UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
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Soliciting
Material Pursuant to 240.14a-12
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Flagstone
Reinsurance Holdings Limited
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PROXY
STATEMENT
Flagstone
Reinsurance Holdings Limited
Crawford
House
23 Church
Street
Hamilton
HM 11, Bermuda
ANNUAL
GENERAL MEETING – May 14, 2009
April 14,
2009
To the
Shareholders of Flagstone Reinsurance Holdings Limited:
You are
cordially invited to attend the Annual General Meeting of your company to be
held at 8:30 a.m. local time on Thursday, May 14, 2009 at The Tuckers Point
Hotel and Spa, Tuckers Town, Smith’s, Bermuda.
A report
of the current affairs of Flagstone Reinsurance Holdings Limited will be
presented at the Annual General Meeting and shareholders will have an
opportunity for questions and comments.
We
request that you complete, sign, and mail the enclosed form of proxy in the
enclosed business reply envelope, whether or not you plan to physically attend
the Annual General Meeting.
The
attached Proxy Statement, accompanying proxy card, Notice of Annual General
Meeting, Annual Report and Form 10-K are first being mailed to shareholders on
or about April 14, 2009.
Sincerely
yours,
/s/ David
A. Brown
David A.
Brown
Chief
Executive Officer
Flagstone
Reinsurance Holdings Limited
Crawford
House
23 Church
Street
Hamilton
HM 11, Bermuda
NOTICE OF
ANNUAL GENERAL MEETING
To be
held on May 14, 2009
NOTICE IS
HEREBY GIVEN that the Annual General Meeting of shareholders of Flagstone
Reinsurance Holdings Limited (the “Company” or “we”) will be held on Thursday,
May 14, 2009, at 8:30 a.m. local time for the following purposes:
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1.
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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.
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2.
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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.
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3.
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To
approve amendments to the
Bye-Laws.
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4.
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To
approve the list of Designated Company Directors for certain subsidiaries
of the Company.
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5.
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To
approve amendments to the Restricted Share Unit
Plan.
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6.
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To
approve the Amended and Restated Long-Term Incentive Plan for Island
Heritage Holdings, Ltd.
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7.
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To
approve the form of Stock Appreciation Rights Plan for Island Heritage
Holdings, Ltd.
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8.
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To
approve the form of Restricted Share Unit Plan for Flagstone Reinsurance
Africa Limited.
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9.
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To
approve and increase the authorized share capital of the
Company.
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In
addition, we will consider any other business as may properly come before the
2009 Annual General Meeting or any adjournment(s) thereof. The
Company’s audited financial statements for the fiscal year ended December 31,
2008 will be presented at the 2009 Annual General Meeting. At the
Annual General Meeting, shareholders may also be asked to consider and take
action with respect to such other matters as may properly come before the Annual
General Meeting or any adjournment(s) thereof.
The Board
of Directors has fixed the close of business March 23, 2009 as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Annual General Meeting. This Proxy Statement, the Notice of Annual General
Meeting, the accompanying proxy card, the Annual Report and Form 10-K for year
ended December 31, 2008 are first being mailed to shareholders on or about April
14, 2009. Although the Annual Report and Proxy Statement are being
mailed together, the Annual Report should not be deemed to be part of the Proxy
Statement.
Shareholders
are encouraged to complete, sign, date and return the enclosed proxy card in the
return envelope furnished for that purpose. Please sign the
accompanying proxy card exactly as your name appears on your share
certificate(s). Signing and returning a proxy card will not prohibit
you from attending the 2009 Annual General Meeting. If you later
decide to revoke your proxy for any reason, you may do so in the manner
described in the attached Proxy Statement.
By order
of the Board of Directors.
/s/
Jean-Paul Dyer
Jean-Paul
Dyer
Corporate
Secretary
Hamilton,
Bermuda
Flagstone
Reinsurance Holdings Limited
2009
Proxy Statement
Page
Proxies
in the form enclosed are being solicited by the Board of Directors. The persons
named in the accompanying proxy card have been designated as proxies by the
Board. Such persons designated as proxies serve as officers of the
Company.
The Board
of Directors has set March 23, 2009 as the record date for the Annual General
Meeting. If you were an owner of our common shares at the close of business on
that date, you are entitled to notice of, and may vote at, the Annual General
Meeting.
As of
March 23, 2009, 84,804,844 common shares were issued and outstanding. The
presence, in person or by proxy, of holders of more than 50% of the common
shares outstanding and entitled to vote on the matters to be considered at the
Annual General Meeting is required to constitute a quorum for the transaction of
business at the Annual General Meeting. Holders of common shares are entitled to
vote on each matter to be voted upon by the shareholders at the Annual General
Meeting in accordance with the voting rights afforded under bye-laws 4 and 30 of
the Company.
If you
are entitled to vote at the Annual General Meeting, you may do so in person at
the Annual General Meeting or by proxy without attending the meeting. To vote by
proxy, you must fill out the enclosed proxy card, date and sign it, and return
it in the enclosed postage-paid envelope. If you receive more than one proxy
card, sign and return each proxy card in order to ensure that all of your shares
are voted.
If no
instructions are provided in an executed proxy, it will be voted “FOR” each of
the proposals, and, as to any other business as may properly come before the
Annual General Meeting, in accordance with the proxyholder’s judgment as to such
business.
Broker
non-votes occur when nominees, such as banks and brokers holding shares on
behalf of beneficial owners, do not receive voting instructions from the
beneficial holders at least ten days before the Annual General Meeting. Member
brokerage firms of The New York Stock Exchange, Inc. that hold shares in street
name for beneficial owners may, to the extent that such beneficial owners do not
furnish voting instructions with respect to any or all proposals submitted for
shareholder action, vote in their discretion upon all of the proposals. Any
broker non-votes and abstentions will not be counted as shares present in
connection with proposals with respect to which they are not voted.
The Board
of Directors has not proposed for consideration at the Annual General Meeting
any transaction for which the laws of Bermuda entitle shareholders to appraisal
rights.
In
accordance with our bye-laws the nominees for election as directors at the
Annual General Meeting who receive the highest number of “FOR” votes will be
elected as directors. This is called plurality voting. All common shares
represented by properly executed proxies that are returned and not revoked will
be voted in accordance with the instructions, if any, given
thereon. Unless you indicate otherwise on your proxy card, or if no
instructions are given, the persons named as your proxies will vote your shares
“FOR” all the nominees for director named in this Proxy Statement. All other
proposals require the affirmative “FOR” vote of a majority of those shares
present at the meeting and entitled to vote on the proposal. A hand vote will be
taken unless a poll is requested pursuant to the bye-laws. You may revoke your
voted proxy at any time prior to the Annual General Meeting or vote in person if
you attend.
The
Company will bear the cost of this solicitation of proxies. Solicitation may be
made by our directors, officers and employees personally, by telephone, internet
or otherwise, but such persons will not be specifically compensated for such
services. We may also make, through bankers, brokers or other persons, a
solicitation of proxies of beneficial holders of the common shares. Upon
request, we will reimburse brokers, dealers, banks or similar entities acting as
nominees for reasonable expenses incurred in forwarding copies of the proxy
materials relating to the Annual General Meeting to the beneficial owners of
common shares which such persons hold of record.
Directors
The table
below sets forth the names, ages and positions of the current directors of the
Company:
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Name
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Age
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Positions
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Mark
J. Byrne
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47
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Executive
Chairman of the Board of Directors
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David
A. Brown
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51
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Chief
Executive Officer, Deputy Chairman and Director
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Gary
Black
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63
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Director
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Stephen
Coley
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64
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Director
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Thomas
Dickson
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46
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Director
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Stewart
Gross
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49
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Director
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E.
Daniel James
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44
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Director
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Anthony
P. Latham
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58
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Director
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Dr.
Anthony Knap
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59
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Director
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Jan
Spiering
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57
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Director
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Wray
T. Thorn
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37
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Director
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Peter
F. Watson
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66
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Director
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__________________________
The Board
of Directors consists of twelve (12) directors and is divided into three equal
classes (A, B and C). At each Annual General Meeting, certain directors shall be
elected or appointed for a full three-year term to succeed those whose terms
expire at such meeting. Each director shall hold office for the term for which
he is elected or until his successor is elected or appointed or until his office
is otherwise vacated.
Mark J.
Byrne has been our Executive Chairman since October 2005. Mr. Byrne also
serves as Chairman of Haverford (Bermuda) Ltd. (“Haverford”), an affiliate of
the Company due to common ownership (see “Certain Relationships and Related
Transactions” below), and Chairman of Island Heritage Holdings Ltd. (“Island
Heritage”), an indirect majority-owned subsidiary of the Company. Mr.
Byrne founded Flagstone Capital Management (Bermuda) Limited (formerly
known as West End Capital Management (Bermuda) Limited and referred to herein as
“Flagstone Capital Management”), a wholly-owned subsidiary of the Company, in
1998. Prior to starting Flagstone Capital Management, Mr. Byrne served as
Managing Director at Credit Suisse First Boston, responsible for Global Fixed
Income Arbitrage in London and Tokyo. Mr. Byrne also held management
positions at PIMCO and Salomon Brothers and has 20 years experience in the fixed
income and derivative business. Mr. Byrne has invested at early stages
in several insurance companies and has served on the boards of directors of
several insurance companies, including three public companies: White Mountains
Insurance Group Ltd., Terra Nova Bermuda Holding Ltd. and Markel Corp. He holds
a Bachelors degree from Dartmouth College and an M.B.A. from the Tuck School of
Business at Dartmouth.
Stewart
Gross has been a director since January 2006. Mr. Gross is a Managing
Director and member of the Investment Committee of Lightyear Capital, a private
equity firm investing in companies in the financial services industry. Prior to
joining Lightyear in April 2005, Mr. Gross spent 17 years at Warburg Pincus
where he was a Managing Director and member of the Executive Management Group.
Mr. Gross has been a primary investor in many highly successful companies,
including RenaissanceRe Holdings Ltd. Mr. Gross is currently a director of
SkillSoft Corporation, and several private companies. Mr. Gross received an
A.B., magna cum laude, from Harvard College and an M.B.A. from Columbia Business
School where he was elected to Beta Gamma Sigma.
E. Daniel
James has been a director since December 2005. Mr. James is a senior
manager of the Merchant Banking Group and a managing director of Lehman
Brothers Inc. He joined the Lehman Brothers Merchant Banking Group in 1995.
Prior to joining the Merchant Banking Group, he was a member of the Lehman
Brothers M&A Group, based in London and New York. In 1988, Mr. James
joined Lehman Brothers’ Financial Institutions Group. He is currently a director
of Blount International, Inc. and Phoenix Brands LLC. He holds a B.A. in
chemistry, with honors, from the College of the Holy Cross.
Anthony
P. Latham has been a director since November 2008. Mr. Latham
currently serves as Chairman of the board of directors of Pool Reinsurance
Limited, the U.K. government-backed terrorism damage reinsurer. He also serves
as the Chairman of the board of directors of Pool Reinsurance (Nuclear) Limited.
He is Deputy Chairman of the board of directors of Codan A/S and Codan
Forsikring A/S in Denmark where he chairs the audit committee. He is also a
Director of Realty Insurance Limited, of Ecclesiastical Insurance Group plc and
Ecclesiastical Insurance Office plc as well as a Director of Torus Insurance
(U.K.) Limited. Mr. Latham is a former member of the Group Executive
of RSA Group plc where he held a variety of senior executive roles over a period
of 17 years. RSA Group plc is an international insurance group, listed on the
London Stock Exchange. Prior to his employment at RSA Group plc, Mr. Latham
worked for an international insurance brokerage firm for 19 years.
David
Brown has served as Chief Executive Officer of Flagstone since October 2005.
Mr. Brown is also a director of Island Heritage, an indirect majority-owned
subsidiary of the Company and Haverford. From September 2003 until October 2005,
Mr. Brown served as the Chief Executive Officer of Haverford and as the
Chief Operating Officer of Flagstone Capital Management, a wholly-owned
subsidiary of the Company. Mr. Brown joined Centre Solutions (Bermuda)
Limited (“Centre Solutions”) in 1993, and was its President and Chief Executive
Officer at the time of his retirement in 1998. Prior to joining Centre
Solutions, Mr. Brown was a Partner with Ernst & Young in Bermuda.
Mr. Brown is the non-executive Chairman of the Bermuda Stock Exchange and a
Director and Trustee for the Schroder Family Trusts. Mr. Brown led the team
which analyzed, structured and negotiated the acquisition of Merastar Insurance
Company in 2004. As Chairman of Merastar, Mr. Brown led the board’s
oversight of the successful turn-around strategy. At Centre Solutions,
Mr. Brown was responsible for the global operations of a group with over
$7 billion in assets and offices in several countries. During his ten years
with Ernst & Young, Mr. Brown specialized in insurance and
was involved in the liquidation of numerous insurance companies in Bermuda, the
U.K. and the U.S. Mr. Brown is a Fellow of the Institute of Chartered
Accountants in England & Wales and a Member of both the Institute of
Chartered Accountants of Bermuda and the Canadian Institute of Chartered
Accountants.
Stephen
Coley has been a director since January 2006. Mr. Coley is a Director
Emeritus of McKinsey & Company. During his more than 28 years of active
client service with McKinsey, Mr. Coley led a wide variety of successful
business strategy and organization efforts, principally serving technology and
basic industrial clients, and led McKinsey’s corporate growth practice. In
addition, Mr. Coley served for 10 years on McKinsey’s Investment Committee,
which oversees employee profit sharing investments and partner alternative
investment vehicles, and served as the committee’s chairman from 2000 to 2004.
Mr. Coley received an M.B.A., with distinction, from Harvard Business
School, where he was named a Loeb Fellow in finance. Mr. Coley has a
B.S. in electrical engineering from Duke University. Mr. Coley currently
serves on the boards of directors of Dycom Industries and Underwriters
Laboratories. He also serves on the Duke University Pratt School of Engineering
Board of Visitors.
Dr.
Anthony Knap, Ph.D., has been a director since December 2005. Dr. Knap
serves as President, Director and Senior Research Scientist of the Bermuda
Institute of Ocean Sciences, which he joined in 1978. In 1994, Dr.
Knap founded the Risk Prediction Initiative, a partnership between the
science community and the reinsurance industry providing essential information
between natural disasters and changing climate. Dr. Knap’s principal
research interests are climate change, environmental science, atmosphere/ocean
interactions, effects of chemicals on the marine environment as well as
relationships between ocean health and human health. Dr. Knap holds a
number of professorships, and serves on numerous expert panels and committees in
his field. Dr. Knap received his Ph.D. in oceanography in 1978 from the
University of Southampton, U.K.
Peter F.
Watson was appointed director in September 2007. Mr. Watson was most
recently a consultant to Attorney’s Liability Assurance Society (Bermuda) Ltd.
(“ALAS”), a mutual insurance company formed in Bermuda to provide professional
liability insurance for large U.S. law firms. Mr. Watson served as
President and Chief Executive Officer of ALAS from 2002 to December 31,
2007. Prior to joining ALAS in 1998, Mr. Watson’s career was with
Price Waterhouse, initially in London and Montreal and, since 1975, in Bermuda
where he also served as senior partner of the firm. In his later years
with Price Waterhouse, Mr. Watson was responsible for managing
the worldwide professional indemnity program for the firm. Mr. Watson is a
past president and a Fellow of the Institute of Chartered Accountants of Bermuda
and a member of the Institute of Chartered Accountants of Ontario and of the
Ordre des compatables agree du Quebec.
Gary
Black has been a director since June 2006. He was Chief Claims Executive and
Senior Vice President of OneBeacon Insurance Company, a subsidiary of White
Mountains Insurance Group, until his retirement in 2006. Prior to joining
OneBeacon in January of 2004, Mr. Black spent 35 years with Fireman’s Fund
Insurance Companies where he was an Executive Vice President and President of
the Claims Division. At Fireman’s Fund his responsibilities included claims,
corporate administration, general counsel, staff counsel and systems. He
received his B.A. degree from Southwest Baptist University and is a Chartered
Property Casualty Underwriter.
Thomas
Dickson has been a director since December 2005. Mr. Dickson is Chief
Executive Officer and Founder of Meetinghouse LLC, a private firm that provides
investment advisory and management services and advice and support to management
for underwriting, ratings, capital management and actuarial functions.
Mr. Dickson currently serves as President and Chief Executive Officer of
Haverford Capital Partners (Cayman) Limited (“HCP”), a private equity fund
specializing in investments in insurance, reinsurance and specialty finance
started in August 2005. Mr. Dickson served as President and Chief Executive
Officer of The Centre Group and as its Chief Underwriting Officer. At the time,
The Centre Group held assets in excess of $9 billion and capital in excess of
$1 billion. He joined The Centre Group at the time of its establishment in
1988 and, prior to assuming responsibilities as Chief Underwriting Officer,
served in a variety of business production and underwriting capacities in
Bermuda and New York. Mr. Dickson holds a bachelor’s degree with
honors from Stanford University and a Masters Degree from the Johns Hopkins
School of Advanced International Studies.
Jan
Spiering has been a director since December 2005. From February 1979 to June
2002, Mr. Spiering served as a member of Ernst & Young, becoming
the Chairman and Managing Partner of Ernst & Young Bermuda. During his
tenure at Ernst & Young, Mr. Spiering was a member of the firm’s
Global Advisory Counsel, founding member of the International Investment
Committee, and was Chairman of the firm’s Offshore Fund’s Group. He retired from
Ernst & Young in 2002, and currently serves on the board of directors
for WP Stewart & Co Ltd. and various private companies.
Mr. Spiering is a Fellow of the Institute of Chartered Accountants in
England & Wales and the Institute of Chartered Accountants of Bermuda
and is a Member of the Canadian Institute of Chartered Accountants.
Wray T.
Thorn has been a director since October 2006. Mr. Thorn is a Senior Managing
Director at Marathon Asset Management, LP, a global alternative investment and
asset management company, where he has worked since 2005. Mr. Thorn is a senior
member of the investment management team responsible for identifying,
evaluating, structuring and managing private debt and equity investments for
Marathon’s family of investment funds. Mr. Thorn has spent the majority of his
career identifying, financing and investing in private equity transactions,
including management buyout transactions, acquisition and expansion strategies,
growth programs, shareholder transitions and financial
restructurings. Prior to joining Marathon, Mr. Thorn was a Director
with Fox Paine & Company, LLC, and had also been a Principal and founding
member of Dubilier & Company, LLC. Mr. Thorn began his career in the
financial analyst program at Chemical Bank, where he worked in the acquisition
finance group, arranging and structuring senior and subordinated debt financings
for the firm’s private equity clients. Mr. Thorn is a graduate of Harvard
University with an A.B. in Government, cum laude.
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Name
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Age
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Positions
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Mark
J. Byrne(1)
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47
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Executive
Chairman of the Board of Directors
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David
A. Brown(2)
|
51
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Chief
Executive Officer, Deputy Chairman and Director
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Patrick
Boisvert
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35
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Chief
Financial Officer
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Thomas
Bolt
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52
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Managing
Director UK Operations
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Khader
Hemsi
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59
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Chief
Executive Officer MENA Operations
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William
Fawcett
|
46
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General
Counsel
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David
Flitman
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38
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Chief
Actuary
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Venkateswara
Rao Mandava
|
47
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Chief
Information Officer and Chief Investment Officer
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Gary
Prestia
|
47
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Chief
Underwriting Officer – Flagstone Réassurance Suisse SA – Bermuda
Branch
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James
O’Shaughnessy
|
45
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Chief
Financial Officer (ex)
|
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Brenton
Slade
|
38
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Chief
Marketing Officer
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Guy
Swayne
|
45
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Chief
Executive Officer – Flagstone Réassurance Suisse SA
|
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Frédéric
Traimond
|
39
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Chief
Operating Officer
|
______________________________
(1) See
biography of Mr. Byrne under “Our Directors”.
(2) See
biography for Mr. Brown under “Our Directors”.
Patrick
Boisvert was appointed as Chief Financial Officer in November
2008. Prior to his appointment as Chief Financial
Officer, Mr. Boisvert had previously served various roles within the
Flagstone Group: CFO and Group Finance Director of Flagstone Reassurance Suisse
SA, a subsidiary of the Company, since July 2008, and Group Chief Accounting
Officer and Treasurer from February 2006 until July 2008. From February
2005 to February 2006, he was CFO of Flagstone Capital Management which was
acquired by the Company in March 2006, where he had responsibility for all
finance aspects of a hedge fund manager with approximately $1 billion dollars
under management. Prior to joining Flagstone, he was Vice President Fund
Administration for BISYS Hedge Fund Services (now part of Citigroup). Mr.
Boisvert began his career with Ernst & Young in Montreal,
Canada. He holds a Bachelor in Accounting from Universite du Quebec a
Trois-Rivieres, is a member of the C.F.A. Institute and a member of the Canadian
Institute of Chartered Accountants.
Thomas
Bolt was appointed as our Managing Director of UK Operations in November, 2008.
Mr. Bolt is also the Chief Executive Officer of Marlborough Underwriting Agency
Limited. Previously he was Managing Director of the European Division
of Berkshire Hathaway Insurance Group, Berkshire Hathaway International
Insurance Limited, Marlborough Underwriting Agency Limited, Tenecom Ltd.
(formerly Yasuda Fire & Marine Insurance Company of Europe) and Transfercom
Limited. Prior to this position, he was Managing Director of the
Insurance Derivatives business at Bankers Trust and involved in the activities
of the various Bankers Trust Insurance Companies. Before that Mr.
Bolt held various positions within Berkshire Hathaway, including President of
the Cyprus Insurance Company and the Redwood Insurance Company, as well as being
involved as a Senior Vice President in the Reinsurance Division. On
March 26, 2009 the Company announced that Mr. Bolt would amicably leave
Marlborough on August 1, 2009 to take over the role of Underwriting Performance
Director at Lloyds.
Khader
Hemsi has served as our Chief Executive Officer MENA Operations since November,
2008. Prior to joining Flagstone, Mr. Hemsi founded Alliance
International Reinsurance Public Company Limited, now known as Flagstone
Alliance Insurance and Reinsurance PLC where he also serves as Deputy Chairman
& Chief Executive Officer. Mr. Hemsi has twenty-six years of
experience in the insurance and reinsurance industry involved in all aspects of
management, administration and underwriting.
William
Fawcett has served as our General Counsel since June 2008. A US and UK
qualified attorney with over twenty years of international experience, Mr.
Fawcett is responsible for the oversight and management of legal functions
throughout the Flagstone Group. Prior to joining Flagstone, he served as
the Chief Legal Officer of AXA’s North American P&C operations. He holds a
Bachelor of Arts degree from Colgate University and a Juris Doctor from the
University of the Pacific, McGeorge School of Law.
David
Flitman joined Flagstone as Chief Actuary in early 2006. Mr. Flitman has
worked in the reinsurance industry for over 15 years offering a depth of
experience in risk management. Prior to joining us he was Chief Actuary
and Senior Vice President for ACE Tempest Reinsurance where he managed
Actuarial, Claims, Development, and Infrastructure. He began his career in
1993 as an Actuarial Analyst with Insurance Services Office. Moving on to
WR Berkley Group where he became Assistant Vice President and Chief Actuary for
Berkley Mid-Atlantic Group managing the department responsible for Actuarial,
Information Management, and Reporting and Regulatory Filing. Mr. Flitman
also worked at XL Reinsurance America as an Assistant Vice President and Senior
Pricing Actuary where he priced all lines of Property and Casualty. Mr.
Flitman earned his Bachelor’s of Science from St. John School of Actuarial
Science, Risk Management, and Insurance in New York. He is an Associate of
the Society of Actuaries, a Member of the American Academy of Actuaries, and a
Fellow of the Casualty Actuarial Society.
Venkateswara
Rao Mandava joined Flagstone Capital Management April, 2004. He is currently the
Group Chief Information Officer, and also has a primary responsibility for our
India operations. Over the past 25 years, Mr. Mandava held multi-disciplinary
roles between Research, Analytics & Development, Technology Management,
Fixed Income Trading and Investment Management at various organizations
globally, including Vanderbilt, Credit Suisse, Barclays Capital, E*Trade, and
American Century. Mr. Mandava received a Ph.D. in Computer Science from
Vanderbilt University, Nashville, TN.
Gary
Prestia served as our Chief Underwriting Officer—North America since December
2005 and as of May, 2008, currently serves as Chief Underwriting Officer –
Flagstone Réassurance Suisse SA (Bermuda). Mr. Prestia has more
than 21 years’ experience in the insurance and reinsurance industry in
senior underwriting and executive management positions successfully navigating
across the underwriting cycles. From 1998 through 2004, Mr. Prestia served
as an executive officer of Converium AG (“Converium”), becoming President of
Converium North America, with responsibility for all legal entities and staff in
the U.S. and Canada. As Senior Vice President and Chief Underwriting Officer of
Converium, he was responsible for property catastrophe, property
non-catastrophe, motor, marine and third-party liability (excluding professional
liability and workers’ compensation). In early 2005, Mr. Prestia joined
Alea North America as Chief Executive Officer of the North American Reinsurance
Division. Prior to 1998, Mr. Prestia held senior underwriting positions at
Transatlantic Re. Mr. Prestia received his CPCU and ARe professional
designations from the American Institute for Chartered Property and Casualty
Underwriters and Bachelor of Business Administration undergraduate degree and
graduate work at St. Johns University School of Risk Management and
Insurance in New York.
James
O’Shaughnessy joined the Company as Chief Financial Officer in May 2006 and
continued in such capacity until November 21, 2008. Mr. O’Shaughnessy
now serves as the Chief Financial Officer - Bermuda. Prior to joining the
Company, he was the Chief Accounting Officer and Senior Vice President at
Scottish Reinsurance Group Limited where he was responsible for group internal
and external reporting as well as various finance functions and research into
accounting issues. Prior to joining Scottish Re in 2005, Mr. O’Shaughnessy
was Chief Financial Officer and Senior Vice President at XL Re Ltd., and before
that he served for four years at Centre Solutions as Controller and Vice
President. Before joining Centre Solutions, he spent four years at ACE
Tempest Reinsurance Ltd., where his last position was Vice President of Finance.
He began his career in Ireland at PricewaterhouseCoopers before moving to KPMG
Peat Marwick in Bermuda. Mr. O’Shaughnessy holds a Bachelor of Commerce
degree from University College, Cork, Ireland and is both a Fellow of the
Institute of Chartered Accountants of Ireland and an Associate Member of the
Chartered Insurance Institute of the U.K.
Brenton
Slade is the Chief Marketing Officer of Flagstone, responsible for investor
relations, capital market initiatives, and firm marketing. Mr. Slade has been at
Flagstone since its founding in 2005 assisting in the formation. Prior to
Flagstone, Mr. Slade worked with several members of the Executive Management at
West End Capital Management in the role of Director of Business Development,
beginning in 2003. Before joining West End Capital, Mr. Slade was a Vice
President at Agora Capital (an XL Capital affiliate). Mr. Slade has a degree in
Economics and Politics from the University of Western
Ontario.
Guy
Swayne has been our Chief Underwriting Officer—International since December 2005
and on September 1, 2007 was appointed as the Chief Executive Officer of
Flagstone Réassurance Suisse SA, a wholly-owned subsidiary of the
Company. Mr. Swayne has extensive experience in the industry
worldwide and brings a depth of expertise in underwriting, business development,
and leadership to the Company. Prior to joining the Company, Mr.
Swayne was Chief Underwriting Officer—International with ACE Tempest
Reinsurance Ltd. where he managed the International Catastrophe underwriting
unit. Mr. Swayne joined Ace in January 2000 and has held senior positions
including Executive Vice President, ACE Financial Solutions International
(AFSI)—Bermuda where he managed AFSI offices in London, Dublin, and Melbourne.
In London he became President of ACE Financial Solutions Europe (AFSE) where he
established and developed the European office reporting directly to the
President and Chief Executive Officer in Bermuda. Mr. Swayne was
instrumental in many key elements associated with a start-up operation,
including business plan and budget development, hiring underwriting teams,
business production and program completion.
Frédéric
Traimond was appointed Group Chief Operating Officer of the Company on November
14, 2008. Prior to his appointment as Group COO, since August 2007, Mr. Traimond
had served as COO of Flagstone Reassurance Suisse SA. Mr. Traimond is
also a member of the Boards of Directors of various entities within the
Flagstone Group. Before joining Flagstone Group, Mr. Traimond worked
for 15 years for AXA Group, primarily in Switzerland. His last position was
Chief Risk Officer of AXA-Winterthur, where most notably he was responsible for
the Economic Capital studies, including Swiss Solvency Test, Asset-Liability
Management, reinsurance strategy and reserve review. For the 8 years
preceding holding that position, he was the chief management officer for the
Non-Life subsidiary of AXA Switzerland. Mr. Traimond is a full member of the IAF
(Institut des Actuaires Français) and SAA (Swiss Association of
Actuaries).
We
describe below the transactions we entered into with parties that are
related to our Company during the year ended December 31, 2008. We believe that
each of the transactions described below was on terms no less favorable to us
than we could have obtained from unrelated parties.
Policies
and Procedures for Related Party Transactions
The
Company adopted a written Code of Conduct and Ethics on June 16, 2006 which
specifies the Company’s policy relating to conflicts of interest. The Code of
Conduct and Ethics defines a “conflict of interest” as any situation in which
the private interest of any director, board observer or employee of the Company
interferes in any way (or even appears to interfere) with the interests of the
Company as a whole. Under the Code of Conduct and Ethics, an individual who
becomes aware of a potential conflict of interest must report this conflict to
the Chairman of the Audit Committee for consideration by the Audit Committee.
The Audit Committee will determine whether a conflict of interest exists on a
case-by-case basis and will memorialize its determinations and the reasons
behind such determinations. The Audit Committee will ensure that the directors
voting on an issue are informed, disinterested and independent with respect to
that issue. If the Audit Committee determines that a conflict of interest
exists, then the director, board observer or employee shall not participate,
directly or indirectly, in the matter or activity that has given rise to such
conflict of interest unless expressly approved by the Audit Committee. The Audit
Committee Charter requires the Audit Committee to review and discuss with
management the reasonableness of the price, terms and conditions for all related
party transactions. Each of the transactions described below has been
reviewed by Audit Committee in accordance with this mandate.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Overview
The named
executive officers, Messrs. Byrne, Brown, Boisvert, Flitman, Prestia and
O’Shaughnessy, are compensated according to the terms of their employment
contracts, which are described below. The Compensation Committee of the Board of
Directors has determined that these six officers are the “Named Executive
Officers.”
Our
executive compensation programs are designed to encourage our executive officers
to think and act like, and over time to themselves become, shareholders of the
Company. We want our executive officers to take appropriate risks with our
capital in order to generate returns for our shareholders but at the same time
to share the downside risk if those risks cause poor performance or even loss.
Through our performance management and rewards processes and programs, we
endeavor to create an environment that fosters and rewards:
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finding
and assuming attractively priced
risk;
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managing
our overall risk exposure to mitigate
loss;
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ensuring
we have optimal capital to run our
business;
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working
hard and cooperating with colleagues;
and
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providing
excellent service to clients and
colleagues.
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We foster
an attitude of shared risk-taking between our executive officers and our
shareholders by providing a significant portion of our executive officers’
incentive compensation through equity-based awards. We emphasize “at risk” pay
tied to performance as the majority of total compensation potential. We evaluate
and reward our executive officers based on dynamic factors such as whether they
are willing and able to challenge existing processes, adapt to sudden or
frequent changes in priorities and capitalize on “windows of
opportunity.”
Our
Compensation Committee reviews and approves all of our compensation
policies.
Executive
Compensation Policy
Overview
The
Company’s performance-driven compensation policy consists of the following three
components:
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base
salary (and, in some cases, housing allowance or mortgage
subsidy);
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annual
cash bonuses; and
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long-term
incentive awards (in the form of Performance Share Units or
“PSUs”).
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We use
short-term compensation (base salaries and annual cash bonuses) and long-term
compensation (PSUs) to achieve our goal of driving long-term growth in diluted
book value per share. The long-term compensation element, the PSUs, are designed
to emphasize the performance measures our executive officers need to address in
order to deliver shareholder value. The PSUs awarded to our Named Executive
Officers (other than our Executive Chairman, who does not participate in the
Amended and Restated Performance Share Unit Plan (the “PSU Plan”)) vest
over three years (except for the special 2009-2010 series discussed below). PSUs
issued prior to December, 2008 may have converted into a quantity of shares
ranging from zero to two based upon the Company’s achievement of diluted return
on equity goals over the three-year period. The factor with respect to the PSUs
granted in December 2008 and January 2009 range between 0.5 and 1.5, depending
on the diluted return on equity goals achieved during the vesting period. In the
future, the Company may award to Named Executive Officers PSUs which have a
different index with a portion of the award tied more closely to the performance
of a specific business unit for which a Named Executive Officer is
responsible. However, a portion would also remain tied to the Company’s
achieving diluted return on equity goals. The Compensation Committee of the
Board of Directors of the Company reviews its assumptions in relation to the
PSUs on a quarterly basis. During 2008, the Company issued PSUs of the
2006-2008, and 2007-2009, and 2008-2010 series. 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 Named Executive Officer’s consent.
On December 8, 2008, the Named Executive Officers each consented to this
cancellation and all PSUs previously granted in 2006, 2007 and 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 diluted return on equity goals in
respect of the previous 2006-2008, 2007-2009 and 2008-2010 series are different
from those issued for the 2009-2010 and 2009-2011 special series. See “―Long-Term
Incentive Awards” below. The Company may also issue in the
future PSUs whose diluted return on equity goals are different from those
issued for the 2009-2010 and 2009-2011 series.
We
carefully determine the percentage mix of compensation structures we think is
appropriate for each of our Named Executive Officers. This is not a mechanical
process, and we use our judgment and experience and work with our Named
Executive Officers to determine the appropriate mix of compensation for each
individual. The number of PSUs each Named Executive Officer (other than our
Executive Chairman) receives is based on the expectations we have for the
individual and, over time, on their performance against those expectations. The
mix of short-term and long-term compensation may sometimes be adjusted to
reflect an individual’s need for current cash compensation. While we expect all
Named Executive Officers to receive the majority of their compensation in PSUs,
family size or geographical location could mean an executive officer needs a
larger and more predictable amount of current cash compensation than a peer. In
such circumstances, instead of issuing PSUs the Company typically pays cash
compensation equal to approximately one-third to two-thirds of the product of
the number of PSUs foregone and the fair value per share of the Company’s common
shares at the time of the grant. This practice is designed to reward the
executive officer for shared risk-taking.
During
fiscal 2008, none of the Named Executive Officers participated in the Amended
and Restated Flagstone Reinsurance Holdings Limited Restricted Share Unit Plan
(the “RSU Plan”).
Base
salary typically will constitute a minority portion of the total compensation of
our Named Executive Officers. We set salary to provide adequate cash
compensation to support a reasonable standard of living, so that our Named
Executive Officers are prepared to have “at risk” the portion of their
compensation received in PSUs. We anticipate that if the Company meets its
diluted return on equity goals the Named Executive Officers will receive
significantly more long-term value (in some cases a multiple) from their PSUs
than from their annual cash bonuses.
Base
salary
Base
salary is used to recognize particularly the experience, skills, knowledge and
responsibilities required of the executive officers in their roles. When
establishing the 2008 base salaries of the Named Executive Officers, the
Compensation Committee and management considered a number of factors, including
the seniority of the individual, the functional role of the individual’s
position, the level of the individual’s responsibility, the ability to replace
the individual, the base salary of the individual at his prior employment and
the limited number of well-qualified candidates available in Bermuda and
Switzerland. For purposes of determining competitive compensation levels for our
Named Executive Officers in Bermuda, we subscribed to the PricewaterhouseCoopers
Bermuda International Compensation Survey in 2008, an independent local market
annual survey. In addition, we informally consider competitive market
practices with respect to the salaries of our Named Executive Officers. We speak
with recruitment agencies and review annual reports on Form 10-K, proxy
statements or similar information of other Bermuda and Swiss reinsurance
companies with market capitalizations greater than $500.0 million and less
than $3.0 billion, in particular Aspen Insurance Holdings Ltd.,
Endurance Specialty Holdings Ltd., Allied World Assurance Company
Holdings, Ltd, Montpelier Re Holdings Ltd. and Platinum Underwriters
Holding Ltd. We do not use compensation consultants at this time, however,
in the future we may seek such advice.
The
salaries of the Named Executive Officers are reviewed on an annual basis, as
well as at the time of promotion or other changes in responsibilities. The
leading factor in determining increases in salary level is the employment market
in Bermuda and, solely in respect of Mr. Boisvert, Switzerland for senior
executives of insurance and reinsurance companies. We expect the salaries of our
Named Executive Officers to stay relatively constant, increasing when the
insurance and reinsurance market moves or when an executive officer assumes a
larger role within the Company.
Annual
cash bonuses
Annual
cash bonuses are intended to reward individual performance during the year and
can therefore be highly variable from year to year. These bonuses are determined
on a discretionary basis. Our Executive Chairman and our Chief Executive Officer
agree with each of the other executive officers upon short-term and long-term
goals as part of an evaluation process, and then subsequently rate each
executive officer in writing against those goals before deciding the bonus. Such
goals include but are not limited to 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. In the case of the Chief Executive Officer, these goals
are established by the Compensation Committee in consultation with the Executive
Chairman, and in the case of the Executive Chairman, these goals are established
by the Compensation Committee. The Named Executive Officer’s performance of
non-goal specific items is also taken into account in determining the Named
Executive Officer’s bonus. Awards for the subject year are based on the
financial statements for that year, and are based on an assessment of each Named
Executive Officer’s achievement of the established goals and non-goal specific
items. This range is based on the seniority of the position and our view of the
degree to which the Named Executive Officer’s performance could affect the
Company’s overall results. The employment agreements for Messrs. Byrne and
Brown do not limit the amount of their annual bonuses. The bonus allocation to
executive officers, other than Named Executive Officers, are set by the
Executive Chairman in consultation with the Chief Executive Officer and approved
by the Compensation Committee. Messrs. Byrne and Brown play no role in
setting their own bonuses. Instead, the bonuses for each of them are set and
approved independently by the Compensation Committee. Bonuses for the Named
Executive Officers are accrued quarterly in the consolidated financial
statements and are updated based on the amounts approved by the Compensation
Committee.
The
Compensation Committee approves the bonus of all Named Executive
Officers. Bonuses for all Named Executive Officers were paid in the
first quarter of 2009.
Long-Term
Incentive Awards
PSUs. The
Company has adopted the PSU Plan to provide PSUs as incentive compensation to
certain key employees (including the Named Executive Officers) of the Company.
Our Executive Chairman does not participate in the PSU Plan but is responsible
for recommending grants under the PSU Plan to the Compensation
Committee.
The PSUs
are designed to align management’s performance objectives with the interests of
our shareholders. We believe that PSUs (which are based on diluted return on
equity) align the compensation of our Named Executive Officers more closely to
shareholder value than other alternatives such as options (which place 100%
weight on growth in market value). The Compensation Committee has exclusive
authority to select the persons to be awarded PSUs. At the time of each award,
the Compensation Committee determines the terms of the award, including the
performance period (or periods) and the performance objectives relating to the
award.
Following
the final performance period of a PSU, the Compensation Committee determines
whether the performance objectives were met in whole or in part, and the payment
due on the PSU as a result. The Compensation Committee has no discretion to
change the growth in diluted return on equity goals for PSUs which have already
been granted.
The PSU
grants made entitle the recipient to receive the number of common shares of the
Company (or cash equivalent or combination of cash and common shares) equal to
the product of the number of PSUs granted times a “multiplier”. The
applicable multiplier for each series of PSUs is determined as
follows:
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(i)
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Cancelled
PSU grants, see “– Executive Compensation Policy – Overview” above, are as
follows:
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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%.
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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%.
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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%.
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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%.
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(ii)
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Current
PSU grants, see “– Executive Compensation Policy – Overview” above, are as
follows:
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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%.
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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%.
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In the
future, the Company may award to Named Executive Officers PSUs which have a
different index with a portion of the award tied more closely to the performance
of a specific business unit for which a Named Executive Officer is responsible.
However, a portion would also remain tied to the Company achieving its diluted
return on equity goals.
The
Company has no policy to recover payments if the relevant performance measures
upon which they are based are restated or otherwise adjusted in a manner that
would reduce the size of a payment. With the exception of the special 2009-2010
series which vest in two years, the PSUs vest over a period of three years. To
enhance retention, PSUs generally will be cancelled without value by the Company
if the participant’s continuous employment terminates prior to the end of the
performance period.
Settlement
of a PSU may be made in cash or by issuance of common shares or a combination of
both, at the discretion of the Compensation Committee. The Company expects
generally to settle the PSUs in common shares. As of April 14, 2009, the maximum
number of common shares that may be issued under the PSU Plan is 11,200,000
common shares, subject to adjustment for share subdivisions, share dividends,
stock splits and similar events. Our long-term expectation is that PSU grants
equal in number to approximately 1% of outstanding common shares will be made
each year. Thus, an increase in the maximum number of common shares that may be
issued under the PSU Plan will need to be authorized in due
course.
We
generally grant PSU awards annually, prior to the commencement of the
performance period they track. In the case of new hires, we generally award PSUs
that have a performance period commencing at the beginning of the year of
hire.
Warrant. 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 date 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. The Company does not
expect to further amend the Warrant.
The
Company does not currently intend to grant any options or additional awards to
purchase common shares of the Company.
Competitive
Market Review
We
consider competitive market practices with respect to the salaries and total
compensation of our Named Executive Officers. For purposes of determining
competitive compensation levels for our Named Executive Officers in Bermuda, we
subscribed to the PricewaterhouseCoopers Bermuda International Compensation
Survey in 2008, an independent local market annual survey. We review the market
practices by speaking to recruitment agencies and reviewing annual reports on
Form 10-K, proxy statements or similar information of other Bermuda and
Swiss reinsurance companies with market capitalizations greater than
$500.0 million and less than $3.0 billion, in particular Aspen
Insurance Holdings Ltd., Endurance Specialty Holdings Ltd., Allied
World Assurance Company Holdings, Ltd, Montpelier Re Holdings Ltd. and
Platinum Underwriters Holding Ltd. We do not use compensation consultants
at this time, however, in the future we may seek such advice.
Common
Share Ownership Requirements
The
Company seeks to weight its compensation scheme to ownership of our common
shares. The Company believes that broad-based stock ownership by its employees
(including the Named Executive Officers) enhances its ability to deliver
superior shareholder returns by increasing the alignment between the interests
of our employees and our shareholders. The goal of the PSU program is to engage
all of our Named Executive Officers as partners in the Company’s success and
help the Company realize the maximum gain from its strategy. The Company does
not have a formal requirement for share ownership by any group of
employees.
Change
in Control and Severance
Upon
termination of employment, the Named Executive Officers may receive payments
under the Company’s PSU Plan and severance payments under their employment
agreements.
PSUs. The
PSU Plan has a “double trigger”: PSUs held by any participant may settle in full
if: (i) the Company undergoes a transaction that is deemed to be a change
of control and (ii) the participant is terminated, constructively
terminated or the PSU Plan is changed adversely. If the change of control is
“hostile,” meaning that it is opposed by our Executive Chairman and our Chief
Executive Officer, all PSUs held by a participant will become fully payable in
shares or cash, or a mixture of both, at the discretion of the Compensation
Committee immediately upon any termination of the employment of the participant
by the Company. If the double trigger occurs, the Named Executive Officer may
receive all or a portion of the maximum award under the PSU Plan.
We
believe this double trigger requirement maximizes shareholder value because it
prevents an unintended windfall to management in the event of a friendly
(non-hostile) change in control. Under this structure, unvested PSUs would
continue to incentivize the Named Executive Officers to remain with the Company
after the friendly change in control.
If, by
contrast, the PSU plan had only a “single trigger,” and a friendly change of
control occurred, management’s PSUs would all vest immediately creating a
windfall, and the new owner would then likely find it necessary to replace the
compensation with fresh unvested compensation in order to retain management.
This is why we believe a “double-trigger” is more shareholder-friendly, and thus
more appropriate, than a single trigger.
Severance. The
Named Executive Officers’ employment agreements entitle each officer to
compensation if such officer’s employment is terminated without cause. Severance
payments include a cash payment equal to one year’s annual salary and a bonus
calculated by averaging the sum of the most recent three bonuses paid to the
Named Executive Officer. In the event a Named Executive Officer has been
employed with the Company for fewer than three years and is terminated without
cause, the bonus will be calculated by averaging the sum of such lesser number
of bonuses paid to the Named Executive Officer.
David
Brown’s employment agreement provides that, in the event he is terminated
without cause, Mr. Brown generally shall be entitled to a lump sum cash
payment of the greater of: (i) one year’s annual salary and a bonus
calculated by averaging the sum of the three most recent bonuses paid to
him (or such lesser number of bonuses if fewer than three bonuses have been paid
since the commencement of his employment agreement), or (ii) the cash value
mark-to-market per the Company’s books and records for the most recently ended
quarter of the PSUs he lost due to termination, pro-rated for the portion of the
performance period served under the PSUs. However, if he is terminated without
cause following a change of control of the Company, Mr. Brown will be
entitled to a cash payment equal to one year’s annual salary and a bonus
calculated by averaging the sum of the three most recent bonuses (or
such lesser number of bonuses if fewer than three bonuses have been paid since
the commencement of his employment agreement) paid to him.
Severance
payments for each Named Executive Officer under his employment agreement are in
addition to the Company’s obligation to pay such officer’s salary during the
requisite notice period. The severance payments are in addition to each Named
Executive Officer’s rights to payment under the PSU Plan discussed
above.
Each
employment agreement includes a covenant by the Named Executive Officer not to
solicit employees of the Company during a period following notice of
termination, and, except for a termination of Mr. Brown without cause
following a change of control of the Company, provides for these severance
payments in a lump sum only after the officer shall have complied with such
non-solicitation requirement (in the reasonable judgment of the
Company). In the case of Messrs. Byrne and Brown, that period is
730 days. In the case of the other Named Executive Officers,
that period is 545 days.
The level
of severance payments determined as follows: prior to the commencement of our
IPO process the level of severance payments was determined as follows: (i) all
executive officer contracts were terminable by either party upon 90 days’
notice; (ii) there were no restrictions on the executive officer, following the
termination of his employment with the Company, from soliciting employees of the
Company; (iii) and there were no severance payments other than payment of salary
during the notice period. It was determined by the Compensation Committee, in
conjunction with our advisors in the IPO process, that these provisions
were generally less protective of the Company’s interest than the provisions
adopted by comparable public firms. It was thus decided, in conjunction with the
relevant executive officers, to amend the employment agreements in two ways
beneficial to the Company (longer notice and the addition of non-solicitation
provisions) and two ways beneficial to the employee (severance arrangements and
use of the Company’s aircraft at marginal cost). It was considered by the
Compensation Committee that, given the lengthy notice period to which the Named
Executive Officers are now committed, a decision to resign would effectively
freeze such executive officer’s career for at least a year. Thus the payment of
one year’s pay, in the event the Company decided to terminate the Named
Executive Officer without cause, was considered roughly
proportionate.
Mr. Brown’s
severance provisions are more generous than those of the other Named Executive
Officers and reflect the high opportunity costs he would bear if the Company
decided to change its Chief Executive Officer.
Role
of Executive Officers in Executive Compensation
The
Compensation Committee approves the final determination of compensation for
Messrs. Boisvert, Flitman, Prestia and O’Shaughnessy acting on the
recommendation of our Executive Chairman, Mr. Byrne, with advice from our Chief
Executive Officer, Mr. Brown. The Compensation Committee determines the
compensation (excluding the annual bonus) of Mr. Brown acting with advice
from Mr. Byrne. The Compensation Committee determines the compensation
(excluding the annual bonus) of Mr. Byrne acting with advice from Mr.
Brown. Messrs. Brown and Byrne do not play a role in determining their own
bonuses. Instead, the bonuses for each of them are set independently by the
Compensation Committee. Our Executive Chairman does not receive PSUs but is
responsible for recommending grants under the PSU Plan to the Compensation
Committee.
Conclusion
The
Company’s compensation policies are designed to retain and motivate our senior
executive officers, align their performance objectives with the interests of our
shareholders and ultimately reward them for outstanding
performance.
Summary
Compensation Table
The
following Summary Compensation Table summarizes the total compensation awarded
to our Named Executive Officers as of December 31, 2008 for services rendered by
them to the Company and to its subsidiaries.
|
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.
|
Grants
of Plan-Based Awards
The
Compensation Committee makes awards to all of our Named Executive Officers,
except our Executive Chairman. Our Executive Chairman does not participate in
the PSU Plan because he contributed the significant majority of capital to
Haverford and we therefore consider him to have sufficient indirect interest in
the value of the Company’s equity, and because this allows him to participate
meaningfully in the allocation of PSU grants to others without conflict of
interest.
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. On January 1, 2009 the
Compensation Committee awarded PSUs for the 2009-2011 performance period. Under
the non-discretionary formula set forth in the PSUs, upon vesting, the executive
officers holding PSUs shall be entitled to receive a number of common shares of
the Company (or the cash equivalent, or a combination of both, in each case at
the election of the Compensation Committee) equal to the product of the number
of PSUs granted multiplied by a factor. The factor will range between 0.5 and
1.5, depending on the diluted return on equity achieved during the vesting
period. The PSUs vest over a period of approximately three years. If the diluted
return on equity goals are not met, no compensation cost is
recognized.
To
enhance retention, if the participant’s continuous employment terminates prior
to the end of the performance period, PSU grants generally will be cancelled
without value by the Company at the end of the next performance
period.
In the
event of a hostile takeover termination, the Compensation Committee would have
the option to pay the maximum award due to the participant in either cash or by
the issuance of common shares in the cash value of the common shares based on
market value rather than net asset value as of the date of the hostile takeover
termination. Under the PSU Plan, a hostile takeover termination would occur if
an employee is terminated or there is an adverse change in the PSU Plan,
following a change in control of the Company that was opposed by the Executive
Chairman and the Chief Executive Officer.
Grants
of Plan-Based Awards Table
The
following Grants of Plan-Based Awards Table summarizes all grants made to the
Named Executive Officers under any plan during the fiscal 2008
year.
|
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.
|
Employment
Agreements
The
following paragraphs summarize the employment-related agreements for our Named
Executive Officers. The employment agreements for Messrs. Boisvert, Flitman,
O’Shaughnessy and Prestia provide that either party may terminate the agreement
upon 6 month’s advance written notice to the other party and do not otherwise
specify a termination date. The employment agreements for
Messrs. Byrne and Brown provide that either party may terminate the
agreement upon 365 days’ advanced written notice to the other party and do
not otherwise specify a termination date. The employment agreement for each
Named Executive Officer provide for a discretionary annual bonus to be paid to
each Named Executive Officer. The employment agreement for each of Messrs.
Boisvert and Flitman specifies that the annual bonus shall not exceed 50% and
60%, respectively, of each of their annual salaries. The employment
agreement for each of Messrs. O’Shaughnessy and Prestia specifies that the
annual bonus shall not exceed 75% of such Named Executive Officer’s annual
salary. The employments agreements for Messrs. Byrne and Brown do not limit
the amount of their annual bonuses.
The
employment agreements for each of the Named Executive Officers specify that each
Named Executive Officer shall have the right to personal use of the Company
aircraft, provided that each Named Executive Officer shall reimburse the
marginal cost to the Company for this personal use. This amount does not include
fixed costs which do not change based on usage, such as pilot salaries, the
lease costs of the Company aircraft, and the cost of maintenance not related to
trips on the aircraft.
Mark Byrne. We
have entered into an employment agreement with Mr. Byrne, dated
October 18, 2006, under which he has agreed to serve as our Executive
Chairman. Pursuant to this agreement, Mr. Byrne was paid an annual salary
of $650,000 for the year ended December 31, 2008. The agreement
further provides that Mr. Byrne shall receive a housing allowance through a
mortgage subsidy, which will lower the effective cost of financing on his
Bermuda residence to 3% per annum. The maximum financing to which this applies
is an amount equal to five times Mr. Byrne’s annual salary as amended from
time to time. Mr. Byrne has agreed terms with the Company such that his annual
salary for the year ending December 31, 2009 will be approximately
$650,000.
David Brown. We
have entered into an employment agreement with Mr. Brown, dated
October 15, 2006, under which he has agreed to serve as our Chief
Executive Officer. Pursuant to this agreement, Mr. Brown was paid an annual
salary of $650,000 for the year ended December 31, 2008. The agreement
further provides that Mr. Brown shall receive a housing allowance through a
mortgage subsidy, which will lower the effective cost of financing on his
Bermuda residence to 3% per annum. The maximum financing to which this applies
is an amount equal to five times Mr. Brown’s annual salary as amended from
time to time. Mr. Brown has agreed terms with the Company such that
his annual salary for the year ending December 31, 2009 will be approximately
$650,000.
Patrick Boisvert. We have
restated the employment agreement with Mr. Boisvert, on March 31, 2009, under
which he has agreed to serve as our Chief Financial Officer. This
employment agreement replaced the prior agreements dated July 1, 2008 and April
9, 2008 between Flagstone Reinsurance Limited and Mr.
Boisvert. Pursuant to the latter agreement, Mr. Boisvert was
paid an annual salary of CHF270,000 for the year ended December 31, 2008.
The agreement further provides that Mr. Boisvert shall receive a housing
allowance of CHF 6,000 per month until July 31, 2010. Mr. Boisvert
has agreed terms with the Company such that his annual salary for the year
ending December 31, 2009 will be approximately CHF410,000.
David Flitman. We
have restated the employment agreement with Mr. Flitman, on March 31, 2009,
under which he has agreed to serve as our Chief Actuary. This
employment agreement replaced the prior employment agreements with the Company
dated August 25, 2008 and January 5, 2006 between Flagstone Reinsurance Limited
and Mr. Flitman. Pursuant to the latter agreement, Mr. Flitman
was paid an annual salary of US$ 500,000 for the year ended December 31,
2008. The agreement further provides that Mr. Flitman shall receive a
housing allowance of up to $120,000 per annum. Mr. Flitman has agreed to terms
with the Company such that his annual salary for the year ending December 31,
2009 will be approximately $525,000.
James
O’Shaughnessy. We have restated the employment agreement with
Mr. O’Shaughnessy, on March 31, 2009, under which he has agreed to serve as
our Chief Financial Officer - Bermuda. This employment agreement replaced the
prior agreements with the Company dated September 24, 2008 and October 18, 2006
between Flagstone Reinsurance Holdings Limited and Mr.
O’Shaughnessy. Pursuant to the 2008 agreement, Mr. O’Shaughnessy
was paid an annual salary of $330,000 for the year ended
December 31, 2008. The agreement further provides that
Mr. O’Shaughnessy shall receive a housing allowance through a mortgage
subsidy, which will lower the effective cost of financing on his Bermuda
residence to 3% per annum. The maximum financing to which this applies is an
amount equal to five times Mr. O’Shaughnessy’s annual salary as amended
from time to time. Mr. O’Shaughnessy has agreed terms with the Company
such that his annual salary for the year ending December 31, 2009 will be
approximately $330,000.
Gary Prestia. We
have restated the employment agreement with Mr. Prestia, on March 31, 2009,
under which he has agreed to serve as our Chief Underwriting Officer - Flagstone
Réassurance Suisse SA - Bermuda Branch. This employment agreement replaced the
prior agreements with the Company dated October 18, 2006 and August 26, 2008
between the Flagstone Reinsurance Limited and Mr. Prestia. Pursuant
to the latter agreement, Mr. Prestia was paid an annual salary of $520,000
for the year ended December 31, 2008. The agreement further provides that
Mr. Prestia shall receive a housing allowance of up to $60,000 per
annum. Mr. Prestia has agreed terms with the Company such that his
annual salary for the year ending December 31, 2009 will be approximately
$546,000.
Compensation
Mix
We use
short-term compensation (base salaries and annual cash bonuses) and long-term
compensation (PSUs) to achieve our goal of driving long-term growth in book
value per share. The long-term compensation element (the PSUs) are designed to
emphasize the performance measures executive officers need to address in order
to deliver shareholder value.
The
cumulative number of outstanding PSUs granted to each of the Named Executive
Officers as at December 31, 2008 was as follows: (i) Mr. Byrne
(none); (ii) Mr. Brown 547,587; (iii) Mr. Boisvert 89,735; (iv) Mr.
Flitman 169,551; (v) Mr. Prestia 188,390; and (vi) Mr. O’Shaughnessy
97,962.
The
cumulative number of outstanding PSUs granted to each of the Named Executive
Officers as at January 1, 2009 was as follows: (i) Mr. Byrne (none);
(ii) Mr. Brown 722,587; (iii) Mr. Boisvert 139,735; (iv) Mr. Flitman
244,551; (v) Mr. Prestia 263,390; and (vi) Mr. O’Shaughnessy
109,962.
The
amount of annual base salary for each of the Named Executive Officers in fiscal
2008 was as follows: (i) Mr. Byrne $650,000; (ii) Mr. Brown
$650,000; (iv) Mr. Boisvert $246,336; (iv) Mr. Flitman $500,000;
(v) Mr. Prestia $520,000; and (vi) Mr. O’Shaughnessy
$330,000.
For the
Named Executive Officers, no PSUs vested during 2008. The
Compensation Committee of the Board of Directors of the Company reviews its
assumptions in relation to the PSUs on a quarterly basis. 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.
Base
salary typically will constitute a minority portion of the total compensation of
our Named Executive Officers. We set salary to provide adequate cash
compensation to support a reasonable standard of living, so that our Named
Executive Officers are prepared to have “at risk” the portion of their
compensation received in PSUs. We anticipate that if the Company meets its
diluted return on equity goals the Named Executive Officers will receive
significantly more long-term value (in some cases a multiple) from their PSUs
than from their annual cash bonuses, the other form of incentive
compensation.
We
maintain a defined contribution pension plan in accordance with the National
Pension Scheme (Occupational Pensions Act) 1998, as amended, for the benefit of
employees that are Bermudians or spouses of Bermudians.
We
maintain a defined contribution pension plan in accordance with the Occupational
Pensions Act in Switzerland for the benefit of employees that are resident in
Switzerland.
The named
executive officers do not participate in any defined contribution or other plan
that provides for the deferral of compensation on a basis that is not
tax-qualified, except for those contributions to the Swiss social pension plan,
or l’Assurance-Vieillesse et Survivant.
Compensation
Committee Interlocks and Insider Participation
|
●
|
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 $0.2 million as at
December 31, 2007. The agreement was terminated, as per the
terms of the swap agreement, on September 15, 2008 due to the bankruptcy
of Lehman Brothers Inc.
|
Outstanding
Equity Awards at Fiscal Year-End Table
The
following table summarizes the number of securities underlying the Warrant and
the Company’s PSU Plan awards for each Named Executive Officer as at December
31, 2008.
|
Name
|
Outstanding Equity Awards at Fiscal
Year-End
|
|||||||||||||||||||||||||||
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||
|
Number of
securities
underlying
unexercised
options
exercisable
(#)
|
Number of
securities
underlying
unexercised
options
unexercisable (1)
(#)
|
Equity incentive plan awards: number of securities
underlying unexercised unearned options (#)
|
Option
exercise
price
($)
|
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.
|
Potential
Payments Upon Termination or Change-in-Control
The
following summarizes potential payments payable to our Named Executive Officers
upon termination of their employment or a change in control of the Company under
their current employment agreements and our PSU Plan.
Employment
Agreements
The
employment agreement of each Named Executive Officer entitles him to a severance
payment if the Company terminates his employment without cause.
As used
in these employment agreements, “cause” means:
|
●
|
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.
|
The
employment agreement of Mr. Byrne provides for cash payment equal to one
year’s annual salary and a bonus calculated by averaging the sum of the most
recent three bonuses paid to the Named Executive Officer. In the event that Mr.
Byrne has been employed with the Company for fewer than three years and is
terminated without cause, the bonus will be calculated by averaging the sum of
such lesser number of bonuses paid to Mr. Byrne. The amounts the Company would
pay to Mr. Byrne under this provision for a termination as of December 31,
2008 would be $1,233,333.
David
Brown’s employment agreement provides that, in the event Mr. Brown is
terminated without cause, Mr. Brown generally shall be entitled to a lump
sum cash payment of the greater of: (i) one year’s annual salary and a
bonus calculated by averaging the sum of the three most recent bonuses (or
such lesser number of bonuses if fewer than three bonuses have been paid since
the commencement of his employment agreement) paid to him, or (ii) the
cash value determined on a mark-to-market basis per the Company’s books and
records for the most recently ended quarter, of the PSUs he lost due to
termination, pro-rated for the portion of the performance period served under
the PSUs. Under this provision, for a termination as of December 31, 2008,
the Company would be obligated to pay $1,233,333 to Mr. Brown.
If the
Company terminates Mr. Brown’s employment without cause following a change
of control of the Company, the Company will be obligated immediately to pay
Mr. Brown a lump sum cash payment equal to one year’s annual salary and a
bonus calculated by averaging the sum of three most recent bonuses (or such
lesser number of bonuses if fewer than three bonuses have been paid since the
commencement of his employment agreement) paid to him. Under this provision, for
a termination as of December 31, 2008, the Company would be obligated to
pay $1,300,000 to Mr. Brown.
Prior to
the commencement of our IPO process the level of severance payments was
determined as follows: (i) all executive officer contracts were terminable by
either party upon 90 days’ notice; (ii) there were no restrictions on the
executive officer, following the termination of his employment with the Company,
from soliciting employees of the Company; (iii) and there were no severance
payments other than payment of salary during the notice period. It was
determined by the Compensation Committee, in conjunction with our advisors in
the public offering process, that these provisions were generally less
protective of the Company’s interest than those provisions at comparable public
firms. It was thus decided, in conjunction with Messrs. Byrne and Brown, to
amend the employment agreements in two ways beneficial to the Company (longer
notice and the addition of non-solicitation provisions) and two ways beneficial
to the employee (severance arrangements and use of the Company’s aircraft at
marginal cost). It was considered by the Compensation Committee that, given the
lengthy notice period to which the executive officers are now committed, a
decision to resign would effectively freeze such an executive officer’s
career for at least a year. Thus the payment of one year’s pay, in the event the
Company decided to terminate the executive officer without cause, was considered
roughly proportionate.
Mr. Brown’s
severance provisions are slightly more generous than those of the other Named
Executive Officers and reflect the high opportunity costs he would bear if the
Company decided to change its Chief Executive Officer.
Severance
payments for each Named Executive Officer under his employment agreement are in
addition to the Company’s obligation to pay such Named Executive Officer’s
salary during the requisite notice period, and are in addition to the Company’s
obligations under the PSU Plan.
Each
employment agreement includes a covenant by the Named Executive Officer not to
solicit employees of the Company during a period following notice of
termination, and, except for a termination of Mr. Brown without cause
following a change of control of the Company, provides for these severance
payments in a lump sum only after the officer shall have complied with such
non-solicitation requirement (in the reasonable judgment of the
Company). In the case of Messrs. Byrne and Brown, that period is
730 days. In the case of the other Named Executive Officers,
that period is 545 days.
PSU
Plan
Within
24 months following a change of control, and prior to the end of the
performance period, the PSU Plan provides for payment in the event of a
termination without cause, constructive termination or adverse change in the
plan. As used in the PSU Plan:
|
●
|
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.
|
In these
circumstances, if the Compensation Committee shall have determined, prior to the
change in control and based on the most recent performance status reports, that
the performance objectives for the particular grant were being met at the date
of the determination, the participant shall receive the maximum award for those
PSUs, which is a number of common shares equal to 1.5 times the number of his
PSUs. If the Compensation Committee shall have determined that the performance
objectives were not being met, the participant shall receive a portion of the
maximum award to be determined by the Compensation Committee at its discretion,
but not less than the pro-rated portion of the maximum award based on the number
of full months which have elapsed since the date of the PSU grant plus half of
the difference between that amount and the maximum award. For all PSU awards to
date, the sole performance objective has been stated as a target diluted return
on equity of the Company.
If the
change of control is “hostile,” meaning that it was opposed by our Executive
Chairman and our Chief Executive Officer, immediately upon any termination of
the employment of the participant by the Company, each participant shall be
entitled to receive common shares equal to two times the number of his unvested
PSUs or, in the discretion of the Company, the cash value of those shares based
on the market price per share at the date of termination.
The
number of common shares issuable under these provisions for a termination event
as of December 31, 2008 would be 821,381 shares to Mr. Brown, 134,603
shares to Mr. Boisvert, 254,327 shares to Mr. Flitman, 282,585 shares to
Mr. Prestia, and 146,943 shares to Mr. O’Shaughnessy. Based on the
price per common share of $9.77 at December 31, 2008, the value of those shares
would be $8,024,887, $1,315,066, $2,484,770, $2,760,855, and $1,435,633
respectively.
Each of
these provisions of the PSU Plan provides for payment only upon a change of
control and another triggering event, such as a termination without cause. We
believe this “double trigger” requirement maximizes shareholder value because
this structure would prevent an unintended windfall to management in the event
of a friendly (non-hostile) change in control, which could be a transaction
maximizing shareholder value. Under this structure, shareholders would have the
ability to sell their common shares since the unvested PSUs would continue to
incentivize the Named Executive Officers to remain with the Company after the
friendly change in control.
If, by
contrast, the PSU plan had only a “single trigger,” and a friendly change of
control occurred, management’s PSUs would all vest immediately creating a
windfall, and the new owner would then likely find it necessary to replace the
compensation with fresh unvested compensation, in order to retain management.
This is why we believe a double trigger is more shareholder-friendly, and
thus more appropriate, than a single trigger.
The PSU
Plan also provides for payment in specified circumstances if the participant
shall retire under an approved retirement program of the Company. The Company
currently has no retirement program.
Director
Compensation Table
The
following table summarizes the fees or other compensation that our directors
earned for services as members of the Board of Directors or any committee of the
Board of Directors during 2008.
|
Name
|
Fees earned
or paid in
cash ($)
|
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.
|
Directors
who are also employees are not paid any fees or other compensation for services
as members of the Board of Directors or of any committee of the Board of
Directors. Directors who are not employees of the Company are paid an annual fee
of $75,000. The Company pays a minimum of $15,000 of the annual fee in RSUs
under the RSU Plan. Each RSU will be valued at the market price of the common
shares as at January 1 of each fiscal year. Directors receive the remaining
portion of the annual fee in cash, or may, at their election, receive RSUs
instead of cash for any amount of their annual fee. Some of our directors
represent institutions that require them to assign over to the institution any
compensation that they receive for serving as directors. The table above
includes these amounts.
Each
director receives cash in the amount of $2,000 for each Board of Director or
committee meeting attended in person, and $1,000 for each meeting attended by
telephone. Each director receives cash in the amount of $3,000 per year for each
committee the director serves upon. In addition, committee chairs (other than
the Audit Committee Chair) receive an annual fee of $2,000 for each committee
chaired. The Audit Committee Chair receives an annual fee of $100,000. This fee
is greater than that received by the other committee chairs due to the
substantially greater time and responsibility demands made upon the Audit
Committee Chair.
MANAGEMENT
AND DIRECTORS
The
following table sets forth information as at March 23, 2009 regarding beneficial
ownership of common shares and the applicable voting rights attached to such
share ownership in accordance with our bye-laws by:
|
●
|
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.
|
The
Board of Directors and its Committees
Our
bye-laws provide for a Board of Directors of no less than ten and no more than
twelve directors. The Board of Directors met a total of eight (8) times in
fiscal 2008 and all incumbent directors attended at least 81% of such meetings
and of meetings held by the committees of the Board of Directors of which they
were members. The Company expects directors to attend the Annual
General Meeting and all of the Company’s then-directors attended the 2008
Annual General Meeting.
Our Board
of Directors is divided into three classes: four Class A directors whose
initial term will expire at the 2009 Annual General Meeting of our
shareholders, four Class C directors whose initial term will expire at
the 2010 Annual General Meeting of our shareholders, and four Class B
directors whose initial term will expire at the 2011 Annual General Meeting of
our shareholders. Thereafter, directors will hold office until the next Annual
General Meeting at which the term of that class of directors expires or until
their successors are duly elected or appointed or their office is otherwise
vacated.
Our Board
of Directors has established corporate governance measures in compliance with
the requirements of the New York Stock Exchange. These include a set of
Corporate Governance Guidelines, Independence Guidelines, and charters for each
of the Audit Committee, Compensation Committee and Governance Committee and a
Code of Conduct and Ethics for directors, officers and employees. Our Board of
Directors has also adopted a Code of Business Practices for the Company’s
principal executive, financial and accounting officers. These documents have
been published on the Company’s website, www.flagstonere.bm, and will
be provided upon written request to the Company’s Corporate Secretary at its
registered office address, Crawford House, 23 Church Street,
Hamilton HM 11, Bermuda.
Our Board
of Directors has reviewed the materiality of any relationship that each of the
twelve directors of the Company has with the Company either directly or
indirectly through another organization. The criteria applied included the
director independence requirements set forth in the Company’s Independence
Guidelines, the independence requirements of the New York Stock Exchange with
respect to the Company’s Audit Committee, and the audit committee
independence rules of the Securities and Exchange Commission (the “SEC”). In
conducting this review of the directors’ independence, the Board of Directors
considered any managerial, familial, professional, commercial or affiliated
relationship between a director and the Company or another director. In
particular, the Board of Directors considered the following arrangements of
certain directors before determining that each is independent under the New
York Stock Exchange independence requirements and the Company’s Independence
Guidelines:
|
●
|
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.
|
Based on
this review, the Board of Directors has determined that Messrs. Black, Coley,
Dickson, Gross, James, Knap, Latham, Roston (resigned from the Board of
Directors on September 29, 2008), Spiering, Thorn and Watson are independent
directors. Therefore, the Board of Directors has concluded that the Audit
Committee, Compensation Committee and Governance Committee consist only of
independent directors, and the Board of Directors consists of a majority of
independent directors.
Committees
of the Board of Directors
As of
April 14, 2009, the standing committees of the Board of Directors and their
members are:
|
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
|
*Chairman
Audit
Committee
The Audit
Committee met a total of nine (9) times during fiscal 2008. The Audit
Committee has general responsibility for the oversight and surveillance of our
accounting, reporting and financial control practices. Among its functions, the
Audit Committee:
|
●
|
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.
|
Mr. Spiering,
who is an independent director, is the Chairman of the Audit Committee, and the
Board of Directors has designated him as an “audit committee financial expert”
as that term is defined in Item 401(k) of Regulation S-K under the Securities
Act of 1933, as amended.
Compensation
Committee
The
Compensation Committee oversees our compensation and benefit plans, including
administration of annual bonus awards and long-term incentive plans and reports
their findings and opinions to the Board of Directors. The
Compensation Committee met four (4) times during fiscal 2008.
Governance
Committee
The
Governance Committee has responsibility for identifying individuals qualified to
become members of the Board of Directors consistent with the criteria approved
by the Board of Directors, recommending director nominees to the Board of
Directors, recommending Corporate Governance Guidelines to the Board of
Directors and overseeing an evaluation of the Board of Directors and
management. The Governance Committee met four (4) times during fiscal
2008.
The Board
of Directors has accorded to the Governance Committee the responsibility to
consider the effectiveness and composition of the Board of Directors, to
nominate candidates for election by our shareholders, and to fill vacancies on
the Board of Directors that emerge from time to time. The Governance Committee
will consider potential nominees to the Board of Directors recommended for
election by shareholders. Any such recommendation must be sent to the Corporate
Secretary of the Company not less than 120 days prior to the scheduled date of
the annual meeting and must set forth for each nominee: (i) the name, age,
business address and residence address of the nominee; (ii) the principal
occupation or employment of the nominee; (iii) the class or series and number of
shares of capital stock of the Company which are owned beneficially or of record
by the nominee; and (iv) any other information relating to the nominee that
would be required to be disclosed in a proxy statement or other filing required
to be made in connection with solicitations of proxies for election of directors
pursuant to Regulation 14A under the Exchange Act and the rules and
regulations promulgated thereunder. The written notice must also include the
following information with regard to the shareholders giving the notice: (1) the
name and record address of such shareholders; (2) the number of common shares of
the Company which are owned beneficially or of record by such shareholders; (3)
a description of all arrangements or understandings between such shareholders
and each proposed nominee and any other person (including his or her name and
address) pursuant to which the nomination(s) are to be made by such
shareholders; (4) a representation that such shareholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice;
and (5) any other information relating to such shareholder that would be
required to be disclosed in a proxy statement or other required filing. Such
notice must be accompanied by a written consent of each proposed nominee to be
named as a nominee and to serve as a director if elected. The Governance
Committee may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Assuming
that the shareholder suggesting a nomination follows the procedure outlined
above, the Governance Committee will evaluate those candidates by following
substantially the same process, and applying substantially the same criteria, as
for candidates submitted by members of the Board of Directors or by other
persons. In considering whether to recommend any candidate for inclusion in the
Board of Director’s slate of recommended director nominees, including candidates
recommended by shareholders, the Governance Committee would expect to apply the
same criteria which it applies to its own nominations. These criteria typically
include the candidate’s integrity, business acumen, leadership qualities,
experience in the reinsurance, insurance and risk-bearing industries and other
industries in which the Company may participate, independence, judgment,
mindset, vision, record of accomplishment, ability to work with others and
potential conflicts of interest. The Governance Committee does not assign
specific weight to particular criteria and no particular criterion is
necessarily applicable to all prospective nominees. Our Board of Directors
believes that the backgrounds and qualifications of the directors, considered as
a group, should provide a significant composite mix of experience, knowledge and
abilities that will allow the Board of Directors to fulfill its
responsibilities.
Underwriting
Committee
The
Underwriting Committee met a total of four (4) times during fiscal
2008. The Underwriting Committee oversees the Company’s underwriting
policies and approves any exceptions thereto. Among its functions, the
Underwriting Committee:
|
●
|
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.
|
Finance
Committee
The
Finance Committee met a total of five (5) times during fiscal
2008. Among its functions, the Finance Committee:
|
●
|
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.
|
The Audit
Committee met a total of nine (9) times during fiscal 2008 and discussed amongst
other things the Company’s quarterly results. The Audit Committee
also discussed with Deloitte & Touche the overall scope and plans for their
audit and the results of such audits. At the end of each meeting the
auditor was given the opportunity to meet with the Audit Committee members
without the presence of management. The Audit Committee conducted an
annual self-assessment in November 2008 in accordance with the terms of its
charter.
The Audit
Committee has reviewed and discussed the Company’s system of internal controls
over financial reporting. The Audit Committee recommended to the
Board of Directors that the Company’s audited financial statements for the
fiscal year ended December 31, 2008 be included in the Company’s Annual Report
on Form 10-K for such fiscal year. The recommendation was based on
the Audit Committee’s (i) review of the audited financial statements, (ii) its
discussion with management regarding the audited financial statements, (iii) its
receipt of written disclosures and the letter from Deloitte & Touche
required by applicable requirements of the Public Company Accounting Oversight
Board regarding Deloitte & Touche’s communications with the Audit Committee
concerning independence, (iv) its discussions with Deloitte & Touche
regarding its independence, the audited financial statements, the matters
required to be discussed by the Statement on Auditing Standards No. 61, as
amended, as adopted by the Public Company Accounting Oversight Board in Rule
3200T, Deloitte & Touche’s communications with respect to their
audit and (v) other matters the Audit Committee deemed relevant and
appropriate,
Jan
Spiering, Chairman
Stephen
Coley
Thomas
Dickson
Stewart
Gross
Dr.
Anthony Knap
Wray T.
Thorn
Peter F.
Watson
The
Compensation Committee has reviewed and discussed with management of the Company
the Compensation Discussion and Analysis (“CD&A”). Based on such
review and discussions referred to below, the Compensation Committee recommended
to the Board that the CD&A be included in this Proxy
Statement.
In
November 2008, the Compensation Committee conducted an annual self-assessment in
accordance with the terms of its charter.
E. Daniel
James, Chairman
Stewart
Gross
Dr.
Anthony Knap
Wray T.
Thorn
Significant
Board Practices
Executive
Session
At the
majority of physical meetings of the Board of Directors there is an executive
session during which Mr. Byrne, our Executive Chairman, and Mr.
Brown, our Chief Executive Officer, are excused. In 2008 there
were four (4) such sessions. The non-management members of the Board
of Directors are at liberty to raise such issues as they deem
necessary. The executive session is chaired by Mr. Stephen
Coley.
Advance
Materials
Information
and related materials necessary to provide the directors with an understanding
of the topics to be discussed at the Board of Director and committee meetings
are, where practicable, circulated in advance of each meeting. The
directors are given sufficient time to allow careful review the Board of
Director materials.
Under the
Exchange Act, our directors and executive officers, and any persons holding more
than 10% of the outstanding common shares, are required to report their initial
ownership of common shares and any subsequent changes in that ownership to the
SEC. Specific filing dates for these reports have been established by the SEC,
and we are required to disclose in this Proxy Statement any failure by such
persons to file these reports in a timely manner during the 2008 fiscal year.
Based upon our review of copies of such reports furnished to us, we believe that
during the 2008 fiscal year our executive officers and directors and the holders
of more than 10% of the outstanding common shares complied with all reporting
requirements of Section 16(a) of the Exchange Act except that Messrs. Byrne and
Brown each inadvertently did not timely file one Form 4 for one
transaction.
Our
bye-laws provide for a classified Board of Directors, divided into three (3)
classes of equal size. Each director will serve a three-year
term. At the Annual General Meeting, our shareholders will elect the
Class A directors, who will serve until 2012 Annual General
Meeting. Our incumbent Class B and Class C directors will serve until
the 2011 and 2010 Annual General Meetings, respectively.
The Board
of Directors will nominate Messrs. Byrne, Gross, James and Latham for
re-election at the Annual General Meeting. Each of these directors
has indicated that he will offer himself for re-election to the Board of
Directors.
If any
nominee shall, prior to the Annual General Meeting, become unavailable for
election as a director, the persons named in the accompanying proxy card will
vote for such other nominee, if any, in their discretion as may be recommended
to the Board of Directors.
NOMINEES
Mark
Byrne
Stewart
Gross
E. Daniel
James
Anthony
P. Latham
The
respective ages, business experience, directorships and committee memberships
for the nominees are set out in “Our Directors” above. All of the
nominees currently serve as directors.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION
OF
THE FOUR DIRECTORS NAMED ABOVE
Upon
recommendation of the Audit Committee, the Board of Directors propose that the
shareholders approve the appointment of Deloitte & Touche to serve as our
independent auditor for the 2009 fiscal year until the 2010 Annual General
Meeting. Deloitte & Touche have served as our independent auditor
since October 2005. A representative from Deloitte & Touche will
attend the Annual General Meeting and will be available to respond to any
questions and make a statement if he or she so desires. Shareholders
at the Annual General Meeting will also be asked to vote to defer the
determination of the auditor’s remuneration to the Board of
Directors.
The
following sets forth the fees billed to us by Deloitte & Touche during the
2008 fiscal year:
Audit
Fees
Aggregate
audit fees billed to us by Deloitte & Touche for the fiscal years ended
December 31, 2008 and 2007 were $3,612,671and $1,606,121,
respectively. Audit fees were for (a) the audit of our annual
financial statements, (b) review of our quarterly financial statements, (c)
statutory audits and (d) assistance with and review of documents filed with the
SEC (including comfort letters and consents).
Audit-Related
Fees
Audit-related
fees billed to us by Deloitte & Touche for the fiscal years ended December
31, 2008 and 2007 were $98,640 and $73,491, respectively, for assurance and
related services that are related to the audit and review of the financial
statements which are not reported as audit fees above.
Tax
Fees
Fees
billed to us by Deloitte & Touche for all tax-related services for the
fiscal years ended December 31, 2008 and 2007 were $18,890 and $44,520,
respectively. These fees were for professional services rendered for
tax compliance.
All
Other Fees
The
aggregate fees billed by Deloitte & Touche for products and services
rendered to the Company, other than the services described above under “Audit
Fees”, “Audit-Related Fees” and “Tax Fees”, for the fiscal years ended December
31, 2008 and 2007 were $157,927 and $ nil, respectively, which relate to
technical consultations and services provided in relation to securities
offerings. The Audit Committee has considered whether any information
technology and non-audit consulting services provided by Deloitte & Touche
could impair the independence of Deloitte & Touche. No such services were
provided by Deloitte & Touche during 2008 and thus the Audit Committee
concluded that such services did not impair the auditor’s
independence.
The Audit
Committee must pre-approve all audit services and permitted non-audit services
performed for the Company by our auditor, subject to the de minimis exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Audit Committee prior to the completion of the audit.
All engagements of Deloitte & Touche to provide audit, audit-related and tax
services to the Company during 2008 and 2007 were pre-approved by the Audit
Committee.
As noted
above, the Audit Committee is responsible for managing our relationship with our
independent auditor. The Audit Committee has the sole authority to hire and
employ our auditor. The Audit Committee regularly reviews the auditor’s work
plan, bills and work product. Accordingly, it is our policy that all proposed
engagements by our current audit firm must be approved in advance by the Audit
Committee.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE REAPPOINTMENT OF DELOITTE &
TOUCHE
AS
OUR INDEPENDENT AUDITOR FOR THE 2009 FISCAL YEAR UNTIL THE 2010 ANNUAL GENERAL
MEETING.
With a
view to modernizing the Companies Act 1981 (as amended) (the “Companies Act”) to
take into account various company law reform initiatives in various
jurisdictions, the Companies Amendment Act 2006 (the “Amendment Act”), which
came into force on December 29, 2006, made a number of important changes to
Bermuda’s primary company legislation.
A. Treasury
Shares
The
Amendment Act permits a company to acquire its own shares to be held as treasury
shares provided this is permitted by the company's memorandum of association or
its bye-laws. Treasury shares generally represent shares that were issued to
shareholders but which have since been reacquired by the issuing company and are
available for retirement or later reissuance. Prior to this amendment, such
purchased shares would be cancelled. Generally, the rights attaching
to treasury shares such as voting and dividend rights are in abeyance while they
are held as treasury shares. It is a requirement under the Amendment
Act that any company wishing to take advantage of the treasury shares facility
will need to change its memorandum or bye-laws to permit this.
Our
Bye-laws and Memorandum of Association do not currently authorize the Company to
acquire its own shares and subsequently hold them as treasury
shares. We believe that having the ability to hold reacquired Common
Shares in treasury affords us valuable corporate financial flexibility under
various circumstances, and is in our best interest and in the best interests of
our shareholders. The recommended amendments to the Bye-laws to accommodate the
ability of the Company to acquire its own shares and either cancel such shares
or hold them in treasury.
B. Provision for electronic
record delivery
The SEC’s
“Internet availability of Proxy Materials” rule is known as Notice & Access.
It provides the option for corporations to publish proxy materials on a
publicly-available website and then mail shareholders a notice of where they can
access these materials. Participation in Notice & Access is required by the
Company.
Pursuant
to the Amendment Act, a company may use electronic delivery to deliver documents
required to be provided by the Companies Act or the bye-laws unless the bye-laws
of the company preclude this. An electronic record may be delivered
by communicating it by electronic means (for example, by e-mail) to an address
provided by the recipient for that purpose. An electronic record is
also deemed to have been delivered if it is published on a website and the
person to whom the document is to be provided has agreed to that method and been
given access to the necessary webpage.
We
believe that it is in the best interest of the Company our shareholders to amend
the Bye-laws to accommodate such changes as it may help to reduce expenses
incurred by the Company in the production and mailing of our annual mailing
material.
C. Corporate Seals No Longer
required by the Companies Act
Our
Bye-laws currently require the use of the Company seal. The Companies
Act no longer requires that deeds or other documents be executed under seal to
be effective as a matter of Bermuda law. The requirements for issuing
share certificates under seal have also been amended to provide enhanced
flexibility. While the corporate seal still has a role, that role is now
limited. We believe it is in the best interest of the Company to
amend our Bye-laws to take advantage of the enhanced flexibility of the Amended
Act.
D. Ability of a company to
Indemnify Directors and Officers Clarified
For the
avoidance of doubt, the Companies Act expressly clarifies that we may indemnify
our Directors and Officers not only from an eventual award against them, but
also against defense costs on the condition that, if fraud or dishonesty is
proved, the particular Directors and Officers will be required to repay funds so
provided for their defense. The proposed amendment to our
Bye-laws seeks only to incorporate such clarifying language in the corporate
documents of the Company.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE AMENDMENTS TO
THE BYE-LAWS OF THE COMPANY.
AS
AMENDED 14TH MAY
2009 20TH JULY,
2007
BYE-LAWS
OF
FLAGSTONE
REINSURANCE HOLDINGS LIMITED
TABLE
OF CONTENTS
|
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
|
||||||
INTERPRETATION
|
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.
|
SHARES
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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).
|
|
|
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.
|
|
4.
|
Rights
Attaching to Shares
|
|
|
4.1
|
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:
|
|
|
(a)
|
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);
|
|
|
(b)
|
be
entitled to such dividends as the Board may from time to time
declare;
|
|
|
(c)
|
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
|
|
|
(d)
|
generally
be entitled to enjoy all of the rights attaching to
shares.
|
|
|
4.2
|
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.
|
|
5.
|
Calls
on Shares
|
|
|
5.1
|
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.
|
|
|
5.2
|
The
joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
|
|
|
5.3
|
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.
|
|
6.
|
Prohibition
on Financial Assistance
|
The
Company shall not give, whether directly or indirectly, whether by means of
loan, guarantee, provision of security or otherwise, any financial assistance
for the purpose of the acquisition or proposed acquisition by any person of any
shares in the Company, but nothing in this Bye-law shall prohibit transactions
permitted under the Act.
|
7.
|
Forfeiture
of Shares
|
|
|
7.1
|
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:
|
Notice of
Liability to Forfeiture for Non-Payment of Call
Flagstone
Reinsurance Holdings Limited (the "Company")
You have
failed to pay the call of [amount of call] made on the [ ] day of [ ], 200[ ],
in respect of the [number] share(s) [number in figures] standing in your name in
the Register of Members of the Company, on the [ ] day of [ ], 200[ ], the day
appointed for payment of such call. You are hereby notified that
unless you pay such call together with interest thereon at the rate of [ ] per
annum computed from the said [ ] day of [ ], 200[ ] at the registered
office of the Company the share(s) will be liable to be forfeited.
Dated
this [ ] day of [ ], 200[ ]
________________________________
[Signature
of Secretary] By Order of the Board
|
|
7.2
|
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.
|
|
|
7.3
|
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.
|
|
|
7.4
|
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.
|
|
8.
|
Share
Certificates
|
|
|
8.1
|
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.
|
|
|
8.2
|
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.
|
|
|
8.3
|
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.
|
|
9.
|
Fractional
Shares
|
The
Company may issue its shares in fractional denominations and deal with such
fractions to the same extent as its whole shares and shares in fractional
denominations shall have in proportion to the respective fractions represented
thereby all of the rights of whole shares including (but without limiting the
generality of the foregoing) the right to vote, to receive dividends and
distributions and to participate in a winding-up.
REGISTRATION
OF SHARES
|
10.
|
Register
of Members
|
|
|
10.1
|
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.
|
|
|
10.2
|
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.
|
|
11.
|
Registered
Holder Absolute Owner
|
The
Company shall be entitled to treat the registered holder of any share as the
absolute owner thereof and accordingly shall not be bound to recognise any
equitable claim or other claim to, or interest in, such share on the part of any
other person.
|
12.
|
Transfer
of Registered Shares and Warrants and Restrictions on
Transfer
|
|
|
12.1
|
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.
|
|
|
12.2
|
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:
|
Transfer
of a Share or Shares
Flagstone
Reinsurance Holdings Limited (the "Company")
FOR VALUE
RECEIVED………………..[amount], I, [name of transferor] hereby sell, assign and
transfer unto [transferee] of [address], [number] of shares of the
Company.
|
DATED
this [ ] day of [ ], 200[ ]
|
|||
|
Signed
by:
|
In
the presence of:
|
||
|
Transferor
|
Witness
|
||
|
Transferee
|
Witness
|
|
|
12.3
|
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.
|
|
|
12.4
|
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.
|
|
|
12.5
|
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.
|
|
|
12.6
|
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.
|
|
|
12.7
|
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.
|
|
|
12.8
|
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.
|
|
|
12.9
|
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.
|
|
|
12.10
|
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.
|
|
|
12.11
|
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.
|
|
13.
|
Transmission
of Registered Shares
|
|
|
13.1
|
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.
|
|
|
13.2
|
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:
|
Transfer
by a Person Becoming Entitled on Death/Bankruptcy of a Member
Flagstone
Reinsurance Holdings Limited (the "Company")
I/We,
having become entitled in consequence of the [death/bankruptcy] of [name and
address of deceased/bankrupt Member] to [number] share(s) standing in the
Register of Members of the Company in the name of the said [name of
deceased/bankrupt Member] instead of being registered myself/ourselves, elect to
have [name of transferee] (the "Transferee") registered as a transferee of such
share(s) and I/we do hereby accordingly transfer the said share(s) to the
Transferee to hold the same unto the Transferee, his or her executors,
administrators and assigns, subject to the conditions on which the same were
held at the time of the execution hereof; and the Transferee does hereby agree
to take the said share(s) subject to the same conditions.
|
DATED
this [ ] day of [ ], 200[ ]
|
|||
|
Signed
by:
|
In
the presence of:
|
||
|
Transferor
|
Witness
|
||
|
Transferee
|
Witness
|
|
|
13.3
|
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.
|
|
|
13.4
|
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.
|
ALTERATION
OF SHARE CAPITAL
|
14.
|
Power
to Alter Capital
|
|
|
14.1
|
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.
|
|
|
14.2
|
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.
|
|
15.
|
Variation
of Rights Attaching to Shares
|
Subject
to Bye-law 59, if, at any time, the share capital is divided into different
classes of shares, the rights attached to any class (unless otherwise provided
by the terms of issue of the shares of that class) may, whether or not the
Company is being wound-up, be varied with the consent in writing of the holders
of three-fourths of the issued shares of that class or with the sanction of a
resolution passed by a majority of the votes cast at a separate general meeting
of the holders of the shares of the class at which meeting the necessary quorum
shall be two persons at least holding or representing by proxy one-third of the
issued shares of the class. The rights conferred upon the holders of
the shares of any class issued with preferred or other rights shall not, unless
otherwise expressly provided by the terms of issue of the shares of that class,
be deemed to be varied by the creation or issue of further shares ranking pari
passu therewith.
DIVIDENDS
AND CAPITALISATION
|
16.
|
Dividends
|
|
|
16.1
|
The
Board may, subject to these Bye-laws and in accordance with the Act,
declare a dividend to be paid to the Members, in proportion to the number
of shares held by them, and such dividend may be paid in cash or wholly or
partly in specie in which case the Board may fix the value for
distribution in specie of any assets. No unpaid dividend shall
bear interest as against the
Company.
|
|
|
16.2
|
The
Board may fix any date as the record date for determining the Members
entitled to receive any dividend.
|
|
|
16.3
|
The
Company may pay dividends in proportion to the amount paid up on each
share where a larger amount is paid up on some shares than on
others.
|
|
|
16.4
|
The
Board may declare and make such other distributions (in cash or in specie)
to the Members as may be lawfully made out of the assets of the
Company. No unpaid distribution shall bear interest as against
the Company.
|
|
17.
|
Power
to Set Aside Profits
|
The Board
may, before declaring a dividend, set aside out of the surplus or profits of the
Company, such sum as it thinks proper as a reserve to be used to meet
contingencies or for equalising dividends or for any other purpose.
|
18.
|
Method
of Payment
|
|
|
18.1
|
Any
dividend, interest, or other monies payable in cash in respect of the
shares may be paid by cheque or draft sent through the post directed to
the Member at such Member's address in the Register of Members, or to such
person and to such address as the holder may in writing
direct.
|
|
|
18.2
|
In
the case of joint holders of shares, any dividend, interest or other
monies payable in cash in respect of shares may be paid by cheque or draft
sent through the post directed to the address of the holder first named in
the Register of Members, or to such person and to such address as the
joint holders may in writing direct. If two or more persons are
registered as joint holders of any shares any one can give an effectual
receipt for any dividend paid in respect of such
shares.
|
|
|
18.3
|
The
Board may deduct from the dividends or distributions payable to any Member
all monies due from such Member to the Company on account of calls or
otherwise.
|
|
19.
|
Capitalisation
|
|
|
19.1
|
The
Board may resolve to capitalise any sum for the time being standing to the
credit of any of the Company's share premium or other reserve accounts or
to the credit of the profit and loss account or otherwise available for
distribution by applying such sum in paying up unissued shares to be
allotted as fully paid bonus shares pro rata to the
Members.
|
|
|
19.2
|
The
Board may resolve to capitalise any sum for the time being standing to the
credit of a reserve account or sums otherwise available for dividend or
distribution by applying such amounts in paying up in full partly paid or
nil paid shares of those Members who would have been entitled to such sums
if they were distributed by way of dividend or
distribution.
|
MEETINGS
OF MEMBERS
|
20.
|
Annual
General Meetings
|
The
annual general meeting of the Company shall be held in each year at such time
and place as the Chairman or any two Directors or any Director and the Secretary
or the Board shall appoint. No annual general meeting shall take place in the
United States.
|
21.
|
Special
General Meetings
|
The
Chairman or any two Directors or the Board may convene a special general meeting
of the Company whenever in their judgment such a meeting is necessary. No
special general meeting shall take place in the United States.
|
22.
|
Requisitioned
General Meetings
|
The Board
shall, on the requisition of Members holding at the date of the deposit of the
requisition not less than one-tenth of such of the paid-up share capital of the
Company as at the date of the deposit carries the right to vote at general
meetings of the Company, forthwith proceed to convene a special general meeting
of the Company and the provisions of the Act shall apply.
|
23.
|
Notice
|
|
|
23.1
|
At
least ten days' notice of an annual general meeting shall be given to each
Member entitled to attend and vote thereat, stating the date, place and
time at which the meeting is to be held, that the election of Directors
will take place thereat, and as far as practicable, the other business to
be conducted at the meeting.
|
|
|
23.2
|
At
least ten days' notice of a special general meeting shall be given to each
Member entitled to attend and vote thereat, stating the date, time, place
and the general nature of the business to be considered at the
meeting.
|
|
|
23.3
|
The
Board may fix any date as the record date for determining the Members
entitled to receive notice of and to vote at any general meeting of the
Company.
|
|
|
23.4
|
A
general meeting of the Company shall, notwithstanding that it is called on
shorter notice than that specified in these Bye-laws, be deemed to have
been properly called if it is so agreed by (i) all the Members entitled to
attend and vote thereat in the case of an annual general meeting; and (ii)
by a majority in number of the Members having the right to attend and vote
at the meeting, being a majority together holding not less than 95% in
nominal value of the shares giving a right to attend and vote thereat in
the case of a special general
meeting.
|
|
|
23.5
|
The
accidental omission to give notice of a general meeting to, or the
non-receipt of a notice of a general meeting by, any person entitled to
receive notice shall not invalidate the proceedings at that
meeting.
|
|
24.
|
Giving
Notice
|
|
|
24.1
|
A
notice may be given by the Company to any Member:
|
|
|
(a)
|
either by
delivering it to such Member in person;
|
|
|
(b)
|
or
by sending it by
letter mail or courier to such Member's address in the Register of
Members;
or to such other
address given for the purpose of this Bye-law, a notice may be sent by
letter mail, courier service, cable, telex, telecopier, facsimile,
electronic mail or other mode of representing words in a legible
form.
|
|
|
(c)
|
by transmitting it by
electronic means (including facsimile and electronic mail, but not
telephone) in accordance with such directions as may be given by such
Member to the Company for such purpose;
or
|
|
|
(d)
|
in accordance with
bye-law 24.4.
|
|
|
24.2
|
Any
notice required to be given to a Member shall, with respect to any shares
held jointly by two or more persons, be given to whichever of such persons
is named first in the Register of Members and notice so given shall be
sufficient notice to all the holders of such
shares.
|
|
|
24.3
|
Any
notice (save for
one delivered in accordance with bye-law 24.4) shall be deemed to
have been served at the time when the same would be delivered in the
ordinary course of transmission and, in proving such service, it shall be
sufficient to prove that the notice was properly addressed and prepaid, if
posted, and the time when it was posted, delivered to the courier or to the cable
company or transmitted by telex,
facsimile, electronic mail or such other
method as the case may be means.
|
|
|
24.4
|
Where a member
indicates his consent (in a form and manner satisfactory to the Board) to
receive information or documents by accessing them on a website rather
than by other means, the Board may deliver such information or documents
by notifying the Member of their availability and including therein the
address of the website, the place on the website where the information or
document may be found and instructions as to how the information or
document may be accessed on the
website.
|
|
|
24.5
|
In
the case of information or documents delivered in accordance with bye-law
24.4, service shall be deemed to have occurred when (i) the Member is
notified in accordance with the bye-law; and (ii) the information or
document is published on the
website.
|
|
25.
|
Postponement
of General Meeting
|
The
Secretary may postpone any general meeting called in accordance with the
provisions of these Bye-laws (other than a meeting requisitioned under these
Bye-laws) provided that notice of postponement is given to each Member before
the time for such meeting. Fresh notice of the date, time and place
for the postponed meeting shall be given to each Member in accordance with the
provisions of these Bye-laws.
|
26.
|
Attendance
at Meetings
|
Members
may participate in any general meeting solely by means of their physical
attendance at the meeting, and participation by telephonic, electronic or other
communication facilities shall not be permitted.
|
27.
|
Quorum
at General Meetings
|
|
|
27.1
|
At
any general meeting of the Company two or more persons present in person
and representing in person or by proxy in excess of 50% of the total
issued voting shares in the Company throughout the meeting shall form a
quorum for the transaction of
business.
|
|
|
27.2
|
If
within half an hour from the time appointed for the meeting a quorum is
not present, then, in the case of a meeting convened on a requisition, the
meeting shall be deemed cancelled and, in any other case, the meeting
shall stand adjourned to the same day one week later, at the same time and
place or to such other day, time or place as the Secretary may determine.
If the meeting shall be adjourned to the same day one week later or the
Secretary shall determine that the meeting is adjourned to a specific
date, time and place, it is not necessary to give notice of the adjourned
meeting other than by announcement at the meeting being
adjourned. If the Secretary shall determine that the meeting be
adjourned to an unspecified date, time or place, fresh notice of the
resumption of the meeting shall be given to each Member entitled to attend
and vote thereat in accordance with the provisions of these
Bye-laws.
|
|
28.
|
Chairman
to Preside
|
Unless
otherwise agreed by a majority of those attending and entitled to vote thereat,
the Chairman shall act as chairman at all meetings of the Members at which such
person is present. In their absence, the Deputy Chairman, if present,
shall act as chairman and in the absence of all of them a chairman shall be
appointed or elected by those present at the meeting and entitled to
vote.
|
29.
|
Voting
on Resolutions
|
|
|
29.1
|
Subject
to the provisions of the Act and these Bye-laws, any question proposed for
the consideration of the Members at any general meeting shall be decided
by the affirmative votes of a majority of the votes cast in accordance
with the provisions of these Bye-laws and in the case of an equality of
votes the resolution shall fail.
|
|
|
29.2
|
No
Member shall be entitled to vote at a general meeting unless such Member
has paid all the calls on all shares held by such
Member.
|
|
|
29.3
|
At
any general meeting a resolution put to the vote of the meeting shall, in
the first instance, be voted upon by a show of hands and, subject to any
rights or restrictions for the time being lawfully attached to any class
of shares and subject to the provisions of these Bye-laws, every Member
present in person and every person holding a valid proxy at such meeting
shall be entitled to one vote and shall cast such vote by raising his or
her hand.
|
|
|
29.4
|
At
any general meeting if an amendment shall be proposed to any resolution
under consideration and the chairman of the meeting shall rule on whether
the proposed amendment is out of order, the proceedings on the substantive
resolution shall not be invalidated by any error in such
ruling.
|
|
|
29.5
|
At
any general meeting a declaration by the chairman of the meeting that a
question proposed for consideration has, on a show of hands, been carried,
or carried unanimously, or by a particular majority, or lost, and an entry
to that effect in a book containing the minutes of the proceedings of the
Company shall, subject to the provisions of these Bye-laws, be conclusive
evidence of that fact.
|
|
30.
|
Limitation
on Voting Rights of Controlled
Shares
|
|
|
30.1
|
Each
share shall entitle or limit the holder thereof to such voting rights
attributable to that class (or series) of share, but the exercise of any
voting right shall be subject to the provisions of Bye-laws 30.2 through
30.7 below.
|
|
|
30.2
|
If,
as a result of giving effect to the provisions of Bye-law 30.1 or
otherwise, the votes conferred by the Controlled Shares of any Person
would otherwise cause such Person or any other Person to be treated as a
9.9% U.S. Shareholder (as defined in Section 951(b) of the Code), the
votes conferred by the Controlled Shares of such U.S. Person are hereby
reduced (and shall be automatically reduced in the future) by whatever
amount is necessary so that after any such reduction the votes conferred
by the Controlled Shares of such Person shall not result in such Person or
any other Person being treated as a 9.9% Shareholder with respect to the
vote on the matter in question.
|
|
|
30.3
|
In
determining the reduction in votes conferred by Controlled Shares pursuant
to Bye-law 30.2, the reduction in the vote conferred by the Controlled
Shares of any Person shall be effected proportionately among all the
Controlled Shares of such Person; provided, however, that if a Member
owns, or is treated as owning by the application of Section 958 of the
Code, interests in another Member, the reduction in votes conferred by
Controlled Shares of such Member (determined
solely on the basis of shares held directly by such Member and shares
attributed from such other Member) shall first be effected by reducing the
votes conferred on the shares held directly by the Member. The reduction
in the votes of the shares held by such Member effected by the foregoing
proviso shall be conferred on the shares held by such Member (and not
otherwise reduced by the operation of this Bye-law 30) to the extent
that so doing does not cause any Person to be treated as a 9.9% U.S.
Shareholder and any remaining reduction in votes shall then be conferred
proportionately among the shares held by the other Members; provided,
however, that no shares shall be conferred votes to the extent that so
doing shall cause any Person to be treated as a 9.9% U.S.
Shareholder.
|
|
|
30.4
|
In
the event that the aggregate reductions required by Bye-laws 30.2 and 30.3
result in less than 100 percent of the voting power of the shares being
entitled to be cast, the excess of 100 percent of the voting power over
the votes entitled to be cast shall be conferred on the shares held by the
Members, proportionately, based on the number of shares held by each
Member; provided, however, that the shares of a Member shall not be
conferred votes to the extent that any U.S. Person would be considered a
9.9% U.S. Shareholder. The maximum votes that shall be conferred pursuant
to this paragraph of Bye-law 30 on a corporation organised under the laws
of the United Kingdom shall be
24.9%.
|
|
|
30.5
|
Upon
written notification by a Member to the Board, the number of votes
conferred by the total number of shares held by such Member shall be
reduced to that percentage of the total voting power of the Company, as so
designated by such Member (subject to acceptance of such reduction by the
Board in its sole discretion) so that (and to the extent that) such Member
may meet any applicable insurance or other regulatory requirement (other
than tax regulatory) or voting threshold or limitation that may be
applicable to such Member or to evidence that such Person’s voting power
is no greater than such threshold.
|
|
|
30.6
|
Notwithstanding
anything to the contrary in this Bye-law 30, the votes conferred
by the Controlled Shares of any Person shall not exceed such amount as
would result in any U.S. Person that owns shares of the Company (within
the meaning of Section 958(a) of the Code) being treated as owning (within
the meaning of Section 958 of the Code) more than 9.9% (or the lower
percentage designated by a Member pursuant to Bye-law 30.5 hereof) of the
aggregate voting power of the votes conferred by all the shares of the
Company entitled to vote generally at any election of
Directors.
|
|
|
30.7
|
The
Board shall implement the foregoing in the manner set forth in this
Bye-law. In addition to any other provision of this Bye-law 30, any shares shall not
carry rights to vote or shall have reduced voting rights to the extent
that the Board reasonably determines in good faith that it is necessary
that such shares should not carry the right to vote or should have reduced
voting rights in order to avoid adverse tax consequences or materially
adverse legal or regulatory treatment to the Company, any subsidiary of
the Company or any Member or its affiliates; provided, however, that the
Board will use reasonable efforts to exercise such discretion equally
among similarly situated Members (to the extent possible under the
circumstances).
|
30A. Requirement to Provide Information
and Notice
(1) The
Company shall have the authority to request from any holder of shares, and such
holder of shares shall provide, (a) a statement setting forth that the holder is
the direct beneficial owner as defined under Rule 13d-3 under
the Exchange Act of the shares or, if not, the identity of such
direct beneficial owner (and, in the case of more than one beneficial owner, the
shares owned by each such beneficial owner), the place of organisation of a
direct beneficial owner that is other than a natural person and whether such
direct beneficial owner has made an election to be treated as a U.S. Person for
any purpose or whether such direct beneficial owner has elected to be treated as
a Subchapter S corporation for U.S. federal income tax purposes, the citizenship
and residency of any person who is a natural person and whether such Person can
be treated as a U.S. resident for U.S. tax purposes, a statement regarding
whether the spouse or minor children of any such beneficial owner are also
acquiring shares, and the names of the great grandparents, grandparents,
parents,
siblings, and lineal descendants (if living) of any such beneficial owner, and a
statement as to whether such direct beneficial owner holds the power to vote the
shares held by such holder and, if not, the identity of the Person empowered to
vote those shares, (b) a list setting out the name of every Person holding a
direct interest in such beneficial owner, the percentage interest held by such
Person therein (including, if applicable, the minimum and maximum percentage
interest in the case of a direct beneficial owner the interests in which can
vary), and whether such Person has a right to vote to determine the manner in
which the direct beneficial owner is to vote the shares owned by such beneficial
owner, (c) a list setting out the name of any Person having an option or other
right to acquire an interest in any direct beneficial owner of shares and the
percentage of interests in such beneficial owner subject to such
option or other right and (d) a list of any partnership or limited liability
company in which the direct beneficial owner holds a direct interest and the
percentage interest held therein (including, if applicable, the minimum and
maximum percentage interest in the case of an interest in which can vary);
provided, however, that for purposes of clause (b) of this Bye-law 30A(1), if
the beneficial owner of the shares is a publicly traded company, such beneficial
owner shall be required to provide information only with respect to a Person
having a 5% or greater ownership interest in the “beneficial owner”. For the
purposes of this Bye-law, a person shall be treated as a “beneficial owner” if
such Person is so treated for U.S. federal income tax purposes (without giving
effect to any attribution or constructive ownership rules). In
addition, the Company shall have the authority to request from any holder of
shares, and such holder shall provide, to the extent that it is reasonably
practicable for it to do so in such holder’s reasonable discretion, such
additional information as the Company may reasonably request to determine the
relationship of a holder with other holders.
(2) Any
information provided by each Member to the Company pursuant to this Bye-law or
other information provided pursuant to this Bye-law or for purposes of making
the analysis required by Bye-laws 3, 12 or 30, shall be deemed “confidential
information” (the “Confidential Information”) and shall be used by the Company
solely for the purposes contemplated by those Bye-laws (except as may be
required otherwise by applicable law or regulation). The Company
shall hold such Confidential Information in strict confidence and shall not
disclose any Confidential Information that it receives, except (i) to the
Internal Revenue Service (the “Service”) if and to the extent the Confidential
Information is required by the Service, (ii) to any outside legal counsel or
accounting firm engaged by the Company to make determinations regarding the
relevant Bye-laws, (iii) to officers and employees of the Company, as set forth
in Bye-laws 30A(3) or (iv) as otherwise required by law or
regulation.
(3) The
Company shall take all measures practicable to ensure the continued
confidentiality of the Confidential Information and shall grant the Persons
referred to in Bye-law 30A(2) (ii) above access to the Confidential Information
only to the extent necessary to allow them to assist the Company in any analysis
required by Bye-laws 3, 12 or 30, or to determine whether the Company would
realise any income that would be included in the income of any Member (or any
interest holder, whether direct or indirect, of any Member) by operation of
Section 953 (c) of the Code. Prior to granting access to the
Confidential Information to such Persons or to any officer or employee as set
out below, the Company shall inform them of its confidential nature and of the
provisions of this Bye-law and shall require them to abide by all the provisions
thereof. The Company shall not disclose the Confidential Information
to any Director (other than a Director that is also Chief Executive Officer,
Chairman or Deputy Chairman, except as required by law or regulation,
upon request to the Company). The Company shall be permitted to
disclose the Confidential Information to an officer (who is not also a Director)
of the Company or any of its subsidiaries, but only if such officer requires the
Confidential Information to determine whether the Company would realise any
income that would be included in the income of any Member by operation of
section 953 (c) of the Code or to implement Bye-laws 3, 12 or 30. For
the avoidance of doubt, the Company shall be permitted to disclose to the
Members and others the relative voting percentages of the Members after
application of Bye-law 30. At the written request of a Member, the
Confidential Information of such Member shall be destroyed or returned to such
Member after the later to occur of (i) such Member no longer being a Member or
(ii) the expiration of the applicable statute of limitations with respect to any
Confidential Information obtained for purposes of engaging in any tax-related
analysis.
(4) The
Company shall (i) notify a Member as soon as reasonably practicable of the
existence, terms and circumstances surrounding any request made to the Company
to disclose any Confidential Information provided by or with respect to such
Member and, prior to such disclosure, shall permit such Member a reasonable
period of time to seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Bye-law, and (ii) if, in the
absence of a protective order, such disclosure is required in the opinion of
counsel to the Company, the Company shall make such disclosure without liability
hereunder, provided that the Company shall furnish only that portion of the
Confidential Information which is legally required, shall give such Member
notice of the information to be disclosed as far in advance of its disclosure as
practicable and, upon the request of such Member and at its expense, shall use
best efforts to ensure that confidential treatment will be accorded to all such
disclosed information.
(5) If
a Member fails to respond to a request for information from the Company pursuant
to this Bye-law, or submits incomplete or inaccurate information in response to
such a request, the Company may in its reasonable discretion determine that such
Member’s shares shall carry no or reduced voting rights, as the case may be,
until otherwise determined by the Company in its reasonable
discretion.
(6) The
Board may rely exclusively on the analysis, deliberation, reports and other
communications of those Persons specified in (i)-(iii) of Bye-law 30A(2) above
with respect to the collection, disclosure or use of the Confidential
Information, including, but not limited to, determining whether the Company
would realise any income that would be included in the income of any Member (or
any interest holder, whether direct or indirect) or implementing
Bye-laws 3, 12 or 30.
|
31.
|
Certain
Subsidiaries
|
|
|
31.1
|
With
respect to any Subsidiary of the Company that is not a U.S. corporation
and that is not treated as a pass-through or disregarded entity
for U.S. federal income tax purposes (together the “Designated
Companies”), (i) the board of directors of each such Designated Company
shall consist of the persons who have been elected by the Members of the
Company by resolution in a general meeting as Designated Company Directors
and (ii) the Members of the Company by resolution in a general meeting may
designate the persons to be removed as directors of such Designated
Company (the “Removed Company
Directors”).
|
|
|
31.2
|
Notwithstanding
the general authority set out in Bye-law 47, the Board shall vote all
shares owned by the Company in each Designated Company (i) to elect the
Designated Company Directors as the directors of such Designated Company
and to remove the Removed Company Directors as directors of such
Designated Company, and (ii) to ensure that the constitutional documents
of such Designated Company require such Designated Company Directors to be
elected and such Removed Company Directors to be removed as provided in
this Bye-law. The Board and the Company shall ensure that the
constitutional documents of each such Designated Company shall effectuate
or implement this Bye-law. The Company shall also enter into agreements
with each such Designated Company and take such other actions as are
necessary to effectuate or implement this
Bye-law.
|
|
32.
|
Power
to Demand a Vote on a Poll
|
|
|
32.1
|
At
any general or special meeting of the Members, a poll may be demanded by
any of the following persons:
|
|
|
(a)
|
the
chairman of such meeting; or
|
|
|
(b)
|
at
least three Members present in person or represented by proxy;
or
|
|
|
(c)
|
any
Member or Members present in person or represented by proxy and holding
between them not less than one-tenth of the total voting rights of all the
Members having the right to vote at such meeting;
or
|
|
|
(d)
|
any
Member or Members present in person or represented by proxy holding shares
in the Company conferring the right to vote at such meeting, being shares
on which an aggregate sum has been paid up equal to not less than
one-tenth of the total sum paid up on all such shares conferring such
right.
|
|
|
32.2
|
Where
a poll is demanded, subject to any rights or restrictions for the time
being lawfully attached to any class of shares, every person present at
such meeting shall have one vote for each share of which such person is
the holder or for which such person holds a proxy and such vote shall be
counted by ballot as described herein, or in the case of a general meeting
at which one or more Members are present by telephone, in such manner as
the chairman of the meeting may direct and the result of such poll shall
be deemed to be the resolution of the meeting at which the poll was
demanded and shall replace any previous resolution upon the same matter
which has been the subject of a show of hands. A person
entitled to more than one vote need not use all his votes or cast all the
votes he uses in the same way.
|
|
|
32.3
|
A
poll demanded for the purpose of electing a chairman of the meeting or on
a question of adjournment shall be taken forthwith and a poll demanded on
any other question shall be taken in such manner and at such time and
place at such meeting as the chairman (or acting chairman) of the meeting
may direct and any business other than that upon which a poll has been
demanded may be proceeded with pending the taking of the
poll.
|
|
|
32.4
|
Where
a vote is taken by poll, each person present and entitled to vote shall be
furnished with a ballot paper on which such person shall record his vote
in such manner as shall be determined at the meeting having regard to the
nature of the question on which the vote is taken, and each ballot paper
shall be signed or initialed or otherwise marked so as to identify the
voter and the registered holder in the case of a proxy. At the
conclusion of the poll, the ballot papers shall be examined and counted by
a committee of not less than two Members or proxy holders appointed by the
chairman for the purpose and the result of the poll shall be declared by
the chairman.
|
|
33.
|
Voting
by Joint Holders of Shares
|
In the
case of joint holders, the vote of the senior who tenders a vote (whether in
person or by proxy) shall be accepted to the exclusion of the votes of the other
joint holders, and for this purpose seniority shall be determined by the order
in which the names stand in the Register of Members.
|
34.
|
Instrument
of Proxy
|
|
|
34.1
|
An
instrument appointing a proxy shall be in writing or transmitted by
electronic mail in substantially the following form or such other form as
the chairman of the meeting shall
accept:
|
Proxy
Flagstone
Reinsurance Holdings Limited (the "Company")
I/We,
[insert names here], being a Member of the Company with [number] shares, HEREBY
APPOINT [name] of [address] or failing him, [name] of [address] to be my/our
proxy to vote for me/us at the meeting of the Members to be held on the [ ] day
of [ ], 200[ ] and at any adjournment thereof. (Any restrictions on
voting to be inserted here.)
|
Signed
this [ ] day of [ ], 200[ ]
|
|
||
|
Member(s)
|
|
|
|
34.2
|
The
instrument of proxy shall be signed or, in the case of a transmission by
electronic mail, electronically signed in a manner acceptable to the
chairman, by the appointor or by the appointor's attorney duly authorised
in writing, or if the appointor is a corporation, either under its seal or
signed or, in the case of a transmission by electronic mail,
electronically signed in a manner acceptable to the chairman, by a duly
authorised officer or attorney.
|
|
|
34.3
|
A
Member who is the holder of two or more shares may appoint more than one
proxy to represent him and vote on his
behalf.
|
|
|
34.4
|
The
decision of the chairman of any general meeting as to the validity of any
appointment of a proxy shall be
final.
|
|
35.
|
Representation
of Corporate Member
|
|
|
35.1
|
A
corporation which is a Member may, by written instrument, authorise such
person or persons as it thinks fit to act as its representative at any
meeting of the Members and any person so authorised shall be entitled to
exercise the same powers on behalf of the corporation which such person
represents as that corporation could exercise if it were an individual
Member, and that Member shall be deemed to be present in person at any
such meeting attended by its authorised representative or
representatives.
|
|
|
35.2
|
Notwithstanding
the foregoing, the chairman of the meeting may accept such assurances as
he thinks fit as to the right of any person to attend and vote at general
meetings on behalf of a corporation which is a
Member.
|
|
36.
|
Adjournment
of General Meeting
|
The
chairman of a general meeting may, with the consent of the Members at any
general meeting at which a quorum is present, and shall if so directed, adjourn
the meeting. Unless the meeting is adjourned to a specific date, place and time
announced at the meeting being adjourned, fresh notice of the date, place and
time for the resumption of the adjourned meeting shall be given to each Member
entitled to attend and vote thereat in accordance with the provisions of these
Bye-laws.
|
37.
|
Written
Resolutions
|
|
|
37.1
|
Subject
to the following, anything which may be done by resolution of the Company
in general meeting or by resolution of a meeting of any class of the
Members may, without a meeting and without any previous notice being
required, be done by resolution in writing signed by, or in the case of a
Member that is a corporation whether or not a company within the meaning
of the Act, on behalf of, all the Members who at the date of the
resolution would be entitled to attend the meeting and vote on the
resolution.
|
|
|
37.2
|
A
resolution in writing may be signed by, or in the case of a Member that is
a corporation whether or not a company within the meaning of the Act, on
behalf of, all the Members, or all the Members of the relevant class
thereof, in as many counterparts as may be
necessary.
|
|
|
37.3
|
A
resolution in writing made in accordance with this Bye-law is as valid as
if it had been passed by the Company in general meeting or by a meeting of
the relevant class of Members, as the case may be, and any reference in
any Bye-law to a meeting at which a resolution is passed or to Members
voting in favour of a resolution shall be construed
accordingly.
|
|
|
37.4
|
A
resolution in writing made in accordance with this Bye-law shall
constitute minutes for the purposes of the
Act.
|
|
|
37.5
|
This
Bye-law shall not apply to:
|
|
|
(a)
|
a
resolution passed to remove an auditor from office before the expiration
of his term of office; or
|
|
|
(b)
|
a
resolution passed for the purpose of removing a Director before the
expiration of his term of office.
|
|
|
37.6
|
For
the purposes of this Bye-law, the date of the resolution is the date when
the resolution is signed by, or in the case of a Member that is a
corporation whether or not a company within the meaning of the Act, on
behalf of, the last Member to sign and any reference in any Bye-law to the
date of passing of a resolution is, in relation to a resolution made in
accordance with this Bye-law, a reference to such
date.
|
|
38.
|
Directors
Attendance at General Meetings
|
The
Directors of the Company shall be entitled to receive notice of, attend and be
heard at any general meeting.
DIRECTORS
AND OFFICERS
|
39.
|
Election
of Directors
|
|
|
39.1
|
The
Board shall consist of no less than ten (10) Directors or such number in
excess thereof up to a maximum of twelve (12) Directors as the Board may
from time to time determine, who shall be elected, except in a case of a
vacancy, by the Members holding a plurality of the votes cast in person or
by proxy for a resolution approving such Director, in accordance with and
subject to the limitations in these Bye-Laws including but not limited to
Bye-Law 30. Except in the case of a casual vacancy, Directors
shall be elected at the annual general meeting of the Members or at any
special general meeting of the Members called for that
purpose.
|
|
|
39.2
|
At
any general meeting, the Members may authorise the Board to fill any
vacancy in their number left unfilled at a general
meeting.
|
|
|
39.3
|
The
only persons who shall be eligible for appointment or election as a
Director in accordance with Bye-law 39.1 at any meeting of the Company
shall be persons for whom a written notice of nomination signed by Members
holding in the aggregate not less than fifteen percent (15%) of the issued
and outstanding paid up share capital of the Company eligible to vote at
the meeting at that time has been delivered to the registered office of
the Company for the attention of the Secretary not later than five days
after notice or public disclosure of the date of such meeting is given or
made available to Members.
|
|
40.
|
Classification
of Directors
|
|
|
The
Directors shall be divided into three (3) classes as nearly equal as
possible (Class A, Class B and Class C). The initial Class A
Directors shall serve for a term expiring at the annual general meeting of
Members to be held in 2009; the initial Class B directors shall serve for
a term expiring at the annual general meeting of Members to be held in
2008 and the initial Class C Directors shall serve for a term expiring at
the annual general meeting of Members to be held in
2007.
|
|
41.
|
Term
of Office of Directors
|
|
|
At
each annual general meeting of Members held after the classification and
election referred to at Bye-law 40 above, Directors shall be elected or
appointed for a full three-year term, as the case may be, to succeed those
whose terms expire at such meeting. Each Director shall hold office for
the term for which he is elected or until his successor is elected or
appointed or until his office is otherwise
vacated.
|
|
42.
|
Removal
of Directors
|
|
|
42.1
|
Subject
to any provision to the contrary in these Bye-laws, the Members entitled
to vote for the election of Directors may, at any special general meeting
convened and held in accordance with these Bye-laws, remove any Director,
but only for Cause, provided that the notice of any such meeting convened
for the purpose of removing a Director shall contain a statement of the
intention so to do and be served on such Director not less than 14 days
before the meeting and at such meeting the Director shall be entitled to
be heard on the motion for such Director's
removal.
|
|
|
42.2
|
If
a Director is removed from the Board under the provisions of this Bye-law
the Members may fill the vacancy at the meeting at which such Director is
removed.
|
|
43.
|
Vacancy
in the Office of Director and appointment of alternate
Directors
|
|
|
43.1
|
The
office of Director shall be vacated if the
Director:
|
|
|
(a)
|
is
removed from office pursuant to these Bye-laws or is prohibited from being
a Director by law;
|
|
|
(b)
|
is
or becomes bankrupt, or makes any arrangement or composition with his
creditors generally;
|
|
|
(c)
|
is
or becomes of unsound mind or dies;
or
|
|
|
(d)
|
resigns
his office by notice in writing to the
Company.
|
|
|
43.2
|
The
Board shall have the power to appoint any person as a Director to fill a
vacancy on the Board occurring as a result of the death, disability,
disqualification or resignation of any
Director.
|
|
|
43.3
|
No
Director shall appoint an alternate Director, and notwithstanding any
provisions of the Companies Act, no director may appoint another Director
to represent him or vote on his behalf at any meeting of the Board of
Directors or at any Committee
meeting.
|
|
44.
|
Remuneration
of Directors
|
The
remuneration (if any) of the Directors shall be determined by the Company in
general meeting and shall be deemed to accrue from day to day. The
Directors may also be paid all travel, hotel and other expenses properly
incurred by them in attending and returning from the meetings of the Board, any
committee appointed by the Board, general meetings of the Company, or in
connection with the business of the Company or their duties as Directors
generally.
|
45.
|
Defect
in Appointment of Director
|
All acts
done in good faith by the Board or by a committee of the Board or by any person
acting as a Director shall, notwithstanding that it be afterwards discovered
that there was some defect in the appointment of any Director or person acting
as aforesaid, or that they or any of them were disqualified, be as valid as if
every such person had been duly appointed and was qualified to be a
Director.
|
46.
|
Directors
to Manage Business
|
The
business of the Company shall be managed and conducted by the
Board. In managing the business of the Company, the Board may
exercise all such powers of the Company as are not, by statute or by these
Bye-laws, required to be exercised by the Company in general meeting subject,
nevertheless, to these Bye-laws, the provisions of any statute and to such
directions as may be prescribed by the Company in general meeting.
|
47.
|
Powers
of the Board of Directors
|
|
|
47.1
|
Subject
to any provision to the contrary in these Bye-laws, the Board
may:
|
|
|
(a)
|
appoint,
suspend, or remove any manager, secretary, clerk, agent or employee of the
Company and may fix their remuneration and determine their
duties;
|
|
|
(b)
|
exercise
all the powers of the Company to borrow money and to mortgage or charge
its undertaking, property and uncalled capital, or any part thereof, and
may issue debentures, debenture stock and other securities whether
outright or as security for any debt, liability or obligation of the
Company or any third party;
|
|
|
(c)
|
appoint
one or more Directors to the office of managing director or chief
executive officer of the Company, who shall, subject to the control of the
Board, supervise and administer all of the general business and affairs of
the Company;
|
|
|
(d)
|
appoint
a person to act as manager of the Company's day-to-day business and may
entrust to and confer upon such manager such powers and duties as it deems
appropriate for the transaction or conduct of such
business;
|
|
|
(e)
|
by
power of attorney, appoint any company, firm, person or body of persons,
whether nominated directly or indirectly by the Board, to be an attorney
of the Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the Board)
and for such period and subject to such conditions as it may think fit and
any such power of attorney may contain such provisions for the protection
and convenience of persons dealing with any such attorney as the Board may
think fit and may also authorise any such attorney to sub-delegate all or
any of the powers, authorities and discretions so vested in the
attorney. Such attorney may, if so authorised under the seal of
the Company, execute any deed or instrument under such attorney's personal
seal with the same effect as the affixation of the seal of the
Company;
|
|
|
(f)
|
procure
that the Company pays all expenses incurred in promoting and incorporating
the Company;
|
|
|
(g)
|
delegate
any of its powers (including the power to sub-delegate) to a committee of
one or more persons appointed by the Board which may consist partly or
entirely of non-Directors, provided that every such committee shall
conform to such directions as the Board shall impose on them and provided
further that the meetings and proceedings of any such committee shall be
governed by the provisions of these Bye-laws regulating the meetings and
proceedings of the Board, so far as the same are applicable and are not
superceded by directions imposed by the
Board;
|
|
|
(h)
|
delegate
any of its powers (including the power to sub-delegate) to any person on
such terms and in such manner as the Board may see
fit;
|
|
|
(i)
|
present
any petition and make any application in connection with the liquidation
or reorganisation of the Company;
|
|
|
(j)
|
in
connection with the issue of any share, pay such commission and brokerage
as may be permitted by law; and
|
|
|
(k)
|
authorise
any company, firm, person or body of persons to act on behalf of the
Company for any specific purpose and in connection therewith to execute
any agreement, document or instrument on behalf of the
Company.
|
|
|
47.2
|
The
Board shall constitute, appoint and
maintain:
|
|
|
(a)
|
an
Audit Committee;
|
|
|
(b)
|
a
Compensation Committee;
|
|
|
(c)
|
a
Governance Committee; and
|
|
|
(d)
|
such
other committee(s) as may be required from time to time by law or
regulation.
|
|
|
47.3
|
The
Board may in its absolute discretion constitute, appoint and maintain and
disband such other committees as it deems to be in the best interests of
the Company.
|
|
48.
|
Register
of Directors and Officers
|
The Board
shall cause to be kept in one or more books at the registered office of the
Company a Register of Directors and Officers and shall enter therein the
particulars required by the Act.
|
49.
|
Officers
|
The
Officers shall consist of a Chairman and a Deputy Chairman, a Secretary and such
additional Officers as the Board may determine all of whom shall be deemed to be
Officers for the purposes of these Bye-laws.
|
50.
|
Appointment
of Officers
|
The Board
shall, as soon as possible after the statutory meeting of Members and after each
annual general meeting, appoint a Chairman and Deputy Chairman who shall be
Directors. The Secretary (and additional Officers, if any) shall be
appointed by the Board from time to time.
|
51.
|
Duties
of Officers
|
The
Officers shall have such powers and perform such duties in the management,
business and affairs of the Company as may be delegated to them by the Board
from time to time.
|
52.
|
Remuneration
of Officers
|
The
Officers shall receive such remuneration as the Board or a committee thereof may
determine.
|
53.
|
Conflicts
of Interest
|
|
|
53.1
|
Any
Director, or any Director's firm, partner or any company with whom any
Director is associated, may act in any capacity for, be employed by or
render services to the Company and such Director or such Director's firm,
partner or company shall be entitled to remuneration as if such Director
were not a Director. Nothing herein contained shall authorise a
Director or Director's firm, partner or company to act as Auditor to the
Company.
|
|
|
53.2
|
A
Director who is directly or indirectly interested in a contract or
proposed contract or arrangement with the Company shall declare the nature
of such interest as required by the
Act.
|
|
|
53.3
|
Following
a declaration being made pursuant to this Bye-law, and unless disqualified
by the chairman of the relevant Board meeting, a Director may vote in
respect of any contract or proposed contract or arrangement in which such
Director is interested and may be counted in the quorum for such
meeting.
|
|
54.
|
Indemnification
and Exculpation of Directors and
Officers
|
|
|
54.1
|
The
Directors, Secretary and other Officers (such term to include any person
appointed to any committee by the Board) for the time being acting in
relation to any of the affairs of the Company, any
subsidiary thereof, and the liquidator or trustees (if any) for the time
being acting in relation to any of the affairs of the Company or any
subsidiary thereof and every one of them, and their heirs, executors and
administrators, shall be indemnified and secured harmless out of the
assets of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their heirs,
executors or administrators, shall or may incur or sustain by or by reason
of any act done, concurred in or omitted in or about the execution of
their duty, or supposed duty, or in their respective offices or trusts,
and none of them shall be answerable for the acts, receipts, neglects or
defaults of the others of them or for joining in any receipts for the sake
of conformity, or for any bankers or other persons with whom any moneys or
effects belonging to the Company shall or may be lodged or deposited for
safe custody, or for insufficiency or deficiency of any security upon
which any moneys of or belonging to the Company shall be placed out on or
invested, or for any other loss, misfortune or damage which may happen in
the execution of their respective offices or trusts, or in relation
thereto, PROVIDED THAT this indemnity shall not extend to any matter in
respect of any fraud or dishonesty which may attach to any of the said
persons. Each Member agrees to waive any claim or right of
action such Member might have, whether individually or by or in the right
of the Company, against any Director or Officer on account of any action
taken by such Director or Officer, or the failure of such Director or
Officer to take any action in the performance of his duties with or for
the Company or any subsidiary thereof, PROVIDED THAT such waiver shall not
extend to any matter in respect of any fraud or dishonesty which may
attach to such Director or
Officer.
|
|
|
54.2
|
The
Company may purchase and maintain insurance for the benefit of any
Director or Officer of the Company against any liability incurred by him
under the Act in his capacity as a Director or Officer of the Company or
indemnifying such Director or Officer in respect of any loss arising or
liability attaching to him by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which the
Director or Officer may be guilty in relation to the Company or any
subsidiary thereof.
|
|
|
54.3
|
The Company may
advance moneys to a Director or Officer for the costs, charges, and
expenses incurred by the Director or Officer in defending any civil or
criminal proceedings against him, on condition that the Director or
Officer shall repay the advance if any allegations of fraud or dishonesty
is proved against him.
|
MEETINGS
OF THE BOARD OF DIRECTORS
|
55.
|
Board
Meetings
|
The Board
may meet for the transaction of business, adjourn and otherwise regulate its
meetings as it sees fit. A resolution put to the vote at a meeting of
the Board shall be carried by the affirmative votes of a majority of the votes
cast and in the case of an equality of votes the resolution shall
fail.
|
56.
|
Notice
of Board Meetings
|
|
|
(1)
|
The
Chairman, Deputy Chairman or any two (2) Directors may, and the Secretary
on the requisition of the Chairman, Deputy Chairman or any two (2)
Directors shall at any time summon a meeting of the Board by at least
three (3) days notice to each Director, unless such director consents to
shorter notice. Attendance at a meeting of the Board shall
constitute consent to short notice.
|
|
|
(2)
|
Notice
of a meeting of the Board shall be deemed to be duly given to a Director
if it is given to such Director verbally in person or by telephone or
otherwise communicated or sent to such Director by registered mail,
electronic mail, courier service, facsimile or other mode of representing
words in a legible and non-transitory form at such Director’s last known
address or any other address given by such Director to the Company for
this purpose. If such notice is sent by electronic mail, next-day courier
or facsimile, it shall be deemed to have been given the day following the
sending thereof and, if by registered mail, five (5) days following the
sending thereof.
|
|
57.
|
Participation
in Meetings by Telephone
|
Directors
may participate in any meeting of the Board by means of such telephone,
electronic or other communication facilities as permit all persons participating
in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.
|
58.
|
Quorum
at Board Meetings
|
The
quorum necessary for the transaction of business at a meeting of the Board shall
be a majority of the Directors then in office, present in person or represented
by a duly authorized representative appointed in accordance with the Act,
provided that at least two Directors are present in person.
|
59.
|
Special
Business
|
|
|
59.1
|
In
addition to any vote of the Members required by the Act or these Bye-laws,
none of the actions listed below shall be taken by the Company without
approval by the Board and the holders of a majority in interest of the
affected classes of shares of the Company then in
issue:
|
|
|
(a)
|
amending
the voting rights of the Common Shares or of any other class of shares
with such rights; or
|
|
|
(b)
|
amending
the dividend rights of the Common Shares or of any other class of shares
with such rights.
|
|
|
59.2
|
In
addition to any vote of the Members required by the Act or these Bye-laws,
none of the actions listed below shall be taken by the Company without the
prior approval by at least seventy five percent (75%) of the Directors in
office;
|
|
|
(a)
|
any
amendment to the Bye-laws or alteration to the Memorandum of
Association;
|
|
|
(b)
|
the
consolidation, sub-division, conversion, reduction or cancellation of any
share capital of the Company;
|
|
|
(c)
|
any
merger, consolidation, amalgamation, continuation or similar transaction
involving the Company, or any acquisition or disposition of a subsidiary
greater then 10 percent (10%) of the Company’s Book
Value;
|
|
|
(d)
|
except
for the rights created under the PSU Plan or the RSU Plan, the creation of
any option or right to subscribe or acquire, or convert any security into,
any share capital of the Company;
|
|
|
(e)
|
any
increase in the maximum number of PSU Shares which can be issued under the
PSU Plan or any material amendment or modification of the PSU Plan, the
RSU Plan or the Warrant;
|
|
|
(f)
|
any
transaction or series of transactions with Haverford or its Affiliates in
excess of US$10 Million in the aggregate, or any material modification or
amendment of the terms thereof
|
|
|
(g)
|
any
resolution to voluntarily wind up or liquidate the
Company,
|
|
60.
|
Board
to Continue in the Event of Vacancy
|
The Board
may act notwithstanding any vacancy in its number but, if and so long as its
number is reduced below the number fixed by these Bye-laws as the quorum
necessary for the transaction of business at meetings of the Board, the
continuing Directors or Director may act for the purpose of (i) summoning a
general meeting of the Company; or (ii) preserving the assets of the
Company.
|
61.
|
Chairman
to Preside
|
Unless
otherwise agreed by a majority of the Directors attending, the Chairman shall
act as chairman at all meetings of the Board at which such person is
present. In their absence the Deputy Chairman, if present, shall act
as chairman and in the absence of all of them a chairman shall be appointed or
elected by the Directors present at the meeting.
|
62.
|
Written
Resolutions
|
A
resolution signed by all the Directors, which may be in counterparts, shall be
as valid as if it had been passed at a meeting of the Board duly called and
constituted, such resolution to be effective on the date on which the last
Director signs the resolution.
|
63.
|
Validity
of Prior Acts of the Board
|
No
regulation or alteration to these Bye-laws made by the Company in general
meeting shall invalidate any prior act of the Board which would have been valid
if that regulation or alteration had not been made.
CORPORATE
RECORDS
|
64.
|
Minutes
|
The Board
shall cause minutes to be duly entered in books provided for the
purpose:
|
|
(a)
|
of
all elections and appointments of
Officers;
|
|
|
(b)
|
of
the names of the Directors present at each meeting of the Board and of any
committee appointed by the Board;
and
|
|
|
(c)
|
of
all resolutions and proceedings of general meetings of the Members,
meetings of the Board, meetings of managers and meetings of committees
appointed by the Board.
|
|
65.
|
Place
Where Corporate Records Kept
|
Minutes
prepared in accordance with the Act and these Bye-laws shall be kept by the
Secretary at the registered office of the Company.
|
66.
|
Form
and Use of Seal
|
|
|
66.1
|
The
seal of
the Company may adopt a
seal shall be in
such form as the Board may determine. The Board may adopt one
or more duplicate seals for use in or outside
Bermuda.
|
|
|
66.2
|
The A seal of the Company
shall may, but need
not, not be
affixed to any deed,
instrument,
share certificate or document, and if the seal is to be affixed thereto it
shall be except
attested by the signature of (i) any Director
and the
Secretary; or (ii) any two
Directors Officer; or
(iii) the
Secretary, or (iv) any person appointed
authorised by
the Board for that purpose. A Resident
Representative may, but need not, affix the seal of the Company to certify
the authenticity of any copies of documents provided that any
Director, Officer or resident
Representative, may affix the seal of the Company attested by such
Director, Officer, or Resident Representative’s signature to any
authenticated copies of these Bye-laws, the incorporating documents of the
Company, the minutes of any meetings or any other documents to be
authenticated by such Director, Officer or Resident
Representative.
|
ACCOUNTS
|
67.
|
Books
of Account
|
|
|
67.1
|
The
Board shall cause to be kept proper records of account with respect to all
transactions of the Company and in particular with respect
to:
|
|
|
(a)
|
all
sums of money received and expended by the Company and the matters in
respect of which the receipt and expenditure
relates;
|
|
|
(b)
|
all
sales and purchases of goods by the Company;
and
|
|
|
(c)
|
all
assets and liabilities of the
Company.
|
|
|
67.2
|
Such
records of account shall be kept at the registered office of the Company,
or subject to the provisions of the Act, at such other place as the Board
thinks fit and shall be available for inspection by the Directors during
normal business hours.
|
|
68.
|
Financial
Year End
|
The
financial year end of the Company may be determined by resolution of the Board
and failing such resolution shall be 31st
December in each year.
AUDITS
|
69.
|
Annual
Audit
|
Subject
to any rights to waive laying of accounts or appointment of an Auditor pursuant
to the Act, the accounts of the Company shall be audited at least once in every
year.
|
70.
|
Appointment
of Auditor
|
|
|
70.1
|
Subject
to the provisions of the Act, at the annual general meeting or at a
subsequent special general meeting in each year, an independent
representative of the Members shall be appointed by them as Auditor of the
accounts of the Company.
|
|
|
70.2
|
Any
Auditor appointed by the Members shall, prior to such appointment, have
been nominated by the Audit
Committee.
|
|
|
70.3
|
The
Auditor may be a Member but no Director, Officer or employee of the
Company shall, during his continuance in office, be eligible to act as an
Auditor of the Company.
|
|
71.
|
Remuneration
of Auditor
|
The
remuneration of the Auditor shall be fixed by the Audit Committee.
|
72.
|
Duties
of Auditor
|
|
|
72.1
|
The
financial statements provided for by these Bye-laws shall be audited by
the Auditor in accordance with generally accepted auditing
standards. The Auditor shall make a written report thereon in
accordance with generally accepted auditing
standards.
|
|
|
72.2
|
The
generally accepted auditing standards referred to in this Bye-law may be
those of a country or jurisdiction other than Bermuda or such other
generally accepted auditing standards as may be provided for in the
Act. If so, the financial statements and the report of the
Auditor shall identify the generally accepted auditing standards
used.
|
|
73.
|
Access
to Records
|
|
|
The
Auditor shall at all reasonable times have access to all books kept by the
Company and to all accounts and vouchers relating thereto, and the Auditor
may call on the Directors or Officers of the Company for any information
in their possession relating to the books or affairs of the
Company.
|
|
74.
|
Financial
Statements
|
Subject
to any rights to waive laying of accounts pursuant to the provisions of the Act,
financial statements as required by the Act shall be laid before the Members in
general meeting.
|
75.
|
Distribution
of Auditor’s Report
|
The
report of the Auditor shall be submitted to the Members in general
meeting.
|
76.
|
Vacancy
in the Office of Auditor
|
If the
office of Auditor becomes vacant by the resignation or death of the Auditor, or
by the Auditor becoming incapable of acting by reason of illness or other
disability at a time when the Auditor’s services are required, the Board shall,
as soon as practicable, convene a special general meeting to fill the vacancy
thereby created.
VOLUNTARY
WINDING-UP AND DISSOLUTION
|
77.
|
Winding-Up
|
If the
Company shall be wound up the liquidator may, with the sanction of a resolution
of the Members, divide amongst the Members in specie or in kind the whole or any
part of the assets of the Company (whether they shall consist of property of the
same kind or not) and may, for such purpose, set such value as he deems fair
upon any property to be divided as aforesaid and may determine how such division
shall be carried out as between the Members or different classes of
Members. The liquidator may, with the like sanction, vest the whole
or any part of such assets in the trustees upon such trusts for the benefit of
the Members as the liquidator shall think fit, but so that no Member shall be
compelled to accept any shares or other securities or assets whereon there is
any liability.
CHANGES
TO CONSTITUTION
|
78.
|
Changes
to Bye-laws
|
No
Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made
save in accordance with the provisions of the Act and until the same has been
approved in accordance with the provisions of Bye-law 59 hereof.
|
79.
|
Changes
to the Memorandum of Association
|
No
alteration or amendment to the Memorandum of Association shall be made save in
accordance with the provisions of the Act and until same has been approved in
accordance with the provisions of Bye-law 59 hereof.
|
80.
|
Discontinuance
|
The Board
may exercise all the powers of the Company to discontinue the Company to a
jurisdiction outside Bermuda pursuant to the Act.
Our
bye-laws provide voting and ownership limitations designed to reduce the risk
that the Company will be considered a controlled foreign
corporation. Our bye-laws also provide a mechanism to apply these
voting limitations to indirect holdings in certain subsidiaries of the Company
(“Designated Companies”) that are not U.S. corporations and that are not treated
as pass-through or disregarded entities for U.S. federal income tax
purposes.
At the
Annual General Meeting, our shareholders are being asked to approve a defined
list of persons who will be considered for membership on the board of directors
of each Designated Company (each, a “Designated Company Director”) at the
discretion of the Chairman of the Board, to the extent permissible by applicable
law. The nominees for Designated Company Directors are as
follows:
|
Les
Allen
|
Clive
Dawson
|
Khader
Hemsi
|
John
B. Mills
|
Adelle
Ramos
|
|
Andreas
Aloneftis
|
John
Dewhurst
|
Ernest
Horvath
|
Bryan
Murphy
|
Melvin
Rosario
|
|
Abdul
Muttalib Al Jaidi
|
Jean-Paul
Dyer
|
John
Hyland
|
Edgar
Nunes
|
Brenton
Slade
|
|
Patrick
Boisvert
|
William
Fawcett
|
Christopher
Jarvis
|
Conor
O’Dea
|
Guy
Swayne
|
|
Thomas
Bolt
|
Richard
Ferrett
|
Dominic
Kirby
|
James
O’Shaughnessy
|
Frédéric
Traimond
|
|
David
Brown
|
Ruth
Gerena
|
Larry
Lombardo
|
Rafael
Padial
|
Hermanus
R.W. Troskie
|
|
Mark
Byrne
|
Karl
Grieves
|
Garth
MacDonald
|
Nicholas
Pawson
|
David
Young
|
|
Colin
Campbell
|
Daniel
Guinnard
|
Iain
Macdowall
|
Charalambos
Pittas
|
Peter
Zumstein
|
|
Howard
Cheetham
|
Bernice
Guzman
|
Ian
Mallery
|
Michalis
Polydorides
|
|
|
Paul
Chubb
|
Manolis
Hadjimanolis
|
Venkateswara
Rao Mandava
|
Gary
Prestia
|
|
|
Jonathan
Coleman
|
Robin
Hargreaves
|
Cesar
Matos
|
Ralph
Rexach
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE
THE
LIST
OF DESIGNATED COMPANY DIRECTORS OF
CERTAIN SUBSIDIARIES OF THE COMPANY.
It is
proposed, subject to shareholder approval, that the Amended and Restated
Restricted Share Unit Plan (the “RSU Plan”) be amended so as to: (i) accurately
incorporate the maximum number of common shares available under the RSU Plan;
and (ii) set a 10 year term for the RSU Plan. For more information on
the RSU Plan, please see “Compensation Discussion and Analysis”
above. Assuming that the Compensation Committee approves the proposed
amendments at its meeting on May 13, 2009, in order to accomplish this
objective, Sections 3.01 and 13.01 of the RSU Plan must be amended, subject to
shareholder approval.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE
AMENDMENTS
TO THE AMENDED AND RESTATED RESTRICTED SHARE UNIT PLAN OF THE
COMPANY.
Amended
and Restated Flagstone Reinsurance Holdings Limited
Employee
Restricted Share Unit Plan
Section 1 –
Purpose of the Plan
|
1.01
|
Flagstone
Reinsurance Holdings Limited (the “Company”) adopted this Amended and
Restated Flagstone Reinsurance Holdings Limited Employee Restricted Share
Unit Plan (the “Plan”), effective as of July 20th
2007 for the benefit of the Directors, officers, and Employees of the
Company. The purpose of the Plan is to promote a proprietary
interest in the Company and its Subsidiaries among its Directors,
officers, and employees; encourage the Directors, officers, and Employees
of the Company to further the development of the Company; and to attract
and retain the key employees necessary for the Company’s long-term
success. This Plan amends and restates in its entirety the
Flagstone Reinsurance Holdings Limited Employee Restricted Share Unit Plan
adopted on July 1, 2006 and amended in November,
2007.
|
Section 2 –
Definitions
|
2.01
|
General
– Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meanings specified below unless the
context clearly indicates to the contrary or as provided under Section 7
of the Plan.
|
|
2.02
|
“Account”
of a Participant means his or her individual account, if any, or the
account of a Director’s employer, as established in accordance with
Section 6.
|
|
2.03
|
“Beneficiary”
means the person or persons designated by a Participant, on a form
provided by the Plan Administrator, to receive payments under the Plan in
the event of the Participant’s
death.
|
|
2.04
|
“Board”
means Board of Directors of the
Company.
|
|
2.05
|
“Cause”
shall mean (a) a material breach by a Participant of any contract between
the Participant and the Company or a Subsidiary; (b) the willful and
continued failure or refusal by the Participant to perform any duties
reasonably required by the Company or a Subsidiary, after notification by
the Company or the Subsidiary of such failure or refusal, and failure to
correct such behaviour within 20 days of such notification; (c) commission
by the Participant of a criminal offence or other offence of moral
turpitude; (d) perpetration by the Participant of a dishonest act or
common law fraud against the Company or a Subsidiary or a client of
either; or (e) the Participant willfully engaging in misconduct which is
materially injurious to the Company or a Subsidiary, including without
limitation, the disclosure of any trade secrets, financial models, or
computer software to persons outside the Company or a Subsidiary without
the consent of the Company or a
Subsidiary.
|
|
2.07
|
“Compensation
Committee” means the Compensation Committee of the Board of Directors of
the Company.
|
|
2.08
|
“Common
Stock” means common shares of the
Company.
|
|
2.09
|
“Company”
means Flagstone Reinsurance Holdings
Limited.
|
|
2.10
|
“Director”
means a member of the board of directors of the Company or its
Subsidiaries.
|
|
2.11
|
“Disability”
means a condition by which the Compensation Committee has determined that
the physical or mental condition of the Participant is such as would
entitle him to receive payment of monthly benefits under any disability
plan of the Company or a Subsidiary in which the individual
participates.
|
|
2.12
|
“Employee”
means an employee of the Company or its
Subsidiaries.
|
|
2.13
|
“Grant
Certificate” means a certificate evidencing the credit of or grant to a
Participant of a Restricted Share Unit under the Plan (sample attached as
Appendix 5).
|
|
2.14
|
“Inter
Vivos Designee” means any person or body of persons corporate or
unincorporate, association, trust, partnership or similar entity or
arrangement designated by a Participant, on a form provided by the Plan
Administrator, to hold such RSUs granted to the Participant under the Plan
and receive payments under the Plan during the life of the
Participant.
|
|
2.15
|
“Participant”
means any Employee, officer, or Director, except for Management Directors,
of the Company or its Subsidiaries who (1) are eligible for RSU credits or
grants under the Plan and (2) the Compensation Committee decides pursuant
to its authority under Section 3.01 of the Plan to grant or credit an RSU
award.
|
|
2.16
|
“Plan”
means the Flagstone Reinsurance Holdings Limited Employee Restricted Share
Unit Plan, as it may be amended from time to
time.
|
|
2.17
|
“Plan
Administrator” means the Compensation Committee, or the person or persons
appointed by the Compensation Committee to serve under Section 4 of the
Plan.
|
|
2.18
|
“Restricted
Share Unit” (or “RSU”) means a right to receive a payment, in cash or in
actual Common Stock of the Company, of the value of Common Stock of the
Company, subject to the terms of this Plan and the respective Grant
Certificate.
|
|
2.19
|
“Subsidiary”
means a subsidiary of the Company.
|
Section 3 – Awards Subject
to the Plan
|
3.01
|
Under
the Plan, the Compensation Committee, in its sole discretion, may grant
RSUs to Participants or credit RSUs to Directors’ Accounts. The
total stock credits or grants under the Plan shall not exceed (a) that
amount required to satisfy the Director requests for fees to be paid in
shares, plus (b) 0.2 percent of the total issued and outstanding share
capital of the Company per annum or as decided by the Compensation
Committee. To the extent that any RSU granted or credited under
the Plan expires, terminates, or is cancelled, such unissued stock credits
or grants shall again be available for grant or credit under the
Plan. The maximum number of
RSUs that may be granted under the Plan shall not exceed 800,000
RSUs. The aggregate maximum number of common shares that shall
be issuable under the Plan shall not exceed 800,000 common
shares.
|
|
3.02
|
The
RSUs will normally be settled by delivery of Common Stock, but can be
settled to the Participant on distribution in cash, by issuance of shares
of Common Stock, or partly in cash and partly by issuance of shares of
Common Stock as determined by the Compensation Committee; provided that
Participants who are UK domiciled for tax purposes may only receive
distributions by issuance of shares of Common
Stock.
|
|
3.03
|
The
amount of cash, if any, to be paid in lieu of issuance of shares of Common
Stock under the Plan shall be determined based on the net book value per
share of Common Stock (or market value, if the Company’s shares are freely
tradable on an exchange) as of the date on which a Participant becomes
entitled to payment, whether or not such payment is
deferred.
|
Section 4 –
Administration
|
4.01
|
The
Plan shall be administered by the Compensation Committee, and the
Compensation Committee shall have the sole authority to interpret the
Plan, to establish and revise rules and regulations relating to the Plan
(including this Plan document), and to make any other determinations that
it believes necessary or advisable for the administration of the
Plan. All of the powers and responsibilities of the
Compensation Committee under the Plan may be delegated by the Compensation
Committee, in writing, to any Compensation Subcommittee or appropriate
Company personnel thereof. The Board of Directors or the
Shareholders of the Company can overrule the Compensation
Committee.
|
Section 5 –
Participation
|
5.01
|
The
Management Committee of the Company will recommend, and the Compensation
Committee will approve, the Participants in the
Plan. Participation in the Plan will be limited to officers,
Employees, and Directors (excluding Management Directors) of the Company
or its Subsidiaries. Participants in the Plan may also
participate in the Flagstone Reinsurance Holdings Limited Performance
Share Unit Plan (the “PSU Plan”) sponsored by the Company, however such
persons shall not be eligible to receive grants of RSUs and Performance
Share Units in the same calendar year. In addition,
participation in the Plan shall be limited only to those individuals who
are approved by the Compensation Committee and whose participation in the
Plan is evidenced by a Grant Certificate executed by the
Company.
|
Section 6 – Terms of the
Grant or Credit of RSUs
|
6.01
|
The
Compensation Committee may grant RSUs to a Participant pursuant to the
Plan. In addition, a Director of the Company may elect to
substitute all or a percentage of his/her compensation for services
performed for the Company with RSUs issued under the Plan, such amount to
be credited to his/her Account as RSUs. A Director who serves on the Board
on behalf of his/her employer may stipulate that amounts be credited to
such employer’s Account as RSUs. Grants or credits of RSUs
shall be evidenced by a Grant Certificate in such form as the Compensation
Committee shall from time to time
approve.
|
|
6.02
|
A
Director who is a Participant in the Plan shall elect no later than
December 31 of the year prior to the year with respect to which the
compensation is earned (or for the first year of the Plan, no later than
the last day of the month prior to the Plan’s effective date), the dollar
amount or percentage of compensation for such year to be converted into
RSUs and credited to his/her Account pursuant to the written terms of the
Plan and the Grant Certificate.
|
|
6.03
|
Upon
a grant or credit of an award of RSUs under the Plan, as applicable, a
Participant’s Account shall be credited with the amount of such grant or
credit.
|
|
6.04
|
Actual
shares of Company Common Stock or cash (as determined by the Committee),
equal in amount to the number of RSUs that have vested, will be
distributed to the Participant upon the earlier of the following: (a)
separation from service other than for cause, (b) satisfaction of the
applicable vesting period(s), (c) a specific date, or (d) such other time
as the Committee may in its sole discretion determine (collectively, the
“Distribution Dates”). The Company shall deliver the shares of
Common Stock of the Company and/or cash to the Participant as soon as
administratively feasible after the identified date of
distribution.
|
|
6.05
|
Grants
of RSUs under the Plan will normally fully vest on the date that is
specified in the applicable Grant Certificate, subject to the
following:
|
|
6.05.1
|
Upon
a Participant’s death or Disability, he/she shall become fully vested in
all RSUs that have been credited or granted under the
Plan.
|
|
6.05.2
|
Except
as otherwise provided herein, the unvested RSU’s of Participants who are
Employees or Officers shall be canceled upon notice of termination from
the Employer to the Employee or the notice of resignation of the
Employee.
|
|
6.05.3
|
Notwithstanding
6.06.2, at the discretion of the Compensation Committee, vesting of RSUs
that are granted under the Plan may continue for Employees who separate
from service with the Company after at least five years’
service.
|
|
6.05.4 –
|
If
an Employee is terminated for Cause all of his RSU’s will be automatically
canceled.
|
|
6.05.5
|
The
RSU’s of a Director shall normally vest on the date noted on the Grant
Certificate, unless accelerated under 6.04.1, and regardless of whether
that Director continues to serve. The Compensation Committee can cancel
the RSU’s of a Director, whether vested or not, if that director engages
in action deemed to be materially hostile to the interests of the Company,
as judged by the Board of
Directors.
|
|
6.05.6
|
The
Compensation Committee may, in its sole discretion, accelerate the vesting
of any RSUs credited or granted under the Plan at any
time.
|
|
6.06
|
RSUs
and the rights and privileges conferred therewith shall not be sold,
transferred, encumbered, hypothecated, or otherwise anticipated by the
Participant, except as provided for under the terms of the
Plan. This Award is not liable for or subject to, in whole or
in part, the debts, contracts, liabilities, or torts of the Participant,
nor shall it be subject to garnishment, attachment, execution, levy, or
other legal or equitable process.
|
Section 7 – Special
Provisions
|
7.01
|
The
Plan has special provisions which apply variously to citizens, residents,
domiciliaries, of certain countries, or employees of Company subsidiaries
located in certain countries. These provisions form part of this Plan and
are attached as Appendix 4.
|
|
7.02
|
The
Company may extend or amend Appendix 4 from time to time in order to
accommodate the development of the Company in new countries, to maintain
the most tax-favorable status available in various countries under the
applicable laws and further modifications/amendments carried out from time
to time. Such technical amendments require the approval of the Management
Compensation Committee of the Company, and the Chairman of the
Compensation Committee.
|
Section 8 –
Taxation
|
8.01
|
Participants
shall be responsible for all individual tax consequences of the RSU grants
under the Plan. Where feasible, the Plan will be interpreted
and administered to provide favorable tax treatment to the Participant,
subject to the compliance with the applicable laws of their respective
jurisdiction.
|
|
8.02
|
The
Company reserves the right to withhold shares or deduct from the
Participant payroll any taxes or social benefit costs to the Participant
or the Company associated with the vesting or fulfillment of the
RSUs.
|
Section 9 – Designation of
Beneficiary
|
9.01
|
A
Participant, by filing the prescribed form (the “Beneficiary Designation
Form”, sample attached as Appendix 2) with the Plan Administrator, or such
other person as the Plan Administrator may designate from time to time,
may designate one or more Beneficiaries and successor Beneficiaries who
shall be given the rights to the RSUs in accordance with the terms of the
Plan in the event of the Participant’s death. A Participant may
change the designation of a Beneficiary at any time by completing a new
Beneficiary Designation Form that shall revoke and supersede all earlier
forms. In the event a Participant does not file a Beneficiary
Designation Form designating one or more Beneficiaries, or no designated
Beneficiary survives the Participant, the RSUs shall be given to the
individual to whom such right passes by will or the laws of descent and
distribution and/or succession.
|
|
9.02
|
A
Participant, by filing the prescribed form (the “Inter Vivos Designee
Form”, sample attached as Appendix 1) with the Plan Administrator, or such
other person as the Plan Administrator may designate from time to time,
may designate one or more Inter Vivos Designees and successor Inter Vivos
Designees who shall be given the rights to all past, present and future
grants or series of RSUs, or to one or more specific grants or series of
RSUs, designated within the Inter Vivos Designee Form during the life of
the Participant and in accordance with the terms of the Plan. A
Participant may change the designation of any Inter Vivos Designee by
completing a new Inter Vivos Designation Form that shall revoke and
supersede all earlier forms. In the event a Participant does not file an
Inter Vivos Designation Form designating one or more Inter Vivos
Designees, or no Inter Vivos Designee survives the Participant, the RSUs
and any payment of shares in place of cash shall be given to the
Participant.
|
Section 10 – Expenses of the
Plan
|
10.01
|
Costs
of administration of the Plan will be paid by the
Company.
|
Section 11 – Claims
Procedure
|
11.01
|
In
general, any claim for benefits under the Plan shall be filed by the
Participant or beneficiary (“claimant”) on the form prescribed for such
purpose with the Plan Administrator. If a claim for benefits
under the Plan is wholly or partially denied, notice of the decision shall
be furnished to the claimant by the Plan Administrator within a reasonable
period of time after receipt of the claim by the Plan
Administrator. A Participant who is denied a claim for benefits
may appeal to the Compensation Committee for a review of the Plan
Administrator’s decision. The decision of the Compensation
Committee shall be furnished to the Participant within a reasonable period
of receipt of the request for review and the decision of the Compensation
Committee shall be final and binding to the
Participant.
|
Section 12 – Termination or Amendment of the
Plan
|
12.01
|
The
Plan may be amended in whole or in part from time to time, or may be
terminated, by the Board in accordance with the bye-laws of the
Company, provided that in event of such amendment or
termination, the rights of the Participants related to an RSU that
have been granted under the Plan shall be preserved and maintained and no
amendment may confer additional benefits upon Participants without prior
approval by the Board. Notice of any amendment or
termination of the Plan shall be given in writing to the
Participant.
|
Section 13 –Term of the
Plan
|
13.01
|
The
Plan shall become effective on the date it is adopted by the Company and
shall continue in effect
as amended from time to time until terminated pursuant to Section
12.
|
|
|
This Plan
shall terminate upon the
earlier of the following dates or events to
occur:
|
|
13.01.1
|
the adoption of a
resolution of the Board terminating the Plan in accordance with the
Bye-laws of the Company; or
|
|
13.01.2
|
ten years from the
date the Plan is initially or subsequently approved and adopted by the
shareholders of the Company in accordance with
Section 12 hereof.
|
No termination of the Plan
shall alter or impair any of the rights or obligations of any person, without
his consent, under any previous grant under the Plan.
Section 14 – Rights as a
Stockholder
|
14.01
|
No
Participant shall have any rights (including voting or dividend rights) as
a shareholder of the Company with respect to any Common Stock covered by,
or related to, any RSU granted or credited pursuant to the Plan until the
date of the delivery of a stock certificate with respect to such Common
Stock.
|
Section 15 –
Anti-Dilution and Other Adjustments
|
15.01
|
In
the event of any change in the issued and outstanding shares of Common
Stock of the Company by reason of any share split, share dividend,
recapitalization, merger, consolidation, reorganization, amalgamation,
combination or exchange of shares of Common Stock or other similar event,
and if the Compensation Committee shall determine, in its sole discretion,
that such change equitably requires an adjustment in the number or kind of
shares of Common Stock of the Company that may be issued pursuant to RSUs
under the Plan pursuant to paragraph 6, then such adjustment shall be made
by the Compensation Committee and shall be conclusive and binding for all
purposes of the Plan.
|
|
15.02
|
Upon
the declaration by the Board of Directors of the Company of a dividend in
specie or in kind in favor of the holders of Common Shares in the Company,
the Compensation Committee shall determine, in its sole discretion, if
such dividend equitably requires an adjustment in the number or kind of
RSUs that may be issued to a Participant under the Plan in lieu of a
dividend payment.
|
Section 16 –
Miscellaneous
|
16.01
|
If
any provision of this Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.
|
|
16.02
|
Except
by will or the laws of descent and distribution and/or succession, a
Participant’s rights and interest under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of Participant’s death),
including but not limited to, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner and no such right or interest of
any Participant in the Plan shall be subject to any obligation or
liability or such Participant; provided that Directors shall be permitted
to assign their rights under the Plan to their employer or an affiliate of
their employer, as approved by the Compensation
Committee.
|
|
16.03
|
Except
to the extent specifically set forth in the Grant Certificate, the
Participant’s rights under the Plan shall be governed in all aspects by
the terms of the Plan, including the provisions that authorize the Plan
Administrator to administer and interpret the Plan and that provide that
the Plan Administrator’s decisions, determinations, and interpretations
with respect to the Plan are final and conclusive on all persons affected
hereby. Additionally, This Plan shall be construed in
accordance with, and governed by the laws of the
Bermuda.
|
|
16.04
|
Nothing
in this Plan, nor any action taken pursuant to this Plan, shall be deemed
to give any Participant any right to remain in the employ of the Company
or affect the right of the Company to terminate a Participant’s employment
at any time, with or without Cause.
|
* * * * *
As
evidence of its adoption of the Plan, Flagstone Reinsurance Holdings Limited has
caused this instrument to be signed by its officer of representative duly
authorized on this 14th day of May, 2009
20th day of July,
2007.
|
Flagstone
Reinsurance Holdings Limited
|
|||
| By: | |||
| Title: | |||
--
APPENDIX
1
Inter
Vivos Designee Form
To: The
Plan Administrator of the Flagstone Reinsurance Holdings Limited Employee
Restricted Share Unit Plan
From: __________________________________________
* * * * *
Pursuant
to Section 9 of the Flagstone Reinsurance Holdings Limited Employee Restricted
Share Unit Plan (the “Plan”), I hereby designate the following person(s) as
inter vivos designee(ies) who during my life shall be entitled to receive
amounts under the Plan and respective Grant Certificate:
Primary
Inter Vivos Designee Name:
__________________________________________
Secondary
Inter Vivos Designee
Name: ________________________________________
Grant
Certificates to which this designation applies:
|
(i)
|
Series/Year(s)
_____________________
|
or,
|
(ii)
|
All Grants after: |
/
|
/
|
_______________ | |
| Day | Month | Year |
In making
the above designation, I reserve the right to revoke this designation or change
the inter vivos designee(ies) designated at any time or times and without the
consent of any other person.
This
designation cancels and supersedes any inter vivos designation previously made
with respect to this Plan and respective Grant Certificate.
Signed:
______________________________
Participant
______________________________
Date
APPENDIX
2
Beneficiary
Designation Form
To: The
Plan Administrator of the Flagstone Reinsurance Holdings Limited Employee
Restricted Share Unit Plan
From: __________________________________________
* * * * *
Pursuant
to Section 9 of the Flagstone Reinsurance Holdings Limited Employee Restricted
Share Unit Plan (the “Plan”), I hereby designate the following person(s) as
beneficiar(ies) who on my death shall be entitled to receive amounts under the
Plan and respective Grant Certificate:
Primary
Beneficiary Name: __________________________________________
Secondary
Beneficiary
Name: ________________________________________
In making
the above designation, I reserve the right to revoke this beneficiary
designation or change the beneficiar(ies) designated at any time or times and
without the consent of any beneficiary.
This
beneficiary designation cancels and supersedes any beneficiary designation
previously made with respect to this Plan and respective Grant
Certificate.
Signed:
______________________________
Participant
______________________________
Date
APPENDIX
3
Director
Participant Election and Account Designation Form
To: The
Plan Administrator of the Flagstone Reinsurance Holdings Limited Employee
Restricted Share Unit Plan
From: __________________________________________
* * * * *
Amount of
Compensation Deferred
I hereby
elect to have the following amounts of compensation for services performed for
the Company for the 20___ year converted into RSUs.
________% or
$________
Distribution
Date(s)
| _________ | Separation from service | ||
| _________ | A date certain (please specify date: __________________) |
Employer
Account Designation (for Directors providing services on behalf of their
Employer)
Pursuant
to Section 6.01 of the Flagstone Reinsurance Holdings Limited Employee
Restricted Share Unit Plan (the “Plan”), I hereby designate the following as my
employer on whose behalf I provide services to the Board of Directors, and to
whose account RSUs shall be credited:
Employer
Account Name: __________________________________________
Signed:
______________________________
Director
Participant
______________________________
Date
APPENDIX
4
Special
Provisions for citizens or residents of certain countries
United States
Provisions
Coverage:
These provisions apply to Participants to whom Section 409A of the United States
Internal Revenue Code of 1986 (as amended from time to time)(“the Code”)
applies.
Provisions:
1. Each grant
and credit of RSUs shall comply with the minimum requirements of Code Section
409A,
2. Any action that
may be taken (and, to the extent possible, any action actually taken) by the
Company or the Participant shall not be taken (or shall be void and without
effect), if such action violates the requirements of Section 409A.
3. The definitions
contained within this Plan and the respective Grant Certificate shall be
interpreted and construed to comply with the minimum requirements of Section
409A.
Canada
Provisions
Coverage:
These provisions apply to Participants who are tax resident in
Canada.
Provisions:
Distributions to Participants to whom this section applies shall be made only
upon the respective Participant’s separation from service or retirement from the
Company or its Subsidiary, and shall me made within one year of such separation
or retirement.
India
Provisions
Coverage:
These provisions apply to Participants who are employees of West End Capital
Management BPO Services (India) Pvt. Ltd., or any other Subsidiary of the
Company incorporated and existing under the laws of India (“Indian Subsidiary)
(collectively, “Indian Participants”)
Provisions:
the following provisions shall apply with respect to any RSUs granted prior to a
public offering of the capital stock of the Company/Indian Subsidiary, and only
to the extent required by applicable law:
|
1.
|
The
aggregate number of RSUs which may be granted to Indian Participants under
this Plan shall not exceed 300,000 or as decided by the Compensation
Committee, and subject to the provisions of Section 3.01 hereof. RSU
credits or grants subject to increase in accordance with the terms of the
plan pursuant to the approval received from the Board of
Directors/Shareholders of the
Company
|
|
2.
|
The
RSUs will be actually paid to the Indian Participants in accordance with
the Section 3.02 and 3.03 of the
Plan.
|
|
3.
|
The
approval of the Board of the Company to the Plan was accorded on 16 June
2006. The assent of the Board of the Company, approving the adoption of
the Plan including this Appendix, for the Indian Subsidiary was accorded
on 16 June 2006. The assent of the board of directors of the
Indian Subsidiary approving the adoption of the Plan including this
Appendix, for the Indian Subsidiary was accorded on
[___].
|
|
4.
|
Participation
in the Plan and the grant of Awards shall be awarded to such Indian
Participant providing bona fide services to or for, one or more Indian
Subsidiary as may be selected by the Board or such Compensation Committee
as designated by the Board, in consultation with the board of directors of
the Indian Subsidiary, from time to time. The Board may also
grant RSUs to individuals in connection with hiring, retention or
otherwise, prior to the date the individual first performs services for an
Indian Subsidiary, provided that such RSUs shall not become vested or
exercisable prior to the date the individual first commences performance
of such services. Provided, however, that an Employee who is a
Promoter or belongs to the Promoter Group or a director who either by
himself or through his relative or through any body corporate, directly or
indirectly holds more than 10% of the outstanding shall not be eligible to
participate in the Plan
|
|
5.
|
For
purposes of the above paragraph (4)
|
|
a.
|
“Promoter”
means –
|
|
i.
|
the
person or persons who are in over-all control of the Indian
Subsidiary;
|
|
ii.
|
the
person or persons who are instrumental in the formation of the Indian
Subsidiary or programme pursuant to which shares of the Indian Subsidiary
may be offered to the public;
|
|
iii.
|
the
person or persons who are named in the offer document (inviting
subscription from the public to the shares of the Indian Subsidiary) as
promoter(s), in the event the Indian Subsidiary decided to offer shares to
the public.
|
Provided
that a director or officer of the Indian Subsidiary, if he is acting as such
only in his professional capacity, will not be deemed to be a Promoter, and that
where a Promoter of the Indian Subsidiary is a body corporate, the promoter of
that body corporate shall also be deemed to be a Promoter of the Indian
Subsidiary.
|
b.
|
“Promoter
Group” means:
|
|
i.
|
an
immediate relative of the Promoter (i.e. spouse of that person, or any
parent, brother, sister or child of the person or of the spouse);
and,
|
|
ii.
|
persons
whose shareholding is aggregated for the purpose of disclosing in the
offer document (inviting subscription from the public to the shares of the
Indian Subsidiary) "shareholding of the promoter
group"
|
|
|
c.
|
“Relative”
means immediate relative namely spouse, parent, brother, sister or child
of the person or the spouse.
|
|
6.
|
All
defined terms that are not otherwise defined under this Appendix shall
have the meaning attributed to them under the provisions of the
Plan.
|
|
7.
|
Except
to the extent as set forth in this Appendix and where not contrary to the
meaning or intention herein, the provisions of the Plan shall apply to the
Indian Participants granted the
RSU.
|
UK
Provisions
Distributions
to Participants who are UK [resident
domiciled for tax purposes] shall be made
only in shares,
notwithstanding the provisions Section 3.02, above.
APPENDIX
5
Sample
RSU Grant Certificate
This
CERTIFICATE, effective as of the ____________ day of ____________, 20___ (the
"Award Date"), certifies that Flagstone Reinsurance Holdings Limited (the
“Company”) has awarded to ________________________ (the “Participant”)
Restricted Share Units (“RSUs”) in the amounts and on the terms set forth below,
subject to and in accordance with the Flagstone Reinsurance Holdings Limited
Restricted Share Unit Plan, dated [●] (“the RSU Plan”).
The
Company awards to the Participant on the Award Date an amount of RSUs as
follows:
|
RSU
Holder
|
«Column1»
|
|
Restricted
Share Units
|
«Column2»
|
|
RSU
Series
|
[●]
|
|
Grant
Date
|
[●]
|
|
Vesting
Date
|
[Normal
Vesting: Grants of these RSUs under the Plan will fully vest on the date
that is two years after the Grant Date immediately above, except as may be
modified by section by the terms of the RSU Plan, and in particular
section [6.05].
-or-
[The
Participant is a Director and is fully and immediately vested in RSUs that
are credited to his/her Account under the
Plan.]
|
Upon
occurrence of a Distribution Date, the shares of Company Common Stock or cash
(as determined solely by the Compensation Committee of the Board of Directors of
the Company) shall be payable to the Participant and shall be delivered to the
Participant as soon as administratively feasible.
This RSU grant is subject to the
terms and conditions described in the RSU Plan, as such plan may be properly
amended from time to time. The terms of the RSU Plan are
incorporated herein, and capitalized words, if not defined herein, shall be
given the same meaning as under the terms of the Plan, unless the context
requires a different meaning.
This
RSU grant is not transferable, and will lapse upon the occasion of an
assignment, charge, disposal or other dealing with the rights conveyed by it in
any other circumstances.
____________________________________
Signed
Mark
Byrne, Chairman
Document Revision
History
|
Amendment
|
Date
|
Summary
of Changes
|
Section
|
Approved
by
|
|
Amendment
1
|
1/7/06
|
Amended
and Restated
|
Various
|
Board
of Directors
|
|
Amendment
2
|
11/9/06
|
Section
5 clarified
|
5.01
|
Board
of Directors
|
|
Amendment
3
|
16/11/06
|
Amended
& Restated
|
Various
|
Shareholders
|
|
Amendment
4
|
20/7/07
|
Amended
& Restated
|
Various
|
Board
of Directors
|
|
Amendment
5
|
15/5/08
|
Language
added regarding notification procedure
of
beneficiary or Designee and ability for such
Designations
to retroactively effect prior RSU grants
|
9
|
Board
of
Directors
|
Island
Heritage Holdings, Ltd. (“IHH”), a subsidiary of the Company, previously adopted
an Amended and Restated Island Heritage Long-Term Incentive Plan (the “IHH
Plan”). The purpose of the IHH Plan is to advance the interests of
IHH and its stockholders by providing long-term incentives to certain key
executives of IHH and of its subsidiaries. The Compensation Committee of IHH
shall determine who the participants of the IHH Plan are, having consideration
to the terms of the IHH Plan itself. The approval of the shareholders
of Flagstone Reinsurance Holdings Limited is necessary.
|
PLAN
BENEFITS
Amended and Restated Island
Heritage Long-Term Incentive Plan
|
||
|
Name
and Position(1)
|
Dollar Value
($)
|
Number of
Units
|
|
Mark
Byrne, Executive Chairman
|
—
|
—
|
|
David
Brown, Chief Executive Officer
|
—
|
—
|
|
Patrick
Boisvert, Chief Financial Officer
|
—
|
—
|
|
David
Flitman, Chief Actuary
|
—
|
—
|
|
Gary
Prestia, Chief Underwriting Officer – Flagstone Réassurance Suisse SA –
Bermuda Branch
|
—
|
—
|
|
James
O’Shaughnessy – Chief Financial Officer (ex)
|
—
|
—
|
|
Executive
Group
|
—
|
—
|
|
Non-Executive
Director Group
|
—
|
—
|
|
Non-Executive
Officer Employee Group
|
—
|
—
|
|
(1)
|
The
named executive officers, executive officers, non-executive directors and
non-executive officer employees of the Company do not participate in the
IHH Plan.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE THE AMENDED AND RESTATED ISLAND HERITAGE
LONG-TERM INCENTIVE PLAN.
AMENDED
AND RESTATED
ISLAND
HERITAGE
LONG-TERM
INCENTIVE
PLAN
May
21, 2008
Island
Heritage
Long-Term
Incentive
Plan
PURPOSE
The
purpose of the Island Heritage Long-Term Incentive Plan (the “Plan”) is to
advance the interests of Island Heritage Company Ltd. (the “Company”) and its
stockholders by providing long-term incentives to certain key executives of the
Company and of its subsidiaries.
|
1.
|
ADMINISTRATION
|
The Plan
shall be administered by the Compensation Committee (the “Committee”) of the
Board of Directors (the “Board”) of the Company. No member of the
Committee shall be an employee of the Company or a subsidiary of the Company or
shall have been eligible within one year prior to his appointment to receive
awards under the Plan (“Awards”) or to receive awards under any other plan of
the Company or its subsidiaries under which participants are entitled to acquire
stock, stock options or stock appreciation rights of the Company or any of its
subsidiaries.
The
Committee shall have exclusive authority to select the employees to be granted
Awards, to determine the size and terms of the Awards and to prescribe the form
of the instruments embodying Awards. The Committee shall be
authorized to interpret the Plan and the Awards granted under the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan and
to make any other determinations which it believes necessary or advisable for
the administration of the Plan. The Committee may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
Award in the manner and to the extent the Committee deems desirable to carry it
into effect. Any decision of the Committee in the administration of
the Plan, as described herein, shall be final and conclusive. The
Committee may act only by a majority of its members in office, except that the
members thereof may authorize any one or more of their number or any officer of
the Company to execute and deliver documents on behalf of the
Committee. No member of the Company shall be liable for anything done
or omitted to be done by him or by any other member of the Committee in
connection with the Plan, except for his own willful misconduct or as expressly
provided by statute.
|
2.
|
AWARDS
|
|
|
(a)
|
Type of
Awards. Awards shall be limited to “Performance Shares”.
Maximum Number of Shares
That May Be Issued. A maximum of 25,000 Shares, subject
to adjustment as provided in paragraph 11, may be issued under the
Plan.
|
|
3.
|
RIGHTS
WITH RESPECT TO SHARES
|
|
|
(i)
|
An
employee to whom Performance Shares are granted (and any person succeeding
to such employee’s rights pursuant to the Plan) shall have no rights as a
shareholder with respect to any Shares issuable pursuant thereto until the
date of the issuance of a stock certificate (whether or not delivered)
therefor. Except as provided in paragraph 12, no adjustment
shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other
property) the record date for which is prior to the date such stock
certificate is issued.
|
|
4.
|
PERFORMANCE
SHARES
|
The Award
of Performance Shares to a participant will entitle him to receive, without
payment to the Company, all or part of a specified amount (the “Actual Value”)
determined by the Committee, if the terms and conditions specified herein and in
the Award are satisfied. Payment in respect of an Award shall be made
as provided in subparagraph 5(e). Each Award of Performance Shares
shall be subject to the following terms and conditions:
|
|
(a)
|
The
Committee shall determine the number of Performance Shares to be granted
to each participant. The “Maximum Value” of each Performance
Share shall be the Value per Share on the date the award is paid or
becomes payable to participants. Performance Shares may be
issued in different classes or series having different terms and
conditions.
|
|
|
(b)
|
The
award period (the “Award Period”) in respect of any Award of Performance
Shares shall be such period as the Committee shall determine commencing as
of the beginning of the fiscal year of the Company in which such Award is
made. An Award Period may contain a number of performance
periods; each performance period shall commence on or after the first day
of the Award Period and shall end no later than the last day of the Award
Period; provided, however, that any such performance period must end on
December 31 of the relevant fiscal year (“Performance
Period”). At the time each Award is made, the Committee shall
establish performance objectives to be attained within the Performance
Periods as the means of determining Actual Value. The
performance objectives shall be approved by the Committee (i) while the
outcome for that Performance Period is substantially uncertain and (ii) no
more than 90 days after the commencement of the performance period to
which the performance objective relates or, if less than 90 days, the
number of days which is equal to 25 percent of the relevant Performance
Period. The performance objectives shall be based upon one or
more of the following criteria: (i) consolidated earnings before or after
taxes (including earnings before interest, taxes, depreciation and
amortization); (ii) net income; (iii) operating income; (iv) earnings per
Share; (v) book value per Share; (vi) return on stockholders’ equity;
(vii) expense management; (viii) return on investment; (ix) improvements
in capital structure; (x) stock price; (xi) combined ratio; (xii)
operating ratio; (xiii)profitability of an identifiable business unit or
product; (xiv) maintenance or improvement of profit margins; (xv) market
share; (xvi) revenues or sales; (xvii) costs; (xviii) cash flow; (xix)
working capital; (xx) return on assets; (xxi) customer satisfaction;
(xxii) employee satisfaction; and (xxiii) economic value per Share
(computed based on book value per Share determined in accordance with
generally accepted accounting principles ("GAAP") adjusted for changes in
the intrinsic value of assets and liabilities whose value differs from
their GAAP carrying value). The foregoing criteria may relate
to the Company, one or more of its subsidiaries or one or more of its
divisions, units, partnerships, joint venturers or minority investments,
product lines or products or any combination of the foregoing, and may be
applied on an absolute basis and/or be relative to one or more peer group
companies or indices, or any combination thereof, all as the Committee
shall determine.
|
|
|
(c)
|
The
Actual Value of a Performance Share shall be equal to its Maximum Value
only if the performance objectives are attained in full, but the Committee
shall specify the manner in which the Actual Value of a Performance Share
shall be a portion of such Maximum Value if the performance objectives are
met in part. In determining Actual Value, the Committee may
either (i) multiply the total number of Shares available for payout at
that time with respect to the participant by the Actual Value of each
individual Share or (ii) multiply the Maximum Value of each individual
Share by a number of Shares equal to or less than the total number of
Shares available for payout, provided that the products obtained in (i) or
(ii) are the same.
|
|
|
(d)
|
Performance
Shares shall be cancelled if the participant’s continuous employment with
the Company or any of its subsidiaries shall terminate for any reason
prior to the end of the Award Period except solely by reason of a period
of Related Employment as defined in paragraph 7, and except as otherwise
specified in this subparagraph 5(d) or in subparagraph
5(e). Notwithstanding the foregoing and without regard to
subparagraph 5(b), if a participant
shall,
|
|
|
(i)
|
while
in such employment, die or become disabled as described in paragraph 6
prior to the end of the Award Period, the Performance Shares shall be
cancelled at the end of the next ending Performance Period and he, or his
legal representative, as the case may be, shall receive payment in respect
of such Shares which he would have received had he been in continuous
employment with the Company through the end of that period and had the
individual performance objectives, if any, that were imposed been
achieved; provided, however, that no such continuation shall be deemed to
have occurred for purposes of applying subparagraph 5(d) in the event of
an Adverse Change in the Plan in respect of the participant following a
Change in Control; or
|
|
|
(ii)
|
retire
under an approved retirement program of the Company or a subsidiary (or
such other plan as may be approved by the Committee, in its sole
discretion, for this purpose) prior to the end of the Award Period,
then:
|
|
|
(A)
|
if
at the time of his retirement, the participant is 65 years old or older,
the Performance Shares shall be cancelled at the end of the next ending
Performance Period, and he shall become entitled to receive a cash payment
equal to the Maximum Value in respect to such Performance Shares he would
have received had he been in continuous employment with the Company
through the end of the Performance Period and had the performance
objectives, if any, that were imposed having been met,
or
|
|
|
(B)
|
if
at the time of retirement the Employee is less than 65 years old and his
retirement occurs before 24 months have elapsed since the grant of the
Performance Shares, the Performance Shares shall be cancelled and the
Employee shall become entitled to receive a cash payment in respect of
one-ninth of the Performance Shares he would have received had he been in
continuous employment with the Company through the end of the next ending
Performance Period and based on the performance objectives, if any, that
were imposed having been met, or
|
|
|
(C)
|
if
at the time of retirement the Employee is less than 65 years old and his
retirement occurs after 24 months have elapsed since the grant of the
Performance Shares, the Performance Shares shall be cancelled and the
Employee shall become entitled to receive a cash payment in respect of
two-ninths of the Performance Shares he would have received had he been in
continuous employment with the Company through the end of the next ending
Performance Period and based on the performance objectives, if
any, that were imposed having been
met.
|
|
|
(e)
|
If
within 24 months after a Change in Control of the Company as defined in
subparagraph 8(a) and prior to the end of an Award
Period:
|
|
|
(i)
|
there
is a Termination Without Cause, as defined in paragraph 9, of the
employment of a participant;
|
|
|
(ii)
|
there
is a Constructive Termination, as defined in paragraph 10, of the
employment of a participant; or
|
|
|
(iii)
|
there
occurs an Adverse Change in the Plan, as defined in paragraph 11, in
respect of a participant, then:
|
|
|
(A)
|
the
participant shall receive the Maximum Value
of:
|
|
|
(1)
|
that
number of Performance Shares which is in the same proportion to the total
number of Performance Shares awarded to the participant under such Award
as
|
|
|
●
|
the
number of full months which have elapsed since the first day of the
Award Period to the end of the first month in which occurs one
of the events described in clauses (i), (ii) or (iii) of subparagraph 7(d)
is to
|
|
|
●
|
the
total number of months in the Award Period,
less
|
|
|
(2)
|
the
number of Performance Shares awarded to the participant under the Award in
respect of which payment has already been made to the participant,
and
|
|
|
(B)
|
if
the number of Performance Shares determined pursuant to subclause (1) of
clause (A) is less than the number of Performance Shares subject to the
particular Award, the participant shall receive the Actual Value of the
remaining Performance Shares. The Actual Value of the remaining
Performance Shares shall be determined as
follows:
|
|
|
(1)
|
if
the Board shall have determined, prior to the Change in Control and based
on the most recent performance status reports, that the performance
objectives for the particular Award were being met at the date of the
determination, the Actual Value of the remaining Performance Shares
subject to the particular Award shall be equal to their Maximum Value,
and
|
|
|
(2)
|
if
the determination of the Board was that the performance objectives for the
particular Award were not being met at the date of the determination, the
Actual Value of the remaining Performance Shares subject to the particular
Award shall be such amount as shall have been determined by the Board as
provided above in this subparagraph 5(e), but in no event shall Actual
Value be less than fifty percent (50%) of Maximum
Value. Payment of any amount in respect of Performance Shares
as described above in this subparagraph 5(e) shall be made as promptly as
possible after the occurrence of one of the events described in clauses
7(e)(i) through 5(e)(iii). Notwithstanding anything herein to
the contrary, if, following a Change in Control of the Company as defined
in subparagraph 8(a), a participant’s employment remains continuous
through the end of a performance period, then the participant shall be
paid with respect to those Performance Shares for which he would have been
paid had there not been a Change in Control and the Actual Value of those
Shares shall be determined in accordance with subparagraph
5(f).
|
|
|
(f)
|
Except
as otherwise provided in subparagraph 5(e), as soon as practicable after
the end of the performance period or such earlier date as the Committee in
its sole discretion may designate, the Committee shall determine whether
the conditions of subparagraphs 5(b) and/or 5(d) hereof have been met and,
if so, shall certify such fact to the Board of Directors and shall
ascertain the Actual Value of the Performance Shares. If the
Performance Shares:
|
|
|
(i)
|
the
Committee shall cause an amount equal to the Actual Value of the
Performance Shares earned by the participant to be paid to him or his
beneficiary; or
|
|
|
(g)
|
Payment
of any amount in respect of the Performance Shares shall be made by the
Company as promptly as practicable or shall be deferred to such other time
or times as the Committee shall determine, and may be made in cash, in
Shares, or partly in cash and partly in Shares as determined by the
Committee. Such deferred payments may be made by undertaking to
pay cash in the future, together with such additional amounts as may
accrue thereon until the date or dates of payment, as determined by the
Committee in its discretion.
|
|
5.
|
DISABILITY
|
For the
purposes of this Plan, a participant shall be deemed to be disabled if the
Committee shall determine that the physical or mental condition of the
participant is such as would entitle him to payment of monthly disability
benefits under any disability plan of the Company or a subsidiary in which he is
a participant.
|
6.
|
RELATED
EMPLOYMENT
|
For the
purposes of this Plan, Related Employment shall mean the employment of an
individual by an employer which is neither the Company nor a subsidiary
provided: (i) such employment is undertaken by the individual and continued at
the request of the Company or a subsidiary; (ii) immediately prior to
undertaking such employment, the individual was an officer or employee of the
Company or a subsidiary, or was engaged in Related Employment as herein defined;
and (iii) such employment is recognized by the Committee, in its sole
discretion, as Related Employment for the purposes of this paragraph
7. The death or disability of an individual during a period of
Related Employment as herein defined shall be treated, for purposes of this
Plan, as if the death or onset of disability had occurred while the individual
was an officer or employee of the Company.
|
7.
|
CHANGE
IN CONTROL
|
|
|
(a)
|
For
purposes of this Plan, a “Change in Control of the Company” within the
meaning of this subparagraph 8(a) shall occur
if:
|
|
|
(i)
|
Any
person or group (within the meaning of Section 13(d) and 14(d)(2) of the
Exchange Act), other than Haverford (Bermuda) Limited, the Bank of
Butterfield or one of its wholly owned subsidiaries or the Company,
becomes the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of fifty percent (50%) or more of the Company’s then
outstanding Shares;
|
|
|
(ii)
|
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 stock of a subsidiary of the
Company). A Change in Control of the Company within the meaning
of this subparagraph 8(a) also may constitute an Unfriendly Change in
Control of the Company within the meaning of this subparagraph
8(b).
|
|
|
(b)
|
A
Change in Control of the Company shall be deemed an “Unfriendly Change in
Control of the Company” if:
|
|
|
(i)
|
any
person or group (within the meaning of Section 13(d) and 14(d)(2) of the
Exchange Act), other the Company, becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of fifty percent (50%) or
more of the Company’s then outstanding Shares through a transaction that
is opposed by the Company’s Chairman and the Company’s Chief Executive
Officer, and
|
|
|
(ii)
|
a
majority of the Company’s Continuing Directors, as defined in subparagraph
8(c), by resolution adopted within 30 days following the date the Company
becomes aware that subparagraph 8(b)(i) has been satisfied, determines
that a Change in Control has
occurred.
|
|
|
(c)
|
For
the purposes of this Plan, “Continuing Director” shall mean a member of
the Board (A) who is not an employee of the Company or its subsidiaries or
of a holder of, or an employee or an affiliate of an entity or group that
holds, thirty-five percent (35%) or more of the Company’s Shares and (B)
who either was a member of the Board on January 1, 2004, or who
subsequently became a director of the Company and whose election, or
nomination for election, by the Company’s shareholders was approved by a
vote of a majority of the Continuing Directors then on the Board (which
term, for purposes of this definition, shall mean the whole Board and not
any committee thereof). Any action, approval of which shall
require the approval of a majority of the Continuing Directors, may be
authorized by one Continuing Director, if he is the only Continuing
Director on the Board, but no such action may be taken if there are not
Continuing Directors on the Board.
|
|
8.
|
TERMINATION
WITHOUT CAUSE
|
For
purposes of this Plan, “Termination Without Cause” shall mean a termination of
the participant’s employment with the Company or a subsidiary by the Company or
the subsidiary other than (i) for disability as described in paragraph 6 or (ii)
for Cause.” “Cause” shall mean (a) an act or omission by the
participant that constitutes a felony or any crime involving moral turpitude; or
(b) willful gross negligence or willful gross misconduct by the participant in
connection with his employment by the Company or by a subsidiary which causes,
or is likely to cause, material loss or damage to the Company. Notwithstanding
anything herein to the contrary, if the participant’s employment with the
Company or one of its subsidiaries shall terminate due to a Change in Control of
the Company as described in sub paragraph 8(a)(iii), where the purchaser, as
described in such subsection, formally assumes the Company’s obligations under
this Plan or places the participant in a similar or like plan with no diminution
of the value of the awards, such termination shall not be deemed to be a
“Termination Without Cause.”
|
9.
|
CONSTRUCTIVE
TERMINATION
|
“Constructive
Termination” shall mean a termination of employment with the Company or a
subsidiary at the initiative of the participant that the participant declares by
prior written notice delivered to the Secretary of the Company to be a
Constructive Termination by the Company or a subsidiary and which 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. Notwithstanding anything herein
to the contrary, Constructive Termination shall not occur within the meaning of
this paragraph 10 until and unless 30 days have elapsed from the date the
Company receives such written notice without the Company curing or causing to be
cured the circumstance or circumstances described in this paragraph 10 on the
basis of which the declaration of Constructive Termination is
given.
|
10.
|
ADVERSE
CHANGE IN THE PLAN
|
An
“Adverse Change in the Plan” shall mean
|
|
(a)
|
termination
of the Plan pursuant to subparagraph
19(a);
|
|
|
(b)
|
amendment
of the Plan pursuant to paragraph 18 that materially diminishes the value
of Awards that may be granted under the Plan, either to individual
participants or in the aggregate, unless there is substituted concurrently
authority to grant long-term incentive awards of comparable value to
individual participants in the Plan or in the aggregate, as the case may
be; or,
|
|
|
(c)
|
in
respect of any holder of an Award a material diminution in his rights held
under such Award (except as may occur under the terms of the Award as
originally granted) unless there is substituted concurrently a long-term
incentive award with a value at least comparable to the loss in value
attributable to such diminution in
rights.
|
|
11.
|
DILUTION
AND OTHER ADJUSTMENTS
|
In the
event of any change in the Outstanding Shares of the Company by reason of any
stock split, stock dividend, recapitalization, merger, consolidation,
reorganization, combination or exchange of Shares or other similar event, and if
the Committee shall determine, in its sole discretion, that such change
equitably requires an adjustment in the number or kind of Shares that may be
issued under the Plan pursuant to subparagraph 4(b), in the number or kind of
Shares awarded subject to the number of Maximum Value or Actual Value of
Performance Shares which have been awarded to any participant, or in any measure
of performance, then such adjustment shall be made by the Committee and shall be
conclusive and binding for all purposes of the Plan.
|
12.
|
DESIGNATION
OF BENEFICIARY BY PARTICIPANT
|
A
participant may name a beneficiary to receive any payment to which he may be
entitled in respect of Performance Shares under the Plan in the event of his
death, in writing to the Committee. A participant may change his
beneficiary from time to time in the same manner. If no designated
beneficiary is living on the date on which any amount becomes payable to a
participant’s executors or administrators, the term “beneficiary” as used in the
Plan shall include such person or persons.
|
13.
|
MISCELLANEOUS
PROVISIONS
|
|
|
(a)
|
No
employee or other person shall have any claim or right to be granted an
Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving an employee any right to be
retained in the employ of the Company or any
subsidiary.
|
|
|
(b)
|
A
participant’s rights and interest under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of a participant’s death), including but
not limited to, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner and no such right or interest of any
participant in the Plan shall be subject to any obligation or liability or
such participant.
|
|
|
(c)
|
No
Shares shall be issued hereunder unless counsel for the Company shall be
satisfied that such issuance will be in compliance with applicable
law.
|
|
|
(d)
|
The
Company and its subsidiaries shall have the right to deduct from any
payment made under the Plan any taxes required by law to be withheld with
respect to such payment. It shall be a condition to the
obligation of the Company to issue Shares upon payment of a Performance
Share that the participant pay to the Company, upon its demand, such
amount as may be required by the Company for the purpose of satisfying any
liability to withhold taxes. If the amount requested is not
paid, the Company may refuse to issue
Shares.
|
|
|
(e)
|
The
expenses of the Plan shall be borne by the Company. However, if
an Award is made to an employee of a
subsidiary:
|
|
|
(i)
|
if
such Award results in payment of cash to the participant, such subsidiary
shall pay to the Company an amount equal to such cash payment;
and
|
|
|
(ii)
|
if
the Award results in the issuance to the participant of Shares, such
subsidiary shall pay to the Company an amount equal to fair market value
thereof, as determined by the Committee, on the date such Shares are
issued (or, in the case of issuance of Restricted Stock or of Shares
subject to transfer and forfeiture conditions, equal to the fair market
value thereof on the date on which such Shares are no longer subject to
applicable restriction), minus the amount, if any received by the Company
in exchange for such Shares.
|
|
|
(f)
|
The
Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under the
Plan.
|
|
|
(g)
|
By
accepting any Award or other benefit under the Plan, each participant and
each person claiming under or through him shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board or the
Committee.
|
|
14.
|
AMENDMENT
|
The Plan
may be amended at any time and from time to time by the Board, but no amendment
which increases the aggregate number of Shares which may be issued pursuant to
the Plan or the class of employees eligible to participate shall be effective
unless and until the same is approved by the shareholders of the
Company. No amendment of the Plan shall adversely affect any right of
any participant with respect to any Award previously granted without such
participant’s written consent.
|
15.
|
TERMINATION
|
This Plan
shall terminate upon the earlier of the following dates or events to
occur:
|
|
(a)
|
the
adoption of a resolution of the Board terminating the Plan;
or
|
|
|
(b)
|
ten
years from the date the Plan is initially or subsequently approved and
adopted by the shareholders of the Company in accordance with paragraph 19
hereof.
|
No
termination of the Plan shall alter or impair any of the rights or obligations
of any person, without his consent, under any Award previously granted under the
Plan.
|
16.
|
SHAREHOLDER
ADOPTION
|
The Plan
shall be submitted to the shareholders of the Company for their approval or
adoption. The Plan shall not be effective and no Award shall be made
hereunder unless and until the Plan has been so approved and adopted by the
shareholders in the manner required by the laws of the Cayman
Islands.
|
17.
|
AMENDMENT
|
The Plan
may be amended at any time and from time to time by the Board, but no amendment
which increases the aggregate number of Shares which may be issued pursuant to
the Plan or the class of employees eligible to participate shall be effective
unless and until the same is approved by the shareholders of the
Company. No amendment of the Plan shall adversely affect any right of
any participant with respect to any Award previously granted without such
participant’s written consent.
|
18.
|
TERMINATION
|
This Plan
shall terminate upon the earlier of the following dates or events to
occur:
|
|
(a)
|
the
adoption of a resolution of the Board terminating the Plan;
or
|
|
|
(b)
|
ten
years from the date the Plan is initially or subsequently approved and
adopted by the shareholders of the Company in accordance with paragraph 19
hereof.
|
No
termination of the Plan shall alter or impair any of the rights or obligations
of any person, without his consent, under any Award previously granted under the
Plan.
Island
Heritage Holdings, Ltd. (“IHH”), a subsidiary of the Company, proposes to adopt
a Stock Appreciation Rights Plan (the “IHH SAR Plan”). The purpose of
the IHH SAR Plan is to advance the interests of the Island Heritage and its
shareholders by providing stock appreciation rights as incentive compensation,
based on the appreciation in value of the fully diluted book value per share of
the IHH, to certain key Employees of the IHH and its subsidiaries, as well as,
at the discretion of the Compensation Committee of IHH, employees of companies
that provide operational support or other services to IHH. The maximum number of
common shares of the Company under the IHH SAR Plan is 150,000. The
approval of the shareholders of Flagstone Reinsurance Holdings Limited is
necessary.
|
NEW PLAN BENEFITS
Island Heritage Stock Appreciation Rights
Plan
|
||
|
Name
and Position(1)
|
Dollar Value ($)
|
Number of Units
|
|
Mark
Byrne, Executive Chairman
|
—
|
—
|
|
David
Brown, Chief Executive Officer
|
—
|
—
|
|
Patrick
Boisvert, Chief Financial Officer
|
—
|
—
|
|
David
Flitman, Chief Actuary
|
—
|
—
|
|
Gary
Prestia, Chief Underwriting Officer – Flagstone Réassurance Suisse SA –
Bermuda Branch
|
—
|
—
|
|
James
O’Shaughnessy – Chief Financial Officer (ex)
|
—
|
—
|
|
Executive
Group
|
—
|
—
|
|
Non-Executive
Director Group
|
—
|
—
|
|
Non-Executive
Officer Employee Group
|
—
|
—
|
|
(1)
|
The
named executive officers, executive officers, non-executive directors and
non-executive officer employees of the Company do not participate in the
IHH SAR Plan.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE THE ISLAND HERITAGE HOLDINGS, LTD. STOCK
APPRECIATION RIGHTS PLAN.
ISLAND
HERITAGE HOLDINGS, LTD.
STOCK
APPRECIATION RIGHTS PLAN
May
14, 2009
Island
Heritage Holdings, Ltd.
Stock
Appreciation Rights Plan
PURPOSE
The
purpose of this Plan is to advance the interests of the Company and its
shareholders by providing stock appreciation rights as incentive compensation,
based on the appreciation in value of the fully diluted book value per share of
the Company, to certain key Employees of the Company and its subsidiaries, as
well as, at the discretion of the
Compensation Committee, employees of companies that provide operational support
or other services to the Company.
DEFINITIONS
|
2.1
|
“Adverse Change in the Plan” is
defined in section 12.
|
|
|
2.2
|
“Award” means a Stock
Appreciation Right, which may be granted under the
Plan.
|
|
|
2.3
|
“Award Certificate” means the
certificate evidencing the Award and which shall provide the terms and
conditions in respect of such Award.
|
|
|
2.2
|
“Board” means the Board of
Directors of the Company.
|
|
|
2.3
|
“Change in Control” is defined in
section 9.
|
|
|
2.4
|
“Common Shares” shall mean common
shares of Flagstone.
|
|
|
2.5
|
“Company” means Island Heritage
Holdings, Ltd.
|
|
|
2.6
|
“Compensation Committee” means
the Compensation Committee of the Board.
|
|
|
2.7
|
“Constructive Termination” is
defined in section 11.
|
|
|
2.8
|
“Employee” means any person, including
officers, employed by the Company or any Subsidiary of the Company. Such
term shall also include directors of the Company or any Subsidiary of the
Company. Such term shall also include, at the discretion of the
Compensation Committee, employees of companies that provide operational
support or other services to the Company. A person shall not
cease to be an Employee in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or
between the Company, any Subsidiary or any
successor. Notwithstanding anything else contained herein, Mark
Byrne shall not be considered an Employee for purposes of the
Plan.
|
|
|
2.9
|
“Exchange
Act” means the U.S.
Securities Exchange Act of 1934, as amended.
|
|
|
2.10
|
“Flagstone” means Flagstone
Reinsurance Holdings Limited, a Bermuda exempted company listed on the New
York Stock Exchange under trading symbol [FSR].
|
|
|
2.11
|
“Hostile
Takeover Termination”
is defined in section 13.
|
|
|
2.12
|
“Inter Vivos Designee” means any
person or body of persons corporate or unincorporate, association, trust,
partnership or similar entity or arrangement designated by an Employee to
hold such Awards granted to the Employee under the Plan and receive
payments under the Plan during the life of the Employee.
|
|
|
2.13
|
“Maximum
Award” shall mean the
maximum number Payment that an Employee would be entitled to receive if
all of the performance goals set forth in a particular Award Certificate
were satisfied over the Performance Period(s) set forth in such Award
Certificate.
|
|
2.14 |
“Payment” means the consideration received with respect to a vested Award (or portion thereof) in accordance with section 6.6 herein. | |
|
2.15
|
“Performance Period(s)” means the period(s) during which
an employee must perform pursuant to the grant of an Award; provided,
however, that any such period must end on December 31 of the relevant
fiscal year.
|
|
|
2.16
|
“Plan” means this Island Heritage
Holdings, Ltd. Stock Appreciation Rights Plan.
|
|
|
2.17
|
“SEC” means the US Securities and
Exchange Commission.
|
|
|
2.18
|
“Subsidiary”, as used herein, has
the meaning assigned to the term “subsidiary company” in the Companies
Act, 1981 of Bermuda.
|
|
|
2.19
|
“Termination Without Cause” is
defined in section 10.
|
|
|
3
|
ADMINISTRATION
OF THE PLAN
|
|
|
3.1
|
Administration.
The Plan shall be administered by the Compensation
Committee. No member of the Compensation Committee shall
be an Employee of the Company eligible to receive Awards under the Plan or
shall have been eligible within one year prior to his appointment to
receive Awards under the Plan or to receive awards under any other plan of
the Company or any of its subsidiaries under which participants are
entitled to acquire shares, share options or stock appreciation rights of
the Company or any of its subsidiaries.
|
|
|
3.2
|
Powers
of the Administrator. The Compensation Committee shall
have exclusive authority to select the Employees to be granted Awards, to
determine the number of Awards to be granted and the terms (including the
performance goals and Performance Period(s)) of such Awards and to
prescribe the form of the Award Certificates or other instruments
embodying such Awards. The Compensation Committee shall be
authorized to interpret the Plan and the Awards granted under the Plan, to
establish, amend and rescind any rules and regulations relating to the
Plan and to make any other determinations which it believes necessary or
advisable for the administration of the Plan. The Compensation
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Certificate in the manner and to
the extent the Compensation Committee deems desirable to carry it into
effect. Any decision of the Compensation Committee in the
administration of the Plan, as described herein, shall be final and
conclusive. The Compensation Committee may act only by a
majority of its members in office, except that the members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Compensation
Committee. No member of the Company shall be liable for
anything done, or for any failure to act, by him or by any other member of
the Compensation Committee in connection with the Plan, except for his own
willful misconduct or as expressly provided by statute.
|
|
|
3.3
|
Eligibility. Awards
may be granted only to Employees, excluding Employees whose employment
contracts specify that they are not entitled to receive
Awards.
|
|
|
4
|
AWARDS
|
|
|
4.1
|
Type
of Grants Under the Plan. Grants under the Plan shall be limited to
Awards.
|
|
|
4.2
|
Maximum
Number Awards and Maximum Amount of Cash or Common Shares that may be
Issued Pursuant to Awards Under the Plan.
|
|
|
The
maximum aggregate number of Awards that may be granted under the Plan
shall not exceed 100,000Awards. The maximum number of Awards
that may be granted under the Plan to any one Employee shall be half the
maximum number of Awards that may be granted under the Plan to all
Employees. The aggregate Maximum Awards that shall be issuable
under the Plan shall not exceed the cash equivalent of 150,000 Common
Shares unless and until the shareholders of Flagstone approve the Plan
(pursuant to section 6.7) and the Plan is filed with the SEC, in which
case, and in addition to the foregoing, upon such approval and filing, the
Maximum Awards shall not exceed 150,000 Common Shares. If an Award is forfeited or
otherwise cancelled, or if an Employee does not achieve the Maximum Award
pursuant to an Award, the Awards shall become available for future grant
under the Plan (unless the Plan has terminated).
|
||
|
5
|
RIGHTS
WITH RESPECT TO AWARDS
|
|||
|
An
Employee to whom Awards are granted (and any person succeeding to such
employee’s rights pursuant to the Plan) shall have no rights as a
shareholder by virtue of having been granted an Award or redeeming such
Award. Except as provided in section 14, no adjustment shall be
made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) the
record date for which is prior to the date such share certificate is
issued.
|
||||
|
6
|
Awards
|
|||
|
The
grant of Awards to an Employee will entitle him to receive, without
payment to the Company, all or a portion of the Maximum Award, as
determined by the Compensation Committee, if the terms and conditions
specified herein and in the Award Certificate are
satisfied. Payment in respect of an Award shall be made as
provided in section 6.6. Each grant of Awards shall be subject
to the following terms and conditions:
|
||||
|
6.1
|
The
Compensation Committee shall determine the number of Awards to be granted
to each Employee. Awards may be issued in different classes or
series having different terms and conditions.
|
|||
|
6.2
|
Subject
to section 6.6, at the end of the Performance Period(s) specified in the
Award Certificate, an Employee shall be entitled to receive the Maximum
Award if the performance objectives set forth in the grant of such Award
Certificate are attained in full. If the performance objectives
specified in the Award Certificate are attained in part but not in full,
the Compensation Committee, in its sole discretion, shall determine the
percentage of the Maximum Award, if any, to which the Employee is entitled
under Award Certificate.
|
|||
|
6.3
|
Awards
shall be cancelled if the Employee’s continuous employment with the
Company or any of its subsidiaries or with any company that provides operational
support or other services to the Company shall terminate for any
reason prior to the end of the Performance Period(s), unless such
termination results in Related Employment (as defined in section 8), and
except as otherwise specified in this section 6.3 or in sections 6.4 or
6.5. Notwithstanding the foregoing and without regard to
section 6.2:
|
|||
|
6.3.1
|
if
an Employee shall, while employed by the Company or any of its
subsidiaries or by any company that provides operational
support or other services to the Company or while engaged in
Related Employment, die or become disabled (within the meaning of section
7) prior to the end of the Performance Period(s), the Awards granted to
such Employee shall be cancelled at the end of the next ending Performance
Period and he, or his legal representative, as the case may be, shall,
subject to section 6.7, become entitled to receive a cash payment
(determined in accordance with subsection 6.6) in respect of the Common
Shares he would have been entitled to receive had he been in continuous
employment with the Company through the end of such Performance Period,
had the performance objectives, if any, that were imposed been achieved
and the conditions of section 6.7 had been satisfied; or
|
|||
|
6.3.2
|
if
an Employee shall retire under an approved retirement program of the
Company or a Subsidiary (or such other plan as may be approved by the
Compensation Committee, in its sole discretion, for this purpose) prior to
the end of the Performance Period(s), then:
|
|||
|
6.3.2.1
|
if
at the time of his retirement the Employee is 65 years old or older, the
Awards shall be cancelled at the end of the next ending Performance
Period, and, subject to section 6.7, he shall become entitled to receive a
cash payment (determined in accordance with section 6.6) in respect of the
Common Shares he would have been entitled to receive had he been in
continuous employment with the Company through the end of the Performance
Period, had the performance objectives, if any, that were imposed been
achieved and the conditions of section 6.7 had been
satisfied,
|
|||
|
6.3.2.2
|
if
at the time of his retirement the Employee is less than 65 years old and
his retirement occurs before 24 months have elapsed since the grant of the
Awards, the Awards shall be cancelled and the Employee shall, subject to
section 6.7, become entitled to receive a cash payment (determined in
accordance with section 6.6) in respect one-ninth of the Common Shares he
would have been entitled to receive had he been in continuous employment
with the Company through the end of the next ending Performance Period,
had the performance objectives, if any, that were imposed been achieved
and the conditions of section 6.7 had been satisfied,
or
|
|||
|
6.3.2.3
|
if
at the time of his retirement the Employee is less than 65 years old and
his retirement occurs after 24 months or more have elapsed since the grant
of the Awards, the Awards shall be cancelled and the Employee shall,
subject to section 6.7, become entitled to receive a cash payment
(determined in accordance with section 6.6) in respect two-ninths of the
Common Shares he would have been entitled to receive had he been in
continuous employment with the Company through the end of the next ending
Performance Period, had the performance objectives, if any, that were
imposed been achieved and the conditions of section 6.7 had been
satisfied.
|
|||||
|
6.4
|
If
within 24 months after a Change in Control of the Company as defined in
section 9 and prior to the end of a Performance Period:
|
|||||
|
6.4.1
|
there
is a Termination Without Cause, as defined in section 10, of the
employment of an Employee;
|
|||||
|
6.4.2
|
there
is a Constructive Termination, as defined in section 11, of the employment
of an Employee; or
|
|||||
|
6.4.3
|
there
occurs an Adverse Change in the Plan, as defined in section 12, in respect
of an Employee, then:
|
|||||
|
6.4.3.1
|
the
Employee shall become entitled to receive:
|
|||||
|
6.4.3.1.1
|
The
Maximum Award multiplied by a fraction the numerator of which is the
number of full months which have elapsed since the date of the Award
Certificate to the end of the first month in which occurs one of the
events described in sections 6.4.1, 6.4.2 or 6.4.3 and the denominator of
which is the total number of months in the Performance Period(s),
plus
|
|||||
|
6.4.3.1.2
|
If
the number of Common Shares or, subject to section 6.7, the cash
equivalent thereof, determined pursuant to 6.4.3.1.1 above is less than
the Maximum Award (such difference being referred to herein as the
“Deficiency”), the Employee shall receive Common Shares or, subject to
section 6.7, the cash equivalent thereof, equal to all or a portion of
such Deficiency as follows:
|
|||||
|
6.4.3.1.2.1
|
if
the Compensation Committee shall have determined, prior to the Change in
Control and based on the most recent performance status reports, that the
performance objectives for the particular grant were being met at the date
of the determination, the Employee shall receive Common Shares or, subject
to section 6.7, the cash equivalent thereof, equal to the full Deficiency,
and
|
|||||
|
6.4.3.1.2.2
|
if
the determination of the Compensation Committee was that the performance
objectives for the particular grant were not being met at the date of such
determination, the Compensation Committee shall at the time of such
determination have also made a determination as to the percentage of the
Deficiency as to which the Employee is entitled to receive Common Shares
or, subject to section 6.7, the cash equivalent thereof, but in no event
shall such percentage be less than fifty percent (50%).
|
|||||
|
6.4.3.2
|
Payment
of any amount in respect of Awards as described above in this section 6.4
shall be made as promptly as possible after the occurrence of one of the
events described in sections 6.4.1 through 6.4.3.
|
|||||
|
6.5 |
Notwithstanding
any other provision in the Plan, in the event of a Hostile Takeover
Termination, the Employee shall immediately become entitled to the Maximum
Award with respect to all Awards granted to such Employee. Such
Maximum Award shall be payable, in the sole discretion of the Compensation
Committee, either in cash based on the market price per Common Share as of
the close of trading on the date of a Hostile Takeover Termination or,
subject to section 6.7, by issuance of Common Shares.
|
|
|
6.6
|
Payment
of any amount due to an Employee in respect of the Awards shall be made by
the Company as promptly as practicable or shall be deferred to such other
time or times as the Compensation Committee shall determine, and, subject
to section 6.7, may be made in cash, by issuance of Common Shares, or
partly in cash and partly by issuance of Common Shares as determined by
the Compensation Committee. The Awards will normally be settled
by delivery of Common Shares, however, until such time as the Plan is
approved by the shareholders of Flagstone and subsequently filed with the
United States Securities and Exchange Commission and New York Stock
Exchange, the Awards will only be settled by delivery of
cash. The amount of cash, if any, to be paid in lieu of
issuance of Common Shares shall be determined based on the market price
per Common Share (or net book value, if no Common Shares are not freely
tradable on an exchange) as of the close of trading on the date on which
an Employee becomes entitled to payment, whether or not such payment is
deferred. The spot exchange rate will be used on the day, and
the payment will be made US dollars (USD). Such deferred payments may be
made by undertaking to pay cash in the future, together with such
additional amounts as may accrue thereon until the date or dates of
payment, as determined by the Compensation Committee in its sole
discretion. In the case of issuance of Common Shares to an Employee, such
Employee’s services rendered to the Company shall be deemed to constitute
full payment to the Company of the par value of such Common
Shares.
|
|
|
7
|
DISABILITY
|
|
|
For
the purposes of this Plan, an Employee shall be deemed to be disabled if
the Compensation Committee shall determine that the physical or mental
condition of the Employee is such as would entitle him to payment of
monthly disability benefits under any disability plan of the Company or a
Subsidiary in which he is a participant.
|
||
|
8
|
RELATED
EMPLOYMENT
|
|
|
For
the purposes of this Plan, Related Employment shall mean the employment of
an Employee by an employer which is neither the Company nor a Subsidiary
provided: (i) such employment is undertaken by the individual and
continued at the request of the Company or a Subsidiary; (ii) immediately
prior to undertaking such employment, the individual was an officer or
employee of the Company or a Subsidiary, or was engaged in Related
Employment as herein defined; and (iii) such employment is recognized by
the Compensation Committee, in its sole discretion, as Related Employment
for the purposes of this section 8. The death or disability of
an individual during a period of Related Employment as herein defined
shall be treated, for purposes of this Plan, as if the death or onset of
disability had occurred while the individual was an officer or employee of
the Company.
|
||
|
9
|
CHANGE
IN CONTROL
|
|
|
For
purposes of this Plan, a “Change in Control of the Company” shall occur
if:
|
||
|
9.1
|
Any
person or group (within the meaning of Section 13(d) and 14(d)(2) of the
Exchange Act), excluding Flagstone, becomes the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of fifty percent (50%)
or more of the Company’s then outstanding shares; or
|
|
|
9.2
|
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).
|
|
|
10
|
TERMINATION
WITHOUT CAUSE
|
|
|
For
purposes of this Plan, “Termination Without Cause” shall mean a
termination of the Employee’s employment with the Company or a Subsidiary
by the Company or the Subsidiary other than for (i) disability as
described in section 7 or (ii) Cause. “Cause” shall mean (a) a
material breach by the Employee of any contract between the Employee and
the Company or a Subsidiary; (b) the willful and continued failure or
refusal by the Employee to perform any duties reasonably required by the
Company or a Subsidiary, after notification by the Company or the
Subsidiary of such failure or refusal, and failing to correct such
behaviour within 20 days of such notification; (c) commission by the
Employee of a criminal offence or other offence of moral turpitude; (d)
perpetration by the Employee of a dishonest act or common law fraud
against the Company or a Subsidiary or a client of either; or (e) the
Employee willfully engaging in misconduct which is materially injurious to
the Company or a Subsidiary, including without limitation, the disclosure
of any trade secrets, financial models, or computer software to persons
outside the Company or a Subsidiary without the consent of the Company or
a Subsidiary. Notwithstanding anything herein to the contrary,
if the Employee’s employment with the Company or a Subsidiary shall
terminate due to a Change in Control of the Company as described in
section 9, where the purchaser, as described in such section, formally
assumes the Company’s obligations under this Plan or places the Employee
in a similar or like plan with no diminution of the value of the grants,
such termination shall not be deemed to be a “Termination Without
Cause.”
|
||
|
11
|
CONSTRUCTIVE
TERMINATION
|
|
|
For
purposes of this plan, a “Constructive Termination” shall mean a
termination of employment with the Company or a Subsidiary at the
initiative of the Employee that the Employee declares by prior written
notice delivered to the Secretary of the Company to be a Constructive
Termination by the Company or a Subsidiary and which 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 Employee 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. Notwithstanding anything herein to the contrary,
Constructive Termination shall not occur within the meaning of this
section 11 until and unless 30 days have elapsed from the date the Company
receives such written notice without the Company curing or causing to be
cured the circumstance or circumstances described in this section 11 on
the basis of which the declaration of Constructive Termination is
given.
|
||
|
12
|
ADVERSE
CHANGE IN THE PLAN
|
|
|
For
purposes of this plan, an “Adverse Change in the Plan” shall
mean:
|
||
|
12.1
|
termination
of the Plan pursuant to section 18.1;
|
|
|
12.2
|
amendment
of the Plan pursuant to section 17 that materially diminishes the value of
Awards, either to individual Employees or in the aggregate, unless there
is substituted concurrently authority to grant Awards of comparable value
to individual Employees in the Plan or in the aggregate, as the case may
be; or
|
|
|
12.3
|
in
respect of any holder of an Award a material diminution in his rights held
under such Award (except as may occur under the terms of the Award
Certificate as originally granted) unless there is substituted
concurrently an Award with a value at least comparable to the loss in
value attributable to such diminution in rights.
|
|
|
13
|
HOSTILE
TAKEOVER TERMINATION
|
|
|
For
purposes of this plan, a “Hostile Takeover Termination” shall mean an
Adverse Change in the Plan as described in section 12 or any termination
(including, but not limited to, a Termination Without Cause as described
in section 10 or a Constructive Termination as described in section 11) of
an Employee’s employment with the Company or a Subsidiary of the Company
at any time following a Change in Control of the Company, as described in
section 9, that was opposed by the Board members nominated by
Flagstone.
|
||
|
14
|
DILUTION
AND OTHER ADJUSTMENTS
|
|
|
14.1
|
In
the event of any change in the issued and outstanding Common Shares of
Flagstone by reason of any share split, share dividend, recapitalization,
merger, consolidation, reorganization, amalgamation, combination or
exchange of Common Shares or other similar event, and if the Compensation
Committee shall determine, in its sole discretion, that such change
equitably requires an adjustment in the number or kind of Common Shares
that may be issued pursuant to Awards under the Plan pursuant to section 6
or in any measure of performance, then such adjustment shall be made by
the Compensation Committee and shall be conclusive and binding for all
purposes of the Plan.
|
|
|
14.2
|
Upon
the declaration by the Board of Directors of Flagstone of a dividend in
specie or in kind in favor of the holders of Common Shares in the Company,
the Compensation Committee shall determine, in its sole discretion, if
such dividend equitably requires an adjustment in the number or kind of
Awards that may be issued to an Employee under the Plan in lieu of a
dividend payment.
|
|
DESIGNATION
OF BENEFICIARY/INTER VIVOS DESIGNEE BY EMPLOYEE
|
|||
|
15.1
|
An
Employee may name in writing to the Compensation Committee, or such other
person as the Compensation Committee may designate from time to time to
receive such instructions, a beneficiary to receive any payment to which
he may be entitled in respect of Awards under the Plan in the event of his
death. An Employee may change his beneficiary from time to time
in the same manner. If no designated beneficiary is living on
the date on which any amount becomes payable to an Employee’s executors or
administrators, the term “beneficiary” as used in the Plan shall include
such person or persons.
|
||
|
15.2
|
An
Employee may name in writing to the Compensation Committee, or such other
person as the Compensation Committee may designate from time to time such
instructions, one or more Inter Vivos Designees and successor Inter Vivos
Designees who shall be given the rights to all past, present and future
grants or series of Awards or to one or more specific grants or series of
Awards. An Employee may change the designation of any Inter
Vivos Designee in the same manner and such designation shall revoke and
supersede all earlier designations. In the event an Employee
does not notify the Compensation Committee designating one or more Inter
Vivos Designees, or no Inter Vivos Designee survives the Employee, the
Awards and any payment of shares in place of cash shall be given to the
Employee.
|
||
|
16
|
MISCELLANEOUS
PROVISIONS
|
||
|
16.1
|
No
employee or other person shall have any claim or right to receive a grant
of Awards under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving an employee any right to be
retained in the employ of the Company or any Subsidiary.
|
||
|
16.2
|
An
Employee’s rights and interest under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of an Employee’s death), including but not
limited to, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner and no such right or interest of any Employee in
the Plan shall be subject to any obligation or liability or such
Employee.
|
||
|
16.3
|
No
Common Shares shall be issued hereunder unless counsel for Flagstone shall
be satisfied that such issuance will be in compliance with applicable
laws.
|
||
|
16.4
|
The
Company and its subsidiaries shall have the right to deduct from any
Payment made under the Plan any taxes required by law to be withheld with
respect to such payment. It shall be a condition to the
obligation of Flagstone to issue Common Shares upon payment of an Award
that the Employee pay to the Flagstone, upon its demand, such amount as
may be required by Flagstone for the purpose of satisfying any liability
to withhold taxes. If the amount requested is not paid,
Flagstone may refuse to issue Common Shares.
|
||
|
16.5
|
The
expenses of the Plan shall be borne by the Company. However, if
a grant of Awards is made to an employee of a Subsidiary:
|
||
|
16.5.1
|
if
such grant results in payment of cash to the Employee, such Subsidiary
shall pay to the Company an amount equal to such cash payment;
and
|
||
|
16.5.2
|
if
the grant results in the issuance to the Employee of Common Shares, such
Subsidiary shall pay to the Company an amount equal to fair market value
thereof, as determined by the Compensation Committee, on the date such
Common Shares are issued.
|
||
|
16.6
|
The
Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure any payment under the Plan.
|
||
|
16.7
|
By
accepting any grant or other benefit under the Plan, each Employee and
each person claiming under or through him shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board or the Compensation
Committee.
|
||
|
16.7
|
By
accepting any grant or other benefit under the Plan, each Employee and
each person claiming under or through him shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board or the Compensation
Committee.
|
||
|
17
|
AMENDMENT
|
|
|
The
Plan may be amended at any time and from time to time by the Board in
accordance with the bye-laws of the Company, but no amendment which
requires an increase in the aggregate number of Common Shares which may be
issued pursuant to the Plan or the class of employees eligible to
participate shall be effective unless and until the same is approved by
the shareholders of Flagstone. For the avoidance of doubt, any
action taken by the Compensation Committee pursuant to section 14 does not
require approval of the shareholders of Flagstone. No amendment
of the Plan shall adversely affect any right of any Employee with respect
to any previous grant without such Employee’s written
consent.
|
||
|
18
|
TERMINATION
|
|
|
This
Plan shall terminate upon the earlier of the following dates or events to
occur:
|
||
|
18.1
|
the
adoption of a resolution of the Board terminating the Plan;
or
|
|
|
18.2
|
ten
years from the date the Plan is initially or subsequently approved and
adopted by the shareholders of the Company in accordance with section 18
hereof.
|
|
|
No
termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any previous grant
under the Plan.
|
||
|
19
|
GOVERNING
LAW
|
|
|
The Plan shall be governed by and
construed and interpreted in accordance with the laws of Cayman
Islands.
|
||
Schedule of
Amendments
|
Section
|
Amendment
|
Approved
|
Document Revision
History
|
Version
|
Date
|
Summary
of Changes
|
Section
|
Approved
by
|
Flagstone
Reinsurance Africa Limited (“Flagstone Africa”), a wholly-owned subsidiary of
the Company, has adopted a Restricted Stock Appreciation Rights Plan (the “RSA
Plan”). The purpose of the RSA Plan is to advance the interests of
Flagstone Africa and its shareholders by providing stock appreciation rights
incentive compensation, based on the appreciation in value of the Common Shares
of Flagstone Reinsurance Holdings Limited. The participants under the
RSA Plan are any employee, officer, or director, of the Flagstone Africa or its
subsidiaries who (1) are eligible for RSU grants under the RSA Plan and (2) to
whom the Compensation Committee decides pursuant to its authority under Section
3.1 of the RSA Plan to grant an RSU award. The approval of the shareholders of
Flagstone Reinsurance Holdings Limited is necessary.
|
PLAN
BENEFITS
Flagstone Reinsurance Africa Stock Appreciation
Rights Plan
|
||
|
Name
and Position(1)
|
Dollar Value ($)
|
Number of Units
|
|
Mark
Byrne, Executive Chairman
|
—
|
—
|
|
David
Brown, Chief Executive Officer
|
—
|
—
|
|
Patrick
Boisvert, Chief Financial Officer
|
—
|
—
|
|
David
Flitman, Chief Actuary
|
—
|
—
|
|
Gary
Prestia, Chief Underwriting Officer – Flagstone Réassurance Suisse SA –
Bermuda Branch
|
—
|
—
|
|
James
O’Shaughnessy – Chief Financial Officer (ex)
|
—
|
—
|
|
Executive
Group
|
—
|
—
|
|
Non-Executive
Director Group
|
—
|
—
|
|
Non-Executive
Officer Employee Group
|
—
|
—
|
|
(1)
|
The
named executive officers, executive officers, non-executive directors and
non-executive officer employees of the Company do not participate in the
RSA Plan.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO
APPROVE THE FLAGSTONE REINSURANCE AFRICA LIMITED RESTRICTED SHARE UNIT PLAN.
APPROVE THE FLAGSTONE REINSURANCE AFRICA LIMITED RESTRICTED SHARE UNIT PLAN.
Flagstone
Reinsurance Africa Limited
Restricted
Stock Appreciation Plan
|
1.
|
Purpose of the
Plan
|
Flagstone
Reinsurance Africa Limited (the “Company”) adopted this Flagstone Reinsurance
Africa Limited Restricted Stock Appreciation Plan (the “Plan”), effective as of
August 12 2008 for the benefit of the Directors, Officers, and Employees of the
Company. The purpose of this Plan is to advance the interests of the
Company and its shareholders by providing stock appreciation rights as incentive
compensation, based on the appreciation in value of the Common Shares of
Flagstone Reinsurance Holdings Limited, to certain key Directors, Officers, and
Employees of the Company and its Subsidiaries.
|
2.
|
Definitions
|
General –
Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meanings specified below unless the context
clearly indicates to the contrary or as provided under Section 7 of the
Plan.
|
|
“Account”
of a Participant means his or her individual account, if any, or the
account of a Director’s employer, as established in accordance with
Section 6.
|
|
|
“Affiliate” means
a company that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the Company
or is a body into which the Company or any of the foregoing parties is
merged or consolidated.
|
|
|
“Beneficiary”
means the person or persons designated by a Participant, on a form
provided by the Plan Administrator, to receive payments under the Plan in
the event of the Participant’s
death.
|
|
|
“Board”
means Board of Directors of the
Company.
|
|
“Cause”
shall mean (a) a material breach by a Participant of any contract between
the Participant and the Company or a Subsidiary; (b) the willful and
continued failure or refusal by the Participant to perform any duties
reasonably required by the Company, Affiliate or a Subsidiary, after
notification by the Company, Affiliate or the Subsidiary of such failure
or refusal, and failure to correct such behavior within 20 days of such
notification; (c) commission by the Participant of a criminal offence or
other offence of moral turpitude; (d) perpetration by the Participant of a
dishonest act or common law fraud against the Company, Affiliate or a
Subsidiary or a client of either; or (e) the Participant willfully
engaging in misconduct which is materially injurious to the Company,
Affiliate or a Subsidiary, including without limitation, the disclosure of
any trade secrets, financial models, or computer software to persons
outside the Company, Affiliate or a Subsidiary without the consent of the
Company, Affiliate or a Subsidiary.
|
|
|
“Compensation
Committee” means the Compensation Committee of the
Board.
|
|
|
“Common
Stock” means common shares of Flagstone.
|
|
|
“Company” means Flagstone Reinsurance Africa
Limited.
|
|
|
“Director”
means a member of the board of directors of the Company or its
Subsidiaries but shall not include any Director, Officer, or Employee of
any Flagstone Overseas Subsidiary.
|
|
|
“Disability”
means a condition by which the Compensation Committee has determined that
the physical or mental condition of the Participant is such as would
entitle him to receive payment of monthly benefits under any disability
plan of the Company or a Subsidiary in which the individual
participates.
|
|
|
“Employee”
means any person, including officers, employed by the Company or any
Subsidiary of the Company. Such term shall also include
Directors. A person shall not cease to be an Employee in the
case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, any Company
Subsidiary or Flagstone Overseas Subsidiary or any
successor. Notwithstanding anything else contained herein, an
employee of any Flagstone Overseas Subsidiary shall not be considered an
Employee for purposes of the Plan.
|
|
|
“Grant
Certificate” means a certificate evidencing the credit of or grant to a
Participant of a Restricted Stock Unit under the Plan (sample attached as
Appendix).
|
|
|
“Flagstone”
means Flagstone Reinsurance Holdings Limited, a Bermuda exempted company
listed on the New York Stock Exchange under trading symbol
FSR.
|
|
|
“Flagstone
Overseas Subsidiary” means any Flagstone Subsidiary other than the Company
and its Subsidiaries.
|
“Management” means management of the
Company.
|
|
“Participant”
means any Employee, Officer, or Director, of the Company or its
Subsidiaries who (1) are eligible for RSU grants under the Plan and (2) to
whom the Compensation Committee decides pursuant to its authority under
Section 3.1 of the Plan to grant an RSU
award.
|
|
“Plan”
means this Flagstone Reinsurance Africa Limited Restricted Stock
Appreciation Rights Plan, as it may be amended from time to
time.
|
|
“Plan
Administrator” means the Compensation Committee, or the person or persons
appointed by the Compensation Committee to serve under Section 4 of the
Plan.
|
|
“Restricted
Stock Unit” (or “RSU”) means a right to receive a payment, in cash or in
actual Common Stock of Flagstone, of the value of one share of Common
Stock of Flagstone, subject to the terms of this Plan and the respective
Grant Certificate.
|
|
| “Subsidiary” means a subsidiary of the Company or Flagstone as the case may be. |
|
3.
|
Awards Subject to the
Plan
|
|
3.1.
|
Under
the Plan, the Compensation Committee, in its sole discretion, may grant
RSUs to Participants. The total RSU grants under the Plan shall
not exceed the value equivalent of 100,000 shares of Common Stock. To the
extent that any RSU granted under the Plan expires, terminates, or is
cancelled, such unissued stock grants shall again be available for future
grant under the Plan (unless the Plan has
terminated).
|
|
3.2.
|
The
RSUs will normally be settled by delivery of Common Stock, but can be
settled to the Participant on distribution in cash, by issuance of shares
of Common Stock, or partly in cash and partly by issuance of shares of
Common Stock as determined by the Compensation Committee in its sole
discretion. However, until such time as the Plan is approved by
the shareholders of Flagstone and subsequently filed with the United
States Securities and Exchange Commission and New York Stock Exchange, the
RSU’s will only be settled by delivery of
cash.
|
|
3.3.
|
The
amount of cash, if any, to be paid in lieu of issuance of shares of Common
Stock under the Plan shall be determined based on the market value per
share of Common Stock (or net book value, if no shares of Common Stock are
not freely tradable on an exchange) as of the date on which a Participant
becomes entitled to payment, whether or not such payment is deferred. The
spot exchange rate will be used on the day, and the payment will be made
in South African Rand (R).
|
|
3.4.
|
The
Company may at any time, in its sole discretion, purchase Common Stock of
Flagstone in the marketplace in an amount equal to the number of RSU
grants to be settled by delivery of Common
Stock.
|
|
4.
|
Administration
|
|
4.1.
|
The
Plan shall be administered by the Compensation Committee, and the
Compensation Committee shall have the sole authority to interpret the
Plan, to establish and revise rules and regulations relating to the Plan
(including this Plan document), and to make any other determinations that
it believes necessary or advisable for the administration of the
Plan. All of the powers and responsibilities of the
Compensation Committee under the Plan may be delegated by the Compensation
Committee, in writing, to any Compensation subcommittee or such other duly
authorized Company personnel, but not to any
Participant.
|
|
5.
|
Participation
|
|
5.1.
|
The
Chief Executive of the Company will recommend, and the Compensation
Committee will approve, the Participants in the
Plan. Participation in the Plan will be limited to Officers,
Employees, and Directors (including Management Directors) of the Company
or its Subsidiaries. Participation in the Plan shall be limited
only to those individuals who are approved by the Compensation Committee
and whose participation in the Plan is evidenced by a Grant Certificate
executed by the Company.
|
|
6.
|
Terms of the Grant or
Credit of RSUs
|
|
6.1.
|
The
Compensation Committee may grant RSUs to a Participant pursuant to the
Plan. Grants of RSUs shall be evidenced by a Grant Certificate
in such form as the Compensation Committee shall from time to time
approve.
|
|
6.2.
|
Upon
a grant of an award of RSUs under the Plan, as applicable, a Participant’s
Account shall be credited with the amount of such
grant.
|
|
6.3.
|
Actual
shares of Flagstone Common Stock or cash (as determined by the Committee),
equal in amount to the number of RSUs that have vested, will be
distributed to the Participant upon the earlier of the following: (a)
separation from service other than for Cause, (b) satisfaction of the
applicable vesting period(s), (c) a specific date, or (d) such other time
as the Committee may in its sole discretion determine (collectively, the
“Distribution Dates”). The Company shall deliver the shares of
Common Stock of Flagstone and/or cash to the Participant as soon as
administratively feasible after the identified date of
distribution.
|
|
6.4.
|
Grants
of RSUs under the Plan will normally fully vest on the date that is
specified in the applicable Grant Certificate, subject to the
following:
|
|
|
6.4.1.
|
Upon
a Participant’s death or Disability, he/she shall become fully vested in
all RSUs that have been granted to him or her under the
Plan.
|
|
|
6.4.2.
|
Except
as otherwise provided herein, the unvested RSU’s of Participants who are
Employees or Officers shall be canceled upon notice of termination from
the Employer to the Employee or the notice of resignation of the
Employee.
|
|
|
6.4.3.
|
If
an Employee is terminated for Cause all of his RSU’s will be automatically
canceled.
|
|
|
6.4.4.
|
The
Compensation Committee may cancel the RSU’s of a Director, whether vested
or not, if that director engages in action deemed to be materially hostile
to the interests of the Company, as judged by the Board of
Directors.
|
|
|
6.4.5.
|
The
Compensation Committee may, in its sole discretion, accelerate the vesting
of any RSUs granted under the Plan at any
time.
|
|
6.5.
|
RSUs and the rights and
privileges conferred therewith shall not be sold, transferred, encumbered,
hypothecated, or otherwise anticipated by the Participant, except as
provided for under the terms of the Plan. Grants are not liable
for or subject to, in whole or in part, the debts, contracts, liabilities,
or torts of the Participant, nor shall they be subject to garnishment,
attachment, execution, levy, or other legal or equitable
process.
|
|
7.
|
Special
Provisions
|
|
7.1.
|
The
Plan has special provisions which apply to citizens, residents or
domiciliaries of certain countries, or Employees located in certain
countries, as applicable. These provisions form part of this
Plan and are attached as Appendix
4.
|
|
7.2.
|
The Company may extend or
amend Appendix 4 from time to time in order to accommodate the development
of the Company in new countries, to maintain the most tax-favorable status
available in various countries under the applicable laws and further
modifications/amendments carried out from time to time. Such technical
amendments require the approval of the Management Compensation Committee
of the Company, and the Chairman of the Compensation
Committee.
|
|
8.
|
Taxation
|
|
8.1.
|
Participants
shall be responsible for all individual tax consequences of the RSU grants
and delivery of cash or shares under the Plan. Where feasible,
the Plan will be interpreted and administered to provide favorable tax
treatment to the Participant, subject to the compliance with the
applicable laws of their respective
jurisdiction.
|
|
8.2.
|
The
Company reserves the right to withhold shares or deduct from the
Participant payroll any taxes or social benefit costs to the Participant
or the Company associated with the vesting or fulfillment of the
RSUs.
|
|
9.
|
Designation of
Beneficiary
|
|
9.1.
|
A
Participant, by filing the prescribed form (the “Beneficiary Designation
Form”, sample attached as Appendix 2) with the Plan Administrator, or such
other person as the Plan Administrator may designate from time to time,
may designate one or more Beneficiaries and successor Beneficiaries who
shall be given the rights to the RSUs in accordance with the terms of the
Plan in the event of the Participant’s death. A Participant may
change the designation of a Beneficiary at any time by completing a new
Beneficiary Designation Form that shall revoke and supersede all earlier
forms. In the event a Participant does not file a Beneficiary
Designation Form designating one or more Beneficiaries, or no designated
Beneficiary survives the Participant, the RSUs shall be given to the
individual to whom such right passes by will or the laws of descent and
distribution and/or
succession.
|
|
10.
|
Expenses of the
Plan
|
Costs of
administration of the Plan will be paid by the Company.
|
11.
|
Claims
Procedure
|
|
11.1.
|
In
general, any claim for benefits under the Plan shall be filed by the
Participant or Beneficiary (“claimant”) on the form prescribed for such
purpose with the Plan Administrator. If a claim for benefits
under the Plan is wholly or partially denied, notice of the decision shall
be furnished to the claimant by the Plan Administrator within a reasonable
period of time after receipt of the claim by the Plan
Administrator. A Participant who is denied a claim for benefits
may appeal to the Compensation Committee for a review of the Plan
Administrator’s decision. The decision of the Compensation
Committee shall be furnished to the Participant within a reasonable period
of receipt of the request for review and the decision of the Compensation
Committee shall be final and binding to the
Participant.
|
|
12.
|
Termination or
Amendment of the Plan
|
|
12.1.
|
The
Plan may be amended in whole or in part from time to time, or may be
terminated, by the Board in accordance with the bye-laws of the Company,
provided that in the event of such an amendment or termination, the rights
of the Participants related to an RSU that have been granted under the
Plan shall be preserved and maintained and no amendment may confer
additional benefits upon Participants without prior approval by the
Board. Notice of any amendment or termination of the Plan shall
be given in writing to the
Participant.
|
|
12.2.
|
No
amendment which increases the aggregate number of shares of Common Stock
which may be issued pursuant to the Plan or the class of Employees
eligible to participate shall be effective unless and until the same is
approved by the shareholders of Flagstone. For the avoidance of
doubt, any action taken by the Compensation Committee pursuant to section
15 does not require shareholder approval. No amendment of the
Plan shall adversely affect any right of any Participant with respect to
any previous grant without such Participant’s written
consent.
|
|
13.
|
Term of the
Plan
|
|
13.1.
|
The
Plan shall become effective on the date it is initially adopted by the
Company (the “Adoption Date”) and shall continue in effect as amended from
time to time for a period not exceeding 10 years from the Adoption Date or
until terminated pursuant to Section
12.
|
|
14.
|
Rights as a
Stockholder
|
|
14.1.
|
No
Participant shall have any rights (including voting or dividend rights) as
a shareholder of Flagstone with respect to any Common Stock covered by, or
related to, any RSU granted or credited pursuant to the Plan until the
date of the delivery of a stock certificate with respect to such Common
Stock.
|
|
15.
|
Anti-Dilution and
Other Adjustments
|
|
15.1.
|
In
the event of any change in the issued and outstanding shares of Common
Stock by reason of any share split, share dividend, recapitalization,
merger, consolidation, reorganization, amalgamation, combination or
exchange of shares of Common Stock or other similar event, and if the
Compensation Committee shall determine, in its sole discretion (subject to
section 3.02), that such change equitably requires an adjustment in the
number or kind of shares of Common Stock that may be issued pursuant to
RSUs under the Plan pursuant to paragraph 6, then such adjustment shall be
made by the Compensation Committee and shall be conclusive and binding for
all purposes of the Plan.
|
|
15.2.
|
Upon
the declaration by the board of directors of Flagstone of a dividend in
specie or in kind in favor of the holders of Common Stock, the
Compensation Committee shall determine, in its sole discretion, whether to
make a cash payment to Participants whose RSUs have vested, equivalent to
the accrued cumulative dividends paid by the Company during the applicable
vesting period(s), without interest thereon, and only in so far as the
record date of any applicable dividend payment fell within a particular
vesting period.
|
|
16.
|
Miscellaneous
|
|
16.1.
|
If
any provision of this Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such
provisions had not been
included.
|
|
16.2.
|
Except
by will or the laws of descent and distribution and/or succession, a
Participant’s rights and interest under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of Participant’s death),
including but not limited to, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner and no such right or interest of
any Participant in the Plan shall be subject to any obligation or
liability or such Participant; provided that Directors shall be permitted
to assign their rights under the Plan to their employer or an affiliate of
their employer, as approved by the Compensation
Committee.
|
|
16.3.
|
Except
to the extent specifically set forth in the Grant Certificate, the
Participant’s rights under the Plan shall be governed in all aspects by
the terms of the Plan, including the provisions that authorize the Plan
Administrator to administer and interpret the Plan and that provide that
the Plan Administrator’s decisions, determinations, and interpretations
with respect to the Plan are final and conclusive on all persons affected
hereby. Additionally, this Plan shall be construed in
accordance with, and governed by the laws of the
Bermuda.
|
|
16.4.
|
Nothing
in this Plan, nor any action taken pursuant to this Plan, shall be deemed
to give any Participant any right to remain in the employ of the Company
or affect the right of the Company to terminate a Participant’s employment
at any time, with or without
Cause.
|
* * * * *
As
evidence of its adoption of the Plan, Flagstone Reinsurance Africa Limited has
caused this instrument to be signed by its officer of representative duly
authorized on this 12th day of
August, 2008.
Flagstone
Reinsurance Africa Limited
By: _________________________
Title:
________________________
APPENDIX
1
Beneficiary
Designation Form
To: The
Plan Administrator of the Flagstone Reinsurance Africa Limited Restricted Stock
Appreciation Rights Plan
From: __________________________________________
* * * * *
Pursuant
to Section 9 of the Flagstone Reinsurance Africa Limited Restricted Stock
Appreciation Rights Plan (the “Plan”), I hereby designate the following
person(s) as beneficiary(ies) who on my death shall be entitled to receive
amounts under the Plan and respective Grant Certificate:
Primary
Beneficiary Name: __________________________________________
Secondary
Beneficiary
Name: ________________________________________
In making
the above designation, I reserve the right to revoke this beneficiary
designation or change the beneficiary(ies) designated at any time or times and
without the consent of any beneficiary.
This
beneficiary designation cancels and supersedes any beneficiary designation
previously made with respect to this Plan and respective Grant
Certificate.
|
Signed:
|
||
| Participant | ||
|
Date
|
APPENDIX
4
Special
Provisions for citizens or residents of certain countries
United States
Provisions
Coverage:
These provisions apply to Participants to whom Section 409A of the United States
Internal Revenue Code of 1986 (as amended from time to time)(“the Code”)
applies.
Provisions:
. Each grant
and credit of RSUs shall comply with the minimum requirements of Code Section
409A.
. Any action that
may be taken (and, to the extent possible, any action actually taken) by the
Company or the Participant shall not be taken (or shall be void and without
effect), if such action violates the requirements of Section 409A.
. The definitions
contained within this Plan and the respective Grant Certificate shall be
interpreted and construed to comply with the minimum requirements of Section
409A.
India
Provisions
Coverage:
These provisions apply to Participants who are employees of any Subsidiary of
the Company incorporated and existing under the laws of India (“Indian
Subsidiary) (collectively, “Indian Participants”)
Provisions:
the following provisions shall apply with respect to any RSUs granted prior to a
public offering of the capital stock of the Indian Subsidiary, and only to the
extent required by applicable law:
|
8.
|
The
aggregate number of RSUs which may be granted to Indian Participants under
this Plan shall not exceed the value equivalent of 15,000 shares of Common
Stock or as decided by the Compensation Committee, subject to the
provisions of Section 3.01 and 12.02 hereof. RSU grants subject to
increase in accordance with the terms of the Plan pursuant to the approval
received from the Board of Directors/Shareholders of the Company and, if
necessary, the shareholders of
Flagstone.
|
|
9.
|
The
RSUs will be actually paid to the Indian Participants in accordance with
the Section 3.02, 3.03 and 3.04 of the
Plan.
|
|
10.
|
The
approval of the Board of the Company to the Plan was accorded on [ ]
August 2008. The assent of the Board of the Company, approving the
adoption of the Plan including this Appendix, for the Indian Subsidiary
was accorded on [ ] August 2008. The assent of the board of
directors of the Indian Subsidiary approving the adoption of the Plan
including this Appendix, for the Indian Subsidiary was accorded on
[___].
|
|
11
|
Participation
in the Plan and the grant of Awards shall be awarded to such Indian
Participant providing bona fide services to or for, one or more Indian
Subsidiary as may be selected by the Board or such Compensation Committee
as designated by the Board, in consultation with the board of directors of
the Indian Subsidiary, from time to time. The Board may also
grant RSUs to individuals in connection with hiring, retention or
otherwise, prior to the date the individual first performs services for an
Indian Subsidiary, provided that such RSUs shall not become vested or
exercisable prior to the date the individual first commences performance
of such services. Provided, however, that an Employee who is a
Promoter or belongs to the Promoter Group or a director who either by
himself or through his relative or through any body corporate, directly or
indirectly holds more than 10% of the outstanding shall not be eligible to
participate in the Plan.
|
|
12.
|
For
purposes of the above paragraph (4)
|
|
|
a.
|
“Promoter”
means:
|
|
i.
|
the person or persons who are in over-all control of the Indian Subsidiary; | ||
|
|
ii.
|
the
person or persons who are instrumental in the formation of the Indian
Subsidiary or program pursuant to which shares of the Indian Subsidiary
may be offered to the public;
|
|
|
iii.
|
the
person or persons who are named in the offer document (inviting
subscription from the public to the shares of the Indian Subsidiary) as
promoter(s), in the event the Indian Subsidiary decided to offer shares to
the public.
|
Provided
that a director or officer of the Indian Subsidiary, if he is acting as such
only in his professional capacity, will not be deemed to be a Promoter, and that
where a Promoter of the Indian Subsidiary is a body corporate, the promoter of
that body corporate shall also be deemed to be a Promoter of the Indian
Subsidiary.
|
|
b.
|
“Promoter
Group” means:
|
|
|
i.
|
an
immediate relative of the Promoter (i.e. spouse of that person, or any
parent, brother, sister or child of the person or of the spouse);
and,
|
|
|
ii.
|
persons
whose shareholding is aggregated for the purpose of disclosing in the
offer document (inviting subscription from the public to the shares of the
Indian Subsidiary) "shareholding of the promoter
group"
|
|
|
c.
|
“Relative”
means immediate relative namely spouse, parent, brother, sister or child
of the person or the spouse.
|
|
13.
|
All
defined terms that are not otherwise defined under this Appendix shall
have the meaning attributed to them under the provisions of the
Plan.
|
|
14.
|
Except
to the extent as set forth in this Appendix and where not contrary to the
meaning or intention herein, the provisions of the Plan shall apply to the
Indian Participants granted the
RSU.
|
APPENDIX
5
Sample
RSU Grant Certificate
This
CERTIFICATE, effective as of the ____________ day of ____________, 20___ (the
"Award Date"), certifies that Flagstone Reinsurance Africa Limited (the
“Company”) has awarded to ________________________ (the “Participant”)
Restricted Stock Units (“RSUs”) in the amounts and on the terms set forth below,
subject to and in accordance with the Flagstone Reinsurance Africa Limited
Restricted Stock Unit Plan, dated [●] (“the RSU Plan”).
The
Company awards to the Participant on the Award Date an amount of RSUs as
follows:
|
RSU
Holder
|
«Column1»
|
|
Restricted
Stock Units
|
«Column2»
|
|
RSU
Series
|
[●]
|
|
Grant
Date
|
[●]
|
|
Vesting
Date
|
[Normal
Vesting: Grants of these RSUs under the RSU Plan will fully vest on the
date that is two years after the Grant Date immediately above, except as
may be modified by section by the terms of the RSU Plan, and in particular
section [6.05].
-or-
[The
Participant is a Director and is fully and immediately vested in RSUs that
are credited to his/her Account under the
Plan.]
|
Upon
occurrence of a Distribution Date, the shares of Company Common Stock or cash
(as determined solely by the Compensation Committee of the Board of Directors of
the Company, subject to section 3.02 of the RSU Plan) shall be payable to the
Participant and shall be delivered to the Participant as soon as
administratively feasible.
This RSU grant is subject to the
terms and conditions described in the RSU Plan, as such plan may be properly
amended from time to time. The terms of the RSU Plan are
incorporated herein, and capitalized words, if not defined herein, shall be
given the same meaning as under the terms of the Plan, unless the context
requires a different meaning.
This
RSU grant is not transferable, and will lapse upon the occasion of an
assignment, charge, disposal or other dealing with the rights conveyed by it in
any other circumstances.
______________________________
Signed
Mark
Byrne, Chairman
Document Revision
History
|
Amendment
|
Date
|
Summary
of Changes
|
Section
|
Approved
by
|
|
1.0
|
August
12, 2008
|
Initial
Adoption
|
Board
|
Currently,
the Memorandum of Association of the Company provides for an authorized share
capital of US$1,500,000.00 comprising 150,000,000 shares of par value US$0.01
per share. It is proposed that the authorized share capital be increased from
US$1,500,000.00 to US$3,000,000 by the creation of an additional 150,000,000
shares of par value US$0.01 per share.
While the
Company has no present intention to increase the issued share capital of the
Company, it believes that the increase to the authorized share capital will
enable the Company to be well positioned to take advantage of any opportunity
which may arise in the future.
In
accordance with the Company's Bye-laws, approval by the Company's shareholders
is required to increase the authorized share capital of the
Company.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE THE INCREASE IN THE AUTHORIZED SHARE
CAPITAL OF THE COMPANY.
A copy of
our financial statements for the year ended December 31, 2008 and the
independent auditor’s report thereon has been sent to all
shareholders. The financial statements will be formally presented at
the Annual General Meeting, but no shareholder action is required to be
taken.
As of the
date of this Proxy Statement we have no knowledge of any business, other than
described herein and customary procedural matters, which will be presented for
consideration at the Annual General Meeting. In the event that any
other business is properly presented at the Annual General Meeting, it is
intended that the persons named in the accompanying proxy will have authority to
vote in accordance with their judgment on such business.
Shareholder
Proposals for 2010 Annual General Meeting of Shareholders
Shareholder
proposals must be received in writing by the Corporate Secretary of the Company
no later than November 14, 2009, and must comply with the requirements of
the SEC and our bye-laws in order to be considered for inclusion in our Proxy
Statement and proxy card relating to the 2010 Annual General Meeting. Such
proposals should be directed to the attention of the Corporate Secretary,
Flagstone Reinsurance Holdings Limited, Crawford House, 23 Church Street,
Hamilton HM 11, Bermuda.
If a
shareholder proposal is not submitted to the Corporate Secretary in a timely
manner or is otherwise introduced at the 2010 Annual General Meeting of
shareholders without any discussion of the proposal in our Proxy Statement, and
the shareholder does not notify us on or before November 14, 2009 as required by
SEC Rule 14a-4(c)(1) of the intent to raise such proposal at the Annual General
Meeting of shareholders, then proxies received by us for the 2010 Annual General
Meeting will be voted by the persons named as such proxies in their discretion
with respect to such proposal. Notice of such proposal is to be sent to the
address specified in the paragraph above.
Shareholder
Communications with the Board of Directors
Shareholders
or any interested party desiring to contact the Board of Directors, any
committee of the Board of Directors or the non-management directors as a group,
should address such communication to Corporate Secretary, Flagstone Reinsurance
Holdings Limited, Crawford House, 23 Church Street, Hamilton HM 11, Bermuda,
with a request to forward the communication to the intended
recipient.
Corporate
Documentation
The
Company will furnish, without charge, to any shareholder a copy of all documents
that it files with the SEC as well as the charter of any of the Company’s
committee of the Board of Directors. All such documents are available at
www.flagstonere.bm or may be obtained upon written request to the Corporate
Secretary, Flagstone Reinsurance Holdings Limited, Crawford House, 23 Church
Street, Hamilton HM 11, Bermuda.
Inspector
of Election
BNY
Mellon Shareowner Services, 480 Washington Boulevard, 29th Floor, Jersey
City, NY 07310, has been appointed as Inspector of Election for the 2009 Annual
General Meeting. Representatives of BNY Mellon Shareowner Services will attend
the 2009 Annual General Meeting to receive votes and ballots, supervise the
counting and tabulating of all votes and determine the results of the
vote.
1. ELECTION
OF DIRECTORS Nominees: FOR ALL WITHHOLD FOR ALL *EXCEPTIONS 01 Mark J. Byrne 02
Stewart Gross 03 E. Daniel James 04 Anthony P. Latham (INSTRUCTIONS:
To withhold authority to vote for any individual nominee, mark the “Exceptions”
box above and write that nominee’s name in the space provided below.)
*Exceptions 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 to the determination of the auditor’s remuneration
to the Board of Directors FOR AGAINST ABSTAIN 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. FOR AGAINST ABSTAIN 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 an increase to the authorized share capital of the Company. 10. To
consider and take action with respect to such other matters as may properly come
before the Annual General Meeting or any adjournment or adjournments thereof.
Mark Here for Address Change or Comments SEE REVERSE Will Attend Meeting YES
Signature Signature Date NOTE:
Please sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such. FOLD AND DETACH HERE FLAGSTONE REINSURANCE HOLDINGS
LIMITED
FLAGSTONE
REINSURANCE HOLDINGS LIMITED PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS OF FLAGSTONE REINSURANCE HOLDINGS
LIMITED The undersigned hereby revoking all proxies granted, appoints
MARK J. BYRNE and DAVID A. BROWN, and each of them, with power of substitution,
as proxy of the undersigned, to attend the Annual General Meeting of
Shareholders of Flagstone Reinsurance Holdings Limited on May 14, 2009 and any
adjournments thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present as designated on the reverse. THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL
1, FOR PROPOSAL 2, FOR PROPOSAL 3, FOR PROPOSAL 4, FOR PROPOSAL 5, FOR PROPOSAL
6, FOR PROPOSAL 7, FOR PROPOSAL 8, FOR PROPOSAL 9, AND FOR PROPOSAL 10. WHETHER
OR NOT DIRECTION IS MADE, THIS PROXY WILL BE VOTED AT THE DISCRETION OF THE
PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING
OF SHAREHOLDERS. BNY
MELLON SHAREOWNER SERVICES P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250
Address
Change/Comments (Mark the corresponding box on the reverse side) (Continued and
to be marked, dated and signed, on the other side) FOLD AND DETACH HERE
Choose MLinkK
for fast, each and secure 24/7 online access to your future proxy materials,
investment plan statements, tax documents and more. Simply log on to Investor
ServiceDirect® at www.bnymellon.com/shareowner/isd
where step-by-step instructions will prompt you through
enrollment.