-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FDrF/GONEDSX4GjEtva9dYutEukQ94turTc0rWrgKvbRXBfbeeV4Y8oEy2Vt79d2 yL62ZoJNHlhWAH2KIfDxhg== 0000898822-00-000035.txt : 20000202 0000898822-00-000035.hdr.sgml : 20000202 ACCESSION NUMBER: 0000898822-00-000035 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20000118 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RISK CAPITAL HOLDINGS INC CENTRAL INDEX KEY: 0000947484 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 061424716 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-45257 FILM NUMBER: 508763 BUSINESS ADDRESS: STREET 1: 20 HORSENECK LANE CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2038624300 MAIL ADDRESS: STREET 1: 20 HORSENECK LANE CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: RISK CAPITAL RE INC DATE OF NAME CHANGE: 19950703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: XL CAPITAL LTD CENTRAL INDEX KEY: 0000875159 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 980058718 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: CUMBERLAND HOUSE STREET 2: 1 VICTORIA ST CITY: HAMILTON HM11 BERMUD STATE: D2 BUSINESS PHONE: 4412928515 MAIL ADDRESS: STREET 1: CAHILL GORDON & REINDEL(IMMANUEL KOHN) STREET 2: 80 PINE STREET CITY: NEW YORKI STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: EXEL LTD DATE OF NAME CHANGE: 19950720 SC 13D/A 1 SCHEDULE 13D/A - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 1) Risk Capital Holdings, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 767711 10 4 - -------------------------------------------------------------------------------- (CUSIP Number) Paul S. Giordano, Esq. Executive Vice President and General Counsel XL Capital Ltd (f/k/a EXEL Limited) Cumberland HOuse One Victoria Street Hamilton HM 11, Bermuda (441) 292-8515 Copy to: Trevor S. Norwitz, Esq. Wachtell, Lipton, Rosen & Katz 51 W. 52nd Street New York, NY 10019 (212) 403-1000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 17, 2000 (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 that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b)for other parties to whom copies are to be sent. - --------------------- --------------------- CUSIP No. 767711 10 4 SCHEDULE 13D Page 2 of 5 Pages - --------------------- --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS XL Capital Ltd (f/k/a EXEL Limited) I.R.S. IDENTIFICATION NO. 98-0058718 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY [_] - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -4,755,000- SHARES _________________________________________________________________ 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER -4,755,000- REPORTING PERSON _________________________________________________________________ 10 SHARED DISPOSITIVE POWER WITH -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -4,755,000- - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 27.8% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- XL Capital Ltd (f/k/a EXEL Limited) hereby amends the Schedule 13D the "Schedule 13D") originally filed on September 17, 1997 as set forth herein. Capitalized terms used without definition in this Amendment No. 1 to the Schedule 13D shall have the respective meanings ascribed thereto in the Schedule 13D. ITEM 4. Purpose of the Transaction. Item 4 of the Schedule 13D is hereby amended by adding the following: On January 17, 2000 the Reporting Person, a wholly owned subsidiary of the Reporting Person, the Company and a wholly owned subsidiary of the Company entered into a Stock Repurchase Agreement (the "Stock Repurchse Agreement") to sell to the Company 4,755,000 shares of the Company common stock. The Stock Repurchase Agreement is filed as Exhibit 99.1. Each share of Company common stock will be valued at 85% of the average closing price per share of Company common stock on the Nasdaq Stock Market during the twenty trading days beginning on the third full trading day following the date on which the repurchase transaction is first disclosed to the public in accordance with the terms of the Stock Repurchase Agreement, provided that the maximum per share price to be paid to the Reporting Person shall not exceed $15.00. In consideration for the sale of the Company common stock to the Company, the Company will transfer to the Reporting Person all of the Company's interests in the capital stock of Latin American Reinsurance Company, Ltd., all of the Company's interests in the capital stock of Annuity & Life Re (Holdings), Ltd. ("ALRE"), plus or minus cash. If the cash component is negative and would therefore require a payment by the Reporting Person to the Company, the Reporting Person will have the option of (1) making such payment, (2) reducing the value of the interests in ALRE being transferred to the Reporting Person or (3) a combination of options (1) and (2). Effective as of the closing of the purchase and sale of the Company common stock pursuant to the Stock Repurchase Agreement, which is expected to take place promptly following satisfaction of all conditions to such agreement, the Reporting Person will cease to be the beneficial owner of any shares of Company common stock, Mr. Ian R. Heap (one of the Reporting Person's two designees on the Company's Board of Directors) will resign from the Company's Board of Directors, and Mr. Michael P. Esposito, Jr. (the other of the Reporting Person's designees on such Board), will continue as a director of such Board but not as the Reporting Person's designee. The Reporting Person and the Company have agreed to enter into a Voting and Disposition Agreement (the "Voting and Disposition Agreement") upon the completion of the transaction. The form of Voting and Disposition Agreement is filed as Exhibit 99.2. Pursuant to the Voting and Disposition Agreement, the Company will, for the benefit of the Reporting Person, continue to hold certain of the ALRE interests pending certain regulatory and other approvals. ITEM 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Item 6 of the Schedule 13D is hereby amended by adding the following: The Stock Repurchase Agreement, attached as Exhibit 99.1 hereto, is incorporated by reference herein in its entirety (described above). The Form of Voting and Disposition Agreement, attached as Exhibit 99.2 hereto, is incorporated by reference herein in its entirety (described above). The XL Voting Agreement, attached as Exhibit 99.3 hereto, is incorporated by reference herein in its entirety (requires the Reporting Person to vote all shares of Company common stock owned by it in favor of the Asset Purchase Agreement, dated as of January 17, 2000, by and among the Company, a wholly owned subsidiary of the Company, Folksamerica Holding Company, Inc. ("FHC") and a wholly owned subsidiary of FHC, and grants to FHC a proxy to vote the Reporting Person's shares of Company common stock in favor of such agreement, subject to the terms and conditions set forth therein, including the termination of such agreement upon, among other events, the completion of the transactions contemplated by the Stock Repurchase Agreement). ITEM 7. Material To Be Filed as Exhibits. Item 7 of the Schedule 13D is hereby amended by adding the following: Exhibit 99.1 Stock Repurchase Agreement, dated as of January 17, 2000, between the Reporting Person, a wholly owned subsidiary of the Reporting Person, the Company and a wholly owned subsidiary of the Company. Exhibit 99.2 Form of Voting and Disposition Agreement by and among the Reporting Person, a wholly owned subsidiary of the Reporting Person, the Company and a wholly owned subsidiary of the Company. Exhibit 99.3 XL Voting Agreement, dated as of January 17, 2000, by and among the Company, Folksamerica Holding Company, Inc., the Reporting Person and a wholly owned subsidiary of the Reporting Person. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 18, 2000 XL Capital Ltd By: /s/ Paul S. Giordano Name: Paul S. Giordano Title: Executive Vice President, General Counsel & Secretary EX-99 2 EXHIBIT 99.1- STOCK REPURCHASE AGREEMENT EXHIBIT 99.1 EXECUTION COPY STOCK REPURCHASE AGREEMENT THIS STOCK REPURCHASE AGREEMENT (the "Agreement") is made this 17th day of January, 2000 by and among Garrison Investments Inc. (the "XL Sub"), XL Capital Ltd ("XL"), Risk Capital Holdings, Inc. ("RCH") and Risk Capital Reinsurance Company, a wholly owned subsidiary of RCH (the "RCH Sub"). RECITALS A. The XL Sub, a wholly owned indirect subsidiary of XL, owns 4,755,000 shares (the "RCH Shares") of the common stock, $0.01 par value, of RCH. B. The XL Sub desires to sell to RCH, and RCH desires to repurchase from the XL Sub, the RCH Shares, upon the terms and subject to the conditions hereinafter set forth (the "Transaction"). C. The RCH Sub owns (i) 8,360,401 voting shares and 15,551,505 non-voting shares (the "LARC Shares") of LARC Holdings, Ltd. ("LARC"), and warrants (the LARC Warrants") to purchase 2,391,191 non-voting shares of LARC, and (ii) 1,418,440 common shares (as the number thereof may be adjusted pursuant to Section 2(b), the "ALRE Shares") of Annuity and Life Re (Holdings), Ltd. ("ALRE") and warrants (as the number thereof may be adjusted pursuant to Section 2(b), the "ALRE Warrants") to purchase an additional 100,000 common shares of ALRE (the ALRE Shares, the ALRE Warrants, the LARC Shares and the LARC Warrants, collectively, the "Interests") and has the right to designate one nominee for election to the Board of Directors of ALRE. D. Immediately prior to the Closing (as hereinafter defined), the RCH Sub will transfer and assign all of its right, title and interest in and to the Interests to RCH. E. RCH desires to sell to the XL Sub, and the XL Sub desires to purchase from RCH, the Interests, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Sale of RCH Shares. Upon the terms and subject to the conditions set forth in this Agreement, the XL Sub agrees to sell, transfer and assign the RCH Shares to RCH and RCH agrees to purchase the RCH Shares from the XL Sub, at the Closing, at which time and concurrently with the transfer of the Interests and other consideration pursuant to Section 2 below, the XL Sub shall deliver to RCH certificates representing the RCH Shares duly endorsed in blank or accompanied by stock powers duly endorsed in blank having attached thereto all necessary stock transfer and documentary stamps at the XL Sub's expense. 2. Consideration for the RCH Shares; Transfer of the Interests. (a) The purchase price per RCH Share (the "Discounted Per Share Price") shall be equal to 85% of the average closing price per share of RCH common stock on the NASDAQ National Market during the twenty trading days (the "Measuring Period") beginning on the third full trading day following the date on which the Transaction is first disclosed to the public in accordance with Section 10 hereof; provided, however, that the maximum Discounted Per Share Price shall not exceed $15 and if the Discounted Per Share Price would be greater than such maximum, then the Discounted Per Share Price shall be deemed to be equal to such maximum. The aggregate purchase price for the RCH Shares (the "Aggregate RCH Share Price") shall be equal to the number of RCH Shares multiplied by the Discounted Per Share Price. (b) The Aggregate RCH Share Price shall be paid by RCH to the XL Sub in the form of (i) the LARC Shares and the LARC Warrants (which together shall be deemed to have an aggregate value of $25,000,000), (ii) the ALRE Shares, which will be deemed to have an aggregate value (the "Aggregate ALRE Share Value") equal to the number of ALRE Shares multiplied by the average closing price per ALRE Share on the NASDAQ National Market during the Measuring Period (the "ALRE Per Share Price"), (iii) the ALRE Warrants, which will be deemed to have an aggregate value (the "Aggregate ALRE Warrant Value") equal to the number of ALRE Warrants multiplied by the Black-Scholes value per ALRE Warrant (using such assumptions as RCH and the XL Sub shall reasonably agree, which they shall use reasonable best efforts to do within 10 days after the date hereof) (the "ALRE Per Warrant Price"), and (iv) cash (the "Cash Component") in an amount equal to the difference between (x) the Aggregate RCH Share Price and (y) the sum of (A) $25,000,000, (B) the Aggregate ALRE Share Value and (C) the Aggregate ALRE Warrant Value; provided, however, that in the event that the Cash Component is a negative number, XL may, in its sole discretion, (i) choose to pay such Cash Component to RCH at the Closing, (ii) choose to have the number of ALRE Shares and/or ALRE Warrants to be delivered pursuant to this paragraph (b) to be decreased so as to eliminate the Cash Component that XL would have to pay or (iii) choose a combination of the procedures described in the preceding (i) and (ii). (c) At the Closing, concurrently with the transfer of the RCH Shares by the XL Sub to RCH pursuant to Section 1 above, (a) RCH shall deliver to the XL Sub certificates representing the Interests being transferred duly endorsed in blank or accompanied by stock powers duly endorsed in blank having attached thereto all necessary stock transfer and documentary stamps at RCH's expense, (b) RCH shall pay the Cash Component to the XL Sub, if such amount is a positive number, by wire transfer of immediately available funds to a bank account designated by the XL Sub in writing to RCH not later than the close of business on the second business day immediately preceding the Closing Date and (c) XL shall, or shall cause the XL Sub, to pay the Cash Component to RCH, if such amount is a negative number after any adjustment pursuant to paragraph (b) of -2- this Section 2, by wire transfer of immediately available funds to a bank account designated by RCH in writing to the XL Sub not later than the close of business on the second business day immediately preceding the Closing Date. (d) RCH and the RCH Sub agree to take all actions required to transfer and assign all right, title and interest in and to the ALRE Shares and the ALRE Warrants from the RCH Sub to RCH. RCH and the RCH Sub further agree that, both before and, if applicable, after the Closing, each shall use its reasonable best efforts to take all actions necessary to complete the transfer of the ALRE Shares and the ALRE Warrants to the XL Sub (including without limitation all actions required under the Purchase Agreement (as hereinafter defined) and the Letter Agreement (as hereinafter defined)) as expeditiously as reasonably possible and at its expense. RCH and the RCH Sub further agree that they will use their reasonable best efforts to take all actions necessary to (1) assign to the XL Sub all rights under the Letter Agreement relating to the selection of one individual to be nominated as a director of ALRE and (2) assign to the XL Sub all rights under the Registration Rights Agreement dated as of March 4, 1998 between ALRE and the RCH Sub relating to the right of the RCH Sub to require the registration by ALRE of the ALRE Shares and the ALRE Warrants under the Securities Act of 1933, as amended (the "Registration Rights Agreement"). (e) Notwithstanding the foregoing paragraphs (c) and (d), the following shall apply: (i) Only that number of ALRE Shares shall be transferred to the XL Sub at the Closing such that the ALRE Shares, together with the common shares of ALRE held by XL or any affiliate of XL as of the Closing, accounts for 9.9% of the total outstanding shares of ALRE common stock. The ALRE Warrants shall not be transferred to the XL Sub at the Closing. (ii) Any ALRE Shares that are not transferred to the XL Sub as a result of the restrictions contained in the preceding paragraph (i) and the ALRE Warrants shall be held initially by RCH for the sole and exclusive benefit of XL and the XL Sub, and such ALRE Shares and any common shares of ALRE issued upon the exercise of ALRE Warrants shall be subject to, and the parties shall execute and deliver prior to the Closing, a Voting and Disposition Agreement, which shall be substantially in the form attached hereto as Exhibit A (the "Voting and Disposition Agreement"); provided, however, that RCH shall transfer such ALRE Shares, ALRE Warrants, common shares of ALRE issued upon the exercise of ALRE Warrants, cash realized upon the sale of any of the foregoing and any dividends or other distributions (whether cash, stock or otherwise) with respect thereto in accordance with the terms of such Voting and Disposition Agreement; provided, further, that neither XL nor the XL Sub shall be permitted (A) to request such transfer of securities of ALRE to XL or any subsidiary of XL or exercise any right to vote or to direct the voting of common shares of ALRE so held by RCH, until such time as XL or the XL Sub has obtained the approval of the applicable insurance regulatory authorities for the acquisition of control of -3- ALRE or has determined upon consultation with outside legal counsel that such transfer can be effected or such voting rights exercised under applicable law and XL or the XL Sub so notifies RCH or (B) to request such transfer of securities of ALRE to XL or any subsidiary of XL, until such time as XL or the XL Sub has obtained the approval of the Board of Directors of ALRE, if required, to effect such transfer or has determined upon consultation with outside legal counsel that such transfer can be effected under the applicable provisions of the ALRE Bye-Laws and XL or the XL Sub so notifies RCH. (iii) At the time of any transfer pursuant to the preceding paragraph (ii), concurrently with such transfer RCH shall deliver to the XL Sub certificates representing the Interests being transferred duly endorsed in blank or accompanied by stock powers duly endorsed in blank having attached thereto all necessary stock transfer and documentary stamps at RCH's expense. (iv) The parties agree that following the Closing they shall continue to use their reasonable best efforts to obtain all regulatory, board and other approvals as may be required or desirable under applicable law and under the ALRE Bye-Laws to effect the transfer of common shares of ALRE held by RCH pursuant to this paragraph (e) to the XL Sub (or to effect such transfer in a manner that does not require such approvals) as promptly as practicable after the Closing. (f) In the event of any stock split, stock combination, stock dividend or similar transaction prior to the Closing involving the RCH Shares, the LARC Shares, the LARC common shares subject to the LARC Warrants, the ALRE Shares or the ALRE common shares subject to the ALRE Warrants, the share numbers and prices herein shall be adjusted as appropriate. 3. Representations and Warranties of XL and the XL Sub. XL and the XL Sub hereby jointly and severally make the following representations and warranties, effective as of the date hereof, and jointly and severally represent and warrant that each such representation and warranty shall be true and accurate in all material respects as of the Closing Date: (a) The XL Sub is the record owner of the RCH Shares, which constitute the entire direct and indirect ownership interest of the XL Sub and XL in RCH's common stock. (b) The XL Sub has good title to the RCH Shares, free and clear of any and all liens, claims, options, security interests and encumbrances of any kind or nature (collectively, "Adverse Interests"). (c) Each of the XL Sub and XL is a duly organized and validly existing corporation in its jurisdiction of incorporation. The XL Sub and XL have all requisite corporate power and authority to deliver and perform this Agreement and all other documents requiring XL's or the XL Sub's execution and delivery hereunder. -4- (d) The XL Sub and XL have taken all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and all other agreements requiring the XL Sub's or XL's execution and delivery hereunder. Assuming due authorization, execution and delivery hereof by RCH and the RCH Sub, this Agreement constitutes the duly authorized, valid and legally binding obligation of the XL Sub and XL, as the case may be, and is enforceable in accordance with its terms. (e) The XL Sub has all requisite corporate power and authority to transfer and deliver the RCH Shares to RCH in the manner provided in this Agreement, and upon delivery of the RCH Shares pursuant to the terms of this Agreement, RCH will receive good title thereto, free and clear of any and all Adverse Interests. (f) The execution, delivery and performance of this Agreement by XL and the XL Sub and the performance of the transactions contemplated hereby by the XL Sub do not require the consent of any third party, including but not limited to that of any governmental authority or agency in any jurisdiction, other than such approvals as may be required by the applicable state insurance regulatory authorities and the insurance regulatory authorities of Bermuda for the transfer of ALRE Shares and the ALRE Warrants in the event that the aggregate interest of XL in ALRE would constitute 10% or more of the outstanding shares of ALRE. (g) With the exception of its arrangement with Goldman, Sachs & Co., neither XL nor the XL Sub has made any agreement for the payment of a broker's fee or commission as a result of the transactions contemplated hereby. Any fee, commission or other amount payable to any financial advisor or consultant engaged by the XL Sub or by XL, including, but not limited to Goldman, Sachs & Co., will be paid by XL. (h) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by the XL Sub and XL do not and will not constitute a breach or violation of, or a default under, either of their articles or certificates of incorporation, by-laws or similar governing documents, or any material contract to which the XL Sub or XL is a party, whether currently in existence or entered into before the Closing. (i) No litigation, claim or other proceeding before any court or governmental agency is pending against the XL Sub or XL that would reasonably be expected to materially adversely affect the completion of the transactions contemplated by this Agreement. 4. Representations and Warranties of RCH and the RCH Sub. RCH and the RCH Sub hereby jointly and severally make the following representations and warranties, effective as of the date hereof and jointly and severally represent and warrant that each such representation and warranty shall be true and accurate in all material respects as of the Closing Date: -5- (a) RCH is a duly organized and validly existing Delaware corporation, is in good standing in Delaware and is in good standing as a foreign corporation in the State of Connecticut. The RCH Sub is a duly organized and validly existing Nebraska corporation, is in good standing in Nebraska and is in good standing as a foreign corporation in the State of Connecticut. RCH and the RCH Sub have all requisite corporate power and authority to deliver and perform this Agreement and all other documents requiring RCH's or the RCH Sub's execution and delivery hereunder. (b) RCH and the RCH Sub have taken all corporate action necessary (including obtaining the unanimous approval by the members of the board of directors (other than those directors affiliated with the XL Sub and XL) of RCH and obtaining the requisite approval by the members of the board of directors of the RCH Sub) to authorize the execution, delivery and performance of this Agreement, and all other agreements requiring the RCH Sub's or RCH's execution and delivery hereunder, and all transactions contemplated in connection with this Agreement and any other such agreement, and the RCH board of directors has determined that the transactions so contemplated are fair to and in the best interests of the holders of common stock of RCH (other than XL and the XL Sub). Without limiting the foregoing, no approval of the transactions contemplated in this Agreement is required by RCH's shareholders. Assuming due authorization, execution and delivery hereof by the XL Sub and XL, this Agreement constitutes, and the documents required hereunder to be executed and delivered by the RCH Sub or RCH will, when executed and delivered, constitute, the duly authorized, valid and legally binding obligations of the RCH Sub or RCH, as the case may be, and this Agreement is, and those documents will be, enforceable in accordance with their terms. (c) The capital of RCH is not impaired and the completion of the repurchase of the RCH Shares contemplated hereby will not cause any impairment of the capital of RCH, within the meaning of Section 160 of the General Corporation Law of the State of Delaware. The completion of the transactions contemplated hereby will not cause RCH's common stock to be delisted from, or to cease to be eligible for listing on, the Nasdaq National Market. (d) The execution, delivery and performance of this Agreement by RCH and the RCH Sub and the performance of the transactions contemplated hereby by RCH and the RCH Sub do not require the consent of any third party, including but not limited to that of any governmental authority or agency in any jurisdiction, other than such approvals as may be required by the insurance regulatory authorities of the State of Nebraska. (e) With the exception of its arrangement with Donaldson Lufkin & Jenrette Securities Corporation ("DLJ"), RCH and the RCH Sub have not made any agreement or taken any other action which might cause anyone to become entitled to a broker's fee or commission as a result of the transactions -6- contemplated hereby. Any fee, commission or other amount payable to any financial advisor or consultant engaged by RCH or the RCH Sub, including, but not limited to DLJ, will be paid by RCH. (f) RCH has received, and has provided to XL and the XL Sub a true copy of, an opinion of DLJ to the effect that, at the time of execution of this Agreement, the terms of the transactions contemplated hereby are fair, from a financial point of view, to RCH. (g) The RCH Sub is the record owner of each Interest (disregarding for the purposes of this Section 4 any adjustment pursuant to Section 2(b)) as of the date of this Agreement, and RCH will be the record owner of each Interest as of the Closing, which Interests constitute RCH's and the RCH Sub's entire direct and indirect ownership or other interest in LARC and ALRE. RCH has provided to the XL Sub and XL a true and complete copy of the letter agreement (the "Letter Agreement") dated March 4, 1998, between the RCH Sub and ALRE, relating to the RCH Sub's right to designate one individual to be nominated as a director of ALRE, which Letter Agreement is in full force and effect and is valid and enforceable in accordance with its terms, and which has not been amended or supplemented in any manner (and there are no oral or written agreements relating to taking any such action). RCH has provided to the XL Sub and XL a true and complete copy of the Registration Rights Agreement, which Registration Rights Agreement is in full force and effect, is valid and enforceable in accordance with its terms, and which has not been amended or supplemented in any manner (and there are no oral or written agreements relating to taking any such action). (h) The RCH Sub and RCH have good title to each Interest, free and clear of any and all Adverse Interests. The RCH Sub and RCH have all requisite corporate power and authority to transfer and deliver such Interest to XL and the XL Sub in the manner provided in this Agreement, and upon delivery of the Interests pursuant to the terms of this Agreement, XL or the XL Sub will receive good and marketable title thereto, free and clear of any and all Adverse Interests (subject to the provisions of ALRE Bye-Law 52 (Limitation on voting rights of Controlled Shares (as such term is defined in the ALRE Bye-Laws))). (i) The execution, delivery and performance of this Agreement by RCH and the consummation of the transactions contemplated hereby by RCH and the RCH Sub do not and will not constitute a breach or violation of, or a default under, either of their articles or certificates of incorporation, by-laws or similar governing documents, or any material contract to which the RCH Sub or RCH is a party currently in existence or entered into prior to the Closing, subject to compliance with Section 5.1(a) of the Securities Purchase Agreement (the "Purchase Agreement") dated as of March 4, 1998 between ALRE and the RCH Sub relating to resale of the ALRE Shares and ALRE Warrants. RCH has provided to the XL Sub and XL a true and complete copy of the Purchase Agreement, which Purchase Agreement is in full force and effect, is valid and enforceable in accordance with its terms, and which has not been amended or -7- supplemented in any manner (and there are no oral or written agreements relating to taking any such action). (j) No litigation, claim or other proceeding before any court or governmental agency is pending against the RCH Sub or RCH that would reasonably be expected to materially adversely affect the completion of the transactions contemplated by this Agreement. (k) Both before and after consummation of the transactions contemplated by this Agreement, each of RCH and the RCH Sub (a) owns and will own assets the fair salable value of which are (i) greater than the total amount of its liabilities (including contingent liabilities) and (ii) greater than the amount that will be required to pay the probable liabilities of its then existing debts and claims as they become absolute and matured, (b) has capital that is not unreasonably small in relation to its businesses as presently conducted, including after giving effect to the consummation of the transactions contemplated hereby, and (c) will be able to pay its debts and other liabilities (including the reasonably anticipated amount of subordinated, unmatured, unliquidated and contingent liabilities and claims) as they become due. 5. Closing. The closing (the "Closing") of the purchase and sale of the RCH Shares pursuant to this Agreement shall take place on the second business day following satisfaction or waiver of all conditions to closing (the "Closing Date") at 10:00 a.m. on the Closing Date at the offices of Wachtell, Lipton, Rosen & Katz in New York or at such other time or place as the parties may mutually agree. 6. Conditions to the Obligations of RCH and the RCH Sub to Close. It shall be a condition to the obligations of RCH and RCH Sub to consummate the transactions contemplated hereby that: (a) All representations and warranties of the XL Sub and XL contained in this Agreement shall be true and accurate in all material respects as of the date hereof and on the Closing Date as made again, on and with respect to the Closing Date. (b) Each of the XL Sub and XL shall have performed and complied in all material respects with all of its agreements contained in this Agreement required to be performed and complied with by it by the Closing. (c) The XL Sub and XL shall each have delivered to the RCH Sub a certificate dated the Closing Date and signed by one of its senior executive officers confirming the matters referred to in Sections 6(a) and 6(b) above. (d) Any filings required under antitrust laws shall have been made and any required waiting period under such laws applicable to the transactions contemplated hereby shall have expired or been earlier terminated and any required approval or consent under such laws applicable to the transactions contemplated hereby shall have been received. -8- (e) Any filings required under state or other insurance laws and regulations shall have been made and any required waiting period under such laws and regulations applicable to the transactions contemplated hereby shall have expired or been earlier terminated and any required approval or consent under such laws and regulations applicable to the transactions contemplated hereby shall have been received without the imposition on RCH or the RCH Sub of any onerous condition. (f) No temporary restraining order, preliminary or permanent injunction or other order issued by a court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Closing shall be in effect. (g) The Measuring Period shall have run in full. 7. Conditions to the Obligations of XL and the XL Sub to Close. It shall be a condition to the obligations of XL and the XL Sub to consummate the transactions contemplated hereby that: (a) All representations and warranties of RCH contained in this Agreement shall be true and accurate in all material respects as of the Closing Date as made again, on and with respect to the Closing Date. (b) RCH shall have performed and complied in all material respects with all of its agreements contained in this Agreement required to be performed and complied with by it by the Closing. (c) RCH and the RCH Sub shall each have delivered to the XL Sub and to XL a certificate dated the Closing Date and signed by one of its senior executive officers confirming the matters referred to in Sections 7(a) and 7(b) above. (d) Any filings required under antitrust laws shall have been made and any required waiting period under such laws applicable to the transactions contemplated hereby shall have expired or been earlier terminated and any required approval or consent under such laws applicable to the transactions contemplated hereby shall have been received. (e) Any filings required under state or other insurance laws and regulations shall have been made and any required waiting period under such laws and regulations applicable to the transactions contemplated hereby shall have expired or been earlier terminated and any required approval or consent under such laws and regulations applicable to the transactions contemplated hereby shall have been received without the imposition on XL or the XL Sub of any onerous condition. (f) No temporary restraining order, preliminary or permanent injunction or other order issued by a court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Closing shall be in effect. -9- (g) The Measuring Period shall have run in full. (h) RCH and the RCH Sub shall have duly executed and delivered the Voting and Disposition Agreement if required pursuant to Section 2(e). 8. Indemnification. (a) The XL Sub and XL hereby agree to jointly and severally indemnify, save, defend and hold harmless the RCH Sub and RCH and their respective officers, directors, employees and authorized agents from and against all losses, liabilities, damages, actions, causes of action, claims, judgments, penalties, fines, costs, obligations, taxes, expenses and fees, including all reasonable attorneys' fees and court costs (collectively, "Loss"), incurred by or asserted against the RCH Sub, RCH or their respective officers, directors, employees or authorized agents resulting from, arising out of, relating to, in the nature of or caused by, any inaccuracy in or any breach by the XL Sub or by XL of, any representation, warranty or agreement of the XL Sub or XL contained herein. (b) RCH and the RCH Sub hereby agree to jointly and severally indemnify, save, defend and hold harmless XL and the XL Sub and their respective officers, directors, employees and agents from and against all Loss incurred by or asserted against XL, the XL Sub or their respective officers, directors, employees and authorized agents resulting from, arising out of, relating to, in the nature of or caused by any inaccuracy in, or the breach by RCH or the RCH Sub of, any representation, warranty or agreement of RCH or the RCH Sub contained herein. (c) Promptly after receipt by any party hereto (the "Indemnitee") of notice of any demand, claim or circumstance which, with the lapse of time, would or might give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation that may result in Loss as to which the Indemnitee is entitled to indemnification hereunder (an "Asserted Liability"), the Indemnitee shall give notice thereof (the "Claims Notice") to any other party (or parties) obligated to provide indemnification with respect to such Asserted Liability pursuant to this Section 8 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted Liability in reasonable detail, and shall indicate the amount (estimated, if necessary and to the extent feasible) of the Loss that has been or may be suffered by the Indemnitee. Failure to provide the Claims Notice shall not relieve the Indemnifying Party of its obligations under this Section 8 except to the extent that the Indemnifying Party demonstrates that it has been materially prejudiced by the failure to give such notice. The Indemnifying Party (as hereinafter defined) shall make any payment required in respect of its obligations under this Section 8 to the Indemnitee promptly upon receipt of notice from such Indemnitee that such Indemnitee has incurred such Loss. (d) The Indemnifying Party may elect to settle, compromise or defend, at its own expense and by its own counsel (which shall be reasonably acceptable to -10- the Indemnitee), any Asserted Liability; provided, however, that if the named or potential parties to any action or proceeding in connection with such Asserted Liability include both the Indemnifying Party and the Indemnitee, and the Indemnitee shall have been advised in writing by counsel that joint representation would be inappropriate due to an actual or potential conflict of interest and that the Indemnitee should have separate counsel, or if the Indemnifying Party does not notify the Indemnitiee of its election as required herein, fails to timely fulfill its indemnity obligations under this Agreement or contests its obligation to indemnify under this Agreement, the Indemnifying Party shall not have the right to settle, compromise or defend such Asserted Liability, and the Indemnitee may elect to employ one separate counsel in each applicable jurisdiction at the expense of the Indemnifying Party to settle, compromise or defend such Asserted Liability, as it relates to such Indemnitee. If the Indemnifying Party is entitled to and elects to settle, compromise or defend an Asserted Liability, it shall within 30 days after receipt of the Claims Notice (or sooner, if the nature of the Asserted Liability so requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall (subject to the foregoing) cooperate, at the expense of the Indemnifying Party (except with respect to the legal fees of Indemnitee's separate counsel as provided for above), in the settlement or compromise of, or defense against, such Asserted Liability. If the Indemnifying Party elects not to settle, compromise or defend the Asserted Liability, fails to notify the Indemnitee of its election as herein provided, fails to timely fulfill its indemnity obligations under this Agreement or contests its obligation to indemnify under this Agreement, the Indemnitee may settle, compromise or defend such Asserted Liability. Notwithstanding anything to the contrary contained in this Section, neither the Indemnifying Party nor the Indemnitee may settle or compromise any claim over the objection of the other; provided, however, that consent to settlement or compromise shall not be unreasonably withheld; provided further that the parties agree that it shall not be unreasonable to withhold such consent if such settlement or compromise contains any material restrictions, limitations or other conditions on the conduct of such party's business or business operations. In any event, each of the Indemnitee and the Indemnifying Party may participate, at its own expense, in the defense of the Asserted Liability. 9. Resignation of Director Nominees. (a) Effective as of the Closing, Mr. Ian R. Heap shall resign from RCH's Board of Directors, and Mr. Michael P. Esposito, Jr., shall continue as a director of such Board but not as XL's designee; provided, however, it is understood and agreed that the indemnification and exculpation rights of such directors under the certificate of incorporation and bylaws of RCH shall survive the Closing in accordance with their present terms to the fullest extent permitted by law for at least six years from the date of the Closing, and that RCH shall cause its directors' and officers' liability insurance policies to continue to apply to such directors with respect to their periods of services in such capacities on terms and with coverage limits no less favorable in the aggregate than presently existing, in each case with respect to any claim, action, suit, proceeding or investigation, whether civil, criminal or administrative or investigative, arising out of actions or omissions occurring prior to or at the Closing (including the transactions contemplated in connection with this Agreement). -11- (b) The directors nominated by RCH or the RCH Sub to the Board of Directors of LARC shall resign from such Board, effective as of the Closing. (c) From and after the Closing, Mr. Robert Clements shall continue to serve on the Board of Directors of ALRE as the designee of XL until his resignation or until XL or the XL Sub (together with RCH or the RCH Sub pursuant to the provisions of the Voting and Disposition Agreement if applicable) designates his replacement and any required consents from ALRE or the ALRE Board of Directors relating thereto are obtained. 10. Public Announcement. Immediately following the execution of this Agreement, RCH and XL will issue press releases which include the language in Exhibit B (provided that such press releases may contain additional language relating to matters other than the transactions contemplated hereby). No party hereto will, without the prior approval of the other parties (which approval shall not be unreasonably withheld), issue any press release or make any public statement relating to the transactions contemplated hereby, except for discussions with investors and analysts consistent with the press releases referred to in the first sentence of this Section 10 or with such party's public filings with the SEC or as may otherwise be required by applicable law or regulation or the rules of an applicable stock market. To the extent reasonably practicable, neither RCH nor XL will make any filing with the SEC or with any other governmental entity relating to the transactions contemplated hereby without first providing the other a reasonable opportunity to review such filing. 11. Reasonable Best Efforts. The parties to this Agreement shall each use its reasonable best efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable law or otherwise to consummate and make effective the transactions contemplated by this Agreement, including by making all required regulatory filings as promptly as practicable, and to cooperate with one another in connection therewith; provided that neither party shall be required to incur any material expenses in connection therewith. 12. Conduct of Business. From the date hereof through the Measurement Period, RCH and the RCH Sub shall, and shall cause each of its subsidiaries to, operate in the ordinary course of business consistent with past practice, each shall, and shall cause each of its subsidiaries to, use reasonable efforts to preserve its business intact and shall not, and shall cause its subsidiaries not to, engage in any conduct (including by failing to take action) that is designed to or would reasonably be expected to have an adverse effect on RCH's stock price, including issuing or trading in securities of RCH or derivatives thereof; provided, however, that RCH and the RCH Sub may enter into and close the transaction provided for in the asset purchase agreement attached hereto as Exhibit C substantially upon the terms, and subject to the conditions, set forth in such agreement in the form attached. RCH and the RCH Sub shall take all actions required to cause any purchaser (whether such purchase is by stock or asset acquisition, merger, consolidation or otherwise) of RCH, the RCH Sub or the RCH Sub's reinsurance business to assume all obligations of RCH and the RCH Sub hereunder; provided that the first clause of this sentence shall not apply if following any such purchase RCH is able to perform all obligations of RCH and the RCH Sub hereunder in a timely manner and without adversely affecting the benefits to be obtained by XL and XL Sub hereunder. -12- 13. Assignment. This Agreement and the rights hereunder shall not be assignable or transferable by any party without the prior written consent of the other parties hereto and any purported assignment or transfer in breach hereof shall be void and of no effect; provided, however, that the XL Sub and XL may assign their rights under this Agreement to any wholly owned subsidiary of XL and the XL Sub may assign its rights under this Agreement to XL (it being understood that any such assignment shall not relieve the XL Sub or XL of their obligations hereunder). Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. 14. Termination. This agreement may be terminated: (a) by mutual written consent; (b) by either XL (on behalf of itself and the XL Sub) or RCH (on behalf of itself and the RCH Sub) if the Transaction shall not have been consummated by July 31, 2000; provided, however, that the right to terminate this Agreement under this Section 14(b) shall not be available to any party (including any of its subsidiaries) whose action or failure to act has been a principal cause of or resulted in the failure of the Transaction to be consummated on or before such date if such action or failure to act constitutes a breach of this Agreement; (c) by either XL (on behalf of itself and the XL Sub) or RCH (on behalf of itself and the RCH Sub)if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Transaction, which order, decree or ruling is final and nonappealable; (d) by XL (on behalf of itself and the XL Sub) if RCH or the RCH Sub, or by RCH (on behalf of itself and the RCH Sub)if XL or the XL Sub, as the case may be, has materially breached any of the representations, warranties, covenants or agreements of RCH or the RCH Sub or the representations, warranties, covenants or agreements of XL or the XL Sub, respectively, and such breach has not been cured within 30 calendar days after the giving of notice of such breach. 15. Covenant Regarding ALRE Shares and ALRE Warrants. (a) RCH agrees it will not permit any of the ALRE Shares, ALRE Warrants or common shares of ALRE issued upon the exercise of ALRE Warrants, cash realized upon the sale of any of the foregoing and any dividends or other distributions (whether cash, stock or otherwise) with respect thereto, if any, to be held by it pursuant to Section 2(e) to become subject to any Adverse Interests, and that it will not, and will not permit any of its subsidiaries to, take any action that could impair the title of RCH and the XL Sub thereto. Upon any transfer effected pursuant to Section 2(e), the XL Sub shall receive good and marketable title thereto, free and clear of any and all Adverse Interests (subject to the provisions of ALRE Bye-Law 52 (Limitation on voting rights of Controlled Shares (as such term is defined in the ALRE Bye-Laws))). -13- (b) This Section 15 is intended to be for the benefit of, and shall be enforceable by, XL and the XL Sub and its permitted successors and assigns. If RCH shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, then proper provisions shall be made so that the successors and assigns of RCH shall assume all of the obligations set forth in this Agreement and the Voting and Disposition Agreement. 16. Fees and Expenses. All fees and expenses of investment banking advisors, counsel, accountants and other experts and all other expenses incurred in connection with this Agreement and the purchase and sale of the RCH Shares contemplated hereby shall be paid by the party incurring such costs or expenses. 17. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or sent via telecopy (receipt confirmed) to the parties at the following addresses or telecopy numbers (or at such other address or telecopy numbers for a party as shall be specified by like notice): (a) if to XL or to the XL Sub, to: XL Capital Ltd. Cumberland House One Victoria Street Hamilton HM JX, Bermuda Attention: Paul S. Giordano, Esq. Telephone: (441) 292-8515 Facsimile: (441) 292-8618 with a copy to: Wachtell, Lipton, Rosen & Katz 51 W. 52nd St. New York, NY 10019 Attention: Trevor S. Norwitz, Esq. Telephone: (212) 403-1000 Facsimile: (441) 403-2000 (b) if to RCH or to the RCH Sub, to Risk Capital Holdings, Inc. 20 Horseneck Lane Greenwich, Connecticut 06830 Attention: Peter A. Appel, Esq. Telephone: (203) 862-4308 Facsimile: (203) 861-4508 -14- with a copy to: Cahill, Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Robert Usadi Telephone: (212) 701-3700 Facsimile: (212) 269-5420 18. Amendments and Waiver. No amendment to this Agreement shall be effective unless it shall be in writing and signed by each of the parties hereto. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party benefited by such provision. 19. Entire Agreement. This Agreement, together with the exhibits hereto (including the Voting and Disposition Agreement), contains the entire agreement and understanding between the parties hereto with respect to the matters covered hereby and supersedes all other agreements and understandings relating thereto. 20. Specific Enforcement. XL, the XL Sub, RCH and the RCH Sub acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they may be entitled by law or equity. 21. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to its principles of conflicts of law. Nothing contained in this Agreement shall be construed to require any party hereto or any of their respective subsidiaries, affiliates, directors, officers, employees, agents or representatives to take or refrain from taking any action in violation of applicable law. 22. Severability. In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto so long as the economic or legal substance of the transactions contemplated hereby are not materially adversely affected. The parties further agree to negotiate in good faith to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 23. Survival of Representations, Warranties, Agreements and Covenants. All representations, warranties, agreements and covenants contained herein shall survive the execution of this Agreement and the consummation of the transactions contemplated hereby. -15- 24. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original hereof and all of which together shall constitute one instrument. [Remainder of Page Intentionally Left Blank] -16- IN WITNESS WHEREOF, the parties hereto have caused this Stock Repurchase Agreement to be duly executed on the date first above written. RISK CAPITAL HOLDINGS, INC. By: /s/ Peter A. Appel Name: Peter A. Appel, Esq. Title: Executive Vice President and Chief Operating Officer RISK CAPITAL REINSURANCE COMPANY By: /s/ Peter A. Appel Name: Peter A. Appel, Esq. Title: Executive Vice President and Chief Operating Officer XL CAPITAL LTD By: /s/ Michael A. Siese Name: Michael A. Siese Title: Senior Vice President and Controller GARRISON INVESTMENTS INC. By: /s/ Michael A. Siese Name: Michael A. Siese Title: Vice President -17- EX-99 3 EXHIBIT 99.2- VOTING AND DISPOSITION AGREEMENT EXHIBIT 99.2 Exhibit A VOTING AND DISPOSITION AGREEMENT THIS VOTING AND DISPOSITION AGREEMENT (the "Agreement") is made this ___ day of ________, 2000 by and among Garrison Investments Inc. (the "XL Sub"), XL Capital Ltd ("XL"), Risk Capital Holdings, Inc. ("RCH") and Risk Capital Reinsurance Company, a wholly owned subsidiary of RCH (the "RCH Sub") (all capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the stock repurchase agreement, by and among RCH, the RCH Sub, XL and the XL Sub, dated as of the 17th day of January, 2000 (the "Repurchase Agreement")). RECITALS A. The XL Sub is selling and RCH is repurchasing (the "Repurchase") from the XL Sub 4,755,000 shares (as adjusted for any stock split, reverse stock split, stock dividend, recapitalization, reclassification, reorganization or similar transactions) of the common stock, $0.01 par value, of RCH pursuant to the Repurchase Agreement. B. Pursuant to the Repurchase Agreement, RCH transferred and assigned all right, title and interest in and to the ALRE Shares (as they may be adjusted pursuant to the Repurchase Agreement) and the ALRE Warrants (as they may be adjusted pursuant to the Repurchase Agreement) to the XL Sub as part of the consideration for the Repurchase. C. Pursuant to the Repurchase Agreement, the parties have agreed to enter into this Agreement, pursuant to which RCH will hold, for the sole and exclusive benefit of XL and the XL Sub, certain of the common shares of ALRE comprising the ALRE Shares, the ALRE Warrants, common shares of ALRE issued upon the exercise of ALRE Warrants, cash realized upon the sale of any of the foregoing and any dividends or other distributions (whether cash, stock or otherwise) with respect thereto (the "Held Interests"), and will vote all common shares of ALRE included in the Held Interests as directed by XL or the XL Sub subject to the limitations set forth in Section 2(e) of the Repurchase Agreement. D. It is the intent of the parties hereto that, beginning on the date hereof, all rights and interests in and to the Held Interests inure to the sole and exclusive benefit of XL and the XL Sub, other than certain voting rights to the extent specified herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Voting of ALRE Shares. Subject to the restrictions set forth in Section 2(e) of the Repurchase Agreement arising from certain regulatory matters and from certain limitations contained in the charter and bye-laws of ALRE, RCH shall cause the common shares of ALRE held or to be held pursuant to this Agreement to be voted on all matters with respect to which the vote of the holders of common shares of ALRE is required, solicited or permitted in accordance with the written instructions of XL or the XL Sub. Upon receipt by RCH as the record holder of the ALRE Shares of notice in respect of any matter as to which a vote of the holders of common shares of ALRE is required, solicited or permitted, RCH shall provide XL or the XL Sub prompt written notice of such matter. If no written instructions are timely received by RCH from XL or the XL Sub, then RCH shall not vote any of the common shares of ALRE held hereunder. 2. Disposition of Held Interests. (a) Subject to the restrictions set forth in Section 2(e) of the Repurchase Agreement arising from certain regulatory matters and from the charter and bye-laws of ALRE, RCH shall sell, transfer, assign or take such other actions as may be requested in writing by XL or the XL Sub with respect to the Held Interests. RCH shall take any such requested action as promptly as reasonably practicable and in the manner specified in writing by XL or the XL Sub (including, but not limited to, the selection of the broker effecting any sale of common shares of ALRE). All proceeds from the sale of any of the Held Interests and all dividends and other distributions of any nature (other than stock dividends, which shall remain subject hereto as provided herein) shall be paid or delivered to the XL Sub (or to such other person as XL or the XL Sub shall direct in writing). RCH shall pay any cash dividends, any cash proceeds and any other cash distributions arising with respect to the Held Interests to XL or the XL Sub by wire transfer of immediately available funds to a bank account designated by XL or the XL Sub in writing to RCH, such payment to be made within one business day of receipt by RCH of such designation from XL or the XL Sub. RCH shall deliver any other proceeds, dividends or distributions of any nature arising in connection with the Held Interests (other than stock dividends, which shall remain subject hereto as provided herein) to XL or the XL Sub in the manner specified in writing by XL or the XL Sub to RCH, such delivery to be made as promptly as reasonably practicable, and in any event within three business days of receipt by RCH of such written notice. (b) If XL or the XL Sub requests the sale, transfer or assignment of any common shares of ALRE held by RCH hereunder, concurrently with the transfer of such shares, RCH shall deliver to XL or the XL Sub (or to such other person as the XL Sub shall direct) certificates representing the Held Interests being transferred duly endorsed in blank or accompanied by stock powers duly endorsed in blank having attached thereto all necessary stock transfer and documentary stamps at RCH's expense. If XL or the XL Sub requests the sale, transfer or assignment of any ALRE Warrants held by RCH hereunder, concurrently with the transfer of such ALRE Warrants, RCH shall deliver to XL or the XL Sub (or to such other person as XL or the XL Sub shall direct) such documents as are required or advisable in connection with such sale, transfer or assignment and shall take such actions as are required or advisable in connection with such sale, transfer or assignment pursuant to the agreement under which the ALRE Warrants were issued. If XL or the XL Sub requests the sale, transfer or assignment of any other non-cash Held Interests, concurrently with the transfer of such Held Interest, RCH shall deliver to XL or the XL Sub (or to such other person as XL or the XL Sub shall direct) such documents as are required or advisable in connection with such sale, transfer or assignment. 3. Adjustments to Shares. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation or similar transaction of ALRE, such new or additional shares issued or issuable with respect to the Held Interests shall be held hereunder and in accordance with the terms hereof. -2- 4. Public Announcement. Without the prior written consent of XL or the XL Sub, neither RCH nor any affiliate of RCH will issue any press release or make any public statement relating to any actions taken hereunder, except as required by applicable law. 5. Reasonable Best Efforts. The parties to this Agreement shall each use their reasonable best efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable law or otherwise to take any action required to be taken hereunder or necessary to fulfill the intent of the parties hereto as expressed in the Recitals. 6. Assignment. This Agreement and the rights hereunder shall not be assignable or transferable by any party without the prior written consent of the other parties hereto and any purported assignment or transfer in breach hereof shall be void and of no effect; provided, however, that the XL Sub and XL may assign their rights under this Agreement to any wholly owned subsidiary of XL, and the XL Sub may assign its rights to XL, it being understood that any such assignment shall not relieve the XL Sub or XL of their obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. 7. Termination. This agreement may be terminated (i) at any time by mutual written consent; (ii) at any time by XL (on behalf of itself and the XL Sub); and (iii) at such time as RCH, in accordance with the terms of this Agreement, no longer holds any of the Held Interests. 8. Covenant Regarding ALRE Shares and ALRE Warrants. (a) RCH agrees (i) it will not permit any of the Held Interests to become subject to any liens, claims, options, security interests or encumbrances of any kind or nature (collectively, "Adverse Interests"), (ii) it will not take, and it will not permit any affiliate to take, any action that could impair the title of RCH, XL and the XL Sub thereto, (iii) it will not permit any Held Interests to be sold, transferred or assigned without the prior written consent of XL or the XL Sub and (iv) it will not take, and it will not permit any affiliate to take, any action inconsistent with the intent of the parties hereto as expressed in the Recitals. Upon any transfer effected pursuant to Section 2, the XL or XL Sub (or such other transferee designated by XL or the XL Sub) shall receive good and marketable title thereto, free and clear of any and all Adverse Interests (subject to the provisions of ALRE Bye-Law 52 (Limitation on voting rights of Controlled Shares (as such term is defined in the ALRE Bye-Laws))). (b) This Section 8 is intended to be for the benefit of, and shall be enforceable by, XL and the XL Sub and its permitted successors and assigns. If RCH shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, then proper provisions shall be made so that the successors and assigns of RCH shall assume all of the obligations set forth in this Agreement. -3- 9. Fees and Expenses. Except as otherwise specified herein, all fees and expenses incurred in connection with this Agreement shall be paid by the party incurring such costs or expenses; provided, however, that XL and the XL Sub shall be responsible for all reasonable costs and expenses incurred with the consent of XL or the XL Sub that are associated with taking actions taken by RCH at XL or the XL Sub's request under Sections 1 and 2 of this Agreement except as otherwise specified therein. 10. Amendments and Waiver. No amendment to this Agreement shall be effective unless it shall be in writing and signed by each of the parties hereto. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party benefited by such provision. 11. Certain Tax Matters. In accordance with the parties' intention that XL and the XL Sub shall be treated as the beneficial owners of the Held Interests at all times, including without limitation for tax purposes, in the event that RCH or the RCH Sub is treated as the owner of the Held Interests or any part thereof for tax purposes and thereby incurs or receives an item of income, gain, loss, deduction or credit, (i) XL shall, or shall cause the XL Sub to, pay to RCH or the RCH Sub an amount equal to the product of any such item of income or gain and the highest combined United States federal, state and local income tax rate applicable to corporations and (ii) RCH shall, or shall cause the RCH Sub to, pay to XL or the XL Sub an amount equal to the sum of (A) any such item of credit and (B) the product of any such item of loss or deduction and the highest combined United States federal, state and local income tax rate applicable to corporations. Neither XL, the XL Sub, RCH, nor the RCH Sub shall take any tax position inconsistent with the ownership of the Held Interests by the XL Sub, and any breach of this sentence shall result in forfeiture of all of the breaching party's rights to payment under this Section 11. The parties agree to treat any payment under this Section 11 as an adjustment to the consideration paid for the Repurchase for tax purposes. 12. Notices. All notices and other communications hereunder shall be made in the manner and to the locations set forth in Section 17 of the Repurchase Agreement. 13. Entire Agreement. This Agreement, together with the Repurchase Agreement, contains the entire agreement and understanding between the parties hereto with respect to the matters covered hereby and supersedes all other agreements and understandings relating thereto. 14. Specific Enforcement. RCH and the RCH Sub acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that XL and the XL Sub shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they may be entitled by law or equity. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to its principles of conflicts of law. Nothing contained in this Agreement shall be construed to require any party hereto or -4- any of their respective subsidiaries,affiliates, directors, officers, employees, agents or representatives to take any action in violation of applicable law. 16. Severability. In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto so long as the economic or legal substance of the transactions contemplated hereby are not materially adversely affected. The parties further agree to negotiate in good faith to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 17. Survival of Representations, Warranties, Agreements and Covenants. All agreements and covenants contained herein shall survive the execution of this Agreement and the consummation of the transactions contemplated hereby. 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original hereof and all of which together shall constitute one instrument. -5- IN WITNESS WHEREOF, the parties hereto have caused this Voting and Disposition Agreement to be duly executed on the date first above written. RISK CAPITAL HOLDINGS, INC. By:__________________________________ Name: Title: RISK CAPITAL REINSURANCE COMPANY By:__________________________________ Name: Title: XL CAPITAL LTD By:__________________________________ Name: Title: GARRISON INVESTMENTS INC. By:__________________________________ Name: Title: -6- EX-99 4 EXHIBIT 99.3- XL VOTING AGREEMENT EXHIBIT 99.3 XL VOTING AGREEMENT VOTING AGREEMENT, dated as of January 17, 2000 (this "Agreement"), among Risk Capital Holdings, Inc., a Delaware corporation ("RCHI"), Folksamerica Holding Company, Inc., a New York corporation ("FHC"), and Garrison Investments Inc. ("GI") and XL Capital Ltd, a Cayman Islands exempted limited company ("XL" and together with GI, the "Stockholder"). WHEREAS, on the date hereof, RCHI and Risk Capital Reinsurance Company, a stock insurance company organized under the laws of the State of Nebraska and a wholly owned subsidiary of RCHI ("RCRe," and together with RCHI, the "Seller") propose to enter into an Asset Purchase Agreement dated as of the date hereof (as such agreement may be amended in immaterial respects, the "Asset Purchase Agreement"; capitalized terms not otherwise defined herein being used herein shall have the meanings assigned to such terms in the Asset Purchase Agreement) with FHC and Folksamerica Reinsurance Company, a stock insurance company organized under the laws of the State of New York ("FRC," and together with FHC, the "Purchaser"), pursuant to which Purchaser will purchase and the Seller will sell the assets comprising the Assumed Business; WHEREAS, as of the date hereof, the Stockholder owns (both beneficially and of record) 4,755,000 shares of common stock of RCHI (the "Common Stock"); WHEREAS, as an inducement for the Purchaser to enter into the Asset Purchase Agreement, the Stockholder has agreed to enter into this Agreement governing the voting of the shares of Common Stock owned as of the date hereof and which may hereafter be acquired by the Stockholder prior to the Termination Date (the "Shares") and the disposition of the Shares; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows: (1) Title; Voting of Shares. a. The Stockholder represents and warrants that the Shares set forth above are all the securities of RCHI owned, either of record or beneficially, by the Stockholder. The Stockholder represents and warrants that it owns all such Shares free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Stockholder's voting rights, charges and other encumbrances of any nature whatsoever, other than the Stock Repurchase Agreement, dated as of January 17, 1999 ("Repurchase Agreement"), by and among XL, GI and RCHI pursuant to which RCHI has agreed to repurchase all of the shares of Common Stock held by XL and GI on the terms set forth therein, and, except pursuant to this Agreement, the Stockholder has not appointed or granted any proxy, which appointment or grant is still effective, with respect to the Shares. b. The Stockholder shall, until the Termination Date, cause the Shares then owned by such Stockholder to be voted at any meeting of the stockholders of RCHI, at any adjournment thereof or in any consent in lieu of such a meeting in favor of the Asset Purchase Agreement and the transactions contemplated thereby. For the purposes of this Agreement, "Termination Date" shall mean the earliest of (i) the termination of the Asset Purchase Agreement in accordance with its terms, (ii) the Closing Date, (iii) the termination of this Agreement by the mutual written agreement of the parties hereto, (iv) the date on which the Asset Purchase Agreement and the transactions contemplated thereby shall have been approved by the affirmative vote of the stockholders of RCHI by the requisite vote in accordance with applicable law, (v) any material amendment to the Asset Purchase Agreement, (vi) the closing of the transactions contemplated by the Repurchase Agreement or (vii) July 31, 2000. (2) Irrevocable Proxy. Only with respect to the approval of the Asset Purchase Agreement and the transactions contemplated thereby and for no other purpose, the Stockholder hereby grants to, and appoints FHC and the president of FHC, in his capacity as an officer of FHC, and any individual who shall hereafter succeed to such office of FHC, and any other designee of FHC, each of them individually, the Stockholder's proxy and attorney-in-fact (with full power of substitution) to vote or act by written consent with respect to the Shares until the Termination Date. This proxy is coupled with an interest and shall be irrevocable; provided that this proxy shall terminate on the Termination Date. (3) No Disposition or Encumbrance of Shares or Warrants. The Stockholder hereby covenants and agrees that, until the Termination Date, the Stockholder shall not, and shall not offer or agree to, sell, transfer, tender, assign, hypothecate or otherwise dispose of, or create or permit to exist any security interest, lien, claim, pledge, option, right of first refusal, agreement, limitation on the Stockholder's voting rights, charge or other encumbrance of any nature whatsoever with respect to, the Shares; provided that the Stockholder shall be permitted to transfer the Shares (i) to any wholly owned subsidiary of the Stockholder that agrees to be bound by the terms of this Agreement, (ii) to RCHI or any wholly-owned subsidiary of RCHI, or (iii) to any other person that expressly assumes and agrees to be bound by this Agreement. (4) Miscellaneous. (a) Amendment and Modification. This Agreement may be amended, modified or supplemented only by written agreement signed by the parties hereto. (b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED IN THAT STATE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN WITNESS WHEREOF, each of the undersigned has duly executed this Agreement, as of the date first written above. RISK CAPITAL HOLDINGS, INC. By: /s/ Peter A. Appel Name: Peter A. Appel Title: Executive Vice President and Chief Operating Officer FOLKSAMERICA HOLDING COMPANY, INC. By: Name: Title: Stockholder: XL CAPITAL LTD By: /s/ Paul S. Giordano Name: Paul S. Giordano Title: EVP, General Counsel & Secretary GARRISON INVESTMENTS INC. By: /s/ Paul S. Giordano Name: Paul S. Giordano Title: Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----