|
Filed
by the Registrant x
|
|
|
Filed
by a Party other than the Registrant o
|
|
|
Check
the appropriate box:
|
|
|
o
|
Preliminary
Proxy Statement
|
|
o
|
Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|
|
x
|
Definitive
Proxy Statement
|
|
o
|
Definitive
Additional Materials
|
|
o
|
Soliciting
Material Pursuant to 240.14a-12
|
|
Flagstone
Reinsurance Holdings Limited
|
||
|
(Name
of Registrant as Specified In Its Charter)
|
||
|
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
|
||
|
Payment
of Filing Fee (Check the appropriate box):
|
||
|
x
|
No
fee required.
|
|
|
o
|
Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
|
|
|
(1)
|
Title
of each class of securities to which transaction
applies:
|
|
|
(2)
|
Aggregate
number of securities to which transaction applies:
|
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
|
|
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(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
(5)
|
Total
fee paid:
|
|
|
o
|
Fee
paid previously with preliminary materials.
|
|
|
o
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
(1)
|
Amount
Previously Paid:
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
(3)
|
Filing
Party:
|
|
|
(4)
|
Date
Filed:
|
|
|
|
1.
|
To
elect four (4) Class A directors to hold office until the 2012 Annual
General Meeting of shareholders or until their respective successors have
been duly elected.
|
|
|
2.
|
To
approve the appointment of Deloitte & Touche to serve as the
Company’s independent auditor for the fiscal year 2009 until our 2010
Annual General Meeting and to refer the determination of the auditor’s
remuneration to the Board of
Directors.
|
|
|
3.
|
To
approve amendments to the
Bye-Laws.
|
|
|
4.
|
To
approve the list of Designated Company Directors for certain subsidiaries
of the Company.
|
|
|
5.
|
To
approve amendments to the Restricted Share Unit
Plan.
|
|
|
6.
|
To
approve the Amended and Restated Long-Term Incentive Plan for Island
Heritage Holdings, Ltd.
|
|
|
7.
|
To
approve the form of Stock Appreciation Rights Plan for Island Heritage
Holdings, Ltd.
|
|
|
8.
|
To
approve the form of Restricted Share Unit Plan for Flagstone Reinsurance
Africa Limited.
|
|
|
9.
|
To
approve and increase the authorized share capital of the
Company.
|
|
Name
|
Age
|
Positions
|
|
Mark
J. Byrne
|
47
|
Executive
Chairman of the Board of Directors
|
|
David
A. Brown
|
51
|
Chief
Executive Officer, Deputy Chairman and Director
|
|
Gary
Black
|
63
|
Director
|
|
Stephen
Coley
|
64
|
Director
|
|
Thomas
Dickson
|
46
|
Director
|
|
Stewart
Gross
|
49
|
Director
|
|
E.
Daniel James
|
44
|
Director
|
|
Anthony
P. Latham
|
58
|
Director
|
|
Dr.
Anthony Knap
|
59
|
Director
|
|
Jan
Spiering
|
57
|
Director
|
|
Wray
T. Thorn
|
37
|
Director
|
|
Peter
F. Watson
|
66
|
Director
|
|
Name
|
Age
|
Positions
|
|
Mark
J. Byrne(1)
|
47
|
Executive
Chairman of the Board of Directors
|
|
David
A. Brown(2)
|
51
|
Chief
Executive Officer, Deputy Chairman and Director
|
|
Patrick
Boisvert
|
35
|
Chief
Financial Officer
|
|
Thomas
Bolt
|
52
|
Managing
Director UK Operations
|
|
Khader
Hemsi
|
59
|
Chief
Executive Officer MENA Operations
|
|
William
Fawcett
|
46
|
General
Counsel
|
|
David
Flitman
|
38
|
Chief
Actuary
|
|
Venkateswara
Rao Mandava
|
47
|
Chief
Information Officer and Chief Investment Officer
|
|
Gary
Prestia
|
47
|
Chief
Underwriting Officer – Flagstone Réassurance Suisse SA – Bermuda
Branch
|
|
James
O’Shaughnessy
|
45
|
Chief
Financial Officer (ex)
|
|
Brenton
Slade
|
38
|
Chief
Marketing Officer
|
|
Guy
Swayne
|
45
|
Chief
Executive Officer – Flagstone Réassurance Suisse SA
|
|
Frédéric
Traimond
|
39
|
Chief
Operating Officer
|
|
●
|
In
connection with the three closings of the private placement of our common
shares in December 2005, January 2006 and February 2006, we issued a
Warrant to Haverford to purchase 8,585,747 common shares of the Company
(which equaled 12.0% of the issued share capital of the Company through
the completion of the private placement in February 2006) at an exercise
price of $14.00 per share (subject to adjustment for share subdivisions,
share dividends, stock splits and similar events). Our Executive Chairman,
Mr. Byrne, and our Chief Executive Officer, Mr. Brown, control and may be
deemed to have an interest in Haverford. See “Security
Ownership of Certain Beneficial Owners, Management and Directors”
below.
|
|
●
|
The
Warrant was granted in recognition of the efforts of Mr. Byrne and
Mr. Brown in creating the Company, assembling the resources and
taking financial risk by covering all of the start-up costs in advance of
the Company being funded by additional investors. In accordance with U.S.
GAAP we have recognized the Warrant as a compensation
expense.
|
|
●
|
The
fair value of the Warrant when issued in December 2005 was
$12.2 million, and this amount was included as compensation expense
for the period ended December 31, 2005. We amended the
Warrant in connection with the additional closings of the private
placement in February 2006 to increase the number of shares for
which the Warrant is exercisable in proportion to the amount of additional
capital raised in the private placement. The increase in the fair value of
the Warrant as a result of this amendment was $3.4 million, and this
amount was included as a compensation expense for the year ended
December 31, 2006.
|
|
●
|
At
a meeting of the Board of Directors held on November 14, 2008, the
Warrant was amended to change the exercise dates from December 1, 2010 to
December 31, 2010, to December 1, 2013 to December 31, 2013, change the
strike price to $14.80 from $14.00 and include a provision that amends the
strike price for all dividends paid by the Company from the issuance of
the Warrant to its exercise date. The increase in the fair
value of the Warrant as a result of these amendments was $3.6 million, and
this amount was included as compensation expense for the year ended
December 31, 2008.
|
|
●
|
LB
I, an affiliate of Lehman Brothers Inc., has invested $50.0 million in
Mont Fort Re Ltd. (“Mont Fort”) in respect of its segregated account “ILW”
(“Mont Fort ILW”) and owns 50.0 million, or 90.9%, of the Mont Fort ILW
preferred shares. LB I invested $55.0 million in Mont Fort Re Ltd. in
respect of its segregated account “ILW 2” (“Mont Fort ILW2”) and which
owned 55.0 million, or 100.0%, of the Mont Fort ILW 2 preferred shares. In
August 2007, LBI transferred 5,000,000 preferred shares in Mont Fort ILW2
to its affiliate, Lehman Brothers PEP Investments L.P. (“Lehman PEP”). On
February 8, 2008, at the request of Lehman PEP, Mont Fort redeemed the
5,000,000 preferred shares held by Lehman PEP. We own all of the common
shares of Mont Fort and have 100% control of its board of directors. E.
Daniel James, who is a director of the Company, is also a senior manager
of the Merchant Banking Group and a managing director of Lehman Brothers
Inc. Lehman Brothers Inc. acted as an underwriter of the Company’s IPO. In
addition, Lehman Brothers Inc. provided additional investment banking
services to the Company. The total fee received by Lehman Brothers
Inc. in connection with our IPO was $3.4 million. On
September 15, 2008, Lehman Brothers Holdings, Inc. filed for Chapter 11
bankruptcy protection. The Lehman entities identified above
continue as ongoing enterprises; none of them have filed for bankruptcy
protection nor are they included in the LBHI bankruptcy
estate.
|
|
●
|
The
Company entered into a foreign currency swap with Lehman Brothers Inc. to
hedge the Euro-denominated Deferrable Interest Debentures recorded as long
term debt. Under the original terms of the foreign currency
swap, the Company exchanged €13.0 million for $16.7 million, will
receive Euribor plus 354 basis points and pay LIBOR plus 371 basis
points. The swap, which was to expire on September 15, 2011,
had a fair value of $2.5 million as at December 31, 2007. The
agreement was terminated, as per the terms of the swap agreement, on
September 15, 2008 due to the bankruptcy of Lehman Brothers Inc. E. Daniel
James, who is a director of the Company, is also a senior manager of the
Merchant Banking Group and a managing director of Lehman Brothers Inc.
|
|
●
|
Further,
on December 7, 2007, the Company entered into an interest rate swap
agreement with Lehman Brothers Special Financing Inc. Under the terms of
the agreement, the Company exchanged interest on a notional amount of
$25.0 million, will receive interest at three month LIBOR and will pay
4.096% interest. The agreement will terminate on September 15, 2012. Also
on December 7, 2007, the Company entered into an interest rate swap
agreement with Lehman Brothers Special Financing Inc. Under the terms of
the agreement, the Company exchanged interest on a notional amount of
$120.0 million, will receive interest at three month LIBOR and will pay
3.962% interest. The fair value of the two swaps was $0.2 million as at
December 31, 2007. The agreement was terminated, as per the
terms of the swap agreement, on September 15, 2008 due to the bankruptcy
of Lehman Brothers Inc.
|
|
●
|
finding
and assuming attractively priced
risk;
|
|
●
|
managing
our overall risk exposure to mitigate
loss;
|
|
●
|
ensuring
we have optimal capital to run our
business;
|
|
●
|
working
hard and cooperating with colleagues;
and
|
|
●
|
providing
excellent service to clients and
colleagues.
|
|
●
|
base
salary (and, in some cases, housing allowance or mortgage
subsidy);
|
|
●
|
annual
cash bonuses; and
|
|
●
|
long-term
incentive awards (in the form of Performance Share Units or
“PSUs”).
|
|
(i)
|
Cancelled
PSU grants, see “– Executive Compensation Policy – Overview” above, are as
follows:
|
|
●
|
2006-2008
(all series): The multiplier is determined based on the geometric average
return on equity of the Company during the fiscal years 2006-2008 measured
in accordance with accounting principles generally accepted in the U.S.
(“U.S. GAAP”) on a fully diluted basis. The multiplier is 100% if
return on equity is 17%, 200% if return on equity is 27% or greater, and
0% if return on equity is 7% or less. The multiplier scales ratably
between return on equity endpoints of 7% and
27%.
|
|
●
|
2007-2009
(all series): The multiplier is determined based on the arithmetic average
return on equity of the Company during the fiscal years 2007-2009 measured
in accordance with U.S. GAAP on a fully diluted basis. The
multiplier is 100% if return on equity is 16%, 200% if return on equity is
26% or greater, and 0% if return on equity is 8% or less. The
multiplier scales ratably between a return on equity endpoint of 8%
and a midpoint of 16%, and between a return on equity midpoint of 16% and
an endpoint of 26%.
|
|
●
|
2008-2010
(Series A): The multiplier is determined based on the geometric average
return on equity of the Company during the fiscal years 2008-2010 measured
in accordance with U.S. GAAP on a fully diluted basis. The
multiplier is 100% if return on equity is 16%, 200% if return on equity is
26% or greater, and 0% if return on equity is 8% or less. The
multiplier scales ratably between a return on equity endpoint of 8% and a
midpoint of 16%, and between a return on equity midpoint of 16% and an
endpoint of 26%.
|
|
●
|
2008-2010
(Series B): The multiplier is determined based on the geometric average
return on equity of the Company during the fiscal years 2008-2010 measured
in accordance with U.S. GAAP on a fully diluted basis. The
multiplier is 100% if return on equity is 17%, 200% if return on equity is
24% or greater, and 0% if return on equity is 10% or less. The
multiplier scales ratably between return on equity endpoints of 10% and
24%.
|
|
(ii)
|
Current
PSU grants, see “– Executive Compensation Policy – Overview” above, are as
follows:
|
|
·
|
2009-2011
(Series A, B, C and D): The multiplier is determined based on the
arithmetic average return on equity of the Company during the fiscal years
2009-2011 measured in accordance with U.S. GAAP on a fully diluted
basis. The multiplier is 100% if return on equity is 13.5%, 150% if
return on equity is 18.5% or greater, and 50% if return on equity is 8.5%
or less. The multiplier scales ratably between return on equity
endpoints of 8.5% and 18.5%.
|
|
·
|
2009-2010
(Special Series F): The multiplier is determined based on the arithmetic
average return on equity of the Company during the fiscal years 2009 and
2010 measured in accordance with U.S. GAAP on a fully diluted basis.
The multiplier is 100% if return on equity is 13.5%, 150% if return on
equity is 18.5% or greater, and 50% if return on equity is 8.5% or
less. The multiplier scales ratably between return on equity
endpoints of 8.5% and 18.5%.
|
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($) (1)
|
Stock
awards(2)
($)
|
Option
awards(3)
($)
|
All other
compensation(4)
($)
|
Total
($)
|
||||||||||||||||||
|
Mark
J. Byrne
Executive
Chairman
|
2008
|
650,000 | 422,500 | — | 3,303,793 | 97,950 | 4,474,243 | ||||||||||||||||||
|
2007
|
600,000 | 750,000 | — | — | 72,469 | 1,422,469 | |||||||||||||||||||
|
David
A. Brown
Chief
Executive Officer
|
2008
|
650,000 | 422,500 | -2,425,404 | 261,708 | 46,958 | 1,381,166 | ||||||||||||||||||
|
2007
|
600,000 | 750,000 | 1,797,277 | — | 46,958 | 3,194,235 | |||||||||||||||||||
|
Patrick
Boisvert
Chief
Financial Officer (5)
|
2008
|
246,336 | 200,000 | -227,872 | — | 91,221 | 537,557 | ||||||||||||||||||
|
2007
|
200,000 | 50,000 | 177,896 | — | 72,000 | 499,896 | |||||||||||||||||||
|
David
Flitman
Chief
Actuary
|
2008
|
500,000 | 280,000 | -612,499 | — | 120,000 | 900,000 | ||||||||||||||||||
|
2007
|
383,333 | 325,000 | 538,705 | — | 103,333 | 1,350,371 | |||||||||||||||||||
|
Gary
Prestia
Chief
Underwriting Officer
Flagstone
Réassurance Suisse SA – Bermuda Branch
|
2008
|
520,000 | 292,500 | -778,135 | — | 51,600 | 864,100 | ||||||||||||||||||
|
2007
|
460,000 | 369,200 | 602,068 | — | 60,494 | 1,491,762 | |||||||||||||||||||
|
James
O’Shaughnessy
Chief
Financial Officer (ex)
|
2008
|
330,000 | 50,000 | -415,545 | — | 70,869 | 450,869 | ||||||||||||||||||
|
2007
|
315,000 | 165,000 | 342,235 | — | 78,750 | 900,985 | |||||||||||||||||||
|
(1)
|
The
amounts shown in this column are bonuses paid in fiscal year 2008 and
reflecting performance in fiscal year 2007, and bonuses paid in fiscal
year 2009 reflecting performance in fiscal year
2008.
|
|
(2)
|
The
amounts shown in this column are based on the dollar amount recognized for
financial statement reporting purposes for the 2008 fiscal year in
accordance with SFAS No. 123(R), “Share-Based Payments” (“SFAS
123(R)”). All share awards are expensed ratably over the vesting
period and thus the amounts shown reflect the portion of stock awards
granted in the 2006, 2007 and 2008 fiscal years. At a meeting of
the Compensation Committee of the Board of Directors on November 13,
2008, the members of the Compensation Committee voted to cancel the PSUs
previously granted to the Named Executive Officers in light of the
Company's then current diluted return on equity estimates, subject to
receiving such executive officer’s consent. On December 8, 2008, the
executive officers each consented to this cancellation and the PSUs
previously granted in 2006, 2007 and January 2008 were cancelled. In
lieu of this cancellation, two special series, 2009-2010 and 2009-2011,
were issued as replacement PSUs to those employees who were holders of the
cancelled series. The value of the stock awards noted above
reflects the reversal of the expense previously recognized for
the prior fiscal years in relation to the cancelled awards pursuant to
SFAS No. 123(R), and takes into account the replacement PSUs from December
8, 2008 through December 31, 2008.
|
|
(3)
|
The
amounts shown in this column are based on the dollar amount recognized for
financial statement reporting purposes for the 2008 fiscal year in
accordance with SFAS 123(R). The amounts shown in this column
represent the respective interests of Mr. Byrne and Mr. Brown in
the fair value of the amendment to the Warrant during 2008, based upon
their respective contributions to the capital of
Haverford.
|
|
(4)
|
The
amounts shown in this column represent housing allowances, school
subsidies and mortgage subsidies provided to the Named Executive Officers.
During 2008, on flights of Company aircraft, the Company allowed employees
and their family members to occupy seats that otherwise would have been
vacant. This benefit had no incremental cost to the Company as each Named
Executive Officer reimbursed the marginal cost to the Company for any such
personal use.
|
|
(5)
|
Mr.
Boisvert received his salary and a portion of his housing allowance in
U.S. dollars from January 1, 2008 until June 30, 2008. Mr.
Boisvert then received his salary and a portion of his housing allowance
in Swiss francs beginning July 1, 2008. The Swiss franc amounts
were converted in U.S. dollars at an average foreign exchange rate for the
period of $0.89871. Prior to his relocation to Switzerland in
July 2008, Mr. Boisvert was paid a bonus of $120,000 relating to his
performance up to that date for fiscal year
2008.
|
|
Estimated future
payouts under equity
incentive
plan awards (1)
|
||||||||||||||||||||||||
|
Name
|
Grant dates
|
Date of
Compensation Committee
Action
|
Threshold
(#)
|
Target
(#)(2)
|
Maximum
(#)
|
Grant Date Fair Value of Stock
and Option
Awards (3)
($)
|
||||||||||||||||||
|
Mark
Byrne
|
n/a
|
n/a
|
n/a | n/a | n/a | — | ||||||||||||||||||
|
David
Brown
|
January
1, 2008
|
October
25, 2007
|
— | 189,000 | 378,000 | — | ||||||||||||||||||
|
December
8, 2008
|
November
13, 2008
|
— | 547,587 | 821,381 | 5,541,580 | |||||||||||||||||||
|
Patrick
Boisvert
|
January
1, 2008
|
October
25, 2007
|
— | 23,000 | 46,000 | |||||||||||||||||||
|
July
1, 2008
|
October
25, 2007
|
— | 19,174 | 38,348 | — | |||||||||||||||||||
|
December
8, 2008
|
November
13, 2008
|
— | 89,735 | 134,603 | 908,118 | |||||||||||||||||||
|
David
Flitman
|
January
1, 2008
|
October
25, 2007
|
— | 67,500 | 135,000 | — | ||||||||||||||||||
|
December
8, 2008
|
November
13, 2008
|
— | 169,551 | 254,327 | 1,715,856 | |||||||||||||||||||
|
Gary
Prestia
|
January
1, 2008
|
October
25, 2007
|
— | 70,000 | 140,000 | — | ||||||||||||||||||
|
December
8, 2008
|
November
13, 2008
|
— | 188,390 | 282,585 | 1,906,507 | |||||||||||||||||||
|
James
O’Shaughnessy
|
January
1, 2008
|
October
25, 2007
|
— | 32,000 | 64,000 | — | ||||||||||||||||||
|
December
8, 2008
|
November
13, 2008
|
— | 97,962 | 146,943 | 991,375 | |||||||||||||||||||
|
(1)
|
There
is no minimum, or “threshold,” number of common shares of the Company
payable under a PSU Plan award. “Target” means the number of common shares
issuable if the performance objectives of the award were met in full
(factor of one), and “maximum” means maximum number of shares issuable
under the award (factor of 2 with respect to PSUs issued prior to December
8, 2008 and factor of 1.5 in respect of PSUs issued on December 8,
2008).
|
|
(2)
|
At
a meeting of the Compensation Committee of the Board of Directors on
November 13, 2008, the members of the Compensation Committee voted to
cancel the PSUs previously granted to the Named Executive Officers in
light of the Company's then current diluted return on equity estimates,
subject to receiving such executive officer’s consent. On December 8,
2008, the executive officers each consented to this cancellation and
the PSUs previously granted in 2006, 2007 and January 2008 were
cancelled. The issuance of shares with respect to the PSUs is
contingent upon the attainment of certain levels of average diluted return
on equity over a three year period. Considering the net loss incurred in
the nine months ended September 30, 2008, the Company reviewed is diluted
return on equity estimates for the applicable performance periods and
accordingly revised the number of PSUs expected to vest. The impact
of this revision was that the PSU’s issued on January 1, 2008 were valued
at Nil.
|
|
(3)
|
The
amounts shown in this column are based on the fair value at time of grant
of the PSUs. It assumes the performance objectives of the PSU grant were
met in full (factor of one). The ultimate value of the PSUs is highly
dependent on the Company’s diluted return on equity. See “―Long Term
Incentive Awards.” The value of the stock awards noted above reflects
the reversal of prior fiscal years’ income on the cancelled awards and the
income on the replacement PSUs from December 8, 2008 through December 31,
2008.
|
|
●
|
The
Compensation Committee is comprised of four non-executive directors,
Messrs. Gross, James, Knap and Thorn, and Mr. James serves as
Chairman. No member has ever been an officer or employee of the Company or
of any of its subsidiaries. As discussed above under “Certain
Relationships and Related Transactions,” E. Daniel James, who is a
director of the Company, is also a senior manager of the Merchant Banking
Group and a managing director of Lehman Brothers Inc. LB I, an affiliate
of Lehman Brothers Inc., has invested $50.0 million in Mont Fort Re Ltd.
(“Mont Fort”) in respect of its segregated account “ILW” (“Mont Fort ILW”)
and owns 50.0 million, or 90.9%, of the Mont Fort ILW preferred shares. LB
I invested $55.0 million in Mont Fort Re Ltd. in respect of its segregated
account “ILW 2” (“Mont Fort ILW2”) and which owned 55.0 million, or
100.0%, of the Mont Fort ILW 2 preferred shares. In August 2007, LBI
transferred 5,000,000 preferred shares in Mont Fort ILW2 to its affiliate,
Lehman Brothers PEP Investments L.P. (“Lehman PEP”). In March 2008, at the
request of Lehman PEP, Mont Fort redeemed the 5,000,000 preferred shares
held by Lehman PEP. We own all of the common shares of Mont Fort and have
100% control of its board of
directors.
|
|
●
|
The
Company entered into a foreign currency swap with Lehman Brothers Inc. to
hedge the Euro-denominated Deferrable Interest Debentures recorded as long
term debt. Under the original terms of the foreign currency
swap, the Company exchanged €13.0 million for $16.7 million, will
receive Euribor plus 354 basis points and pay LIBOR plus 371 basis
points. The swap, which was to expire on September 15, 2011,
had a fair value of $2.5 million as at December 31, 2007. The
agreement was terminated, as per the terms of the swap agreement, on
September 15, 2008 due to the bankruptcy of Lehman Brothers Inc. E. Daniel
James, who is a director of the Company, is also a senior manager of the
Merchant Banking Group and a managing director of Lehman Brothers Inc. As
discussed above, Lehman Brothers Inc. acted as an underwriter of the
Company’s IPO. In addition, Lehman Brothers Inc. provided additional
investment banking services to the Company. The total fee received by
Lehman Brothers Inc. in connection with our IPO was $3.4
million.
|
|
●
|
Further,
on December 7, 2007, the Company entered into an interest rate swap
agreement with Lehman Brothers Special Financing Inc. Under the terms of
the agreement, the Company exchanged interest on a notional amount of
$25.0 million, will receive interest at three month LIBOR and will pay
4.096% interest. The agreement will terminate on September 15, 2012. Also
on December 7, 2007, the Company entered into an interest rate swap
agreement with Lehman Brothers Special Financing Inc. Under the terms of
the agreement, the Company exchanged interest on a notional amount of
$120.0 million, will receive interest at three month LIBOR and will pay
3.962% interest. The fair value of the two swaps was $0.2 million as at
December 31, 2007. The agreement was terminated, as per the
terms of the swap agreement, on September 15, 2008 due to the bankruptcy
of Lehman Brothers Inc.
|
|
Name
|
Outstanding Equity Awards at Fiscal
Year-End
|
|||||||||||||||||||||||||||
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||
|
Number of
securities
underlying
unexercised
options
exercisable
(#)
|
Number of
securities
underlying
unexercised
options
unexercisable (1)
(#)
|
Equity incentive plan awards: number of securities
underlying unexercised unearned options (#)
|
Option
exercise
price
($)
|
Option
expiration
date
|
Equity incentive plan awards: number of unearned
shares, units or other rights that have not vested
(#) (2)
|
Equity incentive plan awards: market or payout
value of unearned shares, units or other rights that have not vested
(3)
($)
|
||||||||||||||||||||||
|
Mark
Byrne
|
n/a
|
7,955,553
|
—
|
$ |
14.80
|
December
31, 2013
|
—
|
—
|
||||||||||||||||||||
|
David
Brown
|
n/a
|
630,194
|
—
|
$ |
14.80
|
December
31, 2013
|
547,587
|
$ |
5,349,925
|
|||||||||||||||||||
|
Patrick
Boisvert
|
n/a
|
n/a
|
|
n/a
|
n/a
|
n/a
|
89,735
|
$ |
876,711
|
|||||||||||||||||||
|
David
Flitman
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
169,551
|
$ |
1,656,513
|
||||||||||||||||||||
|
Gary
Prestia
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
188,390
|
$ |
1,840,570
|
||||||||||||||||||||
|
James
O’Shaughnessy
|
n/a
|
n/a
|
|
n/a
|
n/a
|
n/a
|
97,962
|
$ |
957,089
|
|||||||||||||||||||
|
(1)
|
The
amounts shown in this column represent the respective interests of Mr.
Byrne and Mr. Brown in the Warrant, based upon their respective
contributions to the capital of
Haverford.
|
|
(2)
|
The
number of common shares shown in this column assumes the performance
objectives of the PSU grant were met in full (factor of one). The number
of common shares issuable in respect of the PSUs could increase by a
factor of 1.5 depending on diluted return on equity. See “―Long Term
Incentive Awards.”
|
|
(3)
|
Valuation
of the stock awards replacement PSUs issued on December 8, 2008 assumed a
market price of $9.77 as at December 31,
2008.
|
|
●
|
a
material breach by the Named Executive Officer of any contract between
such executive officer and the
Company;
|
|
●
|
the
willful and continued failure or refusal by such executive officer to
perform any duties reasonably required by the Company, after notification
by the Company of such failure or refusal, and failing to correct such
behavior within 20 days of such
notification;
|
|
●
|
commission
by the executive officer of a criminal offence or other offence of moral
turpitude;
|
|
●
|
perpetration
by the executive officer of a dishonest act or common law fraud against
the Company or a client thereof; or
|
|
●
|
the
Named Executive Officer’s willful engagement in misconduct which is
materially injurious to the Company, including without limitation the
disclosure of any trade secrets, financial models, or computer software to
persons outside the Company without the consent of the
Company.
|
|
●
|
A
“change of control” means any person or group, other than the initial
subscribers of the Company, becomes the beneficial owner of 50% or more of
the Company’s then outstanding shares, or the business of the Company for
which the participant’s services are principally performed is disposed of
by the Company pursuant to a sale or other disposition of all or
substantially all of the business or business related assets of the
Company (including shares of a subsidiary of the
Company).
|
|
●
|
“Cause”
has the meaning set forth above under “—Employment
Agreements.”
|
|
●
|
A
participant who terminates employment at his own initiative may, by prior
written notice to the Company, declare the termination to be a
“constructive termination” if it follows (a) a material decrease in
his salary or (b) a material diminution in the authority, duties or
responsibilities of his position with the result that the participant
makes a determination in good faith that he cannot continue to carry out
his job in substantially the same manner as it was intended to be carried
out immediately before such diminution. The Company has 30 days to
cure the circumstances that would constitute a constructive
termination.
|
|
●
|
An
“adverse change in the plan” principally includes a termination of the
plan, an amendment that materially diminishes the value of PSU grants, or
a material diminution of the rights of the holder of the
PSU.
|
|
Name
|
Fees earned
or paid in
cash ($)
|
Stock
awards
(1)
($)
|
Total
($)
|
|||||||||
|
Gary
Black
|
19,000
|
78,000
|
97,000
|
|||||||||
|
Stephen
Coley
|
33,000
|
83,000
|
116,000
|
|||||||||
|
Thomas
Dickson(2)
|
74,125
|
41,500
|
115,625
|
|||||||||
|
Stewart
Gross(3)
|
108,000
|
15,000
|
123,000
|
|||||||||
|
E.
Daniel James(4)
|
30,000
|
86,000
|
116,000
|
|||||||||
|
Dr.
Anthony Knap
|
46,000
|
84,000
|
130,000
|
|||||||||
|
Anthony
P. Latham
|
11,125
|
—
|
11,125
|
|||||||||
|
Marc
Roston(5)
|
20,000
|
81,000
|
101,000
|
|||||||||
|
Jan
Spiering
|
43,000
|
184,000
|
227,000
|
|||||||||
|
Wray
T. Thorn(6)
|
50,000
|
87,000
|
137,000
|
|||||||||
|
Peter
F. Watson
|
72,000
|
35,000
|
107,000
|
|||||||||
|
(1)
|
The
amounts shown in this column are based on the dollar amount recognized for
financial statement reporting purposes for the 2008 fiscal year in
accordance with SFAS No. 123(R). The amounts shown in this column
also represent the fair value at time of grant of the Restricted Share
Units (“RSUs”) granted to each director during 2008. The aggregate number
of RSUs issued to each director during 2008 (all of which remained
outstanding as at December 31, 2008, with the exception of Mr. Roston
whose RSUs were settled on December 19, 2008) was as follows:
Mr. Black—5,611 RSUs; Mr. Coley—5,971 RSUs;
Mr. Dickson—2,985 RSUs; Mr. Gross—1,079
RSUs; Mr. James—6,187 RSUs; Dr. Knap—6,043 RSUs; Mr. Latham—nil
RSUs; Mr. Roston— 5,827 RSUs Mr. Spiering—13,237 RSUs;
Mr. Thorn—6,258 RSUs; and Mr. Watson—2,517
RSUs.
|
|
(2)
|
As
noted in “Our Directors” above, Thomas Dickson is Chief Executive Officer
and Founder of Meetinghouse LLC. The Company authorized the
issuance of such RSUs in consideration of Mr. Dickson’s service as a
director. The RSUs were granted in favor of Meetinghouse,
LLC.
|
|
(3)
|
As
noted in “Our Directors” above, Stewart Gross is a Managing Director of
Lightyear Capital. The Company authorized the issuance of such RSUs in
consideration of Mr. Stewart’s service as a director. The RSUs were
granted in favor of Lightyear Capital, LLC. Mr. Gross does not
beneficially own these RSUs.
|
|
(4)
|
As
noted in “Our Directors” above, E. Daniel James is a Managing
Director of Lehman Brothers Inc. and a senior manager of Lehman Brothers
Merchant Banking Group. As part of his compensation for serving as a
director of the Company, Mr. James has received, and it is expected that
he will in the future from time to time receive, common shares, RSUs or
options to purchase our common shares. Under the terms of Mr. James’
employment with Lehman Brothers Inc., he is required to surrender to
Lehman Brothers Inc. any compensation (including common shares, RSUs and
options) received in his capacity as a director of the Company. Mr. James
disclaims beneficial ownership of all RSUs granted to him and all
common shares beneficially owned by the Lehman entities. See
“Security Ownership of Certain Beneficial Owners, Management and
Directors” below.
|
|
(5)
|
Mr.
Roston resigned from the Board of Directors on September 29,
2008.
|
|
(6)
|
As
noted in “Our Directors” above, Wray Thorn is Senior Managing
Director at Marathon Asset Management, LP (formerly known as Marathon
Asset Management, LLC) (“Marathon”). Mr. Thorn does not individually
or otherwise beneficially own any common shares of the Company. Mr.
Thorn is an employee of Marathon, which serves as the investment manager
(the “Manager”) of Marathon Special Opportunity Master Fund, Ltd. and
Marathon Special Opportunity Liquidating Fund, Ltd. (together, the
“Marathon Funds”). The Marathon Funds own certain common shares of
the Company, all of which are subject to the sole voting and investment
authority of the Manager. Thus, for purposes of Regulation 13d-3
of the Exchange Act, the Manager is deemed to beneficially own the
securities of the Company held by the Marathon Funds, and Mr. Thorn
disclaims beneficial ownership of the common shares of the Company held by
the Marathon Funds. The Manager, in its capacity as the holder of
sole voting and investment authority of more than 5% of the common shares
of the Company pursuant to Regulation 13d-3 of the Exchange Act,
separately files statements pursuant to Section 13 of the Exchange
Act. Mr. Thorn’s interest in the securities noted herein is limited
to the extent of his pecuniary interest in the Marathon Funds, if
any.
|
|
●
|
each
person known by us to beneficially own 5% or more of our outstanding
common shares;
|
|
●
|
each
of our directors;
|
|
●
|
each
of our named executive officers;
and
|
|
●
|
all
of our executive officers and directors as a
group.
|
|
Name of beneficial owner
|
Number of
Common
Shares
|
Percentage of
voting rights
(1)
|
|
Lehman
entities(2)
|
15,830,000
|
18.7%
|
|
Silver
Creek entities(3)
|
11,208,946
|
13.2
|
|
Mark
J. Byrne(4)
|
9,838,795
|
11.6
|
|
Lightyear
entities(5)
|
6,000,000
|
7.1
|
|
QVT entities(6)
|
5,741,532
|
6.8
|
|
Marathon
Special Opportunity Master Fund, Ltd. and Marathon Special Opportunity
Liquidating Fund, Ltd.
(7)
|
5,439,391
|
6.4
|
|
Gary
Black
|
—
|
—
|
|
David
A. Brown(8)
|
301,205
|
*
|
|
Stephen
Coley
|
—
|
—
|
|
Thomas
Dickson(9)
|
2,510,802
|
3.0
|
|
Stewart
Gross(10)
|
—
|
—
|
|
E.
Daniel James(11)
|
15,830,000
|
18.7
|
|
Dr.
Anthony Knap(12)
|
1,300
|
*
|
|
Marc
Roston(13)
|
—
|
—
|
|
Anthony
P. Latham
|
—
|
—
|
|
Jan
Spiering
|
10,000
|
*
|
|
Wray
T. Thorn(14)
|
5,439,391
|
6.4
|
|
Peter
F. Watson
|
—
|
—
|
|
Patrick
Boisvert
|
3,500
|
*
|
|
Thomas
Bolt
|
—
|
—
|
|
Khader
Hemsi
|
—
|
—
|
|
William
Fawcett
|
—
|
—
|
|
David
Flitman
|
—
|
—
|
|
Venkateswara
Rao Mandava
|
—
|
—
|
|
James
O’Shaughnessy
|
8,000
|
*
|
|
Gary
Prestia(15)
|
500
|
*
|
|
Brenton
Slade
|
—
|
—
|
|
Guy
Swayne(16)
|
10,000
|
*
|
|
Frédéric
Traimond
|
—
|
—
|
|
All
directors and executive officers as a group (24 persons) (see notes
(7) through (16))
|
56,903,971
|
67.1%
|
|
*
|
Represents
less than 0.1% of the outstanding common
shares.
|
|
(1)
|
Our
bye-laws reduce the total voting power of any shareholder who is a U.S.
person controlling more than 9.9% of our common shares to less than 9.9%
of the voting power of our common shares. Under this provision, the
voting power of the Lehman entities and the Silver Creek entities, each of
which is a U.S. person which controls more than 9.9% of our common shares,
has been reduced to less than 9.9% of the voting power of our common
shares. The voting power of the Lehman entities and the Silver Creek
entities will, to the extent necessary, be adjusted so that such entities
possess less than 9.9% of the voting power of our common
shares.
|
|
(2)
|
Of
the common shares beneficially owned by the Lehman entities, 5,117,509 are
held by Lehman Brothers Merchant Banking Partners III L.P.; 1,127,932 are
held by Lehman Brothers Merchant Banking Fund III L.P.; 1,359,223 are held
by Lehman Brothers Merchant Banking Fund (B) III L.P.; 2,147,199 are held
by LB I Group Inc; 172,182 are held by Lehman Brothers Co-Investment
Capital Partners L.P.; 122,081 are held by Lehman Brothers Co-Investment
Group L.P.; 4,705,737 are held by Lehman Brothers Co-Investment Partners
L.P.; 430,000 are held by Lehman Brothers Fund of Funds
XVIII—Co-Investment Holding, LP; 248,137 are held by Lehman Brothers
Merchant Banking Capital Partners V L.P.; and 400,000 are held by Lehman
Crossroads Series XVII Master Holding Fund 66, LP. The address of the
Lehman entities is 399 Park Avenue, 9th Floor New York, NY
10022.
|
|
(3)
|
Of
the common shares beneficially owned by the Silver Creek entities,
3,503,225 are held by Silver Creek Low Vol Strategies Holdings, LLC;
5,417,827 are held by Silver Creek Low Vol Fund A, LLC; and 2,287,894 are
held by Silver Creek Special Opportunities Holdings I, LLC. Silver Creek
Capital Management LLC serves as the managing member of the Silver Creek
entities and as such exercises all management and control of the business
affairs of the Silver Creek entities. The managing members of Silver Creek
Capital Management LLC are Eric Dillon and Timothy Flaherty. The address
of the Silver Creek entities is 1301 Fifth Avenue, 40th Floor, Seattle, WA
98101.
|
|
(4)
|
Mr.
Byrne has provided capital to Haverford (Bermuda) Ltd., and he may be
deemed to have investment or voting control and may be deemed to
beneficially own 2,633,639 common shares of the Company held of
record by Haverford (Bermuda) Ltd. These shares represent the indirect
proportionate interest of Mr. Byrne in the 2,842,409 common shares of
the Company held of record by Haverford (Bermuda) Ltd. These shares are
held through a trust for the benefit of others and Mr. Byrne therefore
disclaims beneficial ownership of these common shares. IAL FSR Limited
owns 7,155,156 common shares of the Company, which it holds for the
benefit of a company which is owned by a trust for which Mr. Byrne acts as
the settlor. Mr. Byrne disclaims beneficial ownership of these shares.
Rebecca Byrne, Mr. Byrne’s wife, is the record holder of 50,000 common
shares of the Company which were purchased through the Directed Share
Program in connection with the initial public offering of common shares of
the Company. Mr. Byrne disclaims beneficial ownership of these
shares. The address of Mr. Byrne is Crawford House, 23 Church
Street, Hamilton HM 11, Bermuda.
|
|
(5)
|
Of
the common shares beneficially owned by the Lightyear entities, 5,982,000
are held by Lightyear Fund II (Cayman), L.P., and 18,000 are held by
Lightyear Co-Invest Partnership II (Cayman), L.P. As the sole general
partner of each of Lightyear Fund II (Cayman), L.P. and Lightyear
Co-Invest Partnership II (Cayman), L.P., Lightyear Fund II
(Cayman) GP, L.P. may be deemed to have voting and/or investment power
over such securities. As the sole general partner of Lightyear Fund II
(Cayman) GP, L.P., Lightyear Fund II (Cayman) GP, Ltd. may also be
deemed to have voting and/or investment power over such securities.
As the sole Class A shareholder of Lightyear Fund II (Cayman) GP,
Ltd., Marron & Associates, LLC (“Marron & Associates”) may also be
deemed to have voting and/or investment power over such securities,
although the Class A shareholder holds only a 7.69% vote with respect to
the voting power over such securities. As the sole member of Marron
& Associates, Chestnut Venture Holdings, LLC may also be deemed to
have voting and/or investment power over such securities. As the
managing member of Chestnut Venture Holdings, LLC, Donald B. Marron may
also be deemed to have voting and/or investment power over such
securities. Each of Lightyear Fund II (Cayman) GP, L.P., Lightyear
Fund II (Cayman) GP, Ltd., Marron & Associates, Chestnut Venture
Holdings, LLC, and Donald B. Marron disclaims beneficial ownership of the
common shares held by Lightyear Fund II (Cayman), L.P. and Lightyear
Co-Invest Partnership II (Cayman), L.P., except to the extent of its
or his pecuniary interest in such common shares. The address of the
Lightyear entities and Donald B. Marron is 375 Park Avenue, 11th Floor,
New York, NY 10152.
|
|
(6)
|
Of
the common shares beneficially owned by the QVT entities,
4,147,009 are held by QVT Fund LP; 1,229,325 are held by Quintessence
Fund L.P.; 365,198 are held by Deutsche Bank which manages a separate
discretionary account the investment manager of which is QVT Financial LP
Management of QVT Fund LP is vested in its general partner, QVT Associates
GP LLC. QVT Associates GP LLC is also the general partner of Quintessence
Fund L.P. QVT Financial LP is the investment manager for QVT Fund LP and
shares voting and investment control over the Company securities held by
QVT Fund LP. QVT Financial GP LLC is the general partner of QVT Financial
LP and as such has complete discretion in the management and control of
the business affairs of QVT Financial LP. The managing members of QVT
Financial GP LLC are Daniel Gold, Lars Bader, Tracy Fu and Nicholas Brumm.
Each of QVT Financial LP, QVT Financial GP LLC, Daniel Gold, Lars Bader,
Tracy Fu and Nicholas Brumm disclaims beneficial ownership of the
Company’s securities held by QVT Fund LP. The address of QVT Fund L.P. is
c/o QVT Financial LP, 1177 Avenue of the Americas, 9th Floor,
New York, NY 10036.
|
|
(7)
|
Marathon
Asset Management, LP (formerly known as Marathon Asset
Management, LLC) (“Marathon”) serves as the investment manager of Marathon
Special Opportunity Master Fund, Ltd. and Marathon Special
Opportunity Liquidating Fund, Ltd. (together the “Funds”) pursuant to an
Investment Management Agreement between Marathon and the Funds. Marathon,
in its capacity as the investment manager of the Funds, has sole power to
vote and direct the disposition of all common shares held by the Funds.
Bruce Richards and Louis Hanover are the managing members of Marathon. As
managing members of Marathon, Messrs. Richards and Hanover may also
be deemed to have voting and/or investment power over the common shares
held by the Funds. However, each of Mr. Richards and Mr. Hanover
disclaims beneficial ownership of the common shares held by the Funds,
except to the extent of his pecuniary interest in such common shares. The
address of Marathon Special Opportunity Master Fund, Ltd. and Marathon
Special Opportunity Liquidating Fund, Ltd. is 461 Fifth Avenue, 10th
Floor, New York, NY 10017.
|
|
(8)
|
Mr.
Brown has provided capital to Haverford (Bermuda) Ltd., and he may be
deemed to have investment or voting control and may be deemed to
beneficially own 208,770 common shares of the Company held of record by
Haverford (Bermuda) Ltd. These common shares represent the indirect
proportionate interest of Mr. Brown in the 2,842,409 common shares of the
Company held of record by Haverford (Bermuda) Ltd. These common shares are
held through a trust for the benefit of others and Mr. Brown therefore
disclaims beneficial ownership of these common shares. In addition, Mr.
Brown acts as the settlor of a trust that is the owner of Leyton Limited,
and Leyton Limited is the record holder of 80,000 common shares of the
Company which were purchased through the Directed Share Program in
connection with the initial public offering of common shares of the
Company, as well as 2,435 common shares of the Company which were paid to
Leyton Limited from Haverford (Bermuda) Ltd on November 12, 2008 as a
dividend in specie. Mr. Brown disclaims beneficial ownership of the shares
held by Leyton Limited. 10,000 of these shares are owned directly by
Mr. Brown.
|
|
(9)
|
Includes
2,500,000 shares held of record by HCP. Mr. Dickson disclaims
beneficial ownership of the shares held by
HCP.
|
|
(10)
|
Mr.
Gross does not beneficially own the shares owned by certain Lightyear
entities as described in note 4
above.
|
|
(11)
|
Represents
shares held by certain Lehman entities as described in note 2 above. Mr.
James disclaims beneficial ownership of all common shares owned by Lehman
entities.
|
|
(12)
|
Represents
shares purchased through the Directed Share Program in connection with the
IPO of common shares of the Company by Philippa Knap, Dr. Knap’s wife. Dr.
Knap disclaims beneficial ownership of shares held by his
wife.
|
|
(13)
|
Mr.
Roston does not beneficially own the shares held by certain funds managed
by Silver Creek Capital Management LLC as described in note 3
above.
|
|
(14)
|
Represents
shares held by Marathon Special Opportunity Master Fund, Ltd. and Marathon
Special Opportunity Liquidating Fund, Ltd. as described in note 7
above. Mr. Thorn does not individually or otherwise beneficially own
any shares of the Company.
|
|
(15)
|
Represents
shares purchased through the Directed Share Program in connection with the
IPO of common shares of the Company by Donna Prestia, Mr. Prestia’s
wife. Mr. Prestia disclaims beneficial ownership of shares held by
his wife.
|
|
(16)
|
Represents
shares purchased through the Directed Share Program in connection with the
IPO of common shares of the Company by Larissa Swayne, Mr. Swayne’s wife.
Mr. Swayne disclaims beneficial ownership of shares held by his
wife.
|
|
●
|
Mr.
Black, a director of
the Company since June 2006, formerly served as Chief Claims Executive and
Senior Vice President of One Beacon Insurance Company, a part of the White
Mountains Insurance Group.
|
|
●
|
Mr.
Coley, a director of the Company since January 2006 is Director Emeritus
of McKinsey & Company, a group which owns common stock of the
Company.
|
|
●
|
Mr. Thomas
Dickson, a director of the Company since December 2005, controls the
investment manager of HCP. Haverford has an investment in HCP.
HCP pays a performance-based fee to its investment manager. HCP
owns approximately 3.0% of the common stock of the
Company.
|
|
●
|
Mr.
Gross, a director of the Company since January 2006, is the Managing
Director of Lightyear Capital LLC, a group which accounts for
approximately 7.1% of the common stock of the
Company.
|
|
●
|
Mr.
E. Daniel James, a director of the Company since December 2005, is
a senior manager of the Merchant Banking Group and managing
director of Lehman Brothers Inc. On December 7, 2007, the
Company entered into an interest rate swap agreement with Lehman Brothers
Special Financing Inc. Under the terms of the agreement, the Company
exchanged interest on a notional amount of $25.0 million, will receive
interest at three month LIBOR and will pay 4.096% interest. The agreement
will terminate on September 15, 2012. Also on December 7, 2007, the
Company entered into an interest rate swap agreement with Lehman Brothers
Special Financing Inc. Under the terms of the agreement, the Company
exchanged interest on a notional amount of $120.0 million, will receive
interest at three month LIBOR and will pay 3.962% interest. The fair value
of the two swaps was $0.2 million as at December 31, 2007. The
agreement was terminated, as per the terms of the swap agreement, on
September 15, 2008 due to the bankruptcy of Lehman Brothers Inc. Affiliates of Lehman
Brothers Inc. are shareholders of the Company, and Mr. James is a managing
director at Lehman Brothers Inc. Lehman Brothers Inc. acted as an
underwriter and provided additional investment banking services to the
Company in connection with its IPO, for which it received fees of $3.4
million.
|
|
●
|
LB
I, an affiliate of Lehman Brothers Inc., has invested $50.0 million in
Mont Fort in respect of Mont Fort ILW and owns 50.0 million, or 90.9%, of
the Mont Fort ILW preferred shares. LB I invested $55.0 million in Mont
Fort in respect of Mont Fort ILW2 and which owned 55.0 million, or 100.0%,
of the Mont Fort ILW 2 preferred shares. In August 2007, LBI transferred
5,000,000 preferred shares in Mont Fort ILW2 to its affiliate, Lehman
Brothers PEP. In March 2008, at the request of Lehman PEP, Mont Fort
redeemed the 5,000,000 preferred shares held by Lehman PEP. We own all of
the common shares of Mont Fort and have 100% control of its board of
directors. E. Daniel James, who is a director of the Company, is also a
senior manager of the Merchant Banking Group and a managing director of
Lehman Brothers Inc. As discussed above, Lehman Brothers Inc. acted as an
underwriter of the Company’s IPO. In addition, Lehman Brothers Inc.
provided additional investment banking services to the Company. The total
fee received by Lehman Brothers Inc. in connection with our IPO
was $3.4 million.
|
|
●
|
Dr.
Anthony Knap, Ph.D., a director of the Company since December 2005, is the
President and Director and Senior Research Scientist of the Bermuda
Institute of Ocean Sciences. The Company has made charitable
contributions to Bermuda Institute of Ocean Sciences, a tax-exempt
organization.
|
|
●
|
Mr.
Anthony P. Latham, a director of the Company since November 2008, is a
former member of the Group Executive of RSA Group plc where he held a
variety of senior executive roles ending December 31, 2007. RSA
Group plc is an international insurance group, listed on the London Stock
Exchange.
|
|
●
|
Mr.
Roston was formerly the Senior Portfolio Manager for Silver Creek Capital,
a group which accounts for approximately 13.2% of the common stock of the
Company. Mr. Roston resigned from the Board of Directors on
September 29, 2008.
|
|
●
|
Mr.
Spiering, a director of the Company since December 2005, served as the
Chairman and Managing Partner of Ernst & Young Bermuda until
2002. The Company has engaged Ernst & Young Bermuda as
a consultant and uses Ernst & Young for other projects for the
Company.
|
|
●
|
Mr.
Thorn, a director of the Company since October 2006, has served as a
Managing Director of Private Equity at Marathon Asset Management, LLC
since 2005 a group which accounts for approximately 6% of the common stock
of the Company.
|
|
●
|
Mr.
Watson, a director of the Company since September 2007, served as a
consultant to Attorney’s Liability Assurance Society (Bermuda) Ltd. until
2008.
|
|
Audit Committee
|
Compensation
Committee
|
Governance
Committee
|
Finance
Committee
|
Underwriting
Committee
|
|
|
Jan
Spiering*
|
E.
Daniel James*
|
Stephen
Coley*
|
Mark
Byrne*
|
Thomas
Dickson*
|
|
|
Stephen
Coley
|
Stewart
Gross
|
E.
Daniel James
|
David
Brown
|
Gary
Black
|
|
|
Thomas
Dickson
|
Dr.
Anthony Knap
|
Jan
Spiering
|
E.
Daniel James
|
David
Brown
|
|
|
Stewart
Gross
|
Wray
T. Thorn
|
Wray
T. Thorn
|
Jan
Spiering
|
Mark
Byrne
|
|
|
Dr.
Anthony Knap
|
Wray
T. Thorn
|
Stewart
Gross
|
|||
|
Wray
T. Thorn
|
Dr.
Anthony Knap
|
||||
|
Peter
F. Watson
|
Anthony
P. Latham
|
||||
|
Peter
F. Watson
|
|
●
|
reviews
and discusses the audited financial statements with management, reviews
the audit plans and findings of the independent auditor, reviews the audit
plans and findings of our internal audit and risk review staff, reviews
the results of regulatory examinations and tracks management’s corrective
actions plans where necessary;
|
|
●
|
reviews
our accounting policies and controls, compliance programs, and significant
tax and legal matters;
|
|
●
|
is
directly responsible for the appointment, compensation, retention and
oversight of the work of the independent
auditor;
|
|
●
|
receive
and consider reports from internal auditors on risk assessment, work
completed against annual audit plan and other areas proposed by the
committee.
|
|
●
|
reviews
our risk assessment and management processes;
and
|
|
●
|
performs
other tasks in accordance with the terms of its
charter.
|
|
●
|
reviews
aggregate underwritten exposures;
|
|
●
|
reviews
performance targets, including loss ratio targets, combined ratio targets,
return on equity targets or other measurement devices employed by the
Company to monitor its underwriting
performance;
|
|
●
|
reviews
projected potential aggregate losses in excess of amounts the Committee
shall determine and revise from time to time;
and
|
|
●
|
advises
the Audit Committee and Board of Directors regarding loss
reserves.
|
|
●
|
reviews
matters relating to liabilities, hedging practices, and other aspects of
the Company’s financial affairs beyond asset
management;
|
|
●
|
formulates
the Company’s investment policy;
and
|
|
●
|
oversees
all of the Company’s significant investing
activities.
|
|
INTERPRETATION
|
32.
|
Power
to Demand a Vote on a Poll
|
CORPORATE
RECORDS
|
||||
|
1.
|
Definitions
|
33.
|
Voting
by Joint Holders of Shares
|
64.
|
Minutes
|
||
|
SHARES
|
34.
|
Instrument
of Proxy
|
65.
|
Place
Where Corporate Records Kept
|
|||
|
2.
|
Power
to Issue Shares
|
35.
|
Representation
of Corporate Member
|
66.
|
Form
and Use of Seal
|
||
|
3.
|
Power
of the Company to Purchase its Shares
|
36.
|
Adjournment
of General Meeting
|
ACCOUNTS
|
|||
|
4.
|
Rights
Attaching to Shares
|
37.
|
Written
Resolutions
|
67.
|
Books
of Account
|
||
|
5.
|
Calls
on Shares
|
38.
|
Directors
Attendance at General Meetings
|
68.
|
Financial
Year End
|
||
|
6.
|
Prohibition
on Financial Assistance
|
DIRECTORS
AND OFFICERS
|
AUDITS
|
||||
|
7.
|
Forfeiture
of Shares
|
39.
|
Election
of Directors
|
69.
|
Annual
Audit
|
||
|
8.
|
Share
Certificates
|
40.
|
Classification
of Directors
|
70.
|
Appointment
of Auditor
|
||
|
9.
|
Fractional
Shares
|
41.
|
Term
of Office of Directors
|
71.
|
Remuneration
of Auditor
|
||
|
REGISTRATION
OF SHARES
|
42.
|
Removal
of Directors
|
72.
|
Duties
of Auditor
|
|||
|
10.
|
Register
of Members
|
43.
|
Vacancy
in the Office of Director and appointment
|
73.
|
Access
to Records
|
||
|
11.
|
Registered
Holder Absolute Owner
|
of
alternate Directors
|
74.
|
Financial
Statements
|
|||
|
12.
|
Transfer
of Registered Shares and the Warrant
|
44.
|
Remuneration
of Directors
|
75.
|
Distribution
of Auditor’s Report
|
||
|
and
restrictions on transfer
|
45.
|
Defect
in Appointment of Director
|
76.
|
Vacancy
in the Office of Auditor
|
|||
|
13.
|
Transmission
of Registered Shares
|
46.
|
Directors
to Manage Business
|
VOLUNTARY
WINDING-UP AND DISSOLUTION
|
|||
|
ALTERATION
OF SHARE CAPITAL
|
47.
|
Powers
of the Board of Directors
|
77.
|
Winding-Up
|
|||
|
14.
|
Power
to Alter Capital
|
48.
|
Register
of Directors and Officers
|
CHANGES
TO CONSTITUTION
|
|||
|
15.
|
Variation
of Rights Attaching to Shares
|
49.
|
Officers
|
78.
|
Changes
to Bye-laws
|
||
|
DIVIDENDS
AND CAPITALISATION
|
50.
|
Appointment
of Officers
|
79.
|
Changes
to the Memorandum of Association
|
|||
|
16.
|
Dividends
|
51.
|
Duties
of Officers
|
80.
|
Discontinuance
|
||
|
17.
|
Power
to Set Aside Profits
|
52.
|
Remuneration
of Officers
|
||||
|
18.
|
Method
of Payment
|
53.
|
Conflicts
of Interest
|
||||
|
19.
|
Capitalisation
|
54.
|
Indemnification and Exculpation of Directors and Officers | ||||
|
MEETINGS
OF MEMBERS
|
MEETINGS
OF THE BOARD OF DIRECTORS
|
||||||
|
20.
|
Annual
General Meetings
|
55.
|
Board
Meetings
|
||||
|
21.
|
Special
General Meetings
|
56.
|
Notice
of Board Meetings
|
||||
|
22.
|
Requisitioned
General Meetings
|
57.
|
Participation
in Meetings by Telephone
|
||||
|
23.
|
Notice
|
58.
|
Quorum
at Board Meetings
|
||||
|
24.
|
Giving
Notice
|
59.
|
Special
Business
|
||||
|
25.
|
Postponement
of General Meeting
|
60.
|
Board
to Continue in the Event of Vacancy
|
||||
|
26.
|
Attendance
at Meetings
|
61.
|
Chairman
to Preside
|
||||
|
27.
|
Quorum
at General Meetings
|
62.
|
Written
Resolutions
|
||||
|
28.
|
Chairman
to Preside
|
63.
|
Validity
of Prior Acts of the Board
|
||||
|
29.
|
Voting
on Resolutions
|
||||||
|
30.
|
Limitation
on Voting Rights of Controlled Shares
|
||||||
|
30A
|
Requirement
to provide Information and Notice
|
||||||
|
31.
|
Certain
Subsidiaries
|
||||||
|
1.
|
Definitions
|
|
|
1.1
|
In
these Bye-laws, the following words and expressions shall, where not
inconsistent with the context, have the following meanings,
respectively:
|
|
|
Act
|
the
Companies Act 1981 as amended from time to
time;
|
|
|
Affiliate
|
means,
with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, Controls, is Controlled by, or is
under common Control with such
Person;
|
|
|
Auditor
|
includes
an individual or partnership appointed as the independent registered
public accounting firm of the Company in accordance with Bye-Law
70;
|
|
|
Board
|
the
board of Directors appointed or elected pursuant to these Bye-laws and
acting by resolution in accordance with the Act and these Bye-laws or the
directors present at a meeting of directors at which there is a
quorum;
|
|
|
Book
Value
|
the
book value of the shares of the Company determined in accordance with GAAP
as set forth in the Company’s most recent audited consolidated balance
sheet;
|
|
|
Bye-laws
|
means
the bye-laws of the Company as from time to time altered or
amended;
|
|
|
Business
Plan
|
means
the business plan of Flagstone submitted to the Insurers’ Admission
Committee on November 7, 2005;
|
|
|
Cause
|
shall
be deemed to exist only if (i) the Director whose removal is proposed has
been charged with or convicted of an indictable offence or a felony by a
court of competent jurisdiction or has been adjudged by a court of
competent jurisdiction to be liable for fraud or dishonesty in the
performance of such Director’s duty to the Company or (ii) the Director
whose removal is proposed suffers from any physical or mental disability
that substantially impairs the ability of such Director to function in
that capacity;
|
|
|
Code
|
means
the United States Internal Revenue Code of 1986, as
amended;
|
|
|
Company
|
means
the company named Flagstone Reinsurance Holdings Limited, incorporated in
Bermuda on October 4, 2005 for which these Bye-laws are approved and
confirmed;
|
|
|
Confidential
Information
|
has
the meaning attributed thereto in Bye-law
30A(2);
|
|
|
Common
Share
|
means
the common shares of the Company of US$ 0.01 par value per
share;
|
|
|
Control
|
“Control”
of a Person means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise, and “Controlling” and “Controlled” shall have meanings
correlative to the foregoing;
|
|
|
Controlled
Shares
|
in
reference to any Person means all shares of the Company directly,
indirectly or constructively owned by such Person within the meaning of
Section 958 of the Code;
|
|
|
Designated
Company
|
has
the meaning attributed thereto in Bye-law
31.1;
|
|
|
Designated
Company Director
|
means
the person elected to the office of Designated Company Director in
accordance with Bye-law 31;
|
|
|
Director
|
a
director of the Company;
|
|
|
Equity
Securities
|
means
any shares of the share capital of the Company, any securities convertible
into or exchangeable for shares of the share capital of the Company, and
any options, warrants, and other rights to purchase or otherwise acquire
from the Company shares of such share capital, or securities convertible
into or exchangeable for shares of such share
capital;
|
|
|
Exchange
Act
|
means
the US Securities Exchange Act of 1934, as
amended;
|
|
|
Fair
Market Value
|
means,
with respect to a repurchase of any shares of the Company in accordance
with these Bye-laws (a) if such shares are listed on a securities
exchange (or quoted in a securities quotation system), the average closing
sale price of such shares on such exchange (or in such quotation system),
or, if such shares are listed on (or quoted in) more than one exchange (or
quotation system), the average closing sale price of the shares
on the principal securities exchange (or quotation system) on which such
shares are then traded, or, if such shares are not then listed on a
securities exchange (or quotation system) but are traded in the
over-the-counter market, the average of the latest bid and asked quotation
for such shares in such market, in each case for the last five trading
days immediately preceding the day on which notice of the repurchase of
such shares is sent pursuant to these Bye-laws, or (b) (i) with respect to
a repurchase, if no such closing sales or prices are available because
such shares are not publicly traded, the value per Common Share
as determined by an independent valuation and approved by the
Board;
|
|
|
Flagstone
|
means
Flagstone Reinsurance Limited, a Bermuda exempted company licensed as a
Class 4 reinsurer under the Insurance Act 1978 as amended from time to
time and its related regulations;
|
|
|
GAAP
|
means
United States generally accepted accounting principles, as in effect from
time to time, applied on a consistent
basis;
|
|
|
Haverford
|
means
Haverford (Bermuda) Ltd., a Bermuda exempted
company;
|
|
|
Initial
Public Offering
|
means
the initial public offering of the shares pursuant to a registration
statement filed pursuant to the Securities Act (Registration No.
333-138182);
|
|
|
Member
|
the
person registered in the Register of Members as the holder of shares in
the Company and, when two or more persons are so registered as joint
holders of shares, means the person whose name stands first in the
Register of Members as one of such joint holders or all of such persons,
as the context so requires;
|
|
|
Memorandum
of Association
|
means
the memorandum of association of the Company as from time to time altered
or amended;
|
|
|
9.9%
U.S. Shareholder
|
of
the Company means a U.S. Person that owns shares (within the meaning of
Section 958(a) of the Code) and is considered a “United States
shareholder” of the Company (as defined in Section 951(b) of the Code);
provided, that for these purposes, “more than 9.9 percent” shall be
substituted for “10 percent” wherever such term appears in Section 951(b)
of the Code;
|
|
|
Notice
|
written
notice as further provided in these Bye-laws unless otherwise specifically
stated;
|
|
|
Officer
|
any
person appointed by the Board to hold an office in the
Company;
|
|
|
Person
|
means
an individual, company, corporation, limited liability company, firm,
partnership, trust, estate, unincorporated association, other entity or
body of Persons;
|
|
|
PSU
Plan
|
means
the Company’s performance share unit plan as from time to time altered or
amended;
|
|
|
PSU
Shares
|
means
the common shares of the Company issuable pursuant to the PSU
Plan;
|
|
|
RSU
Plan
|
means
the Company’s employee restricted share unit plan as from time to time
altered or amended;
|
|
|
Register
of Directors and Officers
|
the
register of directors and officers referred to in these
Bye-laws;
|
|
|
Register
of Members
|
the
register of Members referred to in these
Bye-laws;
|
|
|
Removed
Company Director
|
has
the meaning attributed thereto at Bye-law
31.1;
|
|
|
Resident
Representative
|
any
person appointed to act as resident representative and includes any deputy
or assistant resident
representative;
|
|
|
Rule
144
|
means
Rule 144 under the Securities Act, or any successor rule
thereto;
|
|
|
Secretary
|
the
person appointed to perform any or all of the duties of secretary of the
Company and includes any deputy or assistant secretary and any person
appointed by the Board to perform any of the duties of the
Secretary;
|
|
|
Securities
Act
|
means
the U.S. Securities Act of 1933, as amended, or any U.S. federal statute
then in effect which has replaced such statute, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such replacement U.S. federal
statute;
|
|
|
Shareholders
Agreement
|
means
the agreement dated as of December 19, 2005 as amended from time to time
by and among the Company and the Members listed
therein;
|
|
|
share
|
means
a share in the share capital of the Company and includes the Common
Shares;
|
|
|
Subsidiary
|
means
any entity of which a majority of the Voting Power (under ordinary
circumstances) in electing the board of directors or equivalent body are,
at the time as of which any determination is being made, owned by the
Company, either directly or indirectly through
Subsidiaries;
|
|
|
Treasury
Share
|
means a share of the
Company that was or is treated as having been acquired and held by the
Company and has been held continuously by the Company since it was so
acquired and has not been
cancelled;
|
|
|
U.S.
Person
|
means
(i) an individual who is a citizen or resident of the United States, (ii)
a corporation, partnership or other entity treated as a corporation or
partnership for U.S. federal tax purposes that is created in, or organised
under the laws of, the United States or any state thereof or the District
of Columbia, (iii) an estate that is subject to U.S. federal income
tax on its income regardless of its source, (iv) any trust if (A)(1) a
court within the United States is able to exercise primary supervision
over the administration of the trust and (2) one or more US Persons have
the authority to control all substantial decisions of the trust or (B)
such trust validly elects to be treated as a U.S. Person or (v) any entity
treated as one of the foregoing under any provision of the Code (e.g., a
Bermuda insurance company that elects under Section 953(d) of the Code to
be treated as a domestic
corporation);
|
|
|
United
States or U.S.
|
means
the United States of America including the states thereof, its territories
and possessions and the District of
Columbia;
|
|
|
Voting
Power
|
of
any Person means the total number of votes which may be cast by the
Members or shareholders of the total number of issued and outstanding
shares of such Person carrying the right to vote;
and
|
|
|
Warrant
|
means
the warrant dated as of December 19, 2005 to purchase Common Shares issued
to Haverford, as amended from time to
time.
|
|
|
1.2
|
In
these Bye-laws, where not inconsistent with the
context:
|
|
|
(a)
|
words
denoting the plural number include the singular number and vice
versa;
|
|
|
(b)
|
words
denoting the masculine gender include the feminine and neuter
genders;
|
|
|
(c)
|
words
importing persons include companies, associations or bodies of persons
whether corporate or not;
|
|
|
(d)
|
the
words:
|
|
|
(i)
|
"may"
shall be construed as permissive;
and
|
|
|
(ii)
|
"shall"
shall be construed as imperative;
and
|
|
|
(e)
|
unless
otherwise provided herein, words or expressions defined in the Act shall
bear the same meaning in these
Bye-laws.
|
|
|
1.3
|
In
these Bye-laws expressions referring to writing or written shall, unless
the contrary intention appears, include facsimile, printing, lithography,
photography, electronic mail and other modes of representing words in
visible form.
|
|
|
1.4
|
Headings
used in these Bye-laws are for convenience only and are not to be used or
relied upon in the construction
hereof.
|
|
|
1.5
|
The
incorporation or application of provisions of the Shareholders Agreement
in or to these Bye-laws shall terminate upon the termination of the
Shareholders Agreement in accordance with its terms. For this
purpose, a certificate from the secretary and any director of the Company
stating that the Shareholders Agreement has terminated shall be conclusive
evidence of such termination. Upon delivery of such certificate
to the Company, a copy of such certificate shall be appended to these
Bye-laws by the Secretary and included in every copy of these Bye-laws
published by the Company and these Bye-laws shall thenceforth not include
any provision of the Shareholders
Agreement.
|
|
2.
|
Power
to Issue Shares
|
|
|
2.1
|
Subject
to these Bye-laws and to any resolution of the Members to the contrary,
and without prejudice to any special rights previously conferred on the
holders of any existing shares or class of shares, the Board shall have
the power to issue any unissued shares of the Company on such terms and
conditions as it may determine and any shares or class of shares may be
issued with such preferred, deferred or other special rights or such
restrictions, whether in regard to dividend, voting, return of capital, or
otherwise.
|
|
|
2.2
|
Subject
to the provisions of the Act, any preference shares may be issued or
converted into shares that (at a determinable date or at the option of the
Company or the holder) are liable to be redeemed on such terms and in such
manner as may be determined by the Board (before the issue or
conversion).
|
|
3.
|
Power
of the Company to Purchase its
Shares
|
|
|
3.1
|
Subject
to these Bye-laws, the Company may purchase its own shares for cancellation or
to acquire them as Treasury Shares in accordance with the
provisions of the Act on such terms as the Board shall think
fit. Subject to these Bye-laws, the Board may exercise all the
powers of the Company to purchase or acquire all
or any part of its own shares in accordance with the
Act.
|
|
|
3.2
|
Without
limiting Bye-law 3.1, subject to Section 42A of the Act and the approval
of the Bermuda Monetary Authority or other applicable governmental or
regulatory body (such approval restriction being applicable to all this
Bye-law 3.2), if the Board reasonably determines in good faith based on an
opinion of counsel that share ownership, directly, indirectly or
constructively, by any Member is likely to result in adverse tax
consequences or materially adverse legal or regulatory treatment to the
Company, any of its subsidiaries or any of its Members, the Company will
have the option, but not the obligation, to purchase the minimum number of
shares which is necessary to avoid or cure such adverse consequences or
treatment (but only to the extent the Board reasonably determines in good
faith that such action would avoid or cure such adverse consequences or
treatment) with immediately available funds in an amount equal to the Fair
Market Value of such shares on the date the Company repurchases such
shares (the “Purchase Price”), subject to the provisions of this Bye-law
3.2.
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The
Board shall notify such Member promptly that it has determined that the
provisions of this Bye-law 3.2 may apply to such Member, and shall provide
such Member with seventy-five (75) days (subject to any extension
reasonably necessary to obtain regulatory approvals necessary in
connection with any proposed sale by the Member, if being diligently
pursued, but in any event not more than an additional ninety (90) days),
prior to and in lieu of such repurchase, to remedy the circumstances
pursuant to which the ownership of shares by such Member may result in
adverse tax consequences or materially adverse legal or regulatory
treatment to the Company, any of its subsidiaries or any of its Members
(including by such Member selling such shares to a third party, subject to
Bye-law 12 and any other relevant provisions of these Bye-laws); provided,
that, for the avoidance of doubt, this Bye-law 3.2 does not release such
Member from any contractual restriction on transfer to which such Member
is subject and, if applicable, to select an investment bank to determine
the Fair Market Value of such
shares.
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If
a Member subject to application of this Bye-law 3 does not remedy the
consequences or treatment described in the preceding two paragraphs within
the period referred to above, the Company shall have the right, but not
the obligation, to purchase such shares at the Fair Market Value thereof.
If the Company shall determine not to purchase such shares at the Fair
Market Value pursuant to this Bye-law 3, the Company shall notify each
other Member thereof, and shall permit the other Members to purchase such
shares at the Fair Market Value in its stead, pro rata, to the number of
shares then held by each such Member, and then, to the extent that any
Members shall fail to accept such offer, to the other Members who have
elected to purchase their portion of such shares. After offering the
shares to be repurchased to the other Members in accordance with the
preceding sentence, the Company will also be entitled to assign its
purchase right to a third party which may purchase such shares at the Fair
Market Value. Each Member shall be bound by the determination by the
Company to purchase or assign its right to purchase such Member’s shares
and, if so required by the Company, shall sell the number of shares that
the Company requires it to sell.
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The
Board will use all reasonable efforts to exercise this option equitably
and, to the extent possible, equally among similarly situated Members (to
the extent possible under the
circumstances).
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In
the event that the Member(s) or the Company or its assignee(s) determine
to purchase any such shares, the Company shall provide each Member
concerned with written notice of such determination (a “Purchase Notice”)
at least five (5) calendar days prior to such purchase or such shorter
period as each such Member may authorise, specifying the date on which any
such shares are to be purchased and the Purchase Price. The Company may
revoke the Purchase Notice at any time before the Member(s), the Company
or its assignee(s) pay for the shares. The Board may authorise any person
to sign, on behalf of any Member who is the subject of a Purchase Notice,
an instrument of transfer relating to any of such Member’s shares which
the Company has an option to purchase. Payment of the Purchase Price by
the Member(s), the Company or its assignee(s) shall be by wire transfer or
certified check and made at a closing to be held no less than five (5)
calendar days after receipt of the Purchase Notice by the selling
Member.
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4.
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Rights
Attaching to Shares
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4.1
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Subject
to any resolution of the Members to the contrary (and without prejudice to
any special rights conferred thereby on the holders of any other shares or
class of shares), the share capital of the Company shall be divided into
Common Shares the holders of which shall, subject to the provisions of
these Bye-laws:
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(a)
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be
generally entitled to one vote per share, (but the exercise of any voting
right shall be subject to the provisions of Bye-law 30
hereof);
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(b)
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be
entitled to such dividends as the Board may from time to time
declare;
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(c)
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in
the event of a winding-up or dissolution of the Company, whether voluntary
or involuntary or for the purpose of a reorganisation or otherwise or upon
any distribution of capital, be entitled to the surplus assets of the
Company; and
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(d)
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generally
be entitled to enjoy all of the rights attaching to
shares.
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4.2
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All the rights
attaching to a Treasury Share shall be suspended and shall not be
exercised by the Company while it holds such Treasury Shares and, except
where required by the Act, all Treasury Shares shall be excluded from the
calculation of any percentage or fraction of the share capital or shares
of the Company.
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5.
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Calls
on Shares
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5.1
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The
Board may make such calls as it thinks fit upon the Members in respect of
any monies (whether in respect of nominal value or premium) unpaid on the
shares allotted to or held by such Members and, if a call is not paid on
or before the day appointed for payment thereof, the Member may at the
discretion of the Board be liable to pay the Company interest on the
amount of such call at such rate as the Board may determine, from the date
when such call was payable up to the actual date of
payment. The Board may differentiate between the holders as to
the amount of calls to be paid and the times of payment of such
calls.
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5.2
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The
joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
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5.3
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The
Company may accept from any Member the whole or a part of the amount
remaining unpaid on any shares held by him, although no part of that
amount has been called up.
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6.
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Prohibition
on Financial Assistance
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7.
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Forfeiture
of Shares
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7.1
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If
any Member fails to pay, on the day appointed for payment thereof, any
call in respect of any share allotted to or held by such Member, the Board
may, at any time thereafter during such time as the call remains unpaid,
direct the Secretary to forward such Member a notice in writing in the
form, or as near thereto as circumstances admit, of the
following:
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7.2
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If
the requirements of such notice are not complied with, any such share may
at any time thereafter before the payment of such call and the interest
due in respect thereof be forfeited by a resolution of the Board to that
effect, and such share shall thereupon become the property of the Company
and may be disposed of as the Board shall determine. Without
limiting the generality of the foregoing, the disposal may take place by
sale, repurchase, redemption or any other method of disposal permitted by
and consistent with these Bye-laws and the
Act.
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7.3
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A
Member whose share or shares have been forfeited as aforesaid shall,
notwithstanding such forfeiture, be liable to pay to the Company all calls
owing on such share or shares at the time of the forfeiture and all
interest due thereon.
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7.4
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The
Board may accept the surrender of any shares which it is in a position to
forfeit on such terms and conditions as may be agreed. Subject
to those terms and conditions, a surrendered share shall be treated as if
it had been forfeited.
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8.
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Share
Certificates
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8.1
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Every
Member shall be entitled to a certificate under the seal of the Company
or bearing the
signature (or a facsimile thereof) of a Director or the
Secretary or a person expressly authorised to sign specifying the
number and, where appropriate, the class of shares held by such Member and
whether the same are fully paid up and, if not, specifying the amount paid
on such shares. The Board may by resolution determine, either
generally or in a particular case, that any or all signatures on
certificates may be printed thereon or affixed by mechanical
means.
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8.2
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The
Company shall be under no obligation to complete and deliver a share
certificate unless specifically called upon to do so by the person to whom
the shares have been allotted.
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8.3
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If
any share certificate shall be proved to the satisfaction of the Board to
have been worn out, lost, mislaid, or destroyed the Board may cause a new
certificate to be issued and request an indemnity for the lost certificate
if it sees fit.
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9.
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Fractional
Shares
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10.
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Register
of Members
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10.1
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The
Board shall cause to be kept in one or more books a Register of Members
and shall enter therein the particulars required by the
Act.
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10.2
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The
Register of Members shall be open to inspection without charge
at the registered office of the Company on every business day, subject to
such reasonable restrictions as the Board may impose, so that not less
than two hours in each business day be allowed for
inspection. The Register of Members may, after notice has been
given in accordance with the Act, be closed for any time or times not
exceeding in the whole thirty days in each
year.
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11.
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Registered
Holder Absolute Owner
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12.
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Transfer
of Registered Shares and Warrants and Restrictions on
Transfer
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12.1
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Subject
to the Act and to such of the restrictions contained in these Bye-laws as
may be applicable, any Member may transfer all or any part of his shares
or warrants by an instrument of transfer as specified
herein.
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12.2
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An
instrument of transfer shall be in writing in the form of the following,
or as near thereto as circumstances admit, or in such other
form as the Board may accept:
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DATED
this [ ] day of [ ], 200[ ]
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Signed
by:
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In
the presence of:
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Transferor
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Witness
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Transferee
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Witness
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12.3
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Such
instrument of transfer shall be signed by or on behalf of the transferor
and transferee, provided that, in the case of a fully paid share, the
Board may accept the instrument signed by or on behalf of the transferor
alone. The transferor shall be deemed to remain the holder of
such share until the same has been transferred to the transferee in the
Register of Members.
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12.4
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The
Board may refuse to recognise any instrument of transfer unless it is
accompanied by the certificate in respect of the shares to which it
relates and by such other evidence as the Board may reasonably require to
show the right of the transferor to make the
transfer.
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12.5
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The
restrictions on transfer authorised or imposed by these Bye-laws shall not
be imposed in any circumstances in any way that would interfere with the
settlement of trades or transactions entered into through the facilities
of a stock exchange or automatic quotation system on which the shares are
listed or traded from time to time; provided, that the Company may decline
to register transfers in accordance with these Bye-laws and resolutions of
the Board after a settlement has taken
place.
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12.6
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The
joint holders of any share may transfer such share to one or more of such
joint holders, and the surviving holder or holders of any share previously
held by them jointly with a deceased Member may transfer any such share to
the executors or administrators of such deceased
Member.
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12.7
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The
Board may in its absolute discretion and without assigning any reason
therefor refuse to register the transfer of a share. The Board
shall refuse to register a transfer unless all applicable consents,
authorisations and permissions of any governmental or regulatory body or
agency in Bermuda, the United States or any other applicable jurisdiction
required to be obtained shall have been obtained. For the
avoidance of doubt, the Directors may decline to register the transfer of
a share if the Board has determined in good faith that such transfer would
result in adverse tax or regulatory treatment to the Company and its
subsidiaries or any of its
shareholders.
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12.8
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The
Board may decline to register the transfer of any shares or warrants if
the Board reasonably determines in good faith that, based on an opinion of
counsel, (i) in the case of a transfer other than (a) pursuant to an
effective registration statement under the Securities Act, (b) after an
Initial Public Offering of shares pursuant to such a registration
statement, in a sale by a Member in accordance with Rule 144 or (c) in
connection with the settlement of trades or transactions entered into
through the facilities of a stock exchange or automated quotation system
on which the shares are
listed or traded from time to time, such transfer is likely to expose the
Company, any subsidiary thereof, any Member or any subsidiary of the
Company, any Member or Person ceding insurance to the Company or any
subsidiary of the Company to adverse tax consequences or materially
adverse legal or regulatory treatment in any jurisdiction or (ii)
registration of such transfer under the Securities Act or under any blue
sky or other U.S. state securities laws or under the laws of
any jurisdiction is required and such registration has not been duly
effected; provided, however, that in this case (ii) the Board shall be
entitled to request and rely on an opinion of counsel (such counsel to be
reasonably satisfactory to the Board) to the transferor or the transferee
(and the Company shall not be obliged to pay any expenses of such
counsel), in form and substance reasonably satisfactory to the Board, that
no such registration is required, and the Board shall be obliged to
register such transfer upon the receipt of such an opinion. A
proposed transferee will be permitted to dispose of any shares or warrants
purchased that violate these restrictions and as to which registration of
the transfer is refused. The transferor of such shares or
warrants shall be deemed to own such shares or warrants for dividend,
voting and reporting purposes until a transfer of such shares has been
registered on the Register of Members or such warrants have been
registered in the applicable register of
warrants.
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12.9
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Except
in connection with an effective registration statement, a sale
in accordance with Rule 144 of the shares of the Company after an Initial
Public Offering or in connection with the settlement of trades or
transactions entered into through the facilities of a stock exchange or
automated quotation system on which the shares are listed or traded from
time to time, the Board may require any Member, or any Person proposing to
acquire shares or warrants of the Company, to provide the information
required by Bye-law 30A. If any such Member or proposed
acquiror does not provide such information, or if the Company has reason
to believe that any certification or other information provided pursuant
to any such request is inaccurate or incomplete, the Board may decline to
register any transfer or to effect any issue or purchase of shares or
warrants to which such request
related.
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12.10
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If
the Board refuses to register a transfer of any share the Secretary shall,
within three months after the date on which the transfer was lodged with
the Company, send to the transferor and transferee notice of the
refusal.
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12.11
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Any
purported transfer (except by operation of law) of any shares in
contravention of any of the restrictions on transfer contained in the
Shareholders Agreement or these Bye-laws shall be void and of no
effect.
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13.
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Transmission
of Registered Shares
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13.1
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In
the case of the death of a Member, the survivor or survivors where the
deceased Member was a joint holder, and the legal personal representatives
of the deceased Member where the deceased Member was a sole holder, shall
be the only persons recognised by the Company as having any title to the
deceased Member's interest in the shares. Nothing herein
contained shall release the estate of a deceased joint holder from any
liability in respect of any share which had been jointly held by such
deceased Member with other persons. Subject to the provisions
of the Act, for the purpose of this Bye-law, legal personal representative
means the executor or administrator of a deceased Member or such other
person as the Board may, in its absolute discretion, decide as being
properly authorised to deal with the shares of a deceased
Member.
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13.2
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Any
person becoming entitled to a share in consequence of the death or
bankruptcy of any Member may be registered as a Member upon such evidence
as the Board may deem sufficient or may elect to nominate some person to
be registered as a transferee of such share, and in such case the person
becoming entitled shall execute in favour of such nominee an instrument of
transfer in writing in the form, or as near thereto as circumstances
admit, of the following:
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DATED
this [ ] day of [ ], 200[ ]
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Signed
by:
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In
the presence of:
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Transferor
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Witness
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Transferee
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Witness
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13.3
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On
the presentation of the foregoing materials to the Board, accompanied by
such evidence as the Board may require to prove the title of the
transferor, the transferee shall be registered as a
Member. Notwithstanding the foregoing, the Board shall, in any
case, have the same right to decline or suspend registration as it would
have had in the case of a transfer of the share by that Member before such
Member's death or bankruptcy, as the case may
be.
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13.4
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Where
two or more persons are registered as joint holders of a share or shares,
then in the event of the death of any joint holder or holders the
remaining joint holder or holders shall be absolutely entitled to the said
share or shares and the Company shall recognise no claim in respect of the
estate of any joint holder except in the case of the last survivor of such
joint holders.
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14.
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Power
to Alter Capital
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14.1
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The
Company may, subject to these Bye-laws, increase, divide, consolidate,
subdivide, change the currency denomination of, diminish or otherwise
alter or reduce its share capital in any manner permitted by the
Act.
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14.2
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Where,
on any alteration or reduction of share capital, fractions of shares or
some other difficulty would arise, the Board may deal with or resolve the
same in such manner as it thinks
fit.
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15.
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Variation
of Rights Attaching to Shares
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