Asia
with services provided by the Acquiror under the Transition Services Agreement;
provided, however, (i) the Parent shall continue to comply with the covenants
set forth in Section 5.01 herein with respect to UG Asia, (ii) to the extent
that any covenant set forth in this Agreement with respect to UG Asia would
otherwise be required to be performed or complied with on or prior to the
Closing Date, such covenant shall instead be required to be performed or
complied with on or prior to the UG Asia Closing Date and (iii) any reference to
the Closing Date in Section 6.01  herein as applied to or affecting the
treatment of employees of UG Asia shall be deemed to refer to the UG Asia
Closing Date.”

 

G.                  SECTION 5.08(B) OF THE PURCHASE AGREEMENT IS HEREBY AMENDED
BY ADDING THE FOLLOWING AFTER THE LAST SENTENCE IN SUCH SECTION:

“FURTHERMORE, FOR THE AVOIDANCE OF DOUBT, NO INTERCOMPANY AGREEMENTS WITH OR
RELATING TO UG ASIA SHALL BE REQUIRED TO BE TERMINATED OR COMMUTED PRIOR TO THE
UG ASIA CLOSING DATE.”

H.                  SECTION 5.08(B) OF THE PARENT DISCLOSURE SCHEDULE IS AMENDED
AND RESTATED IN ITS ENTIRETY AS PROVIDED IN SCHEDULE A HERETO.

I.                    THE PURCHASE AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING AS A NEW SECTION 5.08(E): 

“From and after the UG Asia Closing Date, the parties shall cooperate in good
faith and use their respective commercially reasonable efforts to cause, subject
to the receipt of any required approvals or non‑disapprovals by a Governmental
Authority, the novation, effective as of the UG Asia Closing Date (with the
economics novated as of January 1, 2017), to the Acquiror or its Subsidiary of
the 100% Quota Share Reinsurance Agreement, dated as of September 16, 2011 and
effective October 1, 2011, between AIG United Guaranty Insurance (Asia) Limited
and National Union Fire Company of Pittsburgh, Pa.”

                                                                            
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J.                    SECTION 5.09(C) OF THE PURCHASE AGREEMENT IS HEREBY
AMENDED BY ADDING THE FOLLOWING AFTER THE LAST SENTENCE IN SUCH SECTION:

“Notwithstanding the foregoing, the Acquiror shall cause, and the Acquiror
hereby causes, as of Closing, the Company to grant to the Parent (and as of
Closing the Company shall be deemed to have granted to Parent) a limited,
non-exclusive, non-transferable license to use that certain model for the Quota
Share Agreement known as the CAT model (the “Model”) for the sole and exclusive
purposes of performing “stress tests” and planning for capital stress
scenarios.  For the avoidance of doubt, the Parent acknowledges and agrees that
it shall have no right to use the Model to compete against the Acquiror or the
Company through utilization of the Model to price or evaluate post-Closing
business or otherwise.  The Acquiror shall deliver, or cause the Company to
deliver, to the Parent a useable copy of the Model reasonably promptly after
Closing.  The Parent acknowledges and agrees that this is a one-time transfer of
the Model on an “as is” basis and that neither the Acquiror nor the Company
shall have any obligation to provide maintenance or updates to the Model to the
Parent or any of its Affiliates.”

 

K.                  THE FIRST CLAUSE OF SECTION 5.21 OF THE PURCHASE AGREEMENT
IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:

“Except as provided on Section 5.21 of the Parent Disclosure Schedule, on or
prior to the Closing Date,”

 

L.                    SECTION 5.21 IS ADDED TO THE PARENT DISCLOSURE SCHEDULE AS
PROVIDED IN SCHEDULE B HERETO.

M.                THE DEFINITION ASSIGNED TO “ANCILLARY AGREEMENTS” IN EXHIBIT A
TO THE PURCHASE AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS
FOLLOWS:

“ANCILLARY AGREEMENTS” SHALL MEAN THE ESCROW AGREEMENT, THE TRANSITION SERVICES
AGREEMENT AND THE INVESTOR RIGHTS AGREEMENT.

N.                  THE DEFINITION ASSIGNED TO “RUN-OFF UGC ENTITIES” IN EXHIBIT
A TO THE PURCHASE AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS
FOLLOWS:

“Run-Off UGC Entities” shall mean AIG United Guaranty Limited, AIG United
Guaranty Agenzia di Assicurazione S.R.L., AIG United Guaranty, Sociedad
Limitada, AIG United Guaranty Mexico, S.A., and AIG Mortgage Risk Solutions Pty
Ltd.

O.                  EXHIBIT A TO THE PURCHASE AGREEMENT IS HEREBY AMENDED BY
ADDING THE FOLLOWING DEFINITIONS IN ALPHABETICAL ORDER THEREIN:

“Acquiror Escrow Account” has the meaning set forth in the Escrow Agreement.

                                                                            
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“Acqurior Escrow Agent” means Arch MI.

“Arch MI” means Arch U.S. MI Holdings, Inc., a Delaware corporation, as assignee
of the rights of the Acquiror to acquire the Shares pursuant to that certain
assignment agreement between Arch MI and the Acquiror.       

 

“Escrow Agreement” means the Escrow Agreement, dated as of the date hereof, by
and among the Parent, the Acquiror and Arch MI.

“Model” shall have the meaning set forth in Section 5.09(c). 

“Parent Escrow Account” has the meaning set forth in the Escrow Agreement.

“Parent Escrow Agent” means American International Group, Inc., a Delaware
corporation.

 

2.                  MISCELLANEOUS 

. Any reference in the Purchase Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of like import shall hereafter be deemed to refer to
the Purchase Agreement as hereby amended.  Except as expressly amended herein,
the parties hereby agree and acknowledge that all of the terms and provisions
set forth in the Purchase Agreement remain in full force and effect in all
respects.  To the extent of any inconsistency between the provisions of this
Amendment and the provisions of the Purchase Agreement, the terms of this
Amendment shall govern.  This Amendment shall be governed and construed in
accordance with the Purchase Agreement.

3.                  DISPUTE RESOLUTION; ARBITRATION; GOVERNING LAW; WAIVER OF
JURY TRIAL

.

A.                   THIS AMENDMENT, AND ALL CLAIMS AND DEFENSES ARISING OUT OF
OR RELATING TO THIS AMENDMENT OR THE FORMATION, BREACH, TERMINATION OR VALIDITY
OF THIS AMENDMENT, SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT WOULD APPLY THE LAWS OF ANOTHER
JURISDICTION.

B.                  THE PROVISIONS OF SECTION 11.10(B) THROUGH (F)  OF THE
PURCHASE AGREEMENT SHALL APPLY TO THIS AMENDMENT MUTATIS MUTANDIS. 

4.                  COUNTERPARTS 

.  This Amendment may be executed in one or more counterparts, and by the
different parties to such agreement in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Amendment by facsimile or other means of electronic
transmission shall be as effective as delivery of a manually executed
counterpart of any such Agreement.

[Signature Page Follows] 

                                                                            
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.

AMERICAN INTERNATIONAL GROUP, INC.

By:   _________________________
         Name:
         Title:

ARCH CAPITAL GROUP LTD.

By:   _________________________
         Name:
         Title:

 

[Signature Page to Amendment]

 

 

 

 

 

 

 

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