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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
ARCH CAPITAL GROUP LTD.
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(Name of Issuer)
COMMON SHARES, PAR VALUE $0.01 PER SHARE
------------------------------------------------
(Title of Class of Securities)
011576290
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(CUSIP Number)
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RICHARD M. LEVINE, ESQ.
HELLMAN & FRIEDMAN LLC
ONE MARITIME PLAZA, SUITE 1200
SAN FRANCISCO, CALIFORNIA 94111
(415) 788-5111
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
WITH A COPY TO:
PATRICIA A. VLAHAKIS, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
(212) 403-1000
NOVEMBER 20, 2001
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(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 ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box: [ ].
Page 1 of 18 Pages
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CUSIP No. 011576290 SCHEDULE 13D Page 2 of 18 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HFCP IV (BERMUDA), L.P.
I.R.S. IDENTIFICATION NO. 94-3410224
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY [ ]
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
BERMUDA
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7
SOLE VOTING POWER
9,376,497*
NUMBER OF
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8
SHARES SHARED VOTING POWER
-0-
BENEFICIALLY
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9
OWNED BY SOLE DISPOSITIVE POWER
9,376,497*
EACH
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10
REPORTING SHARED DISPOSITIVE POWER
-0-
PERSON WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,376,497*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.2%+
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14 TYPE OF REPORTING PERSON
PN
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----------------------
* Assumes full conversion and exercise of all Securities beneficially owned by
such Reporting Person into Common Shares. Such Securities are subject to the
limitations on voting and conversion described herein.
+ Gives effect to the new issuance of Common Shares upon the full conversion and
exercise of all Securities beneficially owned by such Reporting Person into
Common Shares. Such Securities are subject to the limitations on voting and
conversion described herein.
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CUSIP No. 011576290 SCHEDULE 13D Page 3 of 18 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
H&F INTERNATIONAL PARTNERS IV-A (BERMUDA), L.P.
I.R.S. IDENTIFICATION NO. 94-3410226
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY [ ]
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
BERMUDA
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7
SOLE VOTING POWER
1,538,936*
NUMBER OF
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8
SHARES SHARED VOTING POWER
-0-
BENEFICIALLY
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9
OWNED BY SOLE DISPOSITIVE POWER
1,538,936*
EACH
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10
REPORTING SHARED DISPOSITIVE POWER
-0-
PERSON WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,538,936*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.2%+
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14 TYPE OF REPORTING PERSON
PN
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----------------------
* Assumes full conversion and exercise of all Securities beneficially owned by
such Reporting Person into Common Shares. Such Securities are subject to the
limitations on voting and conversion described herein.
+ Gives effect to the new issuance of Common Shares upon the full conversion and
exercise of all Securities beneficially owned by such Reporting Person into
Common Shares. Such Securities are subject to the limitations on voting and
conversion described herein.
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CUSIP No. 011576290 SCHEDULE 13D Page 4 of 18 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
H&F INTERNATIONAL PARTNERS IV-B (BERMUDA), L.P.
I.R.S. IDENTIFICATION NO. 94-3410228
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY [ ]
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
BERMUDA
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7
SOLE VOTING POWER
508,367*
NUMBER OF
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8
SHARES SHARED VOTING POWER
-0-
BENEFICIALLY
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9
OWNED BY SOLE DISPOSITIVE POWER
508,367*
EACH
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10
REPORTING SHARED DISPOSITIVE POWER
-0-
PERSON WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
508,367*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.2%+
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14 TYPE OF REPORTING PERSON
PN
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----------------------
* Assumes full conversion and exercise of all Securities beneficially owned by
such Reporting Person into Common Shares. Such Securities are subject to the
limitations on voting and conversion described herein.
+ Gives effect to the new issuance of Common Shares upon the full conversion and
exercise of all Securities beneficially owned by such Reporting Person into
Common Shares. Such Securities are subject to the limitations on voting and
conversion described herein.
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CUSIP No. 011576290 SCHEDULE 13D Page 5 of 18 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
H&F EXECUTIVE FUND IV (BERMUDA), L.P.
I.R.S. IDENTIFICATION NO. 94-3410229
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY [ ]
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
BERMUDA
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7
SOLE VOTING POWER
211,328*
NUMBER OF
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8
SHARES SHARED VOTING POWER
-0-
BENEFICIALLY
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9
OWNED BY SOLE DISPOSITIVE POWER
211,328*
EACH
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10
REPORTING SHARED DISPOSITIVE POWER
-0-
PERSON WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
211,328*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.4%+
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14 TYPE OF REPORTING PERSON
PN
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----------------------
* Assumes full conversion and exercise of all Securities beneficially owned by
such Reporting Person into Common Shares. Such Securities are subject to the
limitations on voting and conversion described herein.
+ Gives effect to the new issuance of Common Shares upon the full conversion and
exercise of all Securities beneficially owned by such Reporting Person into
Common Shares. Such Securities are subject to the limitations on voting and
conversion described herein.
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CUSIP No. 011576290 SCHEDULE 13D Page 6 of 18 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
H&F INVESTORS IV (BERMUDA), L.P.
I.R.S. IDENTIFICATION NO. 94-3410230
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY [ ]
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
BERMUDA
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7
SOLE VOTING POWER
11,635,128*
NUMBER OF
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8
SHARES SHARED VOTING POWER
-0-
BENEFICIALLY
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9
OWNED BY SOLE DISPOSITIVE POWER
11,635,128*
EACH
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10
REPORTING SHARED DISPOSITIVE POWER
-0-
PERSON WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,635,128*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
43.4%+
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14 TYPE OF REPORTING PERSON
PN
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----------------------
* Assumes full conversion and exercise of all Securities beneficially owned by
such Reporting Person into Common Shares. Such Securities are subject to the
limitations on voting and conversion described herein.
+ Gives effect to the new issuance of Common Shares upon the full conversion and
exercise of all Securities beneficially owned by such Reporting Person into
Common Shares. Such Securities are subject to the limitations on voting and
conversion described herein.
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CUSIP No. 011576290 SCHEDULE 13D Page 7 of 18 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
H&F CORPORATE INVESTORS IV (BERMUDA) LTD.
I.R.S. IDENTIFICATION NO. 94-3410238
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY [ ]
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
BERMUDA
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7
SOLE VOTING POWER
11,635,128*
NUMBER OF
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8
SHARES SHARED VOTING POWER
-0-
BENEFICIALLY
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9
OWNED BY SOLE DISPOSITIVE POWER
11,635,128*
EACH
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10
REPORTING SHARED DISPOSITIVE POWER
-0-
PERSON WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,635,128*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
43.4%+
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14 TYPE OF REPORTING PERSON
PN
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----------------------
* Assumes full conversion and exercise of all Securities beneficially owned by
such Reporting Person into Common Shares. Such Securities are subject to the
limitations on voting and conversion described herein.
+ Gives effect to the new issuance of Common Shares upon the full conversion and
exercise of all Securities beneficially owned by such Reporting Person into
Common Shares. Such Securities are subject to the limitations on voting and
conversion described herein.
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CUSIP No. 011576290 SCHEDULE 13D Page 8 of 18 Pages
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This Schedule 13D is being filed on behalf of HFCP IV (Bermuda),
L.P., a limited partnership organized under the laws of Bermuda ("HFCP IV
Bermuda"), H&F International Partners IV-A (Bermuda), L.P., a limited
partnership organized under the laws of Bermuda ("HFIP IV-A Bermuda"), H&F
International Partners IV-B (Bermuda), L.P., a limited partnership organized
under the laws of Bermuda ("HFIP IV-B Bermuda"), H&F Executive Fund IV
(Bermuda), L.P., a limited partnership organized under the laws of Bermuda
("HFEF IV Bermuda", and together with HFCP IV Bermuda, HFIP IV-A Bermuda and
HFIP IV-B Bermuda, the "Investors"), H&F Investors IV (Bermuda), L.P., a limited
partnership organized under the laws of Bermuda ("HFI IV Bermuda") and H&F
Corporate Investors IV (Bermuda) Ltd., a company organized under the laws of
Bermuda ("HFCI IV Bermuda"). This Schedule 13D relates to the common shares, par
value $0.01 (the "Common Shares"), of Arch Capital Group Ltd., a company
organized under the laws of Bermuda (the "Company"). The Investors, together
with HFI IV Bermuda and HFCI IV Bermuda are referred to herein as the "Reporting
Persons".
ITEM 1. SECURITY AND ISSUER.
-------------------
This statement on Schedule 13D relates to the Common Shares of the
Company, and is being filed pursuant to Rule 13d-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The address of the principal
executive offices of the Company is 20 Horseneck Lane, Greenwich, Connecticut
06830.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
(a) This statement is filed by the Reporting Persons. The Reporting Persons may
be deemed to be a "group" within the meaning of Rule 13d-5 under the
Exchange Act but disclaim being a member of a "group" with any other
shareholder of the Company. The sole general partner of each of HFCP IV
Bermuda, HFIP IV-A Bermuda, HFIP IV-B Bermuda and HFEF IV Bermuda is HFI IV
Bermuda. The sole general partner of HFI IV Bermuda is HFCI IV Bermuda. The
holders of shares of capital stock of HFCI IV Bermuda are described on
Schedule I, which is attached hereto as part of Exhibit 1 and is
incorporated herein by reference.
(b) The address and principal place of business of all Reporting Persons is
c/o A.S.&K. Services Ltd., Cedar House, 41 Cedar Avenue, Hamilton HM 12,
Bermuda.
(c) The principal business of each of HFCP IV Bermuda, HFIP IV-A Bermuda, HFIP
IV-B Bermuda and HFEF IV Bermuda is that of a partnership engaged in making
private equity and related principal investments. The principal business of
HFI IV Bermuda is acting as general partner of each of HFCP IV Bermuda,
HFIP IV-A Bermuda, HFIP IV-B Bermuda and HFEF IV Bermuda. The principal
business of HFCI IV Bermuda is acting as general partner of HFI IV Bermuda.
(d) None of the Reporting Persons, nor, to the best of their knowledge, any of
the directors,
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CUSIP No. 011576290 SCHEDULE 13D Page 9 of 18 Pages
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executive officers, general partners or members referred to in paragraph
(a) has, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Reporting Persons nor, to the best of their knowledge, any of
the directors, executive officers, general partners or members referred to
in paragraph (a) above has, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(f) Each of the Reporting Persons is organized under the laws of Bermuda.
Except as otherwise indicated on Schedule I, each of the individuals
referred to in paragraph (a) above is a United States citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
The total amount of funds required by each Investor to purchase the
Securities of the Company as described herein was furnished from the working
capital of such Investor and is set forth below.
Investor Amount
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HFCP IV Bermuda $181,322,595
HFIP IV-A Bermuda $29,759,927
HFIP IV-B Bermuda $9,830,812
HFEF IV Bermuda $4,086,666
Total $225,000,000
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
The purchase by the Investors of the Securities (as defined below)
as described herein was effected because of the Reporting Persons' belief that
the Company and the Securities represent an attractive investment.
The Investors, together with Warburg Pincus (Bermuda) Private Equity
VIII, L.P., Warburg Pincus (Bermuda) International Partners, L.P., Warburg
Pincus Netherlands International Partners I, C.V. and Warburg Pincus Netherlands
International Partners II, C.V. (collectively, "Warburg") and affiliates of
Farallon Capital Management, L.L.C., Marsh & McLennan Capital, Inc., GE Asset
Management and GE Capital (collectively, the "Purchasers"),
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CUSIP No. 011576290 SCHEDULE 13D Page 10 of 18 Pages
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acquired the Securities on November 20, 2001 for an aggregate purchase price of
$750 million, pursuant to the terms of a Subscription Agreement, dated as of
October 24, 2001, as amended November 20, 2001 (the "Subscription Agreement"),
by and among the Company and the Purchasers. The Securities purchased by the
Purchasers include Series A Convertible Preference Shares, par value $0.01 per
share, of the Company (the "Preference Shares") and Class A Warrants of the
Company (the "Warrants", and together with the Preference Shares, the
"Securities"). In connection with the acquisition of the Securities by the
Purchasers, the Purchasers, certain members of the Company's management and the
Company entered into a Shareholders Agreement, dated as of November 20, 2001
(the "Shareholders Agreement").
The issuance of the Common Shares issuable upon conversion or
exercise of the Securities has not yet been approved by the shareholders of the
Company or by certain insurance regulatory agencies that have regulatory
authority over certain of the Company's operations. In addition, the
Subscription Agreement contemplates that an amendment to the Company's Bye-Laws
allowing the Purchasers full voting power with respect to their Securities will
be presented to the Company's shareholders for approval. Accordingly, until such
time that the required approvals, as described below, are received, the
Securities purchased by the Purchasers are subject to the restrictions on
voting, conversion and exercise that are described below.
The following summaries set forth the material terms of the
Subscription Agreement, the Securities and the Shareholders Agreement, but these
summaries do not purport to be complete and are qualified in their entirety by
reference to the full text of the documents and agreements that are filed as
exhibits to this Schedule 13D and which are incorporated herein by reference.
Subscription Agreement
----------------------
Pursuant to the terms of the Subscription Agreement, on November 20,
2001, the Investors purchased an aggregate of 10,521,839 Preference Shares and
1,113,289 Warrants from the Company for an aggregate of $225 million, or
approximately $21.38 per Preference Share. The per share purchase price was
designed to equal the per share book value of the Company as of June 30, 2001,
adjusted to reflect a mark-to-market of the Company's investment portfolio.
The initial per share purchase price is subject to adjustment in a
number of circumstances. First, the Company is required to provide the
Purchasers with an audited balance sheet as of June 30, 2001, together with
reports on the Company's reserves and the market value of marketable securities
reflected on such audited balance sheet. Based on this audited balance sheet and
net of certain expenses incurred by the Company in connection with the
transactions contemplated by the Subscription Agreement and of certain losses
incurred by the Company, the per share purchase price is to be recalculated. If
the recalculated per share purchase price is greater than the initial per share
purchase price, the Purchasers will be required to pay the Company an amount
equal to the difference between the recalculated and initial per share purchase
prices, either in cash or in surrendered Preference Shares (valued at the higher
of the recalculated per share purchase price or the then market value of the
Common Shares), at the option of each Purchaser. If the recalculated per share
purchase price is less that the initial per
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CUSIP No. 011576290 SCHEDULE 13D Page 11 of 18 Pages
----------------------- ---------------------
share purchase price, the Company shall issue the Purchasers additional
Preference Shares having a value (based on the recalculated per share purchase
price) equal to the difference between the initial and recalculated per share
purchase prices.
The purchase price is subject to further adjustment based on the
calculation of an "Adjustment Basket" by the Company as soon as practicable
following November 20, 2003 (or earlier if requested by the Purchasers and
consented to by the Company). This Adjustment Basket is designed to represent
the difference between the value of certain existing businesses and assets of
the Company as of June 30, 2001 and the value of those assets and businesses as
of the relevant date for the calculation of the Adjustment Basket. Finally, as
soon as practicable following November 20, 2005, there is to be a further
Adjustment Basket calculated based on the amount of certain liabilities of the
Company. If these Adjustment Baskets are less than zero, the Company is required
to issue additional Preference Shares to the Purchasers. If these Adjustment
Baskets are greater than zero, the Company may repurchase Common Shares having
an aggregate value equal to the Adjustment Basket.
In addition, the Purchasers will receive additional Preference
Shares from the Company in the event that the Company's existing Class B
Warrants become exercisable.
The Company agreed to seek the approval by the holders of Common
Shares and Preference Shares of (a) an amendment to certain of the Company's
Bye-Laws, and (b) the issuance of Common Shares issuable upon conversion of all
Preference Shares and the issuance of Common Shares issuable upon exercise of
all Class A Warrants (including by operation of the anti-dilution adjustments in
the Class A Warrants), to the extent that the number of all such Common Shares
and Common Shares issued in cancellation of the Class A Warrants of the Company
in connection with the transactions under the Subscription Agreement would
exceed 19.9% of the total number of Common Shares issued and outstanding on
November 19, 2001 (the "Requisite Shareholder Approval"). The Company and the
Purchasers have also agreed to seek approval by the insurance authorities in the
States of Florida, Missouri, Nebraska and Wisconsin of the acquisition of
greater than 9.9% of the total voting power of all shares of the Company
entitled to vote generally in the election of directors by the Investors and
Warburg (the "Requisite Regulatory Approval"). If the Requisite Shareholder
Approval or the Requisite Regulatory Approval is not received within a specified
period of time, or if the Adjustment Basket exceeds a specified threshold, the
Purchasers have the right to exchange the Securities for substantially identical
securities of a subsidiary of the Company that the Company has agreed to form,
which subsidiary is to have a capital structure designed to mirror that of the
Company and is to hold the core insurance operations of the Company.
The Purchasers agreed that prior to the earlier of the meeting of
the Company's shareholders to obtain Requisite Shareholder Approval or March 20,
2002, they will not transfer or dispose of any Securities. In addition, the
Investors and certain other Purchasers agreed that if at any time they seek to
transfer or dispose of a majority of the voting power or equity of the Company,
that they will make such transaction available to all shareholders of the
Company.
Preference Shares
-----------------
----------------------- ---------------------
CUSIP No. 011576290 SCHEDULE 13D Page 12 of 18 Pages
----------------------- ---------------------
The Preference Shares have a liquidation preference of $21.00 per
share and are entitled to participating dividends with the Common Shares on an
as-converted basis. Each Preference Share is convertible, at the option of the
holder, into one Common Share (subject to adjustment in certain circumstances).
In addition, each Preference Share is mandatorily convertible into one Common
Share (subject to adjustment in certain circumstances) upon the later of receipt
of Requisite Shareholder Approval and Requisite Regulatory Approval and 90 days
after the completion of the purchase price adjustments described above.
Generally, the Preference Shares are entitled to vote together with the Common
Shares as a single class on an as-converted basis. However, until receipt of
Requisite Shareholder Approval and Requisite Regulatory Approval, no Purchaser
shall have more than 9.9% of the outstanding voting power of the Company and the
Purchasers shall be limited to an aggregate of 19.9% of the outstanding voting
power of the Company.
Warrants
--------
Each Warrant entitles the holder thereof to acquire one Common Share
of the Company for a purchase price of $20.00. The Warrants are immediately
exercisable by the Purchasers and expire on September 19, 2002. Each Warrant may
be exercised through cash payment of the purchase price, through the surrender
of Common Shares having a value equal to the purchase price or upon surrender of
the Warrant in exchange for Common Shares having a value equal to the excess of
the value of the Common Shares that would be received on full exercise of the
Warrant over the purchase price of the Warrant. The number of shares that are
purchasable upon exercise of each Warrant and the per share purchase price are
subject to adjustment in certain circumstances.
Shareholders Agreement
----------------------
The Shareholders Agreement provides the Investors with certain
governance rights and contains provisions relating to the transfer and
disposition of the Securities.
The Shareholders Agreement provides that immediately following the
closing of the transactions contemplated by the Subscription Agreement, the
Board of Directors of the Company shall consist of nine directors and that one
director designated by the Investors and one director designated by Warburg
shall be appointed to the Board. Following the receipt of Requisite Shareholder
Approval and Requisite Regulatory Approval, the Board shall be increased to 15
directors and two additional directors designated by the Investors and four
additional directors designated by Warburg shall be appointed to the Board. The
Investors and Warburg shall have the right to nominate these directors to the
Board for so long as they retain specified percentages of the Securities, and as
these percentages decrease, the number of directors that the Investors and
Warburg have the right to designate will decrease as well. The Shareholders
Agreement further provides that the Company will not take specified actions
unless these actions are approved by at least one of each of the Investors' and
Warburg's designees to the Board, and that the Company will not declare any
dividend or distribution on Common Shares, or repurchase any Common Shares,
until such time as the Company has repurchased an aggregate of $250 million in
Securities from the Investors and Warburg.
----------------------- ---------------------
CUSIP No. 011576290 SCHEDULE 13D Page 13 of 18 Pages
----------------------- ---------------------
Each Purchaser agreed to vote in favor of the matters subject to
Requisite Shareholder Approval at the shareholder meeting called for that
purpose. The Investors and Warburg also agreed that until November 20, 2003
they will not engage in certain transactions with the Company without the
approval of a majority of the directors of the Company who are unaffiliated with
either the Investors or Warburg.
The Shareholders Agreement provides the Purchasers with customary
registration rights, including demand registrations, piggy-back registration
rights and the right to require the Company to register shares for sale on a
delayed or continuous basis.
As among themselves, certain of the Purchasers agreed to various
tag-along and drag-along rights in the event that any one of them seeks to
transfer or dispose of their Securities. The Purchasers also agreed that until
the earliest of November 20, 2002, the vesting of the Company's existing Class B
Warrants or the completion by the Company of a public offering meeting certain
requirements, they would not transfer or dispose of in excess of one-third of
their Securities. In addition, until the receipt of the Requisite Shareholder
Approval and the Requisite Regulatory Approval, the Purchasers agreed that they
will not convert any Preference Shares into Common Shares, or exercise any
Warrant for Common Shares, if the Common Shares acquired by such Purchaser upon
such conversion or exercise would exceed such Purchaser's pro rata portion of
19.9% of the Common Shares outstanding prior to November 20, 2001 or if such
Purchaser's holdings of Common Shares would require regulatory approval.
* * * *
Except as set forth above, none of the Reporting Persons nor, to the
best of their knowledge, any person listed in Schedule I, has any plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company, or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries; (d) any change in the present Board of Directors or management
of the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; (e) any material
change in the present capitalization or dividend policy of the Company; (f) any
other material change in the Company's business or corporate structure; (g) any
changes in the Company's charter, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Company by any
person; (h) causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(j) any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) The Reporting Persons beneficially own Common Shares of the Company by
virtue of their ownership of the Securities, which are (subject to the
restrictions described under Item 4
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CUSIP No. 011576290 SCHEDULE 13D Page 14 of 18 Pages
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above) convertible into, or exercisable for, Common Shares as described
under Item 4 above. As of November 20, 2001, the Investors collectively
beneficially owned an aggregate of 11,635,128 Common Shares, assuming the
full exercise and conversion of the Securities into Common Shares (without
giving effect to the restrictions described under Item 4 above). By reason
of its relationship with the Investors, under Rule 13d-3 under the Exchange
Act, HFCI IV Bermuda may be deemed to own beneficially all of the Common
Shares that are beneficially owned by the Investors.
Assuming the full exercise and conversion of the Securities into Common
Shares, as of November 20, 2001, the 11,635,128 Common Shares collectively
beneficially owned by the Reporting Persons would (subject to the
restrictions described under Item 4 above) represent approximately 43.4% of
the outstanding Common Shares, after giving effect to the new issuance of
Common Shares upon the full conversion and exercise of the Securities into
Common Shares and based on the 12,868,158 Common Shares outstanding as of
September 30, 2000 as set forth in the Company's Form 10-Q for the quarter
then ended and the 2,314,916 Common Shares issued in connection with the
transactions.
(b) The Investors collectively have beneficial ownership of 11,635,128 Common
Shares (without giving effect to the restrictions described under Item 4
above), assuming the full exercise and conversion of the Securities into
Common Shares. Of these Common Shares, 10,521,839 Common Shares are
represented by 10,521,839 Preference Shares, which even if not converted
into Common Shares would, subject to the restrictions on voting described
under Item 4 above, in the aggregate be entitled to the voting power
equivalent to 10,521,839 Common Shares. Each Investor exercises voting
power and dispositive power over its holdings of such shares through its
respective general partner, which, in turn, acts through its respective
general partner.
(c) Except for the Securities acquired pursuant to the Subscription Agreement,
during the last sixty days there were no transactions effected by the
Reporting Persons or by any of the persons set forth on Schedule I hereto.
(d) Except as set forth in this Item 5, no person other than each respective
record owner referred to herein of the Securities is known to have the
right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, such Securities.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
-------------------------------------------------------------
RESPECT TO SECURITIES OF THE ISSUER.
-----------------------------------
Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the
Reporting Persons have entered into an agreement on November 30, 2001 with
respect to the joint filing of this statement and any amendment or amendments
hereto (the "Joint Filing Agreement"). The Joint Filing Agreement is attached
hereto as Exhibit 1 and incorporated herein by reference.
Except as referred to above, or described in Item 4 hereof, there
are no contracts,
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CUSIP No. 011576290 SCHEDULE 13D Page 15 of 18 Pages
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arrangements, understandings or relationships among the persons named in Item 2
or between such persons and any other person with respect to any securities of
the Company.
By virtue of the relationships among the Reporting Persons as
described in Item 2, the Reporting Persons may be deemed to be a "group" under
the Federal securities laws.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
1. Joint Filing Agreement, dated as of November 30, 2001, by and
among HFCP IV (Bermuda), L.P., H&F International Partners VI-A
(Bermuda), L.P., H&F International Partners IV-B (Bermuda),
L.P., H&F Executive Fund (Bermuda), L.P., H&F Investors IV
(Bermuda), L.P. and H&F Corporate Investors (Bermuda) Ltd.
2. Subscription Agreement, dated as of October 24, 2001, by and
among Arch Capital Group Ltd. and the Purchasers party thereto.
3. Amendment No. 1 to the Subscription Agreement, with the
following exhibits:
Exhibit I: Certificate of Designations of Series A Convertible
Preference Shares of Arch Capital Group Ltd.
Exhibit II: Form of Class A Warrant of Arch Capital Group Ltd.
Exhibit III: Amended Bye-Law 45 and 75
Exhibit IV: Form of Shareholders Agreement (See Exhibit 4 below)
4. Shareholders Agreement, dated as of November 20, 2001, by and
among Arch Capital Group and the Shareholders signatory thereto.
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CUSIP No. 011576290 SCHEDULE 13D Page 16 of 18 Pages
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Dated: November 30, 2001
HFCP IV (BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda)
Ltd., its General Partner
By: /s/ John L. Bunce, Jr.
-----------------------------------
Name: John L. Bunce, Jr.
Title: Vice President
H&F INTERNATIONAL PARTNERS IV-A (BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda)
Ltd., its General Partner
By: /s/ John L. Bunce, Jr.
-----------------------------------
Name: John L. Bunce, Jr.
Title: Vice President
H&F INTERNATIONAL PARTNERS IV-B (BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda)
Ltd., its General Partner
By: /s/ John L. Bunce, Jr.
-----------------------------------
Name: John L. Bunce, Jr.
Title: Vice President
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CUSIP No. 011576290 SCHEDULE 13D Page 17 of 18 Pages
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H&F EXECUTIVE FUND IV (BERMUDA), L.P.
By: H&F Investors IV (Bermuda), L.P.,
its General Partner
By: H&F Corporate Investors IV (Bermuda)
Ltd., its General Partner
By: /s/ John L. Bunce, Jr.
-----------------------------------
Name: John L. Bunce, Jr.
Title: Vice President
H&F INVESTORS IV (BERMUDA), L.P.
By: H&F Corporate Investors IV (Bermuda) Ltd.,
its General Partner
By: /s/ John L. Bunce, Jr.
--------------------------------
Name: John L. Bunce, Jr.
Title: Vice President
H&F CORPORATE INVESTORS IV (BERMUDA) LTD.
By: /s/ John L. Bunce, Jr.
--------------------------------------
Name: John L. Bunce, Jr.
Title: Vice President
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CUSIP No. 011576290 SCHEDULE 13D Page 18 of 18 Pages
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INDEX OF EXHIBITS
1. Joint Filing Agreement, dated as of November 30, 2001, by and among
HFCP IV (Bermuda), L.P., H&F International Partners VI-A (Bermuda),
L.P., H&F International Partners IV-B (Bermuda), L.P., H&F Executive
Fund (Bermuda), L.P., H&F Investors IV (Bermuda), L.P. and H&F
Corporate Investors (Bermuda) Ltd.
2. Subscription Agreement, dated as of October 24, 2001, by and among Arch
Capital Group Ltd. and the Purchasers party thereto.
3. Amendment No. 1 to the Subscription Agreement, with the following
exhibits:
Exhibit I: Certificate of Designations of Series A Convertible
Preference Shares of Arch Capital Group Ltd.
Exhibit II: Form of Class A Warrant of Arch Capital Group Ltd.
Exhibit III: Amended Bye-Law 45 and 75
Exhibit IV: Form of Shareholders Agreement (See Exhibit 4 below)
4. Shareholders Agreement, dated as of November 20, 2001, by and among Arch
Capital Group and the Shareholders signatory thereto.