As
filed with the Securities and Exchange Commission on March 22, 2010
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-4
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Flagstone
Reinsurance Holdings Limited
(Exact
name of Registrant as specified in its charter)
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Bermuda
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6331
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98-0481623
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(I.R.S. Employer Identification Number)
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Crawford
House
23
Church Street
Hamilton
HM 11
Bermuda
(441)
278-4300
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s
Principal Executive Offices)
CT
Corporation System
111 Eighth
Avenue, 13th Floor
New
York, New York 10011
(212)
590-9331
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent
For Service)
Copies
to:
Ronald
Cami, Esq.
Cravath,
Swaine & Moore LLP
Worldwide
Plaza
825
Eighth Avenue
New
York, NY 10019
(212)
474-1000
Approximate date of commencement of
proposed sale of the securities to the public: As promptly as practicable
after this registration statement becomes effective.
If the securities being registered on
this Form are being offered in connection with the formation of a holding
company and there is compliance with General Instruction G, check the following
box. o
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accredited filer”, “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer
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o
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Accelerated
Filer
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x
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Non-accelerated
filer
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o
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Smaller
reporting company
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o
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If
applicable, place an X in the box to designate the appropriate rule provision
relied upon in conducting this transaction:
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Exchange
Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
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o
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Exchange
Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
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o
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CALCULATION
OF REGISTRATION FEE
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Title of each class of
securities to be registered
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Amount to be
registered
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Proposed maximum
offering price per unit(1)
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Proposed maximum aggregate
offering price(2)
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Amount of
registration fee(3)
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Common
shares, $0.01 par value per
share
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80,001,073 | $ | 10.90 | $ | 872,011,696 | $ | 62,175 | |||||||||
87
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(1)
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Based
on the average of the high and low sales prices of common stock as
reported by the New York Stock Exchange on March 18,
2010.
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(2)
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Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(f) and Rule 457(c) of the Securities Act of
1933 (the “Securities Act”).
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(3)
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Computed
in accordance with Rule 457(f) under the Securities Act and
equal to 0.00007130 multiplied by the proposed maximum aggregate offering
price.
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The
Registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until this registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Flagstone
Reinsurance Holdings Limited
Crawford
House
23
Church Street
Hamilton
HM 11, Bermuda
,
2010
Dear
Shareholder:
You are
cordially invited to attend the 2010 Annual General Meeting of Shareholders (the
“Annual General Meeting”) of Flagstone Reinsurance Holdings Limited (the
“Company” or “we”). The meeting will be held on , 2010, at
8:30 a.m. (local time) at The Mid Ocean Club, Tucker’s Town, St. George’s,
Bermuda. Details of the business to be conducted at the Annual General Meeting
can be found in the attached Notice of Annual General Meeting and the attached
Proxy Statement.
In
addition to the normal business to be conducted at our Annual General Meeting,
including electing directors and ratifying the appointment of our independent
auditors, we will be asking you to approve the change of our jurisdiction of
incorporation from Bermuda to Luxembourg, a number of changes to our charter
documents to facilitate this change, and a number of organizational matters
required under Luxembourg law. We call this process, in which the Company will
continue to exist as the same company but will discontinue its Bermuda existence
and continue its corporate existence under a different name in Luxembourg as
Flagstone Reinsurance Holdings, S.A., the “Redomestication”.
After
careful consideration of this decision, our Board of Directors and management
team believe that changing our place of incorporation to Luxembourg is in the
best interests of the Company and its shareholders. Luxembourg is a major
financial center known for its stability as well as its financial
sophistication, and we believe this move will increase our strategic and capital
flexibility while requiring no changes to our operating model or our long-term
strategy. Luxembourg has a network of excellent relations with major
developed and developing countries around the world. In addition to our listings
on the New York Stock Exchange and the Bermuda Stock Exchange, this change in
incorporation has the potential to make a listing of our common shares on a
European exchange more attractive. This change will result in our holding
and principal operating companies being in Europe and settles our identity as a
European company. Given the presence of our investment management operations
there, we will also benefit from our familiarity with the regulatory and legal
environment and the ability to use our existing Luxembourg office as our new
corporate holding company office.
Our
reinsurance and insurance operations worldwide will continue to operate without
material changes, and our principal operating company will remain in
Switzerland. We do not expect the Redomestication to have any material change on
our operations or financial results. Our common shares will continue to be
listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “FSR” and
on the Bermuda Stock Exchange. Flagstone will continue to be registered
with the U.S. Securities and Exchange Commission (“SEC”) and remain subject to
SEC reporting requirements, the mandates of the Sarbanes-Oxley Act of 2002, and
the corporate governance rules of the NYSE. Finally, the Company will
continue to report its consolidated financial results in U.S. dollars using U.S.
generally accepted accounting principles.
We
encourage you to read the attached documents carefully. You should carefully consider “Risk
Factors” beginning on page 12 for a discussion of risks related to the
Redomestication proposals before voting.
Whether
or not you plan to attend the Annual General Meeting in person, it is important
that your shares be represented and voted at the meeting. After reading the
enclosed Notice and Proxy Statement, please submit your proxy or voting
instructions. If you attend the meeting in person, you may revoke your proxy and
vote your shares in person.
I look
forward to greeting those of you who are able to attend.
Sincerely,
/s/ David
A. Brown
David A.
Brown
Chief
Executive Officer
Neither
the Securities and Exchange Commission nor any state securities commission, nor
any similar authority in Bermuda or Luxembourg, has approved or disapproved of
the securities to be issued in the transaction or determined if this Proxy
Statement is truthful or complete. Any representation to the contrary is a
criminal offense.
The
attached Proxy Statement is dated , 2010. The Proxy Statement,
accompanying proxy card, Notice of Annual General Meeting and Annual Report are
first being mailed to shareholders on or about ,
2010.
NOTICE
OF ANNUAL GENERAL MEETING
Flagstone
Reinsurance Holdings Limited
Crawford
House
23
Church Street
Hamilton
HM 11, Bermuda
NOTICE
OF ANNUAL GENERAL MEETING
TO
BE HELD ON , 2010
NOTICE IS
HEREBY GIVEN that the 2010 Annual General Meeting of Shareholders (the “Annual
General Meeting”) of Flagstone Reinsurance Holdings Limited (the “Company” or
“we”) will be held on , 2010, 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 C directors (David Brown, Stephen Coley, Dr. Anthony
Knap, Ph.D and Peter F. Watson) to hold office until the 2013 Annual
General Meeting of Shareholders or until their respective successors have
been duly elected or appointed.
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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 fiscal year 2010 and until our 2011 Annual General
Meeting of Shareholders 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 Performance Share Unit
Plan.
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4.
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To
consider and approve the Redomestication from Bermuda to Luxembourg, the
authorizing of the Board of Directors to abandon or delay the
Redomestication for any reason at any time prior to it becoming effective
notwithstanding the approval of the Shareholders, and the granting of a
power of attorney to each member of the Board of Directors (or such
persons appointed attorney in Luxembourg) to appear before a Luxembourg
public notary and to take all necessary steps and to sign all necessary
documents to effect the
Redomestication.
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5.
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If
the Redomestication is approved, to approve the change of the Company’s
corporate name to Flagstone Reinsurance Holdings,
S.A.
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6.
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If
the Redomestication is approved, to approve the Company’s corporate
purpose.
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7.
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If
the Redomestication is approved, to fix the Company’s registered office in
Luxembourg.
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8.
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If
the Redomestication is approved, to approve the Company’s Luxembourg
articles of incorporation.
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9.
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If
the Redomestication is approved, to approve the Company’s issued share
capital.
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10.
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If
the Redomestication is approved, to approve the Company’s authorized share
capital.
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11.
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If
the Redomestication is approved, to waive any preferential or pre-emptive
subscription rights under Luxembourg
law.
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12.
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If
the Redomestication is approved, to allow the Company and its subsidiaries
to acquire and own shares of the
Company.
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13.
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If
the Redomestication is approved, to approve the fiscal year of the
Company.
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14.
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If
the Redomestication is approved, to approve the date and time for future
Annual General Meetings of
Shareholders.
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15.
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If
the Redomestication is approved, to confirm the appointment of the
Company’s directors.
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16.
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If
the Redomestication is approved, to confirm the Company’s independent
auditor.
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17.
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If
the Redomestication is approved, to elect the Company’s statutory
auditor.
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18.
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If
the Redomestication is approved, to acknowledge an independent auditors’
report for the Company.
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19.
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If
there are insufficient votes at the time of the meeting to approve the
Redomestication, to approve the motion to adjourn the meeting to a later
date to solicit additional proxies.
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20.
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To
hear a report from the Chairman.
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We refer
to the proposals conditioned on approval of the Redomestication, i.e., proposals
5 through 18 above, as the “Luxembourg Organizational Proposals”. The Luxembourg
Organizational Proposals, which authorize changes to our charter documents to
facilitate the Redomestication and organizational matters required under
Luxembourg law, are included solely to give effect to the Redomestication. See
“Summary of the Redomestication—The Redomestication”.
YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ALL OF THE
PROPOSALS.
In
addition, we will consider any other business as may properly come before the
Annual General Meeting or any adjournment(s) thereof. The Company’s audited
financial statements for the fiscal year ended December 31, 2009 will be
presented at the 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 on , 2010 as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the Annual General Meeting. The Proxy Statement, this Notice of Annual
General Meeting, the accompanying proxy card and the Annual Report are first
being mailed to shareholders on or about , 2010.
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
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/
William Fawcett
William
Fawcett
Corporate
Secretary
Hamilton,
Bermuda
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A-1
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B-1
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i
This
Proxy Statement incorporates by reference important business and financial
information about Flagstone Reinsurance Holdings Limited from documents filed
with the Securities and Exchange Commission (“SEC”) that have not been included
herein or delivered herewith. This information is available without charge
at the website that the SEC maintains at http://www.sec.gov, as well as from
other sources. See “Where You Can Find More Information”. In
addition you may request copies of the information incorporated by reference in
this Proxy Statement from us, without charge, upon written request to Bank of
New York Mellon Shareowner Services, PO Box 358015, Pittsburgh, PA 15252-8015,
by e-mail at shrrelations@bnymellon.com, or upon oral request by phone at
1-877-296-3711 (1-201-680-6685 outside the U.S.). In order to receive
timely delivery of those materials, you must make your requests no later than
five business days before the date of the Annual General
Meeting.
General
This
Proxy Statement has information about the Annual General Meeting and was
prepared by our management at the direction of Flagstone Reinsurance Holdings
Limited’s Board of Directors (the “Board of Directors” or “Board”). This Proxy
Statement is being mailed through the U.S. postal service to shareholders on or
around , 2010.
Except
where the context otherwise requires or where otherwise indicated, (i) the term
“Flagstone (Bermuda)” refers to Flagstone Reinsurance Holdings Limited, (ii) the
term “Flagstone (Luxembourg)” refers to Flagstone Reinsurance Holdings, S.A.
(the continuation of Flagstone (Bermuda) as a Luxembourg company), (iii) the
term “Redomestication” refers to the change of Flagstone (Bermuda)’s
jurisdiction of incorporation from Bermuda to Luxembourg, changes to Flagstone
(Bermuda)’s charter documents to facilitate this change, and a number of
organizational matters required under Luxembourg law in which Flagstone
(Bermuda) will continue to exist as the same company but will discontinue its
Bermuda existence and continue its corporate existence in Luxembourg as
Flagstone (Luxembourg), (iv) the terms “we”, “us”, “our”, “Flagstone”,
“Flagstone Reinsurance” and the “Company” refer, as applicable, to Flagstone
(Bermuda) and its consolidated subsidiaries before the Redomestication and
Flagstone (Luxembourg) and its consolidated subsidiaries after the
Redomestication and (v) the term “Luxembourg Company Law” refers to the Law
of August 10, 1915 on Commercial Companies, as amended.
Annual
General Meeting
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Date:
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, 2010
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Time:
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8:30
a.m. local time
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Place:
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The
Mid Ocean Club, Tucker’s Town, St. George’s,
Bermuda
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Persons
Making the Solicitation
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 of Directors. Such persons designated as proxies serve as officers of the
Company.
Board
Recommendation
Your
Board of Directors recommends you vote “For” all of the
proposals.
Voting
Why
did I receive this Proxy Statement?
The
Company sent this Proxy Statement, together with the enclosed proxy card,
because our Board of Directors is soliciting your proxy to vote at the Annual
General Meeting on , 2010. This Proxy Statement contains
information about the items being voted on at the Annual General
Meeting.
Who
is entitled to vote?
Each
holder of record of our shares on , 2010, the record date for the
Annual General Meeting, is entitled to attend and vote at the Annual General
Meeting.
How
many votes do I have?
Generally,
each holder of a share on the record date will be entitled to one vote per share
on each matter presented at the Annual General Meeting, except that the total
voting power of any shareholder who is a U.S. person controlling 9.9% or more of
our common shares will be reduced to less than 9.9% of the voting power of our
common shares. For a more detailed description of the operation of this rule,
see “The Shareholder Meeting—Voting Securities and Record Date—Voting
Rights”.
On the
record date, there were 80,001,073 shares outstanding and entitled to vote
at the Annual General Meeting. As of the record date, we believe together our
directors, executive officers and affiliates hold 45.6% of our outstanding
common shares. Some members of this group may have their voting rights reduced,
and the group’s voting rights could be less than 45.6%.
What
proposals are being presented at the Annual General Meeting?
We intend
to present several proposals for shareholder consideration and approval at the
Annual General Meeting in connection with both routine corporate matters and our
Redomestication involving our discontinuance from Bermuda and our continuance as
a Luxembourg company. These proposals are:
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·
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To
elect four (4) Class C directors (David Brown, Stephen Coley, Dr. Anthony
Knap, Ph.D and Peter F. Watson) to hold office until the 2013 Annual
General Meeting of Shareholders or until their respective successors have
been duly elected or appointed.
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·
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To
approve the appointment of Deloitte & Touche to serve as the Company’s
independent auditor for fiscal year 2010 and until our 2011 Annual General
Meeting of Shareholders and to refer the determination of the auditor’s
remuneration to the Board of
Directors.
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·
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To
approve amendments to the Performance Share Unit
Plan.
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To
consider and approve the Redomestication from Bermuda to Luxembourg, the
authorizing of the Board of Directors to abandon or delay the
Redomestication for any reason at any time prior to it becoming effective
notwithstanding the approval of the Shareholders, and the granting of a
power of attorney to each member of the Board of Directors (or such
persons appointed attorney in Luxembourg) to appear before a Luxembourg
public notary and to take all necessary steps and to sign all necessary
documents to effect the
Redomestication.
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If
the Redomestication is approved, to approve the change of the Company’s
corporate name to Flagstone Reinsurance Holdings,
S.A.
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If
the Redomestication is approved, to approve the Company’s corporate
purpose.
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If
the Redomestication is approved, to fix the Company’s registered office in
Luxembourg.
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If
the Redomestication is approved, to approve the Company’s Luxembourg
articles of incorporation.
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If
the Redomestication is approved, to approve the Company’s issued share
capital.
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If
the Redomestication is approved, to approve the Company’s authorized share
capital.
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If
the Redomestication is approved, to waive any preferential or pre-emptive
subscription rights under Luxembourg
law.
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If
the Redomestication is approved, to allow the Company and its subsidiaries
to acquire and own shares of the
Company.
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If
the Redomestication is approved, to approve the fiscal year of the
Company.
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If
the Redomestication is approved, to approve the date and time for future
Annual General Meetings of
Shareholders.
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·
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If
the Redomestication is approved, to confirm the appointment of the
Company’s directors.
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·
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If
the Redomestication is approved, to confirm the Company’s independent
auditor.
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If
the Redomestication is approved, to elect the Company’s statutory
auditor.
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If
the Redomestication is approved, to acknowledge an independent auditors’
report for the Company.
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If
there are insufficient votes at the time of the meeting to approve the
Redomestication, to approve the motion to adjourn the meeting to a later
date to solicit additional proxies.
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How
do I attend the Annual General Meeting?
All
shareholders are invited to attend the Annual General Meeting. For admission to
the Annual General Meeting, shareholders of record should bring valid proof of
identification as a shareholder. Those who have beneficial ownership of shares
held by a bank, brokerage firm or other nominee must bring account statements or
letters from their banks or brokers showing that they own shares of the Company
as of the record date.
What
should I do now to vote?
The
meeting will take place on , 2010. After carefully reading and
considering the information contained in this Proxy Statement and the documents
incorporated by reference, please indicate on the enclosed proxy card how you
want to vote. Submit your proxy by following the instructions on the enclosed
proxy card as soon as possible so that your shares may be represented at the
meeting.
What
if I return my proxy or voting instruction card but do not mark it to show how I
am voting?
Your
shares will be voted according to the instructions you have indicated on your
proxy. If you sign and return your proxy card but do not indicate instructions
for voting, your shares will be voted “FOR” each of the proposals described in
this Proxy Statement and, with respect to any other matter which may properly
come before the Annual General Meeting, at the discretion of the proxy
holders.
May
I change or revoke my vote after I return my proxy or voting instruction
card?
You may
change your vote in one of three ways at any time before it is
exercised:
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notify
our Secretary in writing before the Annual General Meeting that you are
revoking your proxy;
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·
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submit
another proxy card (or voting instruction card if you hold your shares in
street name) with a later date; or
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·
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if
you are a holder of record, or a beneficial holder with a proxy from the
holder of record, vote in person at the Annual General
Meeting.
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Your
presence without voting at the meeting will not automatically revoke your proxy,
and any revocation during the meeting will not affect votes previously taken. If
you hold your shares in the name of a bank, broker or other nominee, you should
follow the instructions provided by your bank, broker or nominee in revoking
your previously granted proxy.
What
constitutes a quorum?
The
presence, in person or by proxy, of two or more of the holders representing in
excess of 50% of the total shares outstanding and entitled to vote at the Annual
General Meeting constitutes a quorum for the conduct of business.
What
vote is required in order to approve each proposal?
Under
Proposal 1, 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 other proposals require the affirmative “FOR”
vote of a majority of those shares present, in person or by proxy, at the
meeting and entitled to vote on the proposal.
How
will voting on any other business be conducted?
Other
than matters incidental to the conduct of the Annual General Meeting, we do not
know of any business or proposals to be considered at the Annual General Meeting
other than those set forth in this Proxy Statement. If any other business is
proposed and properly presented at the Annual General Meeting, the proxies
received from our shareholders give the proxy holders the authority to vote on
the matter at their discretion.
Redomestication
What
is the Redomestication?
In the
Redomestication, the Company will discontinue its existence as a Bermuda company
and continue as a Luxembourg company.
Why
do we want to change our jurisdiction of incorporation from Bermuda to
Luxembourg?
We
believe that the Redomestication is in the best interests of Flagstone and our
shareholders. This determination was based in part on our belief that the
Redomestication will:
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increase
our strategic and capital
flexibility;
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build
upon our existing European presence with few risks to our operating model
or our long-term strategy; and
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help
reduce reputational, political, regulatory and financial risks to the
Company.
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We have
chosen to redomesticate to Luxembourg, among other reasons, because
it:
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is
a leading financial center with political, economic and regulatory
stability;
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|
|
·
|
has
a sophisticated financial and regulatory
environment;
|
|
|
·
|
has
a network of excellent relations with major developed and developing
countries around the world;
|
|
|
·
|
is
party to an extensive network of commercial and tax treaties,
significantly with the United States and certain members of the European
Union;
|
|
|
·
|
settles
our identity as a European company;
|
|
|
·
|
leverages
our regulatory and legal familiarity and office space in Luxembourg given
the existing presence of our investment management operations there;
and
|
|
|
·
|
potentially
makes a listing of our common shares on a European exchange more
attractive.
|
Will
the Redomestication affect the Company’s current or future
operations?
We
believe that the Redomestication should have no material impact on how we
conduct our day-to-day operations.
Will
the Redomestication dilute my economic interest?
The
Redomestication will not dilute your economic interest in the Company.
Immediately after the Redomestication, the number of our issued and outstanding
shares will be the same as the number of our issued and outstanding shares
immediately before the Redomestication.
Will
the Redomestication alter my rights with respect to shares I hold in the
Company?
The
completion of the Redomestication will change the governing law that applies to
our shareholders from Bermuda law to Luxembourg law. Many of the principal
attributes of our shares will be similar. There are, however, differences
between your rights under Luxembourg law and under Bermuda law, and there are
differences between our current Memorandum of Association and Bye-Laws and the
proposed Luxembourg articles of incorporation (the “Articles”) that will apply
to us after we continue as a Luxembourg company. We discuss these differences
under “Proposal 4 - Approval of the Redomestication—Description of Flagstone
(Luxembourg) Shares” and “Proposal 4 - Approval of the
Redomestication—Comparison of Rights of Shareholders”. A copy of the English
version of the Flagstone (Luxembourg) Articles is attached as Annex A to this
Proxy Statement.
In
addition, to mitigate certain potential adverse U.S. federal income tax
consequences to U.S. shareholders, our current Bye-Laws reduce the total voting
power of any shareholder who is a U.S. person controlling 9.9% or more of our
common shares to less than 9.9% of the voting power of our common shares. For a
more detailed description of the operation of this rule, see “The Shareholder
Meeting—Voting Securities and Record Date—Voting Rights”. After the
Redomestication, each share will be entitled to one vote with no potential
reduction in voting power. Thus, as a result of the Redomestication and the
corresponding removal of the 9.9% voting limitation from the Company’s corporate
documents, there may be an increase in the voting rights of certain U.S.
shareholders and a dilution of the voting rights of other shareholders. This
change will be undertaken for Luxembourg legal reasons and could result in
adverse U.S. federal income tax consequences to U.S. shareholders controlling
10% or more of our common shares. See “Risk Factors—Tax Risk Factors—After the
Redomestication, U.S. persons holding shares in Flagstone (Luxembourg) with an
aggregate voting power of 10% or greater may be subject to current U.S. federal
income tax with respect to certain income earned by Flagstone (Luxembourg) and
its subsidiaries”.
When
do you expect the Redomestication to be completed?
Assuming
the Redomestication is approved by the requisite shareholder vote, we expect to
complete the Redomestication as soon as practicable following such approval. We
expect to complete the Redomestication soon after the Annual General Meeting
(the “Effective Time”). The Redomestication may be abandoned or delayed for any
reason by our Board of Directors at any time prior to the Effective Time, even
though the Redomestication may have been approved by our shareholders and all
conditions to the Redomestication may have been satisfied.
What
effect will the Redomestication have on my current shares?
If you
hold shares in certificated form, you do not need to take any action as a result
of the Redomestication. Your certificated shares will still be valid and
continue to represent your interest in the Company.
If you
hold your shares through a broker, dealer, commercial bank, trust company or
similar institution, you should not need to take any action as a result of the
Redomestication. Since the Redomestication will not impact the number of shares
you own, we expect the account statements from your institution will look
largely the same after the Redomestication.
If you
hold direct registration shares, after the Redomestication the Company will be
required to issue you certificated shares.
Can
I trade shares between the date of this Proxy Statement and the Effective
Time?
Yes. Our
shares will continue to trade during this period.
After
the Redomestication, will the shares still be listed on the New York Stock
Exchange?
Yes. We
will submit an application so that immediately following the Redomestication our
shares will continue to be listed on the New York Stock Exchange under the
symbol “FSR”, the same symbol under which our shares currently are
listed.
What
are the material tax consequences of the Redomestication?
The
Company should not be subject to U.S. federal income tax as a result of the
Redomestication. For U.S. federal income tax purposes, holders of Flagstone
(Bermuda) shares should not recognize gain or loss solely as a result of the
Redomestication. See “Proposal 4 - Approval of the Redomestication—Material Tax
Considerations—Material U.S. Tax Consequences of the
Redomestication”.
For
Luxembourg tax purposes, holders of Flagstone (Bermuda) shares should not
realize a taxable gain solely as a result of the Redomestication. See “Proposal
4 - Approval of the Redomestication—Material Tax Considerations—Material
Luxembourg Tax Consequences of the Redomestication”.
Will
there be Luxembourg withholding tax on any future dividends?
Regular
dividends are, in principle, subject to a Luxembourg withholding tax of 15%. Any
repurchase of shares or repayment of capital or share premium is, under certain
circumstances, also subject to a 15% Luxembourg withholding tax, for example, if
the Company has distributable reserves or profits generated
post-Redomestication. If Flagstone (Luxembourg) were to make any such taxable
payment, it would in principle be required to withhold at the 15% rate and remit
the withheld amounts to the Luxembourg tax authorities.
However,
it is our intention to make payments to shareholders in the form of share
capital reductions and share premium reductions in such a way that no Luxembourg
withholding tax is due. As such, we expect that a substantial amount of any
potential future payments to be made by Flagstone (Luxembourg) may be exempt
from Luxembourg withholding tax. Flagstone recommends that each shareholder
consult his or her own tax advisor as to the tax consequences of holding shares
in and receiving share capital, share premium and dividend payments from
Flagstone (Luxembourg). See “Risk Factors─After the Redomestication, dividends
you receive may be subject to Luxembourg dividend withholding tax and Luxembourg
income tax” and “—Material Tax Consequences Relating to the
Redomestication—Luxembourg Tax Considerations—Post-Redomestication Consequences
to Flagstone (Luxembourg) Shareholders”.
This
summary highlights selected information from this Proxy Statement. It does not
contain all of the information that is important to you. For a better
understanding of the Redomestication, and for a more complete legal description
of the Redomestication, you should read carefully the entire Proxy Statement,
including the annexes. The Articles, which are attached as Annex A to this Proxy
Statement, will govern us after the completion of the Redomestication. We
encourage you to read those documents.
The
Company
Flagstone
Reinsurance Holdings Limited
Crawford
House
23 Church
Street
Hamilton
HM 11
Bermuda
(441)
278-4300
The
Company, a global reinsurance and insurance company, was incorporated under the
laws of Bermuda in October 2005 and commenced operations in
December 2005. The Company is currently organized into three business
segments: Reinsurance, Lloyd’s and Insurance. Through our Reinsurance segment,
we write primarily property, property catastrophe and short-tail specialty and
casualty reinsurance. Through our Lloyd’s segment we primarily write property
and short-tail specialty and casualty insurance and reinsurance for risks such
as energy, hull and cargo, marine liability, engineering and aviation. Through
our Insurance segment, we primarily write property insurance for homes,
condominiums and office buildings in the Caribbean region. We diversify our
risks across business lines by risk zones, each of which combines a geographic
zone with one or more types of peril (for example, Texas Windstorm, Florida
Hurricane or California Earthquake). The majority of our reinsurance contracts
contain loss limitation provisions such as fixed monetary limits to our exposure
and per event caps. We specialize in underwriting where sufficient data exists
to analyze effectively the risk/return profile, and where we are subject to
legal systems we deem reasonably fair and reliable.
The
Redomestication
At the
Annual General Meeting, we will be asking you to approve the change of our
jurisdiction of incorporation from Bermuda to Luxembourg and to approve a number
of organizational matters necessary to accomplish the Redomestication. The
Redomestication will be effected by our discontinuing our existence as a Bermuda
company, as provided in Section 132G of The Companies Act 1981 of Bermuda,
and continuing our existence as a Luxembourg société anonyme (“S.A.”). We also
will be asking you to approve a number of changes to our charter documents to
facilitate the Redomestication and a number of organizational matters required
under Luxembourg law. Under Luxembourg law, a number of these matters must be
voted on separately, and so we will present multiple proposals (the “Luxembourg
Organizational Proposals”) to be voted on at the Annual General Meeting. We have
summarized these proposals below.
First, we
will ask you to approve the Redomestication.
Second,
Luxembourg law requires that a number of matters be specifically approved by
shareholders, including our corporate purpose, our registered office, the
Articles, our issued share capital, our authorized share capital, the waiver of
preferential and pre-emptive subscription rights under Luxembourg law, the
ability of the Company to purchase and hold its own shares, our fiscal year, our
Annual General Meeting, our directors, our independent auditor, our statutory
auditor and the acknowledgement of an auditors’ report.
We
anticipate that the Redomestication will become effective as soon as practicable
following approval of the shareholders, with the exact date and time being
determined by our Board of Directors. Subject to filing the relevant documents
with the Bermuda Registrar of Companies, the Redomestication will become
effective upon the execution of the required notarial deed at the meeting to be
held before the public notary in Luxembourg.
As of the
record date for the Annual General Meeting, there were 80,001,073 shares
outstanding.
We
believe that the Redomestication is in the best interests of Flagstone and our
shareholders. This determination was based in part on our belief that the
Redomestication will:
|
|
·
|
increase
our strategic and capital
flexibility;
|
|
|
·
|
build
upon our existing European presence with few risks to our operating model
or our long-term strategy; and
|
|
|
·
|
help
reduce reputational, political, regulatory and financial risks to the
Company.
|
We have
chosen to redomesticate to Luxembourg, among other reasons, because
it:
|
|
·
|
is
a leading financial center with political, economic and regulatory
stability;
|
|
|
·
|
has
a sophisticated financial and regulatory
environment;
|
|
|
·
|
has
a network of excellent relations with major developed and developing
countries around the world;
|
|
|
·
|
is
party to an extensive network of commercial and tax treaties,
significantly with the United States and certain members of the European
Union;
|
|
|
·
|
settles
our identity as a European company;
|
|
|
·
|
leverages
our regulatory and legal familiarity and office space in Luxembourg given
the existing presence of our investment management operations there;
and
|
|
|
·
|
potentially
makes a listing of our common shares on a European exchange more
attractive.
|
Our
reinsurance and insurance operations worldwide will continue to operate without
material changes, and our principal operating company will remain in
Switzerland. We do not expect the Redomestication to have any material change on
our operations or financial results. Our common shares will continue to be
listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “FSR” and
on the Bermuda Stock Exchange. We will continue to be registered with the
U.S. Securities and Exchange Commission (“SEC”) and remain subject to SEC
reporting requirements, the mandates of the Sarbanes-Oxley Act of 2002, and the
corporate governance rules of the NYSE. Finally, we will continue to
report our consolidated financial results in U.S. dollars using U.S. generally
accepted accounting principles (“U.S. GAAP”).
Effects
of the Redomestication
After the
Redomestication, we will remain in existence as the same company, but as a
Luxembourg company rather than a Bermuda company. You will continue to own an
interest in the same company that will continue to conduct the same business
operations as conducted by, and to own the same assets as owned by, it before
the Redomestication. The number of shares you will own will be the same as the
number of shares you owned immediately prior to the Redomestication, and your
relative economic interest will be unchanged.
Upon
completion of the Redomestication, we will continue to be responsible for our
existing obligation to deliver shares in connection with awards granted under
our incentive plans, warrants or other outstanding rights. Immediately after the
Redomestication, we will have issued and outstanding the same number of shares
as we had issued and outstanding immediately before the completion of the
Redomestication.
Upon
completion of the Redomestication, we will remain subject to SEC reporting
requirements, the mandates of the Sarbanes-Oxley Act and the applicable
corporate governance rules of the NYSE, and we will continue to report our
financial results in U.S. dollars and under U.S. GAAP.
To
mitigate potential U.S. federal income tax consequences, our current Bye-Laws
reduce the total voting power of any shareholder who is a U.S. person
controlling 9.9% or more of our common shares to less than 9.9% of the voting
power of our common shares. After the Redomestication, each share will be
entitled to one vote with no potential reduction in voting power. For a more
detailed description of the operation of this rule and potential adverse U.S.
federal income tax implications to shareholders resulting from its removal, see
“The Shareholder Meeting—Voting Securities and Record Date—Voting Rights” and
“Risk Factors—Tax Risk Factors—After the Redomestication, U.S. persons holding
shares in Flagstone (Luxembourg) with an aggregate voting power of 10% or
greater may be subject to current U.S. federal income tax with respect to
certain income earned by Flagstone (Luxembourg) and its
subsidiaries”.
Rights
of Shareholders
The
completion of the Redomestication will change the governing law that applies to
our shareholders from Bermuda law to Luxembourg law. Many of the principal
attributes of our shares will be similar. There are, however, differences
between your rights under Luxembourg law and under Bermuda law, and there are
differences between our current Memorandum of Association and Bye-Laws and the
Articles that will apply to us after we continue as a Luxembourg company. We
discuss certain of the main differences under “Proposal 4 - Approval of the
Redomestication—Description of New Luxembourg Shares” and “Proposal 4 - Approval
of the Redomestication—Comparison of Rights of Shareholders”. A copy of the
English version of the Articles is attached as Annex A to this Proxy
Statement.
Stock
Exchange Listing
We will
submit an application so that our shares will continue to be listed on the NYSE
under the symbol “FSR”, the same symbol under which our shares currently are
listed. Our shares are also currently listed on the Bermuda Stock Exchange, and
we expect that they will continue to be listed on the Bermuda Stock Exchange
after the Redomestication.
Accounting
Treatment
Under
U.S. GAAP, the assets and liabilities in our financial statements after the
Redomestication will be reflected at their historical value in our financial
statements at the time of the Redomestication.
Tax
Considerations of the Redomestication
The
Company should not be subject to U.S. federal income tax as a result of the
Redomestication. For U.S. federal income tax purposes, holders of Flagstone
(Bermuda) shares should not recognize gain or loss solely as a result of the
Redomestication. See “Proposal 4 - Approval of the Redomestication—Material Tax
Considerations—Material U.S. Tax Consequences of the
Redomestication”.
For
Luxembourg tax purposes, holders of Flagstone (Bermuda) shares should not
realize a taxable gain solely as a result of the Redomestication. See “Proposal
4 - Approval of the Redomestication—Material Tax Considerations—Material
Luxembourg Tax Consequences of the Redomestication”.
Please
refer to “Proposal 4 - Approval of the Redomestication—Material Tax
Considerations” for a description of certain material U.S. federal, Luxembourg
and Bermuda tax consequences of the Redomestication to Flagstone Reinsurance
shareholders. Determining the actual tax consequences to you may be complex and
will depend on your specific situation. Accordingly, the tax consequences
summarized above may not apply to all holders of Flagstone Reinsurance shares
and you should consult your own tax advisors regarding the particular U.S.
(federal, state and local), Luxembourg, Bermuda and other non-U.S. tax
consequences of the Redomestication and ownership and disposition of the
Flagstone (Luxembourg) shares in light of your particular
situation.
The
following table presents selected financial data for the Company. Statement of
operations data and balance sheet data of the Company are derived from our
audited consolidated financial statements which have been prepared in accordance
with U.S. GAAP. The historical financial information may not be indicative of
the Company’s future performance. The data should be read in conjunction with
the sections entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009 and the Company’s
financial statements, related notes and other financial information incorporated
by reference in this Proxy Statement.
|
Years Ended December 31,
|
Period October
4, 2005 through
December 31,
|
|||||||||||||||||||
|
(in thousands, except per share data)
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||||||
|
Summary
Statement of Operations Data:
|
||||||||||||||||||||
|
Net
premiums written
|
792,469 | 694,698 | 527,031 | 282,498 | - | |||||||||||||||
|
Net
income (loss)
|
242,192 | (187,302 | ) | 167,922 | 152,338 | (12,384 | ) | |||||||||||||
|
Net
income (loss) per common share outstanding—Basic
|
2.87 | (2.20 | ) | 2.05 | 2.17 | (0.22 | ) | |||||||||||||
|
Dividends
declared per common share
|
0.16 | 0.16 | 0.08 | - | - | |||||||||||||||
|
As at December 31,
|
||||||||||||||||||||
|
Summary Balance Sheet Data:
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||||||
|
Total
assets
|
2,566,768 | 2,215,970 | 2,103,773 | 1,144,502 | 548,356 | |||||||||||||||
|
Total
investments, cash and cash equivalents and restricted cash
|
1,945,320 | 1,700,844 | 1,865,698 | 1,018,126 | 548,255 | |||||||||||||||
|
Long
term debt
|
252,402 | 252,575 | 264,889 | 137,159 | - | |||||||||||||||
|
Loss
and loss adjustment reserves
|
480,660 | 411,565 | 180,978 | 22,516 | - | |||||||||||||||
|
Shareholders’
equity
|
1,211,018 | 986,013 | 1,210,485 | 864,519 | 547,634 | |||||||||||||||
|
Book
Value Per Common Share —Basic
|
14.56 | 11.61 | 14.17 | 12.08 | 9.91 | |||||||||||||||
As of January 1, 2007, we adopted SFAS No. 157, “Fair Value Measurements” and SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (currently FASB Accounting Standards Codification Topics on Fair Value Measurements and Disclosures and on Financial Instruments (see Item 8, Note 1 “Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2009 for additional details regarding the adoption of the FASB Accounting Standards Codification)). As a result, substantially all of our investments are now carried at fair value with changes in fair value being reported as net realized and unrealized gains (losses) in our statement of operations. Prior to the adoption of these Topics, our available for sale investments were carried at fair value with changes in fair value with changes therein reported as a component of other comprehensive income.
On
January 12, 2007, we began to consolidate the operations of Mont Fort
Re Ltd. in accordance with the FASB ASC Topic on Consolidation and on July
1, 2007, we began to consolidate the operations of Island Heritage
Holdings Ltd. in accordance with the FASB ASC Topic on
Consolidation.
On July
1, 2008, we began to consolidate the operations of Flagstone Reinsurance Africa
Limited, on October 1, 2008, we began to consolidate the operations of Flagstone
Alliance Insurance & Reinsurance PLC and on November 18, 2008, we
began to consolidate the operations of Marlborough Underwriting Agency Limited
in accordance with the FASB ASC Topic on Consolidation.
Pro
Forma Selected Financial Data
Pro forma
financial statements are not included in this Proxy Statement because no
significant pro forma adjustments are required to be made to the historical
statement of operations and balance sheet of the Company for the year ended and
as of December 31, 2009. Those financial statements are included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2009.
Market
Price Information
On March
19, 2010, the last trading day before the public announcement of the
Redomestication, the closing price of our shares on the NYSE was $11.15 per
share.
The
presence, in person or by proxy, of two or more of the holders representing in
excess of 50% of the total shares outstanding and entitled to vote at the Annual
General Meeting constitutes a quorum for the conduct of business. Abstentions
will be counted as present for purposes of determining whether there is a quorum
in respect of the proposals. “Broker non-votes” (i.e., common shares held by
brokers which are represented at the Annual General Meeting but with respect to
which the broker is not empowered to vote on a particular proposal) will be
counted as present for purposes of determining whether there is a quorum in
respect of the proposals.
Required
Vote
Under our
Bye-Laws, the Redomestication requires the approval of a majority of the shares
present and voting on the proposals at the Annual General Meeting, whether in
person or by proxy.
As of the
record date, we believe our directors, executive officers and affiliates as a
group held 45.6% of our outstanding common shares. Under our Bye-Laws, some
members of this group may have their voting rights reduced, and the group’s
voting rights could be less than 45.6%. See “Security Ownership of Certain
Beneficial Owners, Management and Directors”.
Regulatory
Matters
Prior to
the Redomestication, we expect to move the location of certain U.K. subsidiaries
within our company structure for which we will seek the approval of the
U.K.’s
Financial Services Authority (“FSA”) and Lloyd’s of London. We
are not aware of any other governmental approvals or actions that are required
to complete the Redomestication, other than compliance with U.S. federal and
state securities laws and Bermuda and Luxembourg corporate law.
No
Appraisal Rights
Under
Bermuda law, our shareholders do not have any right to an appraisal of the value
of their shares or payment for them in connection with the Redomestication. See
“The Shareholder Meeting—Dissenter’s Right of Appraisal”.
Before
you decide how to vote on the Redomestication, you should consider carefully the
following risk factors, in addition to the other information contained in this
Proxy Statement and the documents incorporated by reference, including our
Annual Report on Form 10-K for the year ended December 31, 2009 and
subsequent filings with the SEC.
COMPANY
RISK FACTORS
The
market for our common shares may differ after the Redomestication.
We intend
to take steps to ensure that, immediately following the Redomestication, our
common shares will continue to be listed on the NYSE under the symbol “FSR”;
however, the market price, trading volume or volatility of our common shares
could be different after the Redomestication.
After
the Redomestication, there may be less demand for our shares if persons seek to
avoid being a 10% U.S. Shareholder.
After the
Redomestication, the voting power of any shareholder owning 9.9% or more of the
Company’s shares will not be reduced to less than 9.9%, which could result in
adverse tax consequences to U.S. holders controlling 10% or more of our shares.
See “─After the Redomestication, U.S. persons holding shares in Flagstone
(Luxembourg) with an aggregate voting power of 10% or greater may be subject to
current U.S. federal income tax with respect to certain income earned by
Flagstone (Luxembourg) and its subsidiaries”. As a result, existing U.S.
shareholders may sell a certain portion of their shares in the Company, and U.S.
persons may, in general, purchase fewer shares in the Company than they might
otherwise purchase, in order to avoid controlling 10% or more of our shares.
This, in turn, could adversely impact our share price.
Following
the Redomestication, we may be removed from certain stock indices and mutual
funds, which we expect could have an adverse impact on our share
price.
Stock
indices and mutual funds often impose a variety of qualifications for a
company’s inclusion that could be affected by the Redomestication. If our shares
are removed as a component of certain stock indices or no longer meet the
qualifications of certain mutual funds, institutional investors that are
required to track the performance of such indices or the funds that impose those
qualifications may be required to sell their shares, which we anticipate may
adversely affect the price of our shares.
Legislative
or regulatory action could materially and adversely affect us after the
Redomestication or eliminate or reduce some of the anticipated benefits of the
Redomestication.
Our tax
position could be adversely impacted by changes in tax laws, tax treaties or tax
regulations or the interpretation or enforcement thereof by the tax authorities
in Luxembourg, the United States and other jurisdictions following the
Redomestication. Any future amendments to the current income tax treaties
between Luxembourg and other jurisdictions, including the United States, could
subject us to increased taxation and potentially significant expense. We cannot
assure you that the Redomestication will eliminate the risk that these changes,
if made, will apply to us.
As a
Luxembourg company following the Redomestication, we will be required to comply
with numerous Luxembourg and European Union laws and regulations as from time to
time in effect, which may have a material and adverse effect on our financial
condition and results of operations.
The
Redomestication will result in additional direct and indirect costs, even if the
Redomestication is not completed.
We will
incur additional direct costs as a result of the Redomestication. Following the
Redomestication, we will hold certain Board of Directors meetings, management
meetings and annual general meetings in Luxembourg. We also expect to increase
our presence in Luxembourg and incur costs and expenses, including professional
fees, to comply with Luxembourg corporate and tax laws. In addition, we expect
to incur attorneys’ fees, accountants’ fees, filing fees, mailing expenses and
financial printing expenses in connection with the Redomestication, even if it
is not approved or completed. The Redomestication also may negatively affect us
by diverting attention of our management and employees from our operating
business and by increasing other administrative costs and
expenses.
As a
Luxembourg company we will incur additional accounting and audit costs. We will
be required to hire and incur the additional expense of a statutory auditor to
audit the Company and its stand alone accounts, separate from the subsidiaries,
which accounts will be prepared in accordance with Luxembourg Generally Accepted
Accounting Principles (“Lux GAAP”) on an annual basis. The requirement to
appoint the statutory auditor is in addition to the requirement of the Company
to prepare consolidated financial statements under U.S. GAAP for SEC purposes.
Should the Company, in the future, meet certain thresholds under Luxembourg law
on a stand alone basis, it may be required to appoint an independent auditor to
audit its stand alone accounts. If the Company is required to appoint such
an independent auditor, it is released from its obligations to have a statutory
auditor for its stand alone accounts.
In
addition, the Company is required by Luxembourg law to prepare consolidated
accounts under Lux GAAP (or IFRS). The consolidated accounts will be
required to be audited by an independent auditor. The preparation of these
consolidated accounts is in addition to the requirement of the Company to
prepare consolidated financial statements under U.S. GAAP for SEC
purposes. The Company will apply to the appropriate government authorities
in Luxembourg for an exemption from the requirement to prepare consolidated
accounts under Lux GAAP (or IFRS). Even if the exemption is granted,
Luxembourg may require us to prepare a reconciliation of our shareholders’
equity and annual results between U.S. GAAP and Lux GAAP (or IFRS). Should
the application for exemption not be successful, the preparation of consolidated
accounts under U.S. GAAP will not release the Company from its legal obligation
under Luxembourg Law to prepare consolidated accounts under Lux GAAP (or
IFRS).
The
Company may potentially therefore be required to prepare three sets of accounts
and to have these three sets of accounts audited.
We
may choose to abandon or delay the Redomestication.
We may
abandon or delay the Redomestication at any time prior to it becoming effective
by action of our Board of Directors, even after the Annual General Meeting.
While we currently expect the Redomestication to take place as soon as
practicable after obtaining shareholder approval of the Redomestication at the
Annual General Meeting, our Board of Directors may delay the Redomestication for
a significant time or may abandon the Redomestication after the Annual General
Meeting because, among other reasons, of an increase in our estimated cost of
the Redomestication or a determination by the Board of Directors that the
Redomestication is no longer in the best interests of our shareholders or may
not result in the benefits we expect.
TAX
RISK FACTORS
After
the Redomestication, U.S. persons holding shares in Flagstone (Luxembourg) with
an aggregate voting power of 10% or greater may be subject to current U.S.
federal income tax with respect to certain income earned by Flagstone
(Luxembourg) and its subsidiaries.
If the
Company or any of its subsidiaries is characterized as a controlled foreign
corporation (“CFC”) for an uninterrupted period of 30 days or more during a
taxable year, then any 10% U.S. Shareholder that owns, directly or indirectly
through non-U.S. entities shares of the Company or any of its non-U.S.
subsidiaries (based on voting power) on the last day of the taxable year on
which the Company or any of its non-U.S. subsidiaries (as the case may be) is a
CFC, would be required to include in such 10% U.S. Shareholder’s U.S. federal
gross income for the taxable year, as income subject to taxation at ordinary
income tax rates, such 10% U.S. Shareholder’s pro rata share of the relevant
company’s undistributed earnings and profits characterized as “subpart F income”. A “10%
U.S. Shareholder” is a United States person (as defined in Section 957(c)
of the Internal Revenue Code of 1986, as amended (the “Code”)) (“U.S. Person”)
that owns (directly or indirectly through non-U.S. entities or constructively)
at least 10% of the total combined voting power of all classes of stock entitled
to vote of the Company or any of its non-U.S. subsidiaries (as the case may be).
Subpart F income generally includes passive investment income (such as interest,
dividends and certain rent or royalties) and subpart F insurance income, which
includes certain insurance underwriting income and related investment income.
Additionally, a United States person (as defined in Section 7701(a)(30) of
the Code) that sells or exchanges our common shares (including by way of
repurchase or liquidation) and that was a 10% U.S. Shareholder at any time
during the five-year period ending on the date of such disposition while the
Company was characterized as a CFC may be taxable at dividend rates on any gain
realized on the disposition to the extent of our current and accumulated
earnings and profits attributable to such common shares.
Unlike
the Bye-Laws of Flagstone (Bermuda), the Articles will not contain a provision
reducing the voting power of any shareholder owning 9.9% or more of the
Company’s shares to less than 9.9%. For a more detailed description of the
operation of this rule, see “The Shareholder Meeting—Voting Securities and
Record Date—Voting Rights”. Accordingly, no assurance can be given that
Flagstone (Luxembourg) or any of its subsidiaries will not be, or become, a CFC
after the Redomestication. Investors should consult their own tax advisors
regarding the U.S. tax ramifications of owning shares of Flagstone (Luxembourg),
and in particular regarding the manner in which ownership is computed for
purposes of applying the CFC rules described above, and the potential U.S. tax
ramifications of ownership of shares of Flagstone (Luxembourg) with an aggregate
voting power of 10% or greater.
After
the Redomestication, dividends you receive may be subject to Luxembourg dividend
withholding tax and Luxembourg income tax.
Dividend
withholding tax (currently at a rate of 15%) may arise in respect of dividends
paid on Flagstone (Luxembourg) shares. A Luxembourg withholding tax levied at a
rate of 15% is due on dividends and similar non-exempt distributions to
Flagstone (Luxembourg)’s holders. Flagstone (Luxembourg) will be required to
withhold at such rate from distributions to the shareholder and to pay such
withheld amounts to the Luxembourg tax authorities.
Dividends
and similar distributions paid to Flagstone (Luxembourg)’s holders may be exempt
from Luxembourg dividend withholding tax if: (1) the shareholder is a qualifying
corporate entity holding a stake of at least 10% of the total issued and
outstanding share capital of Flagstone (Luxembourg) or a stake of such share
capital with an acquisition price of at least €1.2 million; and (2) has
either held this qualifying stake in the capital of Flagstone (Luxembourg) for
an uninterrupted period of at least 12 months at the time of the payment of the
dividend, or if it undertakes to continue to own such qualifying shareholding
until such time as the entity has held the shares for an uninterrupted period of
at least 12 months. Examples of qualifying corporate shareholders are
taxable Luxembourg companies, certain taxable companies resident in other EU
member states, capital companies resident in Switzerland subject to income tax
and companies fully subject to a tax corresponding to Luxembourg corporate
income tax that are resident in countries that have concluded a treaty for the
avoidance of double taxation with Luxembourg. Residents of countries that have
concluded a treaty for avoidance of double taxation with Luxembourg might claim
application of a dividend withholding tax reduced rate (or exemption) depending
on the applicable tax treaty.
Under
current Luxembourg tax law, payments to shareholders in relation to a reduction
of share capital or share premium are not subject to Luxembourg dividend
withholding tax if certain conditions are met, including, for example, the
condition that Flagstone (Luxembourg) does not have distributable reserves or
profits generated post-Redomestication. If Flagstone (Luxembourg) has, at the
time of the payment to shareholders with respect to their shares, distributable
reserves or profits in Flagstone (Luxembourg) generated Post-Redomestication, a
distribution of share capital or share premium will be recharacterized for
Luxembourg tax purposes as a distribution of such reserves or earnings subject
to withholding tax. While it is our intention to make payments to
shareholders in a way that no Luxembourg withholding tax is due, we may not be
able to do so or our ability to do so could be limited.
Flagstone
recommends that each shareholder consult his or her own tax advisor as to the
tax consequences of holding shares in and receiving share capital, share premium
and dividend payments from Flagstone (Luxembourg).
The
Redomestication may not allow us to maintain a competitive worldwide effective
corporate tax rate.
We
believe the Redomestication should permit us to maintain a competitive worldwide
effective tax rate. However, we cannot provide any assurance as to what our
worldwide effective tax rate will be after the Redomestication because of, among
other things, uncertainty regarding the amount of business activities and
profits in any particular jurisdiction in the future and the tax laws of
such jurisdictions. Our actual worldwide effective tax rate may vary from our
expectation and that variation may be material.
We
will be subject to various Luxembourg taxes as a result of the
Redomestication.
Although
we do not expect Luxembourg taxes materially to affect our worldwide effective
corporate tax rate, we will be subject to additional corporate taxes in
Luxembourg as a result of the Redomestication. Luxembourg imposes corporate
income tax plus municipal business tax and surcharges for Luxembourg resident
companies at an effective tax rate, currently, of 28.59% (for companies
registered in Luxembourg City). However, we should be entitled to a
“participation relief” that in most cases will effectively eliminate any
Luxembourg taxation on the dividends paid to us out of profits of our qualifying
subsidiaries as well as on capital gains related to the sale of equity interests
in our qualifying subsidiaries. We also will be subject to Luxembourg net wealth
tax at the rate of 0.5% levied on the net assets except for equity interests in
our qualifying subsidiaries. The net wealth tax charge can be reduced if a
specific reserve is created and maintained for five years. However, the maximum
reduction is limited to the corporate income tax rate due for the same year. In
addition, we will be subject to Luxembourg indirect taxes (e.g., VAT). We
currently are not subject to income, capital, net wealth or indirect taxes in
Bermuda.
There
could be adverse tax consequences if we fail to maintain sufficient presence in
Luxembourg.
If the
Company does not maintain sufficient presence in Luxembourg, the Luxembourg tax
authorities may not be willing to confirm that the Company is a tax resident of
Luxembourg. In such case, the Company may not be entitled to tax treaty
benefits. In addition, a foreign jurisdiction may claim the right to tax
Flagstone (Luxembourg) as if it were a tax resident of that foreign
jurisdiction, and ultimately double taxation may result.
BERMUDA
V. LUXEMBOURG SHAREHOLDER RIGHTS RISK FACTORS
Certain
of your rights as a shareholder will change as a result of the
Redomestication.
The
completion of the Redomestication will change the governing law that applies to
our shareholders from Bermuda law to Luxembourg law. There are differences
between your rights under Luxembourg law and under Bermuda law, and there are
differences between our current Memorandum of Association and Bye-Laws and the
Articles that will apply to us after we continue as a Luxembourg company. We
discuss these differences under “Proposal 4 - Approval of the
Redomestication—Description of Flagstone (Luxembourg) Shares” and “Proposal 4 -
Approval of the Redomestication—Comparison of Rights of Shareholders”. A copy of
the English version of the Articles is attached as Annex A to this Proxy
Statement.
In
addition, to mitigate certain potential adverse U.S. tax consequences to U.S.
shareholders, our current Bye-Laws reduce the total voting power of any
shareholder who is a U.S. person controlling 9.9% or more of our common shares
to less than 9.9% of the voting power of our common shares. For a more detailed
description of the operation of this rule, see “The Shareholder Meeting—Voting
Securities and Record Date—Voting Rights”. After the Redomestication, each share
will be entitled to one vote with no potential reduction in voting power. Thus,
as a result of the Redomestication and the corresponding removal of the 9.9%
voting limitation from the Company’s corporate documents, there may be an
increase in the voting rights of certain U.S. shareholders and a dilution of the
voting rights of other shareholders. This change will be undertaken for
Luxembourg legal reasons and could create adverse tax consequences to certain
U.S. shareholders. See “Risk Factors—Tax Risk Factors—After the Redomestication,
U.S. persons holding shares in Flagstone (Luxembourg) with an aggregate voting
power of 10% or greater may be subject to current U.S. federal income tax with
respect to certain income earned by Flagstone (Luxembourg) and its
subsidiaries.”
These
differences could cause our shares to be less attractive to you and other
shareholders and could adversely impact the share price.
As
a result of increased shareholder approval requirements, we may have less
flexibility as a Luxembourg company than as a Bermuda company with respect to
certain aspects of capital management.
Under
Bermuda law, our directors may issue, without further shareholder approval, any
shares authorized in our Memorandum of Association that are not already issued
or reserved. Bermuda law also provides substantial flexibility in establishing
the terms of preferred shares. In addition, our Board of Directors currently has
the right, subject to statutory limitations, to declare and pay dividends on our
shares without a shareholder vote. Luxembourg law will allow our shareholders to
authorize share capital that can be issued by the Board of Directors without
further shareholder approval, but this authorization will be limited to the
amount fixed in the Articles, and the authorization given to the Board of
Directors must be renewed by the shareholders every five years. The renewal
requires a general meeting of shareholders deliberating in accordance with the
requirements for amendments to the Articles. The increase of capital must be
recorded in a notarial instrument, prepared at the request of the Board of
Directors, within one month from the end of the subscription period or within
three months from the day on which that period commenced. Luxembourg law grants
pre-emptive rights to existing shareholders to subscribe for new issuances of
shares where such shares are issued for cash. Shareholders will be asked to
waive their pre-emption rights in relation to shares to be issued for cash. In
addition, after the Redomestication, we will not be able to issue different
classes of shares (including preferred shares) unless the shareholders approve
them. If shareholders do not approve further extensions of the Board’s ability
to issue shares without prior shareholder approval and free from shareholder
pre-emption rights, or approve the issuance of different classes of shares, the
Company’s capital flexibility could be adversely impacted.
Luxembourg
law also reserves for approval by shareholders many corporate actions over which
our Board of Directors currently has authority under Bermuda law. We cannot
assure you that situations will not arise where such flexibility would have
provided substantial benefits to our shareholders.
This
Proxy Statement, including the documents we incorporate by reference, contains,
and the Company may from time to time make, written or oral “forward-looking
statements” within the meaning of the U.S. federal securities laws, which are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. All forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of
uncertainties and other factors, many of which are outside the Company’s control
that could cause actual results to differ materially from such statements. In
particular, statements using words such as “may”, “should”, “estimate”,
“expect”, “anticipate”, “intend”, “believe”, “predict”, “potential”, or
words of similar import generally involve forward-looking
statements.
Important
events and uncertainties that could cause the actual results to differ include,
but are not necessarily limited to: market conditions affecting the Company’s
common share price; the impact of volatility in the financial markets, including
the duration of the economic crisis and the effectiveness of governmental
solutions; the weakening economy, including the impact on our consumers’
businesses; fluctuations in interest rates; the effects of corporate
bankruptcies on capital markets; the possibility of severe or unanticipated
losses from natural or man-made catastrophes; the effectiveness of our loss
limitation methods; our dependence on principal employees; the cyclical nature
of the insurance and reinsurance business; the levels of new and renewal
business achieved; opportunities to increase writings in our core property and
specialty reinsurance and insurance lines of business and in specific areas of
the casualty reinsurance market; the sensitivity of our business to financial
strength ratings established by independent rating agencies; the estimates
reported by cedents and brokers on pro-rata contracts and certain excess of loss
contracts where the deposit premium is not specified in the contract; the
inherent uncertainties of establishing reserves for loss and loss adjustment
expenses; our reliance on industry loss estimates and those generated by
modeling techniques; unanticipated adjustments to premium estimates; changes in
the availability, cost or quality of reinsurance or retrocessional coverage;
changes in general economic conditions; changes in governmental regulation or
tax laws in the jurisdictions where we conduct business; the amount and timing
of reinsurance recoverables and reimbursements we actually receive from our
reinsurers; the overall level of competition, and the related demand and supply
dynamics in our markets relating to growing capital levels in the insurance and
reinsurance industries; declining demand due to increased retentions by cedents
and other factors; the impact of terrorist activities on the economy; and rating
agency policies and practices. In addition, the Company’s forward-looking
statements about the Redomestication and its anticipated effects, operations,
stock trading matters, and tax and financial matters could be affected by risks
including that the Redomestication may not close, shareholders or regulators may
not provide required approvals, the Company may encounter difficulties moving
jurisdictions, tax and financial expectations might not materialize or might
change, and Luxembourg corporate governance and regulatory schemes could prove
different or more challenging than currently expected.
These and
other events that could cause actual results to differ are discussed in more
detail from time to time in our filings with the SEC. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required
by U.S. federal securities laws. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date on which they are made.
Date,
Time and Place
The
Annual General Meeting of Shareholders will be held on ,
2010 at 8:30 a.m. local time at The Mid Ocean Club, Tucker’s Town, St.
George’s, Bermuda.
We are
first mailing this Proxy Statement and accompanying form of proxy to
shareholders beginning on or about , 2010.
Company’s
Mailing Address
Flagstone
Reinsurance Holdings Limited
Crawford
House
Church
Street
Hamilton
HM 11
Bermuda
(441)
278-4300
Purpose
of the Meeting
At the
meeting, the Board of Directors will ask our shareholders to vote:
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Proposal 1: To
elect four (4) Class C directors (David Brown, Stephen Coley, Dr. Anthony
Knap, Ph.D and Peter F. Watson) to hold office until the 2013 Annual
General Meeting of Shareholders or until their respective successors have
been duly elected or appointed.
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Proposal 2: To
approve the appointment of Deloitte & Touche to serve as the Company’s
independent auditor for fiscal year 2010 and until our 2011 Annual General
Meeting of Shareholders and to refer the determination of the auditor’s
remuneration to the Board of
Directors.
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Proposal 3: To
approve amendments to the Performance Share Unit
Plan.
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Proposal 4: To
consider and approve the Redomestication from Bermuda to Luxembourg, the
authorizing of the Board of Directors to abandon or delay the
Redomestication for any reason at any time prior to it becoming effective
notwithstanding the approval of the Shareholders, and the granting of a
power of attorney to each member of the Board of Directors (or such
persons appointed attorney in Luxembourg) to appear before a Luxembourg
public notary and to take all necessary steps and to sign all necessary
documents to effect the
Redomestication.
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Proposal 5: If
the Redomestication is approved, to approve the change of the Company’s
corporate name to Flagstone Reinsurance Holdings,
S.A.
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Proposal 6: If
the Redomestication is approved, to change the Company’s corporate
purpose.
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Proposal 7: If
the Redomestication is approved, to fix the Company’s registered office in
Luxembourg.
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Proposal 8: If
the Redomestication is approved, to approve the Company’s Luxembourg
articles of incorporation.
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Proposal 9: If
the Redomestication is approved, to approve the Company’s issued share
capital.
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Proposal 10: If
the Redomestication is approved, to approve the Company’s authorized share
capital.
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Proposal 11: If
the Redomestication is approved, to waive any shareholder preferential or
pre-emptive subscription rights under Luxembourg
law.
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Proposal 12: If
the Redomestication is approved, to allow the Company and its subsidiaries
to acquire and own shares of the
Company.
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Proposal 13: If
the Redomestication is approved, to approve the fiscal year of the
Company.
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Proposal 14: If
the Redomestication is approved, to approve the date and time for future
Annual General Meetings of
Shareholders.
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Proposal 15: If
the Redomestication is approved, to confirm the appointment of the
Company’s directors.
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Proposal 16: If
the Redomestication is approved, to confirm the Company’s independent
auditor.
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Proposal 17: If
the Redomestication is approved, to elect the Company’s statutory
auditor.
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Proposal 18: If
the Redomestication is approved, to acknowledge an independent auditors’
report for the Company.
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Proposal 19: If
there are insufficient votes at the time of the meeting to approve the
Redomestication, to approve the motion to adjourn the meeting to a later
date to solicit additional proxies.
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The
matters described in this Proxy Statement are the only matters that we know will
be voted on at the Annual General Meeting. If other matters are properly
presented at the Annual General Meeting, the proxy holders will vote your shares
as they see fit.
Our Board
of Directors has approved the proposals and recommends that you vote “FOR” all
of the proposals.
Revocability
of Proxy
You may
change your vote in one of three ways at any time before it is
exercised:
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notify
our Secretary in writing before the Annual General Meeting that you are
revoking your proxy;
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submit
another proxy card (or voting instruction card if you hold your shares in
street name) with a later date; or
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if
you are a holder of record, or a beneficial holder with a proxy from the
holder of record, vote in person at the Annual General
Meeting.
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Your
presence without voting at the meeting will not automatically revoke your proxy,
and any revocation during the meeting will not affect votes previously taken. If
you hold your shares in the name of a bank, broker or other nominee, you should
follow the instructions provided by your bank, broker or nominee in revoking
your previously granted proxy.
Dissenter’s
Right of Appraisal
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.
Persons
Making the Solicitation
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.
We will
pay the cost of solicitation of proxies. We have engaged Okapi Partners and BNY
Mellon Shareowner Services as the proxy solicitors for the Annual General
Meeting for an aggregate fee of approximately $42,500. In addition to the use of
the mails, certain of our directors, officers or employees may solicit proxies
by telephone or personal contact. Upon request, we will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding proxy materials to beneficial owners of
shares.
Interest
of Certain Persons in Matters to be Acted Upon
Other
than for any interest arising from the ownership of our common shares or any
nominees election to office, the Company is not aware of any substantial
interest of any director, executive officer, nominee for election as a director
or associate of any of the foregoing in any matter to be acted upon at the
Annual General Meeting.
Voting
Securities and Record Date
Record
Date
Our Board
of Directors has fixed the close of business on , 2010 as
the record date for the Annual General Meeting. Only holders of record of our
shares on the record date are entitled to notice of and to vote at the meeting
or any adjournment or postponement of the meeting. You will not be the holder of
record of shares that you hold in “street name”. Instead, the depository (for
example, Cede & Co.) or other nominee will be the holder of record
of such shares.
Number
of Shares Outstanding
On the
record date of the Annual General Meeting, 80,001,073 shares were issued and
entitled to be voted at the meeting.
Voting
Rights
In
general, and except as provided below, shareholders have one vote for each
common share held by them. However, if the common shares of a
shareholder are treated as “controlled shares” (generally, common shares held
directly, indirectly through non-U.S. entities or constructively through certain
relationships) of any U.S. Person (as defined in Section 957(c) of the
Code) and such controlled shares constitute 9.9% or more of the votes conferred
by the Company’s issued shares, the voting rights with respect to the controlled
shares of that U.S. Person (a “9.9% U.S. Shareholder”) shall be limited to a
voting power of less than 9.9% under a formula specified in the
Bye-Laws. The reduction in votes is generally to be applied
proportionately among all the controlled shares of the 9.9% U.S. Shareholder;
provided, however, that the reduction shall first be effected by reducing the
votes conferred on the common shares held directly by such 9.9% U.S.
Shareholder. The reduction in the votes of the common shares held by
a 9.9% U.S. Shareholder effected by the foregoing shall be allocated
proportionately among the common shares held by the other shareholders so long
as the allocation does not cause any U.S. Person to become a 9.9% U.S.
Shareholder. The formula is applied repeatedly until the voting power
of all 9.9% U.S. Shareholders has been reduced to 9.9%.
Principal
Holders of Common Shares
Our
directors and executive officers have indicated that they intend to vote their
shares in favor of all of the proposals. On the record date, we believe our
directors, executive officers and affiliates beneficially owned 45.6% of
the outstanding common shares. Under our Bye-Laws, some members of this group
may have their voting rights reduced and the group’s voting rights could be
reduced to less than 45.6%. See “Security Ownership of Certain
Beneficial Owners, Management and Directors”.
Voting
Procedures
Quorum
The
presence, in person or by proxy, of two or more of the holders representing in
excess of 50% of the total shares outstanding and entitled to vote at the Annual
General Meeting constitutes a quorum for the conduct of business. Holders of
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.
Voting
in Person or By Proxy
A proxy
card is being sent to each record holder as of the record date. If you properly
received a proxy card, you may grant a proxy to vote on the proposals by marking
your proxy card appropriately, executing it in the space provided, dating it and
returning it to us. We may accept your proxy by any form of communication
permitted by Bermuda law and our Bye-Laws. If you hold your shares in the name
of a bank, broker or other nominee, you should follow the instructions provided
by your bank, broker or nominee when voting your shares.
If you
have timely mailed a properly executed proxy card and clearly indicated your
votes, your shares will be voted as indicated. If you have timely submitted a
properly executed proxy card and have not clearly indicated your votes, your
shares will be voted “FOR” each of the proposals. If any other matters properly
come before the meeting, the persons named in the proxy card will vote the
shares represented by all properly executed proxies in accordance with their
best judgment, unless authority to do so is withheld in the proxy.
You may
abstain on any of the proposals by marking “ABSTAIN” with respect to any
proposal.
The
matters described in this Proxy Statement are the only matters that we know will
be voted on at the Annual General Meeting. If other matters are properly
presented at the Annual General Meeting, the proxy holders will vote your shares
as they see fit.
If you do
not appoint a proxy and you do not vote at the meeting, you will still be bound
by the outcome. You therefore are strongly urged to attend and vote at the
meeting in person or by proxy.
Abstentions
and Broker Non-Votes
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. Pursuant
to Bermuda law, (i) common shares which abstain from voting on any matter are
not included in the determination of the common shares voting on such matter but
are counted for quorum purposes and (ii) common shares which are
represented by “broker non-votes” (i.e., common shares held by brokers which are
represented at the Annual General Meeting but with respect to which the broker
is not empowered to vote on a particular proposal) are not included in the
determination of the common shares voting on such matter but are counted for
quorum purposes.
Member
brokerage firms of the NYSE 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, may vote in their discretion upon certain proposals.
Vote
Required for Approval
In
accordance with our Bye-Laws, under Proposal 1, 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 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.
Our
Bye-Laws provide for a classified Board of Directors of no fewer than ten (10)
and no more than twelve (12) directors, divided into three (3) classes of as
nearly equal size as possible. The Board of Directors currently
consists of twelve (12) directors pursuant to a resolution of the Board of
Directors. Each director will serve a three-year term. At
the Annual General Meeting, our shareholders will elect the Class C directors,
who will serve until the 2013 Annual General Meeting of
Shareholders. Our incumbent Class A and Class B directors will serve
until the 2012 and 2011 Annual General Meetings of Shareholders,
respectively.
At its
meeting on February 26, 2010, the Board of Directors nominated Messrs. Brown,
Coley, Knap and Watson for re-election as Class C directors 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 or by the Board of Directors.
NOMINEES
David
Brown
Stephen
Coley
Dr.
Anthony Knap, Ph.D.
Peter F.
Watson
The
respective ages, business experience, directorships and committee memberships
for the nominees are set out in “Our Directors”. All of the nominees
currently serve as directors.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF
THE FOUR CLASS C DIRECTORS NAMED ABOVE
Upon the
recommendation of the Audit Committee, the Board of Directors proposes that the
shareholders approve the appointment of Deloitte & Touche to serve as our
independent auditor for the 2010 fiscal year until the 2011 Annual General
Meeting of Shareholders. Deloitte & Touche has 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 refer 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
2009 fiscal year:
Audit
Fees
Aggregate
audit fees billed to us by Deloitte & Touche for the fiscal years ended
December 31, 2009 and 2008 were $3,057,559 and $3,612,671,
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, 2009 and 2008 were $123,718 and $98,640, respectively, for assurance and
related services that are related to the audit and review of the financial
statements (including technical consultations and services provided in relation
to securities offerings) 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, 2009 and 2008 were $nil and $18,890,
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, 2009 and 2008 were $106,772 and $157,927, respectively, which relate to
other consents primarily for due diligence services. 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 2009 or 2008 and thus the Audit Committee concluded
that such services did not impair the auditor’s independence.
Pre-Approval
Policies
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 2009 and 2008 were pre-approved by the Audit
Committee.
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 2010 FISCAL YEAR UNTIL THE 2011 ANNUAL
GENERAL MEETING OF SHAREHOLDERS AND THE REFERRAL OF THE DETERMINATION OF THE
AUDITOR’S REMUNERATION TO THE BOARD OF DIRECTORS. PROXIES WILL BE SO VOTED
UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
It is
proposed, subject to shareholder approval, that the Company’s Performance Share
Unit Plan (the “PSU Plan”) be amended to, among other things, (i) modify the
treatment of Performance Share Units (“PSUs”) upon the retirement of an
employee, (ii) permit Mark Byrne, Chairman of the Company, to
receive PSUs and (iii) cancel PSUs if the Company is required to make
a financial restatement due to a material misstatement and those PSUs were
granted based upon the erroneous financial information.
Retirement
Amendments
Currently,
if an employee is 65 or older at the age of retirement, the employee’s PSUs are
cancelled. However, at the end of the first performance period after the
retirement, the retiree is paid in cash what they would have received had they
been employed until the end of that performance period. For an employee that
retires at 65 or over, the Board proposes to amend the PSU Plan so that PSUs are
not cancelled and continue to vest as if the retiree were still
employed.
Currently,
an employee who retires before 65 but whose age plus years of service exceeds 60
keeps their PSUs but the reward factor used to determine the number of PSUs
becomes fixed as of the most recent quarter prior to the retirement. The Board
proposes to increase the age plus service requirement from 60 to 65. For such
retirees, the Board also proposes that the retiree keeps their PSUs, and the
PSUs vest as if the retiree were still employed.
Eligible
Employee Amendment
The Board proposes to amend the PSU Plan to make Mark Byrne,
Chairman of the Company, eligible to receive PSUs.
Clawback
Amendment
The Board
proposes to add a provision that would cancel PSUs if the Company is required to
make a financial restatement due to a material misstatement and those PSUs were
granted based upon the erroneous financial information.
Other
Amendment
In
addition, the Board proposes to make other changes that are reflected in the PSU
Plan below.
Board
Recommendation; Required Approval
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 3. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
Text
of Amended PSU Plan
The text
of the PSU Plan as proposed to be amended appears below.
Flagstone
Reinsurance Holdings Limited
Performance
Share Unit Plan
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1.
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PURPOSE
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The
purpose of this Plan is to advance the interests of the Company and its
shareholders by providing PSUs as incentive compensation 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.
|
2.
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DEFINITIONS
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2.1.
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“Adverse Change in the
Plan” is defined in paragraph
12.
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2.2.
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“Affiliates”
includes any company affiliated50% or more
owned, directly with
West End Capital
Management (Bermuda) Limited or Flagstone Reinsurance Holdings
Limitedor
indirectly, by the Company.
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2.3.
|
“Board” means
the Board of Directors of the
Company.
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2.4.
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“Change in
Control” is defined in paragraph
9.
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2.5.
|
“Common Shares”
shall mean common shares of the
Company.
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2.6.
|
“Company” means
Flagstone Reinsurance Holdings
Limited.
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2.7.
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“Compensation
Committee” means the Compensation Committee of the
Board.
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2.8.
|
“Constructive
Termination” is defined in paragraph
11.
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2.9.
|
“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.
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2.10.
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“Exchange Act”
means the U.S. Securities Exchange Act of 1934, as
amended.
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2.11.
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“Hostile Takeover
Termination” is defined in paragraph
13.
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2.12.
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“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 PSUs granted to the
Employee under the Plan and receive payments under the Plan during the
life of the Employee.
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2.13.
|
“Maximum Award”
shall mean the maximum number of Common Shares that an Employee would be
entitled to receive if all of the performance goals set forth in a
particular PSU were satisfied over the Performance Period(s) set forth in
such PSU.
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2.14.
|
“Performance
Period(s)” means the period(s) during which an employee must
perform pursuant to the grant of a PSU; provided, however, that any such
period must end on December 31 of the relevant fiscal
year.
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2.15.
|
“Plan” means
this Flagstone Reinsurance Holdings Limited Performance Share Unit
Plan.
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2.16.
|
“PSU” means a
Performance Share Unit.
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2.17.
|
“Retire” means to
resign from the Company to be
Retired.
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2.18.
|
“Retired” means not
acting as an Employee, Officer, Director, or consultant to any insurance
or reinsurance firm. The Committee may waive this provision at its sole
discretion with respect to Clause 6.3.2, if it determines in its sole
discretion that the Employee is not competing in any way with the Company
or Affiliates.
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2.19.
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“Subsidiary”, as
used herein, has the meaning assigned to the term “subsidiary company” in
the Companies Act, 1981 of Bermuda.
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2.20.
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“Termination Without
Cause” is defined in paragraph
10.
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2.21.
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“Term of Service”
means the time between
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2.21.1.
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the date the
Employee’s continuous employment with the Company or one or more
Affiliates commenced, with the term of service of each employee
of an Affiliate deemed to commence at the latest of December 20, 2005, or
the date of acquisition of 50% or more by the Company of the ownership
interest, or the date of the Employee’s actual commencement of
service
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and
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2.21.2.
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any date of separation
from service, including for resignation, termination for Cause
or not for Cause, or
retirement.
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3.
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ADMINISTRATION
OF THE PLAN
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3.1.
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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 PSUs under the Plan or
shall have been eligible within one year prior to his appointment to
receive PSUs 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 share appreciation rights of
the Company or any of its
subsidiaries.
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3.2.
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Powers of the
Administrator. The Compensation Committee shall have
exclusive authority to select the Employees to be granted PSUs, to
determine the number of PSUs to be granted and the terms (including the
performance goals and Performance Period(s)) of such PSUs and to prescribe
the form of the instruments embodying such PSUs. The
Compensation Committee shall be authorized to interpret the Plan and the
PSUs 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
PSU grant instrument 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.
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3.3
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Eligibility. PSUs
may be granted only to Employees, excluding Employees whose employment
contracts specify that they are not entitled to receive
PSUs.
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4.
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AWARDS
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4.1.
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Type
of Awards Under the Plan. Awards under the Plan shall be
limited to PSUs.
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4.2.
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Maximum
Number of
PSUs and Maximum Number of Common Shares that may be Issued Pursuant to
PSUs Under the Plan. The maximum number of PSUs that may be
granted under the Plan shall not exceed 5,600,000 PSUs. The
maximum number of PSUs that may be granted under the Plan to any one
Employee shall be half the maximum number of PSUs that may be granted
under the Plan to all Employees. The aggregate Maximum Awards
that shall be issuable under the Plan shall not exceed 11,200,000 Common
Shares. If a PSU is forfeited or otherwise cancelled, or if an
Employee does not achieve the Maximum Award pursuant to a PSU, the Common
Shares underlying such PSU shall become available for future grant under
PSUs pursuant the Plan (unless the Plan has
terminated).
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5.
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RIGHTS WITH RESPECT TO
PSUs
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5.1.
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An
Employee to whom PSUs 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 Common Shares issuable pursuant thereto
until such Employee’s name is entered into the Register of Members of the
Company and until the date of the issuance of a share certificate (whether
or not delivered) thereforetherefor. Except
as provided in paragraph 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.
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6.
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PSUs
|
The grant
of PSUs 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
PSU are satisfied. Payment in respect of a PSU shall be made as
provided in subparagraph 6.6. Each grant of PSUs shall be subject to
the following terms and conditions:
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6.1.
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The
Compensation Committee shall determine the number of PSUs to be granted to
each Employee. PSUs may be issued in different classes or
series having different terms and
conditions.
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6.2.
|
Subject
to subparagraph 6.6, at the end of the Performance Period(s) specified in
the grant of a PSU, an Employee shall be entitled to receive the Maximum
Award if the performance objectives set forth in the grant of such PSU are
attained in full. If the performance objectives specified in
the grant 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 the
PSU.
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6.3.
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PSUs
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 paragraph 8), and
except as otherwise specified in this subparagraph 6.3 or in subparagraphs
6.4 or 6.5. Notwithstanding the foregoing and without regard to
subparagraph 6.2:
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6.3.1.
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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 paragraph 7) prior to the end of
the Performance Period(s), the PSUs 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 become entitled to receive
a cash payment (determined in accordance with subparagraph 6.6) in respect
of the Common Shares he would have received had he been in continuous
employment with the Company through the end of such Performance Period and
had the performance objectives, if any, that were imposed been achieved;
or
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6.3.2.
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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 Vesting Period(s),
then:
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6.3.2.1.
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ifIf at the time
of histheir
retirement the Employee is 65 years old or older, the PSUs shall not be
cancelled at
the end of the next ending Performance Period, and he shall become
entitled to receive a cash payment (determined in accordance with
subparagraph 6.6) in respect of the Common 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 been
achieved,on the Employee’s
official retirement date, but they shall continue to vest and the Employee
shall receive payments in cash or stock at the discretion of the
Compensation Committee on schedule as described in subparagraph 6.6
or
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6.3.2.2.
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ifIf at the time
of histheir early
retirement, the sum of the Employee’s age plus years of service for the
Company or any of its affiliates is greater than or equal to 6065 (sixty-five), the
multiplier
for the unvested PSUs shall be fixed as of the most recent quarter close,
and the PSUs will vest as scheduled on the grant certificate. This
early retirement provision is at the sole
judgment of the Compensation Committee and will not apply in circumstances
where Employees are working for a competitor in any capacity at any point
between their retirement from the Company and the PSU vesting date,
orPSUs
shall not be cancelled on the Employee’s official retirement
date, but shall continue to vest and the Employee shall receive
payments in cash or stock at the discretion of the Compensation Committee
on schedule as described in subparagraph 6.4, as they would have received
had they
been in continuous employment with the Company on that date, provided only
that the Employee remains Retired on each vesting date. This
early retirement provision will not apply
where any conflicting provisions exist in an
individual’s
employment contract exist, unless
otherwise approved by the Compensation Committee; or;
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6.3.2.3.
|
if
at the time of histheir
retirement the Employee does not meet the criteria under section 6.3.2.2
and is less than 65 years old and histheir
retirement occurs before 24 months have elapsed since the grant of the
PSUs, the PSUs shall be cancelled and the Employee shall become entitled
to receive a cash payment (determined in accordance with subparagraph 6.6)
in respect of
one-ninth of the Common Shares hethey would have
received had hethey been in
continuous employment with the Company through the end of the next ending
Performance Period and had the performance objectives, if any, that were
imposed been achieved, or
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6.3.2.4.
|
if
at the time of histheir
retirement the Employee does not meet the criteria under section 6.3.2.2
and is less than 65 years old and histheir
retirement occurs after 24 months or more have elapsed since the grant of
the PSUs, the PSUs shall be cancelled and the Employee shall become
entitled to receive a cash payment (determined in accordance with
subparagraph 6.6) in respect of two-ninths
of the Common Shares hethey would have
received had hethey been in
continuous employment with the Company through the end of the next ending
Performance Period and had the performance objectives, if any, that were
imposed been achieved.
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|
6.4.
|
If
within 24 months after a Change in Control of the Company as defined in
paragraph 9 and prior to the end of a Performance
Period:
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|
6.4.1.
|
there
is a Termination Without Cause, as defined in paragraph 10, of the
employment of an Employee;
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|
6.4.2.
|
there
is a Constructive Termination, as defined in paragraph 11, of the
employment of an Employee; or
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|
6.4.3.
|
there
occurs an Adverse Change in the Plan, as defined in paragraph 12, in
respect of an Employee, then:
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|
6.4.3.1.
|
the
Employee shall become entitled to
receive:
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|
|
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 PSU grant
to the end of the first month in which occurs one of the events described
in clauses 6.4.1, 6.4.2 or 6.4.3and the denominator of which is the total
number of months in the Performance Period(s),
plus
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6.4.3.1.2.
|
If
the number of Common Shares determined pursuant to subclause (1) above is
less than the Maximum Award (such difference being referred to herein as
the “Deficiency”), the Employee shall receive Common Shares equal to all
or a portion of such Deficiency as
follows:
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|
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 equal to
the full Deficiency, and
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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,
but in no event shall such percentage be less than fifty percent
(50%).
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|
|
6.4.3.2.
|
Payment
of any amount in respect of PSUs as described above in this subparagraph
6.4 shall be made as promptly as possible after the occurrence of one of
the events described in clauses 6.4.1 through
6.4.3.
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|
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 PSUs granted to such Employee. Such
Maximum Award shall be payable, in the sole discretion of the Compensation
Committee, either by issuance of Common Shares or in cash based on the
market price per Common Share as of the close of trading on the date of a
Hostile Takeover Termination.
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|
6.6.
|
Payment
of any amount due to an Employee in respect of the PSUs 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 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 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 as of the close of trading on the date on which an
Employee becomes entitled to payment, whether or not such payment is
deferred. 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.
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|
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 paragraph
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 the initial subscribers to 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; or
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|
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).
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|
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 paragraph 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 paragraph 9, where the
purchaser, as described in such paragraph, 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 paragraph 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
paragraph 11 on the basis of which the declaration of Constructive Termination
is given.
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12.
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ADVERSE CHANGE IN THE
PLAN
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For
purposes of this plan, an “Adverse Change in the Plan” shall mean:
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12.1.
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termination
of the Plan pursuant to subparagraph
18(a);
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12.2.
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amendment
of the Plan pursuant to paragraph 17 that materially diminishes the value
of PSU grants, either to individual Employees or in the aggregate, unless
there is substituted concurrently authority to grant PSUs of comparable
value to individual Employees in the Plan or in the aggregate, as the case
may be; or,
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12.3.
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in
respect of any holder of a PSU a material diminution in his rights held
under such PSU (except as may occur under the terms of the PSU as
originally granted) unless there is substituted concurrently a PSU grant
with a value at least comparable to the loss in value attributable to such
diminution in rights.
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13.
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HOSTILE TAKEOVER
TERMINATION
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For
purposes of this plan, a “Hostile Takeover Termination” shall mean an Adverse
Change in the Plan as described in paragraph 12 or any termination (including,
but not limited to, a Termination Without Cause as described in paragraph 10 or
a Constructive Termination as described in paragraph 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 paragraph 9, that was
opposed by the two Board members nominated by Haverford (Bermuda)
Ltd.
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14.
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DILUTION AND OTHER
ADJUSTMENTS
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14.1.
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In
the event of any change in the issued and outstanding Common Shares of the
Company 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 PSUs under the Plan pursuant to paragraph 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.
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14.2.
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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
PSUs that may be issued to an Employee under the Plan in lieu of a
dividend payment.
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15.
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DESIGNATION OF
BENEFICIARY/INTER VIVOS DESIGNEE BY
EMPLOYEE
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15.1.
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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 PSUs 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.
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15.2.
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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 PSUs or to one or more specific grants or series of
PSUs. 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
PSUs and any payment of shares in place of cash shall be given to the
Employee.
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16.
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MISCELLANEOUS
PROVISIONS
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16.1.
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No
employee or other person shall have any claim or right to receive a grant
of PSUs 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.
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16.2.
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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.
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16.3.
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No
Common Shares shall be issued hereunder unless counsel for the Company
shall be satisfied that such issuance will be in compliance with
applicable laws and Bermuda law.
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16.4.
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In the event the
Company is required to make a financial restatement due to a material
misstatement, any grant based upon the erroneous financial statement shall
be void.
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16.5.
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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 the Company to issue Common Shares upon payment of a PSU
that the Employee 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 Common
Shares.
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16.6.
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16.5 The
Company reserves the right to withhold shares or deduct from the Employee
payroll any taxes or social benefit costs to the Employee or the Company
associated with the vesting or fulfillment of the
PSUs.
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16.7.
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16.6 The
expenses of the Plan shall be borne by the Company. However, if
a grant of PSUs is made to an employee of a
Subsidiary:
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16.7.1.
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16.6.1 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
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16.7.2.
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16.6.2 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.
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16.8.
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16.7 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.
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16.9.
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16.8 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.
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17.
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AMENDMENT
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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 increases 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 the Company. For the avoidance of
doubt, any action taken by the Compensation Committee pursuant to paragraph 14
does not require shareholder approval. 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.
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18.
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TERMINATION
|
This Plan
shall terminate upon the earlier of the following dates or events to
occur:
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18.1.
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the
adoption of a resolution of the Board terminating the Plan;
or
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18.2.
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ten
years from the date the Plan is initially or subsequently approved and
adopted by the shareholders of the Company in accordance with paragraph 18
hereof.
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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.
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19.
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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 grant 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 Bermuda.
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20.
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GOVERNING
LAW
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The Plan
shall be governed by and construed and interpreted in accordance with the laws
of Bermuda.
On
February 26, 2010, our Board of Directors adopted resolutions declaring it
advisable to take steps to obtain shareholder approval to effect the
Redomestication by way of continuance as a body corporate under the laws of
Luxembourg and discontinuance in Bermuda. Our Board of Directors directed that
approval of the Redomestication be submitted for consideration by our
shareholders at the Annual General Meeting and recommended that shareholders
approve the following proposals. Under Bermuda law and our Bye-Laws, the
approval of a majority of the shares present and voting at the meeting, whether
in person or by proxy, is required for the approval of the resolutions approving
the Redomestication.
Text
of the Shareholder Resolution
The
Shareholder Resolution approving the Redomestication is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon the recommendation of the Board, the
Company discontinue as an exempted company in Bermuda and continue as a société
anonyme under the laws of Luxembourg, as of the date (the “Effective
Date”) determined by the Board or its duly authorized delegates, by transferring
its registered and principal office and central administration to Luxembourg and
changing its nationality to Luxembourg;
RESOLVED
THAT, the Board, may abandon or delay the discontinuance of the Company for any
reason at any time prior to the Effective Date, notwithstanding the approval of
the Shareholders; and further
RESOLVED
THAT, each member of the Board of Directors (or such persons appointed attorney
in Luxembourg) be hereby granted a power of attorney to appear before a
Luxembourg public notary and to take all necessary steps and to sign all
necessary documents to effect the Redomestication”.
Principal
Reasons for the Redomestication
After
careful consideration, we believe that the Redomestication is in the best
interests of Flagstone and our shareholders. This determination was based in
part on our belief that the Redomestication will:
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·
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increase
our strategic and capital
flexibility;
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·
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build
upon our existing European presence and poses few risks to our operating
model or our long-term strategy;
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·
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help
reduce reputational, political, regulatory and financial risks to the
Company.
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Strategic
and Capital Flexibility
As a
Luxembourg company, we expect to benefit from Luxembourg’s network of excellent
relations and agreements with major developed and developing countries around
the world. Despite our significant European presence, we believe we are
primarily viewed as a Bermuda company and that the Redomestication will help us
settle our identity as a European company. We believe the enhanced
ability to market ourselves as European company will be beneficial by, among
other things, providing us better access to capital in the European
market. For example, it may make a listing of our common shares on a
European stock exchange more attractive.
Building
on Existing European Presence and Few Risks to Our Operating Model and Long-Term
Strategy
The
Redomestication builds on our existing European presence. Our principal
operating companies are in Europe, including our principal operating company in
Switzerland, and our investment management operations are already in Luxembourg.
Given the presence of our investment management operations, we will benefit from
our familiarity with the regulatory and legal environment and the ability to use
our existing Luxembourg office as our new corporate holding company
office.
In
addition, the Redomestication is not expected to materially impact our
operations or our financial results. Our reinsurance and insurance operations
worldwide will continue to operate without material changes. Our
principal operating company will remain in Switzerland, and we will retain
substantial and important underwriting capital in our Bermuda branch as well as
some executive offices in Bermuda.
Reduces
Reputation, Political, Regulatory and Financial Risks
By
locating our holding company near our principal operating companies, we believe
we will settle our identity as a European company. We believe the
Redomestication decreases our exposure to political, regulatory and financial
risks and will reinforce our reputation, which is important to our continuing
business. Luxembourg itself is a leading financial center with political,
economic and regulatory stability and a sophisticated financial and regulatory
environment. In addition, Luxembourg benefits from being a member of the
European Union and OECD. We believe this stability will increase our ability to
focus on operating the business and minimize time spent responding to actual and
potential political or regulatory changes.
In
addition, the Redomestication will allow us to benefit from the extensive
network of commercial and tax treaties that Luxembourg is party to,
significantly with the United States and certain members of the European Union.
We expect these treaties will provide greater predictability with respect to the
tax environment in which our business operates.
Amendment
or Termination
The
Redomestication may be amended, modified or supplemented at any time before or
after its adoption by our shareholders. Our Board of Directors may terminate the
Redomestication and abandon or delay the Redomestication at any time prior to
its effectiveness without obtaining the approval of our shareholders. After
adoption, however, no amendment, modification or supplement may be made or
effected that requires further approval by our shareholders without obtaining
that approval.
Conditions
to Consummation of the Redomestication
The
Redomestication will not be completed unless the following conditions are
satisfied or, if allowed by law, waived:
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·
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the
Redomestication is approved by the requisite vote of our
shareholders;
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·
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we
are not subject to any governmental decree, order or injunction that
prohibits the consummation of the
Redomestication;
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·
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the
required notarial deed effecting the Redomestication is validly executed
before a Luxembourg public notary at a notarial meeting to be held in
Luxembourg;
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·
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in
accordance with Section 132G of The Companies Act 1981 of Bermuda, the
following occurs: each of the directors of the Company swears a statutory
declaration confirming the matters set out therein, each director and the
Company sign an irrevocable deed poll as to service of process, the
Company advertises its intention to discontinue in an appointed newspaper
at least 14 days before the effective date of the Redomestication and a
notice of discontinuance is filed with the Bermuda Registrar of
Companies;
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·
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our
Luxembourg common shares are authorized for listing on the NYSE, subject
to official notice of issuance;
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·
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we
receive an opinion from Baker & McKenzie LLP, in form and substance
reasonably satisfactory to us, confirming the matters discussed under
“—Material Tax Considerations—U.S. Federal Income Tax
Considerations”;
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·
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we
receive an opinion from Appleby, in form and substance reasonably
satisfactory to us, confirming that the Annual General Meeting was validly
constituted, that all quorum requirements for the Annual General Meeting
were fulfilled and that all resolutions passed at the Annual General
Meeting were validly and correctly passed in accordance with the
requirements of Bermuda law and the Bye-Laws of the
Company;
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·
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we
receive an opinion from Appleby, in form and substance reasonably
satisfactory to us, confirming the matters discussed under “—Material Tax
Considerations—Bermuda Tax Considerations”;
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·
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we
receive an opinion from Tax S. Arts S.à.r.l, in form and substance
reasonably satisfactory to us, confirming the matters discussed under
“—Material Tax Considerations—Luxembourg Tax Considerations”;
and
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·
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we obtain all consents, rulings and approvals that are necessary, desirable or appropriate in connection with the Redomestication including approvals from the FSA and Lloyd’s for the movement of certain U.K. subsidiaries within our corporate structure. |
In
addition, the Redomestication may be abandoned or delayed for any reason by our
Board of Directors at any time prior to the Effective Time, even though the
Redomestication may have been approved by our shareholders and all conditions to
the Redomestication may have been satisfied.
Applicable
Law
As of the
effective date of the Redomestication, our legal jurisdiction of incorporation
will be Luxembourg and the continuing corporation will no longer be subject to
the provisions of Bermuda law. All matters of corporate law will be determined
under Luxembourg law. We will continue to be subject to the reporting
requirements of the Exchange Act. In addition, we will continue to be subject to
the rules and regulations of the New York Stock Exchange.
Assets,
Liabilities, Obligations, Etc.
Under
Luxembourg law, as of the effective date of the Redomestication, all of our
assets, property, rights, liabilities and obligations immediately prior to the
Redomestication will continue to be our assets, property, rights, liabilities
and obligations. Bermuda law will cease to apply to us upon our filing of the
appropriate documents with the Bermuda Registrar of Companies and the execution
of the notarial deed before the public notary in Luxembourg. If approved, we
expect to complete the Redomestication soon after the Annual General
Meeting.
Capital
Stock
Once the
Redomestication is completed, holders of our common shares will, in principle,
continue to own one share for each share held before the Redomestication. The
existing certificates representing the Company’s common shares will not be
cancelled. Shortly after the effectiveness of the Redomestication, we will
provide information on how to exchange your existing certificates for new
certificates. Beneficial holders of shares held in “street name” will not be
required to take any action.
Voting
To
mitigate potential U.S. tax consequences, our current Bye-Laws reduce the total
voting power of any shareholder who is a U.S. person controlling 9.9% or more of
our common shares to less than 9.9% of the voting power of our common shares.
After the Redomestication, each share will be entitled to one vote with no
potential reduction in voting power. For a more detailed description of the
operation of this rule and potential U.S. tax implications resulting from its
removal, see “The Shareholder Meeting—Voting Securities and Record Date—Voting
Rights” and “Risk Factors—Tax Risk Factors—After the Redomestication, U.S.
persons holding shares in Flagstone (Luxembourg)
with an aggregate voting power of 10% or greater may be subject to current U.S.
federal income tax with respect to certain income earned by Flagstone
(Luxembourg) and its subsidiaries”.
Dividends
We paid
four quarterly cash dividends in 2009 and four in 2008, at the rate of
$0.04 per
common share. Future declaration and payment of cash distributions,
whether in the form of capital repayments, dividends or otherwise, following the
completion of the Redomestication will depend upon circumstances prevailing at
the time, but we anticipate that we will continue to pay to the holders an
amount that is consistent with our recent practice. For a description of
restrictions on dividends and capital returns imposed by Luxembourg law, see
“—Material Tax Consequences Relating to the Redomestication—Luxembourg Tax
Considerations—Post-Redomestication Consequences to Flagstone (Luxembourg)
Shareholders”.
We expect
that, post-Redomestication, payments to the holders will be done, mainly,
through repayment of capital and share premium of Flagstone (Luxembourg) as well
as of the pre-Redomestication retained earnings. Share premium can be repaid
upon a decision by the Board of Directors or by a decision at a general meeting
of the shareholders. Reduction of share capital must be approved by a
shareholders’ meeting.
Assuming
that post-Redomestication no newly generated distributable retained earnings or
profits are recorded in the non-consolidated accounts (i.e., statutory accounts
established under Lux GAAP) of Flagstone (Luxembourg), repayments of capital and
share premium by the Company should not be subject to Luxembourg dividend
withholding tax.
Business
and Operations
The
Redomestication, if approved, will effect a change in the legal jurisdiction of
incorporation as of the effective date thereof, but our business and operations
will remain the same. We expect to retain our employees and office space in
Bermuda. We expect our new Luxembourg offices will have staffing appropriate to
a Luxembourg-based holding company and to strategic oversight of the Company.
After the Redomestication, the Board of Directors expects to hold most of their
in-person meetings in Luxembourg.
Management
When the
Redomestication is completed, executive officers and directors of Flagstone
(Bermuda) immediately prior to the completion of the Redomestication will be
executive officers and directors of Flagstone (Luxembourg). Our directors will
continue as directors during their respective assigned terms.
Accounting
Treatment of the Redomestication
We will
continue to report our financial results in U.S. dollars using U.S.
GAAP.
The
assets and liabilities of Flagstone (Luxembourg), the continuing entity, will be
reflected at their historical value to Flagstone (Bermuda) in the Company’s
consolidated financial statements. In addition, the Redomestication will not
impact the Company’s capitalization.
Effective
Time
If the
Redomestication is approved by the requisite shareholder vote, we anticipate
that the Redomestication will become effective promptly following such approval,
with the exact date and time being determined by our Board of Directors. Subject
to filing the relevant documents with the Bermuda Registrar of Companies, the
Redomestication will become effective upon the execution of the required
notarial deed at the meeting to be held before the public notary in
Luxembourg. If approved, we expect to complete the Redomestication
soon after the Annual General Meeting.
In the
event the conditions to the Redomestication are not satisfied, the
Redomestication may be abandoned or delayed, even after approval by our
shareholders. In addition, the Redomestication may be abandoned or delayed for
any reason by our Board of Directors at any time prior to the Effective Time,
even though the Redomestication might have been approved by our shareholders and
all conditions to the Redomestication might have been satisfied.
Board
Recommendation; Required Vote
OUR
BOARD OF DIRECTORS HAS APPROVED THE REDOMESTICATION AND HAS RECOMMENDED THAT
SHAREHOLDERS VOTE “FOR” APPROVAL OF ALL THE PROPOSALS RELATED TO THE
REDOMESTICATION.
Under our
Bye-Laws, the Redomestication requires the approval of a majority of the shares
present and voting on the proposal at the Annual General Meeting, whether in
person or by proxy. The adjournment proposal requires the approval of holders of
the same majority.
Regulatory
Matters
Prior to
the Redomestication, we expect to move the location of certain U.K. subsidiaries
within our company structure for which we will seek the approval of the FSA and Lloyd’s of London. We
are not aware of any other governmental approvals or actions that are required
to complete the Redomestication, other than compliance with U.S. federal and
state securities laws and Bermuda and Luxembourg corporate law.
No
Appraisal Rights
Under
Bermuda law, our shareholders do not have any right to an appraisal of the value
of their shares or payment for them in connection with the
Redomestication.
Share
Compensation Plans
If the
Redomestication is completed, we will continue our long-term incentive plan and
other employee benefit plans and arrangements, and those plans and arrangements
will be amended, if necessary, to reflect the Redomestication. Shareholder
approval of the Redomestication also will constitute shareholder approval of
these amendments.
Stock
Exchange Listing
Our
shares are listed on the NYSE. We will submit an application so that,
immediately following the Redomestication, our shares will continue to be listed
on the NYSE under the symbol “FSR”, the same symbol under which our shares
currently are listed. Our shares are also currently listed on the Bermuda Stock
Exchange, and we expect that they will continue to be listed on the Bermuda
Stock Exchange after the Redomestication.
Effect
on Shares
If you
hold shares in certificated form, you do not need to take any action as a result
of the Redomestication. Your certificated shares will still be valid and
continue to represent your interest in the Company.
If you
hold your shares through a broker, dealer, commercial bank, trust company or
similar institution, you should not need to take any action as a result of the
Redomestication. Since the Redomestication will not impact the number of shares
you own, we expect that account statements from your institution will look
largely the same after the Redomestication.
If you
hold direct registration shares, after the Redomestication the Company will be
required to issue you certificated shares.
Federal
Securities Law Consequences; Resale Restrictions
Our
common shares after the Redomestication will be freely transferable, except for
restrictions applicable to certain “affiliates” of the Company under the
Securities Act, as follows:
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|
·
|
Persons
who were not affiliates of the Company at the time of the effectiveness of
the Redomestication and that have not been affiliated within 90 days prior
to such time will be permitted to sell any common shares pursuant to Rule
144.
|
|
|
·
|
Persons
who were affiliates of the Company at the time of the effectiveness of the
Redomestication or were affiliates within 90 days prior to such time will
be permitted to resell any common shares in the manner permitted by Rule
144.
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|
|
·
|
Persons
whose common shares are subject to transfer restrictions under the
Securities Act will continue to be subject to the same restrictions after
the Redomestication.
|
In
computing the holding period of the common shares for the purpose of Rule
144(d), such persons will be permitted to “tack” the holding period of their
common shares held prior to the Effective Time to the period beginning at the
Effective Time.
Persons
who may be deemed to be affiliates of the Company for these purposes generally
include individuals or entities that control, are controlled by, or are under
common control with, the Company, and would generally not include shareholders
who are not executive officers, directors or significant shareholders of the
Company.
The
Company will file certain post-effective amendments to existing effective
registration statements of the Company concurrently with the completion of the
Redomestication.
Upon
consummation of the Redomestication, the common shares of the Company will be
deemed to be registered under Section 12(b) of Exchange Act, by virtue of
Rule 12g-3 under the Exchange Act, without the filing of any Exchange Act
registration statement.
Interests
of Certain Persons in the Redomestication
No person
who has been a director or executive officer of the Company at any time since
the beginning of the last fiscal year, or any associate of any such person, has
any substantial interest in the Redomestication, except for any interest arising
from his or her ownership of securities of the Company. No such person is
receiving any extra or special benefit not shared on a pro rata basis by all
other holders of shares of the Company.
This
section contains a general discussion of certain material tax consequences of:
(1) the Redomestication; (2) post-Redomestication ownership and disposition of
Flagstone (Luxembourg) shares; and (3) post-Redomestication operations of
Flagstone.
The
discussion under the caption “—U.S. Federal Income Tax Considerations” addresses
certain material U.S. federal income tax consequences to: (1) the Company of the
Redomestication and post-Redomestication operations; and (2) U.S. holders and
non-U.S. holders (each as defined below) of the Redomestication and of owning and
disposing of Flagstone (Luxembourg) shares received in the
Redomestication.
The
discussion under the caption “—Luxembourg Tax Considerations” addresses certain
material Luxembourg tax consequences to: (1) shareholders resulting from the
Redomestication and from ownership and disposition of the Flagstone (Luxembourg)
shares and (2) the Company resulting from the Redomestication and from
subsequent operations.
The
discussion under the caption “—Bermuda Tax Considerations” addresses the Bermuda
income tax consequences of the Redomestication.
The below
discussion is not a substitute for an individual analysis of the tax
consequences of the Redomestication, post-Redomestication ownership and
disposition of Flagstone (Luxembourg) shares or post-Redomestication operations
of Flagstone. You
should consult your own tax advisors regarding the particular U.S. (federal,
state and local), Luxembourg, Bermuda and other non-U.S. tax consequences of
these matters in light of your particular situation.
Scope
of Discussion
This
discussion generally does not address any aspects of U.S. taxation other than
U.S. federal income taxation, is not a complete analysis or listing of all
potential tax consequences of the Redomestication or of holding and disposing of
Flagstone (Luxembourg) shares, and does not address all tax considerations that
may be relevant to Flagstone Reinsurance shareholders. In particular, the below
discussion addresses tax consequences to holders who hold their Flagstone
(Bermuda) shares, and who will hold their Flagstone (Luxembourg) shares solely
as capital assets, which generally means as property held for investment. The
below discussion does not address any tax consequences to Flagstone (Bermuda) or
Flagstone (Luxembourg) shareholders, as applicable, who, for U.S. federal tax
purposes, are subject to special rules, such as:
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banks,
financial institutions or insurance
companies;
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tax-exempt
entities;
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persons
who hold shares as part of a straddle, hedge, integrated transaction or
conversion transaction;
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persons
who have been, but are no longer, citizens or residents of the United
States;
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persons
holding shares through a partnership or other fiscally transparent
person;
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dealers
or traders in securities, commodities or
currencies;
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grantor
trusts;
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persons
subject to the alternative minimum
tax;
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U.S.
persons whose “functional currency” is not the U.S.
dollar;
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regulated
investment companies and real estate investment
trusts;
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persons
who received the Flagstone Reinsurance shares through exercise of employee
share options or otherwise as compensation or through a tax qualified
retirement plan;
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persons
who, at any time within the five-year period ending on the date of the
Redomestication, have owned (directly, indirectly or through attribution)
10% or more of the total combined voting power of all classes of shares of
Flagstone (Bermuda) entitled to vote;
or
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persons
who, immediately after the Redomestication, will own (directly, indirectly
or through attribution) 10% or more of the total combined voting power of
all classes of shares of Flagstone (Luxembourg) entitled to
vote.
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This
discussion is based on the Code, the Treasury regulations promulgated
thereunder, which we refer to as the “Treasury Regulations”, judicial and
administrative interpretations thereof and the Convention Between the Government
of the Grand Duchy of Luxembourg and the Government of the United States of
America for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and Capital (the “Luxembourg-U.S. Tax
Treaty”), in each case as in effect and available on the date of this Proxy
Statement. All of the foregoing are subject to change, which change could apply
with retroactive effect and could affect the tax consequences described in this
proxy. The discussion assumes, as is the case under current law, that Flagstone
Reinsurance is treated as a foreign person for U.S. federal tax purposes and
will be so treated as of and after the Effective Time. The Company will not
request a ruling from the United States Internal Revenue Service, which we refer
to as the “IRS”, as to the U.S. federal tax consequences of the Redomestication,
post-Redomestication ownership and disposition of Flagstone (Luxembourg) shares
or any other matter. There can be no assurance that the IRS will not challenge
any of the U.S. federal tax consequences described below.
For
purposes of this discussion, a “U.S. holder” is a beneficial owner of Flagstone
(Bermuda) shares or, after the completion of the Redomestication, Flagstone
(Luxembourg) shares, that for U.S. federal income tax purposes is:
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an
individual citizen or resident alien of the United
States;
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a
corporation or other entity taxable as a corporation created or organized
in or under the laws of the United States or any state thereof or the
District of Columbia;
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an
estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or
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a
trust, if such trust validly has elected to be treated as a U.S. person
for U.S. federal income tax purposes or if (1) a U.S. court can exercise
primary supervision over its administration and (2) one or more U.S.
persons have the authority to control all of the substantial decisions of
the trust.
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A
“non-U.S. holder” is a beneficial owner of Flagstone (Bermuda) shares or, after
the completion of the Redomestication, Flagstone (Luxembourg) shares, other than
a U.S. holder or an entity or arrangement treated as a partnership for U.S.
federal income tax purposes, which we refer to as a “Partnership”. If a
Partnership is a beneficial owner of Flagstone (Bermuda) shares or Flagstone
(Luxembourg) shares, the tax treatment of a partner in that Partnership will
generally depend on the status of the partner and the activities of the
Partnership. Holders of Flagstone (Bermuda) shares or Flagstone (Luxembourg)
shares that are Partnerships and partners in such Partnerships should consult
their tax advisors regarding the U.S. federal income tax consequences to them of
the Redomestication and the ownership and disposition of Flagstone (Luxembourg)
shares. For purposes of this tax discussion, “holder” or “shareholder” means
either a U.S. holder or a non-U.S. holder or both, as the context may
require.
Material
U.S. Tax Consequences of the Redomestication
The
Redomestication should qualify as a Code Section 368(a)(1)(F)
reorganization and/or result in an exchange of shares under Code
Section 1036. The below discussion describes the general consequences of
the Redomestication’s qualification as a Code Section 368(a)(1)(F)
reorganization and/or resulting in an exchange of shares under Code
Section 1036.
The
Company
The
Company should not be subject to U.S. federal income tax as a result of the
Redomestication. The below discussion describes the general
consequences to U.S. holders and non-U.S. holders of the
Redomestication.
U.S.
Holders
If the
Redomestication is consummated, a U.S. holder who holds Flagstone (Bermuda)
shares at the Effective Time should not recognize any gain or loss solely as a
result of the Redomestication. The tax basis of the Flagstone (Luxembourg)
shares held after the Redomestication will be equal to the basis of the
Flagstone (Bermuda) shares held before the Redomestication. U.S. holders whose
tax basis in their Flagstone (Bermuda) shares exceeds the fair market value of
such shares at the time of the Redomestication will carry over the tax basis of
(and thus the inherent “loss” in) their Flagstone (Bermuda) shares to their
Flagstone (Luxembourg) shares. Thus, subject to any subsequent changes in the
fair market value of the Flagstone (Luxembourg) shares, any loss will be
preserved. The holding period for U.S. holders with respect to their Flagstone
(Luxembourg) shares held after the Redomestication will include the holding
period for the corresponding Flagstone (Bermuda) shares held before the
Redomestication. U.S. holders who hold their Flagstone (Bermuda) shares with
differing tax bases or holding periods are urged to consult their tax advisors
with regard to identifying the tax bases and holding periods of the particular
Flagstone (Luxembourg) shares held after the Redomestication.
Non-U.S.
Holders
A
non-U.S. holder generally will not be subject to U.S. federal income or
withholding tax on gain realized, if any, with respect to such non-U.S. holder’s
Flagstone (Bermuda) shares as a result of the Redomestication.
Material
U.S. Tax Considerations Post-Redomestication to the Company
U.S. Income and Branch Profits
Tax. A foreign corporation deemed to be engaged in the conduct of a trade
or business in the U.S. will generally be subject to U.S. federal income tax, as
well as a branch profits tax in certain circumstances, on its income which is
treated as effectively connected with the conduct of that trade or business
unless the corporation is entitled to relief under an applicable income tax
treaty, as discussed below. Such tax, if imposed, would be based on effectively
connected income computed in a manner generally analogous to that applied to the
income of a U.S. corporation, except that a foreign corporation is entitled to
deductions and credits only if it timely files a U.S. federal income tax return.
Whether a trade or business is being conducted in the United States is an
inherently factual determination. Because the Code, Treasury Regulations and
court decisions do not identify definitively activities that constitute being
engaged in a trade or business in the United States, we cannot assure you that
the IRS will not contend successfully that Flagstone Reinsurance and/or certain
of its non-U.S. subsidiaries are or will be engaged in a trade or business in
the United States. Flagstone Reinsurance believes it and its non-U.S.
subsidiaries have operated, and intends for Flagstone (Luxembourg) and its
non-U.S. subsidiaries to continue to operate, in such a manner that they will
not be considered to be conducting a trade or business within the United States
for purposes of U.S. federal income taxation, except with regard to the
Company’s business conducted through Lloyd’s of London (the “Lloyd’s Business”),
which is governed by a negotiated closing agreement between the IRS and Lloyd’s
of London, pursuant to which certain of Flagstone’s income related to the
Lloyd’s Business is subject to U.S. tax. Flagstone (Bermuda) and certain of its
non-U.S. subsidiaries have filed, and Flagstone Reinsurance intends for
Flagstone (Luxembourg) and certain of its non-U.S. subsidiaries to file,
protective U.S. federal income tax returns on a timely basis in order to
preserve the right to claim income tax deductions and credits if it is ever
determined that they are subject to U.S. federal income tax.
A
corporation resident in Luxembourg generally will be entitled to the benefits of
the Luxembourg-U.S. Tax Treaty if the corporation: (1) is a “resident” of
Luxembourg as defined under the “Residence” article of the Luxembourg-U.S. Tax
Treaty, and (2) qualifies as a “qualified resident” under the “Limitation on
Benefits” article of the Luxembourg-U.S. Tax Treaty. Flagstone Reinsurance
expects that Flagstone (Luxembourg) will be entitled to the benefits of the
Luxembourg-U.S. Tax Treaty. Assuming Flagstone (Luxembourg) is entitled to
benefits under the Luxembourg-U.S. Tax Treaty, it will not be subject to U.S.
federal income tax on any business income found to be effectively connected with
a U.S. trade or business unless that trade or business is conducted through a
permanent establishment in the United States, and then only on income
attributable to that permanent establishment. Whether business is being
conducted in the United States through a permanent establishment is an
inherently factual determination. Flagstone Reinsurance intends to continue to
conduct its activities so as not to have a permanent establishment in the United
States, although we cannot assure you that it will achieve this result. Some of
Flagstone (Luxembourg)’s non-U.S. subsidiaries may also be entitled to the
benefits of a tax treaty between the United States and the country where those
subsidiaries are resident. In those cases, the non-U.S. subsidiaries may have
analogous protections against U.S. taxation.
Foreign
corporations also are subject to U.S. withholding tax at a rate of 30% of the
gross amount of certain “fixed or determinable annual or periodical gains,
profits and income” (such as dividends and certain interest on investments)
derived from sources within the United States, to the extent such amounts are
not effectively connected with the foreign corporation’s conduct of a trade or
business in the United States. The tax rate is subject to reduction by
applicable treaties.
U.S.
subsidiaries of Flagstone Reinsurance are and will continue to be subject to
taxation in the United States on their worldwide income at regular corporate
rates.
Sections
482 and 845 of the Code give the IRS broad authority to reallocate income,
deductions and credits from transactions (in the case of Section 845 of the
Code, reinsurance transactions) between related parties. Flagstone Reinsurance
believes that all agreements it or its subsidiaries have entered into, and that
all agreements Flagstone (Luxembourg) or its subsidiaries intend to enter into,
whether with related or unrelated parties, have and will continue to have
arm’s-length terms. Nevertheless, no assurance can be given that the Internal
Revenue Service will not assert its authority under Sections 482 or 845 of the
Code in a manner that would increase the tax liability of Flagstone
(Luxembourg)’s U.S. subsidiaries.
The
United States also imposes an excise tax on insurance and reinsurance premiums
paid to foreign insurers or reinsurers with respect to risks located in the
United States. The rate of tax applicable to premiums paid to Flagstone
(Luxembourg)’s Bermuda subsidiaries is 4% for direct, non-life insurance
premiums and 1% for reinsurance and direct, life insurance premiums. The excise
tax is waived, pursuant to the Convention Between the United States of America
and the Swiss Confederation for the Avoidance of Double Taxation with Respect to
Taxes on Income, with Protocol and Memorandum of Understanding, signed October
2, 1996, as amended by Diplomatic Notes signed April 8, 1997 (the
“Switzerland-U.S. Tax Treaty”), with respect to U.S. premiums paid to insurers
and reinsurers that are resident in Switzerland to the extent those risks are
not reinsured with a non-U.S. reinsurer which is not entitled to the benefits of
a U.S. treaty that waives the excise tax. This exemption should apply to certain
of the Company’s Swiss subsidiaries. Flagstone Reinsurance expects premiums
received by its primary Swiss subsidiary to be exempt from the excise tax per
its closing agreement with the IRS, to the extent not reinsured with a company
which does not have an exemption.
Post-Redomestication
Consequences to U.S. Holders
Receiving Distributions on Flagstone
(Luxembourg) Shares. Subject to the discussion below under “—Special
Rules—Controlled Foreign Corporations”, “—Special Rules—Related Person Insurance
Income”, and “—Special Rules—Passive Foreign Investment Company Provisions”,
U.S. holders will be required to include in gross income the gross amount of any
distribution received on the Flagstone (Luxembourg) shares to the extent that
the distribution is paid out of Flagstone (Luxembourg)’s current or accumulated
earnings and profits as determined for U.S. federal income tax purposes, to
which we refer as a dividend. With respect to non-corporate U.S. holders,
certain dividends received in taxable years beginning before January 1, 2011
from a qualified foreign corporation will be subject to U.S. federal income tax
at a maximum rate of 15%. As long as the Flagstone (Luxembourg) shares are
regularly tradable on the NYSE (or certain other stock exchanges) and/or
Flagstone (Luxembourg) qualifies for benefits under the Luxembourg-U.S. Tax
Treaty, and Flagstone (Luxembourg) is not a passive foreign investment company,
it will be treated as a qualified foreign corporation for this purpose. This
reduced rate will not be available in all situations, and U.S. holders should
consult their own tax advisors regarding the application of the relevant rules
to their particular circumstances. Dividends from Flagstone (Luxembourg) will
not be eligible for the dividends-received deduction under the Code, which is
generally allowed to U.S. corporate shareholders on dividends received from
certain domestic and foreign corporations.
Distributions
in excess of the current and accumulated earnings and profits of Flagstone
(Luxembourg) will be applied first to reduce the U.S. holder’s tax basis in its
Flagstone (Luxembourg) shares, and thereafter will constitute gain from the sale
or exchange of such shares. In the case of a non-corporate U.S. holder, the
maximum U.S. federal income tax rate applicable to such “gain” is 15% under
current law if the holder’s holding period for such Flagstone (Luxembourg)
shares exceeds twelve months. This reduced rate is scheduled to expire effective
for taxable years beginning after December 31, 2010. Special rules not here
described may apply to U.S. holders who do not have a uniform tax basis and
holding period in all of their Flagstone (Luxembourg) shares, and any such U.S.
holders are urged to consult their own tax advisors with regard to such
rules.
Subject
to complex limitations, Luxembourg withholding tax, if any, on dividends paid
will be treated for U.S. federal tax purposes as a foreign tax creditable
against the U.S. federal income tax liability of a U.S. holder. The
rules relating to the determination of the foreign tax credit are complex, and
you should consult your own tax advisor to determine whether and to what extent
a credit would be available. In lieu of claiming a foreign tax
credit, U.S. holders may claim a deduction of foreign taxes paid in the taxable
year.
Dispositions of Flagstone
(Luxembourg) Shares. Subject to the discussion below under “—Special
Rules—Related Person Insurance Income” and “—Special Rules—Passive Foreign
Investment Company Provisions”, U.S. holders of Flagstone (Luxembourg) shares
generally should recognize capital gain or loss for U.S. federal income tax
purposes on the sale, exchange or other taxable disposition of Flagstone
(Luxembourg) shares in an amount equal to the difference between the amount
realized from such sale, exchange or other taxable disposition and the U.S.
holders’ tax basis in such shares. In the case of a non-corporate U.S. holder,
the maximum U.S. federal income tax rate applicable to such gain is 15% under
current law if the holder’s holding period for such Flagstone (Luxembourg)
shares exceeds twelve months. This reduced rate is scheduled to expire effective
for taxable years beginning after December 31, 2010. The deductibility of
capital losses is subject to limitations.
Post-Redomestication
Consequences to Non-U.S. Holders
Consequences of Owning Flagstone
(Luxembourg) Shares. A non-U.S. holder generally will not be subject to
U.S. federal income or withholding tax on dividends from Flagstone (Luxembourg)
unless: (1) the dividends are effectively connected with the holder’s conduct of
a trade or business in the United States (or, if a tax treaty applies, the
dividends are attributable to a permanent establishment or fixed place of
business maintained by the non-U.S. holder in the United States); or (2) such
non-U.S. holder is subject to backup withholding.
Consequences of Disposing of
Flagstone (Luxembourg) Shares. A non-U.S. holder generally will not be
subject to U.S. federal income or withholding tax on any gain recognized on the
sale, exchange or other disposition of Flagstone (Luxembourg) shares unless: (1)
such gain is effectively connected with the conduct by the non-U.S. holder of a
trade or business within the United States (or, if a tax treaty applies, is
attributable to a permanent establishment or fixed place of business maintained
by the non-U.S. holder in the United States); (2) in the case of certain capital
gains recognized by a non-U.S. holder that is an individual, such individual is
present in the United States for 183 days or more during the taxable year in
which the capital gain is recognized and certain other conditions are met; or
(3) the non-U.S. holder is subject to backup withholding.
Post-Redomestication—Special
Rules
Classification of Flagstone
(Luxembourg) or its Non-U.S. Subsidiaries as Controlled Foreign
Corporations. In general, a foreign corporation is considered a
controlled foreign corporation, or “CFC”, if 10% U.S. Shareholders own
(directly, indirectly through non-U.S. entities or by application of the
constructive ownership rules of Section 958(b) of the Code (i.e.,
“constructively”)) more than 50% of the total combined voting power of all
classes of voting stock of such foreign corporation, or more than 50% of the
total value of all stock of such corporation. A “10% U.S. Shareholder” is a
United States person (as defined in Section 957(c) of the Code) (“U.S. Person”)
that owns (directly or indirectly through non-U.S. entities or constructively)
at least 10% of the total combined voting power of all classes of stock entitled
to vote of the foreign corporation. Each 10% U.S. Shareholder of a foreign
corporation that is a CFC for an uninterrupted period of 30 days or more during
a taxable year and owns shares in that CFC directly or indirectly through
foreign entities on the last day of the foreign corporation’s taxable year in
which it is a CFC must include in its gross income for U.S. federal income tax
purposes its pro rata share (based on its actual direct and indirect, through
foreign entities, ownership) of the CFC’s “subpart F income,” even if the
subpart F income is not distributed. Subpart F income generally includes, among
other things, investment income such as dividends, interest and capital gains,
and income from insuring certain risks. For purposes of taking into account
insurance income, a CFC also includes a foreign corporation in which more than
25% of the total combined voting power of all classes of stock (or more than 25%
of the total value of the stock) is owned by 10% U.S. Shareholders on any day
during the taxable year of such corporation, if certain premium tests are
met. It is expected that a portion of the income of Flagstone
(Luxembourg)’s non-U.S. insurance and reinsurance subsidiaries would be
considered subpart F income if such subsidiaries were to be considered CFCs. In
addition, a non-U.S. insurance subsidiary of Flagstone (Luxembourg) may be
considered a CFC under the RPII rules discussed below. For purposes of taking
into account insurance income, the Subpart F inclusion would be limited to the
current-year earnings and profits of that non-U.S. subsidiary reduced by the
shareholder’s pro rata share, if any, of certain prior-year deficits in earnings
and profits related to activities generating insurance income or “foreign
personal holding company income” as defined in Section 954(c) of the Code
(including most types of investment income).
Unlike
the Bye-Laws of Flagstone (Bermuda), the Articles will not contain a provision
reducing the voting power of any shareholder holding 9.9% or more of Flagstone
(Luxembourg) shares to less than 9.9%. Accordingly, no assurance can be given
that Flagstone (Luxembourg) or any of its subsidiaries will not be, or become, a
CFC after the Redomestication. Investors should consult their own tax advisors
regarding the U.S. tax ramifications of owning shares of Flagstone (Luxembourg),
and in particular regarding the manner in which ownership is computed for
purposes of applying the CFC rules, and the potential U.S. tax ramifications of
ownership of shares of Flagstone (Luxembourg) with an aggregate voting power of
10% or greater.
Related
Person Insurance Income
Generally. The CFC rules
described above also apply (with certain modifications) to certain insurance
companies that earn related person insurance income, to which we refer as
“RPII”. For purposes of applying the CFC rules to foreign corporations that earn
RPII, a foreign corporation will be treated as a CFC if RPII Shareholders
collectively own (directly, indirectly through foreign entities or by
application of the constructive ownership rules) 25% or more of the stock of the
corporation by vote or value. The term “RPII Shareholder” means any U.S. Person
that owns, directly or indirectly through foreign entities, any amount (rather
than stock possessing 10% or more of the total combined voting power) of the
foreign corporation’s stock. The term “RPII CFC” means any CFC that
earns RPII.
RPII is
defined as any “insurance income” attributable to policies of insurance or
reinsurance with respect to which the person (directly or indirectly) insured is
an “RPII Shareholder” of the foreign corporation or a “related person” with
respect to such RPII Shareholder. In general, and subject to certain
limitations, “insurance income” is income (including premium and investment
income) attributable to the issuing of any insurance or reinsurance contract
which would be taxed under the provisions of the Code relating to insurance
companies if the income were the income of a domestic insurance
company.
For
purposes of the RPII rules, “related person” means a person that controls or is
controlled by the RPII Shareholder or that is controlled by the same person or
persons that control the RPII Shareholder. “Control” is measured by either more
than 50% in value or more than 50% in voting power of stock, applying
constructive ownership principles. A corporation’s pension plan is ordinarily
not a “related person” with respect to the corporation unless the pension plan
owns, directly or indirectly through the application of constructive ownership
rules, more than 50%, measured by vote or value, of the stock of the
corporation. In the case of a partnership, trust or estate, control means the
ownership, directly or indirectly, of more than 50% (by value) of the beneficial
interests in such partnership, estate or trust.
If none
of the exceptions described below applies, each U.S. Person that owns shares in
Flagstone (Luxembourg) (and therefore, indirectly in its non-U.S. insurance
subsidiaries) on the last day of the tax year in which a non-U.S. subsidiary is
an RPII CFC would be required to include in such U.S. Person’s gross income for
U.S. federal income tax purposes such U.S. Person’s share of RPII of that
non-U.S. subsidiary for the U.S. Person’s taxable year that includes the end of
that non-U.S. subsidiary’s taxable year. This inclusion generally would be
determined as if such RPII were distributed proportionately only to such U.S.
Persons holding shares on that date. The inclusion would be limited to the
current-year earnings and profits of that non-U.S. subsidiary reduced by the
shareholder’s pro rata share, if any, of certain prior-year deficits in earnings
and profits. Even if one or more of the exceptions to the RPII rules applies,
the general CFC rules described earlier may still apply to require 10% U.S.
Shareholders to include in income their pro rata share of RPII, among other
things.
RPII Exceptions. The special
RPII rules described above will not apply to a non-U.S. subsidiary if: (1)
direct or indirect insureds and persons related to such insureds, whether or not
U.S. Persons, own, at all times during that non-U.S. subsidiary’s taxable year
directly or indirectly, less than 20% of the voting power and less than 20% of
the value of the stock of that non-U.S. subsidiary (the “20% Ownership
Exception”); (2) RPII, determined on a gross basis, is less than 20% of that
non-U.S. subsidiary’s gross insurance income for the taxable year (the “20%
Gross Income Exception”); (3) that non-U.S. subsidiary elects to be taxed on its
RPII as if the RPII were effectively connected with the conduct of a U.S. trade
or business and to waive all treaty benefits with respect to RPII and meets
certain other requirements; or (4) that non-U.S. subsidiary elects to be treated
as a U.S. corporation for U.S. tax purposes. Flagstone Reinsurance has not made
and does not intend to make either of the elections in (3) and (4).
However, Flagstone Reinsurance expects Flagstone (Luxembourg) and its non-U.S.
subsidiaries to qualify for the 20% Gross Income Exception and for the 20%
Ownership Exception. Flagstone (Luxembourg) will not always be able to determine
the identities of all of its shareholders or direct or indirect insureds.
Accordingly, it is possible that the IRS will assert that 20% or more of the
vote or value of the shares of a non-U.S. insurance subsidiary of Flagstone
(Luxembourg) are owned by insureds of that non-U.S. subsidiary of Flagstone
(Luxembourg) or their related persons or that RPII constitutes 20% or more of
the gross insurance income of that insurance subsidiary for the taxable year,
and that Flagstone (Luxembourg) may be unable to prove otherwise.
Computation of RPII. In order
to determine how much RPII each of its non-U.S. insurance subsidiaries has
earned in each taxable year, Flagstone (Luxembourg) may obtain and rely upon
information from its insureds and reinsureds to determine whether any of the
insureds or reinsureds is an RPII Shareholder or is related to an RPII
Shareholder. Flagstone (Luxembourg) may not be able to determine whether any of
the underlying insureds of the insurance companies to which its non-U.S.
subsidiaries provides insurance or reinsurance are RPII Shareholders or related
persons with respect to such shareholders. Consequently, Flagstone (Luxembourg)
may not be able to determine accurately the gross amount of RPII earned by its
non-U.S. subsidiaries in a given taxable year. Flagstone (Luxembourg) may also
seek information from its shareholders to determine whether direct or indirect
owners of Flagstone (Luxembourg)’s shares at the end of the year are U.S.
Persons so that the RPII may be determined and apportioned among such persons.
To the extent Flagstone (Luxembourg) is unable to determine whether a direct or
indirect owner of shares is a U.S. Person, Flagstone (Luxembourg) may assume
that such owner is not a U.S. Person, thereby increasing the per share RPII
amount for all shareholders identified as U.S. Persons.
Uncertainty as to Application of
RPII. Treasury Regulations interpreting the RPII provisions of the Code
exist only in proposed form. It is not certain whether these Treasury
Regulations will be adopted in their proposed form or what changes might
ultimately be made or whether any such changes, as well as any interpretation or
application of the RPII rules by the IRS, the courts or otherwise, might have
retroactive effect. Accordingly, the meaning of the RPII provisions and their
application to Flagstone (Luxembourg) is uncertain. These provisions include the
grant of authority to the U.S. Treasury to prescribe “such regulations as may be
necessary to carry out the purposes of this subsection, including . . .
regulations preventing the avoidance of this subsection through cross insurance
arrangements or otherwise”. In addition, we cannot assure you that the IRS will
not challenge any determinations by Flagstone (Luxembourg) as to the amount, if
any, of RPII that should be includible in income or that the amounts of the RPII
inclusions will not be subject to adjustment based upon subsequent IRS
examination. U.S. holders should consult their tax advisors as to the effects of
these uncertainties.
Other
Rules Applicable to CFCs, including RPII CFCs
Basis Adjustments for CFC Rules,
including RPII. A U.S. shareholder’s tax basis in its Flagstone
(Luxembourg) shares will be increased by the amount of any subpart F income that
the shareholder includes in income, including any RPII included in income by an
RPII Shareholder. Any distributions made by Flagstone (Luxembourg) out of
previously taxed subpart F income, including RPII income, will be exempt from
further U.S. income tax in the hands of the U.S. shareholder. The U.S.
shareholder’s tax basis in its Flagstone (Luxembourg) shares will be reduced by
the amount of any distributions that are excluded from income under this
rule.
Information Reporting. Under
certain circumstances, U.S. Persons owning stock in a foreign corporation are
required to file IRS Form 5471 with their U.S. federal income tax returns.
Generally, information reporting on IRS Form 5471 is required with respect to
(1) a person who is treated as an RPII Shareholder, and (2) certain 10% U.S.
Shareholders.
Dispositions of Shares and Code
Section 1248. Section 1248 of the Code provides that if a United States
person (as defined in Section 7701(a)(30) of the Code) sells or exchanges
stock in a foreign corporation and such person was a 10% U.S. Shareholder at any
time during the five-year period ending on the date of disposition when the
corporation was a CFC, any gain from the disposition will be treated as a
dividend to the extent of the CFC’s earnings and profits (determined under U.S.
federal income tax principles) during the period that the shareholder held the
shares and while the corporation was a CFC (with certain adjustments). A 10%
U.S. Shareholder may in certain circumstances be required to report a
disposition of shares of a CFC by attaching IRS Form 5471 to the U.S. federal
income tax or information return that it would normally file for the taxable
year in which the disposition occurs.
Section
1248 of the Code also applies to the sale or exchange of shares in a foreign
corporation if the foreign corporation would be treated as a CFC for RPII
purposes and would be taxed as an insurance company if it were a domestic
corporation, regardless of whether the shareholder was a 10% U.S. Shareholder
during the five-year period ending on the date of the disposition or whether the
20% Gross Income Exception or the 20% Ownership Exception applies. Existing
Treasury Regulations do not address whether section 1248 of the Code would apply
if a foreign corporation is not a CFC but the foreign corporation has a
subsidiary that is a CFC or that would be taxed as an insurance company if it
were a domestic corporation. U.S. holders should consult their tax advisors
regarding the effects of these rules on a disposition of shares.
Passive
Foreign Investment Company Provisions
The
treatment of U.S. holders of Flagstone (Luxembourg) shares in some cases could
be materially different from that described above if, at any relevant time,
Flagstone (Bermuda) or Flagstone (Luxembourg) were a passive foreign investment
company, which we refer to as a “PFIC”.
For U.S.
tax purposes, a foreign corporation will generally be classified as a PFIC for
any taxable year if either: (1) 75% or more of its gross income is “passive
income” (as defined for U.S. federal income tax purposes); or (2) the average
percentage of assets held by such corporation which produce passive income or
which are held for the production of passive income is at least 50%. For
purposes of applying the tests in the preceding sentence, a look-through rule
applies and the foreign corporation is deemed to own its proportionate share of
the assets, and to receive directly the proportionate share of the income, of
any other corporation of which the foreign corporation owns, directly or
indirectly, at least 25% by value of the stock. In addition, the PFIC statutory
provisions also contain an express exception for income derived in the active
conduct of an insurance business by a corporation that is predominantly engaged
in an insurance business. This exception is intended to ensure that income
derived by a bona fide insurance company is not treated as passive income,
except to the extent such income is attributable to financial reserves in excess
of the reasonable needs of the insurance business.
Flagstone
Reinsurance believes that it is not a PFIC, and has not been a PFIC in any prior
taxable year. Flagstone Reinsurance further believes that Flagstone (Luxembourg)
will not be a PFIC following the Redomestication. The tests for determining PFIC
status are applied annually, and it is difficult to predict accurately future
income and assets relevant to this determination. In addition, there are
currently no Treasury Regulations regarding the application of the PFIC
provisions to an insurance company and Treasury Regulations or pronouncements
interpreting or clarifying these rules may be forthcoming. Accordingly, no
assurance can be given that the IRS would not challenge this position or that a
court would not sustain such challenge.
If
Flagstone (Luxembourg) should determine in the future that it is a PFIC, it will
endeavor to so notify U.S. holders of Flagstone (Luxembourg) shares, although
there can be no assurance that it will be able to do so in a timely and complete
manner.
U.S.
holders of Flagstone (Luxembourg) shares should consult their own tax advisors
about the PFIC rules, including the availability of certain
elections.
Information
Reporting and Backup Withholding
If the
Redomestication is consummated, U.S. holders that own at least five percent (of
total voting power or total value) of Flagstone (Bermuda) immediately before the
Redomestication will be required to file a Section 368(a) statement. Other
information reporting could also apply to the Redomestication. Shareholders of
Flagstone (Bermuda) should consult their own tax advisor about the information
reporting requirements that could be applicable as a result of the
Redomestication.
Dividends
on Flagstone (Luxembourg) shares paid within the United States or through
certain U.S.-related intermediaries are subject to information reporting unless
the holder is a corporation, other exempt recipient or non-U.S. holder who
establishes foreign status. Dividends subject to information reporting are
subject to backup withholding (currently at a rate of 28%) unless the payee
furnishes the payor with a taxpayer identification number and satisfies certain
certification requirements. Information reporting requirements and backup
withholding may also apply to the payment of proceeds from a sale of Flagstone
(Luxembourg) shares within the United States or through certain U.S.-related
intermediaries. Any amounts withheld under the backup withholding rules may be
allowed as a refund or a credit against the holder’s U.S. federal income tax
liability, provided that the holder furnishes certain required information to
the IRS.
If a U.S.
holder of Flagstone (Luxembourg) shares does not provide us (or our paying
agent) with the holder’s correct taxpayer identification number or other
required information, the holder may be subject to penalties imposed by the
IRS.
In order
for a non-U.S. holder to not be subject to backup withholding tax on a
subsequent disposition of Flagstone (Luxembourg) shares, or dividends paid on
those shares, a non-U.S. holder may be required to provide a taxpayer
identification number, certify the holder’s foreign status or otherwise
establish an exemption.
Holders
should consult their tax advisors regarding the application of information
reporting and backup withholding to their particular situations.
THE
U.S. FEDERAL INCOME TAX CONSIDERATIONS SUMMARIZED ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH FLAGSTONE REINSURANCE SHAREHOLDER SHOULD CONSULT HIS OR
HER TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES THAT MAY APPLY TO SUCH
SHAREHOLDER.
Scope
of Discussion
This
summary is based on the laws of the Grand-Duchy of Luxembourg, including the
Income Tax Act of December 4, 1967, as amended, the Municipal Business Tax Act
of December 1, 1936, as amended and the Net Wealth Tax Act of October 16, 1934,
as amended, to which we jointly refer as the “Luxembourg tax law”, existing and
proposed regulations promulgated thereunder, and published judicial decisions
and administrative pronouncements, each as in effect on the date of this Proxy
Statement or with a known future effective date. This discussion does
not generally address any aspects of Luxembourg taxation other than income tax,
corporate income tax, municipal business tax, withholding tax and net wealth
tax. This discussion is not a complete analysis or listing of all of the
possible tax consequences of the Redomestication or of holding and disposing of
shares and does not address all tax considerations that may be relevant to you.
Special rules that are not discussed in the general descriptions below may also
apply to you. The Luxembourg corporate income tax and dividend withholding tax
consequences in relation to the Redomestication and post-Redomestication
ownership and disposition of Flagstone (Luxembourg) shares and certain other
matters have been confirmed with the Luxembourg Direct Tax authorities. However,
there can be no assurance that the Luxembourg tax authorities will not challenge
any of the Luxembourg tax consequences described below; in particular, changes
in law and/or administrative practice, as well as changes in relevant facts and
circumstances, may alter the tax considerations described below.
For
purposes of this discussion, a “Luxembourg holder” is any beneficial owner of
shares that for Luxembourg income tax purposes is:
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an
individual resident of Luxembourg under article 2 of the Luxembourg Income
Tax Act, as amended; or
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a
corporation or other entity taxable as a corporation that is organized
under the laws of Luxembourg under article 159 of the Income Tax Act, as
amended.
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A
“non-Luxembourg holder” of shares is a holder that is not a Luxembourg holder.
For purposes of this summary, “holder” or “shareholder” means either a
Luxembourg holder or a non-Luxembourg holder or both, as the context may
require.
This
discussion does not constitute tax advice and is intended only as a general
guide. The summary is not exhaustive and shareholders should consult their own
tax advisors as to the Luxembourg tax consequences of the Redomestication and
the ownership and disposition of Flagstone (Luxembourg) shares. The summary
applies only to shareholders who will own Flagstone (Luxembourg) shares as
capital assets and does not apply to other categories of shareholders, such as
dealers in securities, trustees, insurance companies, collective investment
schemes and shareholders who have, or who are deemed to have, acquired their
shares in the capital of Flagstone (Luxembourg) by virtue of an office or
employment.
Material
Luxembourg Tax Consequences of the Redomestication
The
Company
Although
the Company will become subject to Luxembourg tax as a result of the
transactions constituting the Redomestication, the Redomestication transaction
itself will not trigger any Luxembourg corporate income taxes on the Company,
except that the transfer of the statutory seat of the Company to Luxembourg
should be subject to a flat registration duty of €75.
Shareholders
No
Luxembourg tax should become due for holders as a result of the
Redomestication.
Material
Luxembourg Tax Considerations Post-Redomestication to Flagstone
The
Company will become a Luxembourg tax resident entity upon the Redomestication,
and it will therefore be subject to Luxembourg corporate income tax, municipal
business tax, withholding tax, and net wealth tax. We intend, however, to take
actions to prevent the Company from being required to pay a substantial amount
of any of the aforementioned taxes.
Corporate
Income Tax / Municipal Business Tax
A
Luxembourg resident company is subject to corporate income tax and municipal
business tax on its worldwide income. Qualifying dividend income and net capital
gains on the sale of qualifying investments in subsidiaries generally are
exempt from corporate income tax and municipal business tax under Luxembourg’s
“participation exemption”. Consequently, qualifying dividends received by
Flagstone (Luxembourg) from its subsidiaries and capital gains from sales by
Flagstone (Luxembourg) of investments in its subsidiaries should be exempt from
corporate income tax and municipal business tax.
Net
Wealth Tax
A
Luxembourg resident company is subject to net wealth tax on its worldwide
wealth. Qualifying investments in subsidiaries generally are exempt from net
wealth tax. Consequently, the fair market value of qualifying investments held
by Flagstone (Luxembourg) should be exempt from net wealth tax.
Capital
Contribution Tax / Registration duties
The
issuance of shares and increases in the capital of Luxembourg corporations is
subject to a Luxembourg flat registration duty of €75. Registration
duties may be levied on the registration of certain debt instruments in
Luxembourg at a rate equal to 0.24% of the nominal value of the debt. Flagstone
(Luxembourg), however, has no obligation to register such debt instruments and
does not intend to do so. Thus, only the flat registration duty
should be imposed.
Post-Redomestication
Consequences to Flagstone (Luxembourg) Shareholders
The tax
consequences discussed below are not a complete analysis or listing of all the
possible tax consequences that may be relevant to you. You should consult your
own tax advisor in respect of the tax consequences related to ownership, sale or
other disposition of shares in Flagstone (Luxembourg).
Luxembourg
Income Tax on Dividends and Similar Distributions
A
non-Luxembourg holder will not be subject to Luxembourg income taxes on dividend
income and similar distributions in respect of shares in Flagstone (Luxembourg)
unless the shares are attributable to a permanent establishment or a fixed place
of business maintained in Luxembourg by such non-Luxembourg holder. However,
dividends and similar distributions are generally subject to Luxembourg
withholding tax. See “Luxembourg Withholding Tax—Distributions to
Shareholders”.
A
Luxembourg resident individual holder will be subject to Luxembourg income taxes
on dividend income and similar distributions in respect of shares in Flagstone
(Luxembourg). Luxembourg income tax will be levied on 50% of the gross amount of
the dividends, under certain conditions, at progressive rates. Taxable dividends
are also subject to dependence insurance contribution levied at a rate of 1.4%.
A Luxembourg resident corporation may benefit from the Luxembourg participation
exemption with respect to dividends received if certain conditions are met. If
the conditions with respect to the Luxembourg participation exemption are not
met, the aforementioned 50% exemption may also apply to dividends received by a
Luxembourg resident corporation.
Luxembourg
Wealth Tax
A
non-Luxembourg holder will not be subject to Luxembourg wealth taxes unless the
holder’s shares are attributable to a permanent establishment or a fixed place
of business maintained in Luxembourg by such non-Luxembourg holder.
Luxembourg
resident individual holders are not subject to Luxembourg wealth
tax.
A
Luxembourg corporate entity holder will be subject to Luxembourg net wealth tax,
in respect of the shares held in the capital of Flagstone (Luxembourg) unless
such shares form a stake of at least 10% of the total issued share capital of
Flagstone (Luxembourg) or have a cost price of at least €1,200,000.
Luxembourg
Capital Gains Tax upon Disposal of Shares
A
non-Luxembourg holder will be subject to Luxembourg income taxes for capital
gains in the following cases (among others):
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The
holder’s shares are attributable to a permanent establishment or a fixed
place of business maintained in Luxembourg by such non-Luxembourg holder.
In such case, the non-Luxembourg holder is required to recognize capital
gains or losses on the sale of such shares, which will be subject to
Corporate Income Tax and Municipal Business Tax;
or
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At
any time within a five-year period prior to the disposal of shares in the
Company, the holder’s shares and those held by close relatives belong
to a substantial shareholding of more than 10% of the total issued share
capital of Flagstone (Luxembourg) and the shares sold have been disposed
of within a period of six months following their acquisition, provided no
provisions of a treaty for the avoidance of double taxation can be invoked
to override this domestic law
result.
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A
Luxembourg resident individual holder will be subject to Luxembourg income taxes
for capital gains in the following cases:
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If
the shares (1) represent the assets of a business or (2) were
acquired for speculative purposes (i.e., disposed of within six months
after acquisition), then any capital gain will be taxed at ordinary income
tax rates and subject to dependence insurance contribution levied at a
rate of 1.4%; and
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Provided
that the shares do not represent the assets of a business, and the
Luxembourg resident individual has disposed of them more than six months
after their acquisition, then the capital gains are taxable at half the
overall tax rate if the shares belong to a substantial participation
(i.e., shareholding representing more than 10% of the share capital, owned
by the Luxembourg resident individual or together with his spouse/partner
and dependent children, directly or indirectly at any time during the five
years preceding the disposal). In this case, the capital gains would also
be subject to dependence insurance contribution levied at a rate of
1.4%.
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A
Luxembourg corporate entity holder will be subject to Luxembourg corporate
income taxes for capital gains unless (a) the holder’s shares form a stake
of at least 10% of the total issued share capital in Flagstone (Luxembourg) or
have a cost price of at least €6,000,000 and (b) such qualifying
shareholding has been held for an uninterrupted period of at least 12 months or
the Luxembourg corporate entity holder undertakes to continue to own such
qualifying shareholding until such time as the entity has held the shares for an
uninterrupted period of at least 12 months.
Luxembourg
Withholding Tax—Distributions to Shareholders
A
Luxembourg withholding tax of 15% is due on dividends and similar distributions
to Flagstone (Luxembourg)’s holders (subject to the exceptions discussed under
“Exemption from Luxembourg Withholding Tax—Distributions to Shareholders”).
Flagstone (Luxembourg) will be required to withhold at such rate from
distributions to the shareholder and pay such withheld amounts to the Luxembourg
tax authorities.
Exemption
from Luxembourg Withholding Tax—Distributions to Shareholders
Dividends
and similar distributions paid to Flagstone (Luxembourg)’s Luxembourg and
non-Luxembourg holders may be exempt from Luxembourg dividend withholding tax
if: (1) the shareholder is a qualifying corporate entity holding a stake of at
least 10% of the total issued and outstanding share capital of Flagstone
(Luxembourg) or acquired the holder’s shares for at least €1,200,000; and (2)
the shareholder has either held this qualifying stake in the capital of
Flagstone (Luxembourg) for an uninterrupted period of at least 12 months at the
time of the payment of the dividend or if such shareholder undertakes to
continue to own such qualifying shareholding until such time as the entity has
held the shares for an uninterrupted period of at least 12 months. Examples
of qualifying corporate shareholders are taxable Luxembourg companies, certain
taxable companies resident in other EU member states, capital companies resident
in Switzerland subject to income tax and companies fully subject to a tax
corresponding to Luxembourg corporate income tax that are resident in countries
that have concluded a treaty for the avoidance of double taxation with
Luxembourg. Residents of countries that have concluded a treaty for avoidance of
double taxation with Luxembourg might claim application of a reduced rate on or
exemption from dividend withholding tax, depending on the terms of the relevant
tax treaty.
Under
current Luxembourg tax law, payments to shareholders in relation to a reduction
of share capital or share premium are not subject to Luxembourg dividend
withholding tax if certain conditions are met, including, for example, the
condition that Flagstone (Luxembourg) does not have distributable reserves or
profits generated post-Redomestication. If Flagstone (Luxembourg) has, at the
time of the payment to shareholders with respect to their shares, distributable
reserves or profits generated post-Redomestication, a distribution of share
capital or share premium will be recharacterized for Luxembourg tax purposes as
a distribution of such reserves or earnings subject to withholding tax. We
expect that a substantial amount of any potential future payments to be made by
Flagstone (Luxembourg) may be exempt from Luxembourg withholding
tax.
Reduction
of Luxembourg Withholding Tax—Distributions to Shareholders
Pursuant
to the provisions of the EU Parent Subsidiary Directive, the aforementioned
Luxembourg dividend withholding tax may be eliminated under certain
circumstances. In addition, pursuant to the provisions of certain bilateral
treaties for the avoidance of double taxation concluded between Luxembourg and
other countries, and under certain circumstances, the aforementioned Luxembourg
dividend withholding tax may be reduced, but only with respect to corporate
direct investment dividends. Luxembourg has entered into bilateral treaties for
the avoidance of double taxation with:
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Austria;
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Canada;
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Finland;
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Azerbaijan;
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China;
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France;
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Belgium;
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Czech Republic;
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Georgia;
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Brazil;
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Denmark;
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Germany;
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Bulgaria;
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Estonia;
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Greece;
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Hong Kong;
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Spain;
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Hungary;
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Sweden;
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Iceland;
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Switzerland;
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India;
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Thailand;
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Indonesia;
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Trinidad and Tobago;
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Ireland;
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Tunisia;
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Israel;
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Turkey;
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Italy;
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United Arab Emirates;
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Japan;
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United Kingdom;
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Latvia;
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United States of America;
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Lithuania;
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Uzbekistan;
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Malta;
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Vietnam.
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Malaysia;
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Mauritius;
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Mexico;
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Moldavia;
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Mongolia;
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Morocco;
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The Netherlands;
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Norway;
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Poland;
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Portugal;
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Romania;
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Russia;
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San Marino;
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Singapore;
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Slovak Republic
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Slovenia;
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South Africa;
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South Korea;
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U.S. Holders. The
Luxembourg-U.S. Tax Treaty provides that U.S. residents eligible for benefits
under the treaty can seek a refund of the Luxembourg withholding tax on
dividends for the portion exceeding 15% in respect of portfolio dividends, i.e.
dividends distributed on shareholdings of less than 10% of the total issued
share capital of the dividend paying entity. Given that the domestic Luxembourg
withholding tax rate is 15%, no further reductions can be obtained in respect of
these portfolio dividends received by a U.S. holder.
Credit
of Luxembourg Withholding Tax on Dividends and Other Distributions
Luxembourg
Holders. Subject to the satisfaction of certain conditions and
assuming, in the case of corporate holders, that the participation exemption
does not apply, only half of the gross amount of a dividend distributed to a
Luxembourg corporate or individual holder will be subject to Luxembourg
corporate income tax or Luxembourg income tax. All or part of the withholding
tax levied can in principle be credited against the applicable tax.
THE
LUXEMBOURG TAX CONSIDERATIONS SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY.
EACH FLAGSTONE REINSURANCE SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS
TO THE PARTICULAR CONSEQUENCES THAT MAY APPLY TO SUCH SHAREHOLDER.
The
Redomestication will not result in any income tax consequences under Bermuda law
to Flagstone (Bermuda), Flagstone (Luxembourg) or their
shareholders.
Introduction
The
following is a summary of the rights of holders of shares in Flagstone
(Luxembourg) after the Redomestication. These rights will be set out
in the Articles or are provided by applicable Luxembourg law. These rights may
differ from those shareholders’ rights typically provided for in Bermuda or any
of the States in the United States.
This
summary is not exhaustive and does not contain all information that may be
important to you. For complete information, you should read the Articles, which
are attached to this Proxy Statement as Annex A. Pursuant to Luxembourg Law, the
Company is required to also prepare its Articles in one of the official
languages of Luxembourg. The Company will therefore have an English version of
its Articles and a French version of its Articles, which together shall
constitute the Articles of the Company. In the event of any discrepancies
between the English version and the French version of the Articles, the Articles
will provide that the English version will prevail. By approving the English
version of the Articles, shareholders will be deemed to have approved the
appropriate French translation.
General
Flagstone
(Luxembourg) will be a joint stock corporation (société anonyme) organized
pursuant to the laws of Luxembourg. Flagstone (Luxembourg) will be registered in
Luxembourg under an allocated registration number in the Registre du Commerce et
des Sociétés (the Luxembourg registrar of Companies).
Share
Capital and Shares
Flagstone
(Luxembourg) will have an authorized share capital of US$3,000,000 divided into
300,000,000 shares with a par value of US$0.01 each.
The
issued share capital of Flagstone Reinsurance as at March 19, 2010, is
US$849,852.19 divided into 84,985,219 shares with a par value of US$0.01 each
(the “Shares”) of which 4,984,146 shares are held as treasury shares. All
Shares currently in issue are fully paid up.
The
authorized share capital will be fixed by the Articles. Any amendments to the
articles of incorporation of a Luxembourg company must be performed (except
where authority is otherwise given to the board of directors of the company in
the articles) at an extraordinary general meeting of the shareholders of the
company held in the presence of a Luxembourg notary. See “—General Meetings and
Voting of Shareholders”.
Shares
are issued in registered form only. Flagstone (Luxembourg) will be entitled to
treat the registered holder of any Share as the absolute owner thereof and will
not be bound to recognize any equitable claim or other claim or interest in such
Share on the part of any other person.
In the
event that Shares are recorded in the Register on behalf of one or more persons
in the name of a securities settlement system or the operator of such system, or
in the name of a professional depository of securities, or any other depository
(such systems, professionals or other depositories, being referred to
hereinafter as “Depositories”) or of a sub-depository designated by one or more
Depositories, the Company (subject to it having received from the Depository
with whom those Shares are kept in account a certificate in proper form) will
permit those persons to exercise the rights attaching to those Shares, including
admission to and voting at general meetings, and will consider those persons to
be the shareholders.
The Board
of Directors is generally and unconditionally authorized for a period of five
years from the date of the Redomestication to issue shares up to a maximum of
the authorized but unissued share capital of Flagstone (Luxembourg). Such issue
may include an issue of shares pursuant to the PSU Plan or the RSU Plan, which
are the Company’s current share incentive plans, or as a consequence of the
obligations of Flagstone (Luxembourg) pursuant to the Warrant described under
“Proposal 4 - Approval of the Redomestication—Description of Flagstone
(Luxembourg) Shares—Warrant”. Shares may be issued for cash, as compensation,
for contribution in kind, upon conversion of shareholders’ claims, or by
incorporation of profits or distributable reserves, including the incorporation
of share premium into capital. Pursuant to the Articles, the shareholders of
Flagstone (Luxembourg) have waived their statutory pre-emptive rights to the
issue of new Shares for cash by the Board of Directors.
Shares in
Flagstone (Luxembourg) may be issued either at par, or at a premium and with
such rights and restrictions (whether in regard to dividend, voting, return of
capital, or otherwise) as Flagstone (Luxembourg) may direct by special
resolution passed at an extraordinary general meeting held in the presence of a
Luxembourg notary, or as may be determined by the Board of Directors pursuant to
the five year authority to issue authorized Shares.
Share
Certificates
Shares
will be issued in certificated form.
In the
case where shares are held through a Depository, such as a securities settlement
system, a certificate will be issued to the Depository whose name appears in the
share register.
Repurchase
of Shares and Article 49-2 of the Luxembourg Company Law
Flagstone
(Luxembourg) is generally authorized by shareholders for a period of five years,
pursuant to a resolution passed at the annual general meeting of shareholders,
to (i) make open market purchases, or (ii) make offers for repurchase. Flagstone
(Luxembourg) is further authorized to repurchase Shares, and force
shareholders to sell, in circumstances where the acquisition of the Company’s
own Shares is necessary to prevent imminent harm to the Company.
Repurchased
Shares may be cancelled or held as treasury shares.
The
Company may generally only repurchase Shares on the open market or by offer for
repurchase, provided that:
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The
maximum price which may be paid for each Share shall not exceed the fair
market value (as defined below);
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The
maximum number of Shares to be repurchased does not exceed the number of
Shares available for repurchase as set out in the authorizing shareholders
resolution;
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The minimum
price which may be paid for each Share shall not be less than the par
value of each Share, being US$0.01;
|
|
|
·
|
The
acquisitions, including the Shares previously acquired by the Company
and held by it may not have the effect of reducing the net assets of
the Company below the limits set forth in Luxembourg Company Law;
and
|
|
|
·
|
The
authority granted by the shareholders to the Company to repurchase its
Shares, unless revoked, varied or renewed, shall not exceed five
years.
|
The
Company may only exercise the option to repurchase Shares, and force a
shareholder to sell, if it reasonably determines in good faith, based on the
opinion of counsel, that Share ownership, directly, indirectly, or
constructively, by any holder is likely to result in imminent harm to the
Company. Imminent harm is described in the Articles as adverse tax
consequences or materially adverse legal or regulatory treatment to Flagstone
(Luxembourg) or any of its subsidiaries. Time periods are provided for in the
Articles for a shareholder whose Shares may be so repurchased by the Company to
remedy such matter prior to the enforcement of the option by Flagstone
(Luxembourg). Upon any such repurchase, the shareholder must receive at least
the fair market value for each Share so repurchased.
The fair
market value of a Share is defined in the Articles as:
(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 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 or (b) if
no such closing sales or prices are available because such Shares are not
publicly traded, the value per Share as determined by an independent valuation
and approved by the Board.
Transfer
and Transmission of Shares
Other
than with respect to the procedures for the transfer of fungible shares in the
event that such shares are held by a Depository, a shareholder may transfer all
or any part of his Shares by written instrument of transfer.
Any
restrictions on transfer set out in the Articles will not be imposed in any
circumstances 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, provided that the Company may
decline to register transfers in accordance with the Articles and resolutions of
the Board, after a settlement has taken place.
Any
person becoming entitled to a Share as a result of the death or bankruptcy of
any Holder will execute an instrument of transfer in writing in the form
acceptable to Flagstone (Luxembourg) (along with any other evidence as may be
required by the Board) after which the applicable transferee will be registered
as the new holder of the Shares in the register kept by Flagstone
(Luxembourg).
Alteration
of Share Capital
Flagstone
(Luxembourg) may by Special Resolution:
|
|
·
|
increase
the number of authorized shares;
and
|
|
|
·
|
consolidate
its shares into a fewer number of outstanding shares;
and
|
|
|
·
|
subdivide
its shares into a larger number of outstanding
shares.
|
Any
alteration to the share capital of the Company will require an appropriate
amendment to the Articles.
Dividends
Subject
to the Luxembourg Company Law, interim dividends may be declared by the Board of
Directors of the Company. The declaration of interim dividends is subject to the
approval of shareholders at the next general meeting of shareholders. Where the
payments made on account of interim dividends exceed the amount of dividends
subsequently approved by the shareholders at the general meeting, they shall, to
the extent of the overpayment, be deemed to have been paid on account of the
next dividend.
The
shareholders may declare dividends at a general meeting of shareholders, but the
dividend may not exceed the amount recommended by the Board of Directors.
Dividends may only be declared from the distributable reserves available to the
Company.
Share
premium will be available for repayment to the shareholders of Flagstone
(Luxembourg) in the discretion of the Board of Directors.
Dividends
may be paid in (1) cash, in the form of a check, or by warrant or (2) wholly or
partly in kind, by the distribution of assets (in particular, paid up shares,
debentures or debenture stock) to shareholders.
No
dividend or other moneys payable in respect of a Share will bear interest
against Flagstone (Luxembourg) unless otherwise provided by the rights attached
to the Share.
Regular
dividends are, in principle, subject to a Luxembourg withholding tax of 15%. Any
repurchase of shares or repayment of capital or share premium is, under certain
circumstances, also subject to 15% Luxembourg withholding tax, for example, to
the extent the Company has distributable reserves or profits generated
post-Redomestication. If Flagstone (Luxembourg) were to make any such taxable
payment, it would, in principle, be required to withhold at the 15% rate and
remit the withheld amounts to the Luxembourg tax authorities. See
“Risk Factors─After the Redomestication, dividends you receive may be subject to
Luxembourg dividend withholding tax and Luxembourg income tax” and “—Material
Tax Consequences Relating to the Redomestication—Luxembourg Tax
Considerations—Post-Redomestication Consequences to Flagstone (Luxembourg)
Shareholders”.
The
Luxembourg-U.S. Tax Treaty provides that U.S. residents eligible for benefits
under the treaty can seek a refund of the Luxembourg withholding tax on
dividends for the portion exceeding 15% in respect of portfolio dividends, i.e.
dividends distributed on shareholdings of less than 10% of the total issued
share capital of the dividend paying entity. Given that the domestic Luxembourg
withholding tax rate is 15%, no further reductions can be obtained in respect of
these portfolio dividends received by a U.S. holder. See “─Material Tax
Considerations Relating to the Redomestication─Luxembourg Tax
Considerations─Material Luxembourg Tax Considerations Post-Redomestication to
Flagstone─Post-Redomestication Consequences to Flagstone (Luxembourg)
Shareholders─Reduction of Luxembourg Withholding Tax—Distributions to
Shareholders”.
However,
it is our intention to make payments to shareholders in the form of share
capital reductions and share premium reductions in such a way that no Luxembourg
withholding tax is due. As such, we expect that a substantial amount
of any potential future payments to be made by Flagstone (Luxembourg) may be
exempt from Luxembourg withholding tax. Flagstone recommends that each
shareholder consult his or her own tax advisor as to the tax consequences of
holding shares in and receiving share capital, share premium and dividend
payments from Flagstone (Bermuda). See “Risk Factors─After the Redomestication,
dividends you receive may be subject to Luxembourg dividend withholding tax and
Luxembourg income tax”.
General
Meetings and Voting of Shareholders
Votes of
shareholders may be given at general meetings of Flagstone (Luxembourg), either
personally or by proxy. Subject to the rights and restrictions for the time
being attached to any Shares by the Articles or any applicable law, every
shareholder present, whether in person or by proxy, will have one vote for each
Share carrying voting rights, of which the shareholder is the registered
holder.
The
annual general meeting of Flagstone (Luxembourg) will be held on the second
Thursday of the month of May at 2:00 p.m. (CET). If this is not a
business day, then such meeting will be held on the next business day. Notice of
such annual general meeting will be given to shareholders at least 10 clear days
prior to the meeting being held. For at least fifteen days prior to the annual
general meeting, each shareholder may obtain a copy of the financial statements
for the preceding financial year at the office of Flagstone (Luxembourg) and
inspect all documents required by Luxembourg Company Law to be made available
for inspection.
In
addition to the annual general meeting, Flagstone (Luxembourg) may also call for
ordinary general meetings and extraordinary general meetings. Ordinary and
extraordinary general meetings must be called on at least 10 days notice.
An extraordinary general meeting is required for any meeting to amend the
Articles (or other item specified in the Articles requiring a Special Resolution
or super majority vote). At an extraordinary general meeting, a quorum requires
at least two shareholders and shareholders together holding more than one half
of the issued Shares of Flagstone (Luxembourg). An extraordinary general meeting
held for the purposes of amending the Articles must be held in the presence of a
Luxembourg notary. Any Special Resolution to be passed at an extraordinary
general meeting will be validly passed by a majority of two-thirds of the Shares
present or represented at the meeting. Any resolution requiring a super
majority resolution will be passed by the applicable super majority vote at
an extraordinary general meeting as specified in the Articles. At
ordinary general meetings, quorum requires two persons being entitled to vote,
and a resolution may be passed by a simple majority of shares present or
represented at such meeting.
Distributions
on Dissolution of Flagstone (Luxembourg)
Any
voluntary dissolution of Flagstone (Luxembourg) will take place in accordance
with the provisions of Luxembourg law. Flagstone (Luxembourg) may
only be placed into voluntary dissolution if shareholders vote in favor of such
dissolution by means of a Special Resolution passed at an extraordinary general
meeting of shareholders. In the event of a dissolution of Flagstone
(Luxembourg), the dissolution will be carried out by one or more liquidators
appointed by the general meeting of shareholders, which will determine their
powers and remuneration within the Luxembourg Company Law.
If upon
dissolution the assets available for distribution among the shareholders are
insufficient to repay the whole of the paid up or credited as paid up share
capital, the assets will be distributed so that, as nearly as possible, the
losses will be borne by the shareholders in proportion to the capital paid up or
credited as paid up at the commencement of the dissolution on the Shares held by
them respectively.
If in a
dissolution the assets available for distribution among the shareholders are
more than sufficient to repay the whole of the share capital paid up or credited
as paid up at the commencement of the dissolution, the excess will be
distributed among the shareholders in proportion to the capital at the
commencement of the dissolution paid up or credited as paid up on the Shares
held by them respectively.
After the
payment of all debts and any charges against Flagstone (Luxembourg) and of the
liquidation expenses, the net liquidation proceeds will be distributed to the
shareholders to achieve on an aggregate basis the same economic result as the
distribution rules set for dividend distributions.
If
Flagstone (Luxembourg) is dissolved, the liquidators, with the sanction of a
Special Resolution, may divide among the shareholders in specie or kind the
whole or any part of the assets of Flagstone (Luxembourg) (whether they will
consist of property of the same kind or not) and, for such purpose, may value
any assets and determine how the division will be carried out as between the
shareholders. The liquidators may vest the whole or any part of such assets in
trusts for the benefit of the shareholders as the liquidator determines, but so
that no shareholder will be compelled to accept any assets upon which there is a
liability.
Classification
of the Board of Directors
The Board
of Directors will consist at all times of no less than 10 and no more than 12
directors, divided into 3 classes as nearly equal as possible in size, each of
whom will hold office for a term determined by the shareholders, (such term not
to exceed six years) or, in the absence of such determination, for a three-year
term. Directors may be re-elected at the end of any such term.
Shareholders’
Agreement
Flagstone
(Bermuda) and certain shareholders who acquired our Shares prior to the date of
our initial public offering (the “Existing Shareholders”) are parties to the
Shareholders’ Agreement. The Shareholders’ Agreement permits persons
who hold at least five million of our Shares to request registration for a
public offering of Shares. We have agreed to use our best efforts to
cause the prompt registration of such Shares but may postpone the filing of a
registration statement in connection with such public offering for up to three
months from the date of the request if we determine in good faith that the
registration would reasonably be expected to have an adverse effect on any
proposal or plan by us or any of our subsidiaries to engage in any acquisition
of assets (other than in the ordinary course of business) or any stock purchase,
amalgamation, merger, consolidation, tender offer, reorganization, or similar
transaction or if an underwritten public offering is contemplated in which the
Shares proposed to be registered would be included. If the number of Shares to
be sold in the requested offering is limited by the managing underwriter, then
the number of Shares requested to be registered will be allocated, pro rata,
among the requesting shareholders. The Existing Shareholders are
currently entitled to request up to three demand registrations.
Additionally,
the Shareholders’ Agreement provides that, if at any time we propose to register
any of our Shares under the Securities Act, we will offer the Existing
Shareholders the opportunity, subject to certain conditions, to include their
Shares in such registration statement. We are generally required to
pay all expenses associated with any demand or “piggyback”
registrations.
Warrant
The
Company has granted to Haverford (Bermuda) Ltd. (“Haverford”) a Warrant to
purchase Shares. The Warrant is exercisable during the month of
December 2013. The Warrant entitles the holder to purchase 8,585,747
Shares, at an exercise price of $14.80 per share (subject to adjustment for
share splits, dividends declared and similar events). Haverford may
transfer the Warrant only to certain of its affiliates.
Restrictions
on Transfer of Shares or Warrants
The FSA
regulates the acquisition of “control” of any U.K. person, such as Marlborough,
authorized under the Financial Services and Markets Act 2000
(“FSMA”). Similarly, Lloyd’s approval is required prior to acquiring
control of a Lloyd’s managing agent. Any company or individual that (together
with its or his/her associates) directly or indirectly acquires 10% or more of
the shares of a U.K. authorized insurance company or its parent company, or is
entitled to exercise or control the exercise of 10% or more of the voting power
in such authorized insurance company or its parent company, would be considered
to have acquired “control” for the purposes of FSMA, as would a person who had
significant influence over the management of such authorized insurance company
or its parent company by virtue of the person’s shareholding or voting power in
either. A purchaser of 10% or more of Flagstone (Luxembourg)’s Shares would
therefore be considered to have acquired “control” of Marlborough. Under FSMA,
any person proposing to acquire “control” over a U.K. authorized insurance
company must notify the FSA of that person’s intention to do so and obtain the
FSA’s prior approval. The FSA would then have three months to consider that
person’s application to acquire “control”. In considering whether to approve
such application, the FSA must be satisfied both that the acquirer is a fit and
proper person to have such “control” and that the interests of consumers would
not be threatened by such acquisition of “control”. Failure to make the relevant
prior application would constitute a criminal offense, whereas a failure to
obtain Lloyd’s approval could result in Lloyd’s taking action against the
relevant managing agent.
Lloyd’s
also regulates the acquisition of control over Lloyd’s corporate members, such
as Flagstone Corporate Name Limited. The test for acquisition of control is the
same as that described above in relation to FSMA. Accordingly, any person who
proposed to acquire 10% or more of the ordinary shares in Flagstone Corporate
Name Limited or a parent company, including Flagstone (Luxembourg), would have
to obtain the prior approval of Lloyd’s.
The
restrictions on transfer described above may have the effect of delaying,
deferring or preventing a change in control of the Company.
Transfer
Agent and Registrar
The
transfer agent and registrar for the Shares is BNY Mellon Shareowner Services,
whose principal executive office is located at 1 Wall Street, New York, NY
10004.
Listing
Flagstone
(Bermuda)’s Shares are currently listed on the NYSE under the symbol “FSR” and
Flagstone (Luxembourg)’s Shares will continue to be listed on the NYSE after the
Redomestication under the same symbol. The Shares are also currently listed on
the Bermuda Stock Exchange, and we expect that they will continue to be listed
on the Bermuda Stock Exchange after the Redomestication. Other than for our
Shares, there is no market for any other shares we may offer.
SHAREHOLDERS
ARE ADVISED TO REVIEW THE ARTICLES OF FLAGSTONE (LUXEMBOURG) (ATTACHED TO THIS
PROXY STATEMENT AS ANNEX A TO SUPPLEMENT THE SUMMARIZED INFORMATION PROVIDED IN
THIS PROXY STATEMENT.
SHAREHOLDERS
ARE ALSO REFERRED TO THE SECTION IN THIS PROXY STATEMENT ENTITLED “COMPARISON OF
RIGHTS OF SHAREHOLDERS” FOR FURTHER INFORMATION.
Your
current rights as a shareholder are governed by Bermuda law, our Memorandum of
Association and our Bye-Laws. After the Redomestication, your rights will be
governed by Luxembourg law and our Articles.
Many of
the principal features of our Bermuda shares and Luxembourg shares will be
similar. There are differences, however, between your rights under the civil law
system of Luxembourg and your rights under the corporate statutory and common
law of Bermuda, which is modeled on certain provisions of the corporate
statutory law of England and Wales and in respect of which the common law of
England and Wales is highly persuasive authority as to questions of Bermuda law.
In addition, there are differences between our current Bermuda Memorandum of
Association and Bye-Laws and the Articles. The following discussion is a summary
of the material changes in your rights that will result from the
Redomestication.
This
summary is not complete and does not cover all of the differences between
Luxembourg law and Bermuda law affecting companies and their shareholders or all
the differences between our Bermuda Memorandum of Association and Bye-Laws and
the Articles. This summary contains a list of the material
differences but is not meant to be relied upon as an exhaustive list or a
detailed description of the provisions described. The Articles are attached to
this Proxy Statement as Annex A. For information as to how you can obtain our
Bermuda Memorandum of Association and Bye-Laws, see “Incorporation of Certain
Information by Reference”.
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Authorized
and Issued Shares
|
Authorized
share capital: US$3,000,000, divided into 300,000,000 shares with a par
value of US$0.01 each.
Issued
share capital: 84,985,219.
Outstanding
share capital: 80,001,073.
|
Authorized
share capital: US$3,000,000, divided into 300,000,000 shares with a par
value of US$0.01 each.
Issued
share capital: 84,985,219.
Outstanding
share capital: 80,001,073.
|
||
|
Voting
|
One
vote per share, except our Bye-Laws reduce the total voting power of any
U.S. person controlling 9.9% or more of our common shares to less than
9.9% of the voting power of our common shares.
|
One
vote per share.
|
||
|
Preferred
Shares
|
The
Board of Directors can issue preferred shares on such terms and conditions
as it may determine and having such voting rights, dividend rates, return
of capital, conversion rights or other provisions as may be fixed by the
Board of Directors without any further shareholder
approval.
|
The
issuance of any preferred shares requires an amendment to the Articles.
See “Amendments to the Bye-Laws and Articles of Association”.
|
||
|
Variation
of Rights
|
If,
at any time, the share capital of Flagstone (Bermuda) 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 Flagstone (Bermuda) is being wound-up, be varied with (1)
the consent in writing of the holders of three-fourths of the issued
shares of that class or (2) with the sanction of a resolution passed by a
majority of the votes cast at a separate general meeting of the holders of
shares of the class. At this latter meeting, the necessary quorum will 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 will 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 for further shares
ranking pari
passu therewith.
|
Except
as set out below, provisions regarding Variation of Rights under the
Articles are similar to corresponding provisions under Flagstone
(Bermuda)’s Memorandum of Association and Bye-Laws.
Where
the share capital of Flagstone (Luxembourg) is divided into different
classes of shares, any variation of the rights attached to any class of
shares must be made by means of a super majority vote of 75%
passed at a meeting of the shareholders of the affected class.
Should
the change to the rights of the shares of that class require an amendment
to the Articles of Flagstone (Luxembourg), then a Special Resolution
passed at an extraordinary general meeting of all of the
shareholders must be obtained for such amendment. See “Amendment to the
Articles”.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Pre-emptive
Rights and Advance Subscription Rights
|
None.
|
The
Articles authorize the Board of Directors to issue shares up to the
authorized share capital of Flagstone (Luxembourg) for a period of five
years and shareholders waive their statutory pre-emption rights during
this period. Thereafter shares issued for cash will be offered
on a pre-emptive basis to shareholders in proportion to the capital
represented by their shares unless the shareholders once again waive their
pre-emption rights for another period up to a maximum of five
years.
|
||
|
Minority
Rights
|
Not
applicable.
|
If
Flagstone (Luxembourg) loses three-fourths of its corporate capital, it
must be dissolved if such dissolution is approved by 25% of the votes cast
at a general meeting of shareholders convened for that purpose.
Shareholders
holding together 20% of the issued capital are entitled, while a
shareholders’ meeting is in session, to require a postponement of that
meeting for up to 4 weeks. Any such postponement will annul any decision
taken at the meeting.
In
addition to the auditors already appointed for Flagstone (Luxembourg) (see
“Auditors”), the commercial court in Luxembourg, in exceptional
circumstances and upon application of shareholders holding together 20% of
the issued capital of Flagstone (Luxembourg), may appoint one or more
auditors to audit the accounts of the company.
Shareholders,
holding together at least 10% of the issued share capital, are entitled to
require the Board of Directors to convene a meeting of shareholders with
the agenda indicated by them. Such meeting must be held within
one month of the said request. In addition, shareholders holding together
at least 10% of the issued share capital are entitled to require the Board
of Directors to add further items on the agenda of a meeting of
shareholders.
|
||
|
Legal
Reserve
|
Not
applicable.
|
Flagstone
(Luxembourg) is required to allocate a sum of at least five percent (5%)
of its annual net profits to a legal reserve, until such time as the legal
reserve amounts to ten percent (10%) of the nominal value of its issued
share capital.
If
and to the extent that this legal reserve falls below the ten percent
(10%) amount, the company will again allocate a sum of at least five
percent (5%) of its annual net profits to restore the legal reserve to the
minimum
amount.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Dividends
and Other Distributions
|
The
Board may, subject to the Bye-Laws and the Companies Act 1981 of Bermuda,
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.
The
Board may fix any date as the record date for determining the members
entitled to receive any dividend.
Flagstone
(Bermuda) 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.
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 Flagstone
(Bermuda).
|
Shareholders
of Flagstone (Luxembourg) may by resolution declare dividends in
accordance with the respective rights of shareholders in proportion to the
number of shares held by them. Dividends may not exceed the amount
recommended by the Board.
Any
share premium created upon the issuance of shares will be available for
repayment to the shareholders pursuant to the discretion of the
Board.
A
meeting of shareholders declaring a dividend may direct, with the
recommendation of the Board, that the dividend be paid entirely or in part
by the distribution of assets (including paid up shares, debentures or
debenture stock of any other company).
The
Company may make such other distributions (in cash or in specie) to the
shareholders as may be lawfully made out of the assets of Flagstone
(Luxembourg).
The
Board may declare and pay interim dividends upon fulfillment
of the requirements set forth in the Law. Such dividends may be declared
and paid in relation to any class of shares or in relation to all classes
(if the company creates other classes of shares), provided that the shares
of any particular class must rank equally for dividends. Where the
payments made on account of interim dividends exceed the amount of the
dividend subsequently approved by the shareholders at the general meeting,
they shall, to the extent of the overpayment, be deemed to have been paid
on account of the next
dividend.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Repurchase
of Shares
|
Flagstone
(Bermuda) may purchase its own shares for cancellation or to hold as
treasury shares.
If
Flagstone (Bermuda) reasonably determines in good faith that share
ownership, directly, indirectly or constructively is likely to result in
adverse tax consequences or materially adverse legal or regulatory
treatment to Flagstone (Bermuda), it has the option to purchase the
minimum number of shares which is necessary to avoid or cure such adverse
consequences or treatment.
|
Flagstone
(Luxembourg) is authorized by the shareholders to purchase its own shares
for cancellation or to hold as treasury shares for a period of five years,
where such shares are repurchased (i) in open market purchases, or (ii) by
offer to shareholders. Flagstone (Luxembourg) is further
authorized to repurchase its own shares in circumstances where the
acquisition of the Company’s own shares is necessary to prevent imminent
harm (as such term is defined in the Articles) to the
Company.
|
||
|
Quorum
and Voting Rights
|
At
any general meeting of members, 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 Flagstone (Bermuda) throughout the meeting will form a
quorum for the transaction of business.
Generally,
members resolutions may be passed by a simple majority. Directors are
elected by a plurality vote.
|
Except
as provided for in relation to an adjourned meeting, two persons entitled
to vote upon the business to be transacted at a general meeting of
shareholders, each being: (i) a shareholder; (ii) a proxy for a
shareholder; or (iii) a duly authorized representative of a corporate
shareholder, constitutes a quorum for such general meeting.
Where
any Special Resolution is to be passed at an extraordinary general meeting
of shareholders for an amendment to the Articles (or other item specified
in the Articles requiring a super majority vote), the quorum requires in
addition to the requirements set out above, the presence, in person or by
proxy, of shareholders holding at least one half of the issued share
capital.
If
the appropriate quorum is not present, the meeting shall be
dissolved. A second meeting may be convened at which one
shareholder present in person or by proxy shall be a quorum.
Any
Ordinary Resolution, including the election of directors, at an ordinary
general meeting will be passed by a vote in favor by a simple majority of
the shares present or represented at the meeting.
Any
Special Resolution at an extraordinary general meeting will be passed by a
majority of two-thirds of the shares present or represented at the
extraordinary general meeting.
Any
item requiring a super majority vote will be passed by the appropriate
percentage as required by the super majority vote.
|
||
|
Shareholders’
Written Resolutions
|
A
written resolution signed by all of the members at the date of the
resolution who would be entitled to attend a meeting and vote on such
resolution is as valid as if it had been passed at a meeting of
shareholders called for the purposes of passing such a resolution (except
for resolutions passed to remove an auditor or director from office before
the expiration of his term of office).
|
Not
permitted.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
||||
|
Supermajority
Voting
|
The
variation of any rights that may be attached to a class of shares requires
the consent in writing of the holders of not less than 75% of the issued
shares of that class or a resolution passed at a general meeting of the
holders of shares of that class by a simple majority of the votes cast at
which meeting quorum requires at least two persons holding or represented
by proxy at least one-third of the issued shares of the
class.
Flagstone
(Bermuda) may merge with another entity with the approval of 75% of votes
cast at a meeting of members at which a quorum is present.
|
The
unanimous consent of the shareholders is required in an extraordinary
general meeting to approve the following matters:
|
|||
|
·
|
the
change of the domicile of Flagstone (Luxembourg), as effected through a
continuation of its corporate seat and effective place of management;
and
|
||||
|
·
|
any
increase in the shareholders’ commitments.
|
||||
|
The
affirmative vote of at least two-thirds of the votes cast is required in
an extraordinary general meeting to approve the following
matters:
|
|||||
|
·
|
the
increase or the reduction of Flagstone (Luxembourg)’s share
capital;
|
||||
|
·
|
any
matter requiring the passing of a Special Resolution;
and
|
||||
|
·
|
any
other amendment to the Articles. See “Amendment to
Articles”.
|
||||
|
The
affirmative vote of at least 75% of the votes cast is required in an
extraordinary general meeting to approve the following
matters:
|
|||||
|
·
|
a
variation of rights of any class of shares, in which case a vote of 75% of
the vote present or represented of that class of shares is
required;
|
||||
|
·
|
the
sale, lease or exchange of a substantial part of the Company’s
assets;
|
||||
|
·
|
a
merger, de-merger or amalgamation; and
|
||||
|
·
|
an
amendment, variation, or deletion of a clause in the Articles of the
Company, but only where such amendment, variation or deletion relates to a
clause dealing with a matter requiring a super majority
resolution.
|
||||
|
Election
of Directors
|
Directors
are elected at the annual general meeting of the members or at any special
general meeting of the members called for that purpose.
Only
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 eligible to vote at the meeting at that
time has been delivered to the registered office of Flagstone (Bermuda)
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 are eligible for appointment or election as a
Director at any meeting.
Directors
are elected by plurality voting which means that the persons who have been
nominated for election as Directors who receive the highest number of
“For” votes cast out of all of the nominated persons will be elected as
directors of the Company.
|
Directors
are elected at a general meeting.
The
Board may elect to nominate directors for election by shareholders, by
placing the names for nomination on the agenda of the
meeting.
Should
shareholders wish to nominate any person for election as a director,
shareholders holding at least 10% of the issued and outstanding paid up
share capital of the Company who are eligible to vote at the meeting must
deliver to the registered office of Flagstone (Luxembourg), not later than
five days after notice of, or public disclosure of the meeting, a written
notice of nomination nominating such person for election as director at
the meeting.
Shareholders
holding together at least 10% of the issued share capital of Flagstone
(Luxembourg) are entitled to require the Board of Directors to convene a
meeting of shareholders with the agenda indicated by them or may add any
item to the agenda of a meeting called (see “Minority Rights”), which item
may include the nomination and election of a director.
There
is no plurality of voting in Luxembourg. Directors are elected to office
if sufficient votes are cast by shareholders in favor of the election of
such Director as is required for the passing of the appropriate
shareholders resolution, see “Election of Directors”
above.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Vacancies
in the Board of Directors
|
The
office of director is vacated if the director:
·
is removed from office pursuant to the Bye-Laws or is prohibited
from being a director by law;
· is
or becomes bankrupt, or makes any arrangement or composition with his
creditors generally;
·
is or becomes of unsound mind or dies; or
· resigns
his office by notice in writing.
The
Board has 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.
A
director cannot appoint an alternate director, and 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.
|
The
office of director is vacated if the director:
· is
prohibited from being a director by law;
·
is or becomes bankrupt, or makes an arrangement or composition with
his creditors generally;
· is
or becomes of unsound mind or dies; or
· resigns
his office by notice in writing.
The
Board may provisionally appoint a person as a director to fill a vacancy.
A director so appointed holds office only until the next annual general
meeting unless re-appointed at such annual general meeting.
Shareholders
holding together at least 10% of the issued share capital can nominate
a person to be appointed as a director, by requiring the Company to place
the nomination on the agenda of the general meeting and requiring the
Company to call a general meeting. At the general meeting, the nominated
person can be appointed as a director by Ordinary Resolution at the
meeting (see “Election of Directors”).
|
||
|
Board
of Directors
|
The
Board consists of no fewer than ten (10) directors and no more than a
maximum of twelve (12) directors. Flagstone (Bermuda) currently has 12
directors.
|
The
Board will be composed of no fewer than ten (10) directors and no more
than a maximum of twelve (12) directors as the Board may from time to time
determine, who shall be elected by shareholders except in the case of
vacancy.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Term
of Office of Directors
|
Three-year
terms.
|
Three-year
terms.
|
||
|
Quorum
for Board and Committee Meetings
|
Quorum
for a meeting of the Board is a majority of the directors then in office,
present in person or represented by a duly authorized representative,
provided that at least two directors are present in
person.
|
Quorum
for a meeting of the Board is a majority of the directors then in office,
present in person, or represented by a duly authorized representative
provided that at least two directors are present.
|
||
|
Removal
of Directors
|
Members
entitled to vote for the election of directors may, at any special general
meeting remove any director, but only for cause.
If
a director is removed from the Board for cause, the members may fill the
vacancy at the meeting at which such director is removed.
|
The
shareholders may vote on an Ordinary Resolution at a general meeting to
remove any director from office without cause.
|
||
|
Special
Shareholder Meetings / Extraordinary General Meeting
|
The
Chairman, any two directors, or the Board of Directors is required to
convene a special general meeting whenever in their judgment such a
meeting is necessary.
|
The
Board of Directors is required to convene an extraordinary general meeting
of shareholders at the request of shareholders holding not less than 10%
of registered shares (see “Minority Rights”).
|
||
|
Liquidation/
Dissolution
|
Upon
liquidation, members are entitled to receive any assets remaining after
the payment of our debts and the expenses of the liquidation, subject to
special rights of any other class of shares.
|
Any
dissolution of Flagstone (Luxembourg) will be carried out by one or more
liquidators appointed at a meeting of shareholders.
After
payment of all debts and any charges against Flagstone (Luxembourg) and
the liquidation expenses, the net liquidation proceeds are distributed to
the shareholders to achieve on an aggregate basis the same economic result
as the distribution rules set for dividend distributions.
Distributions
in specie are allowed if such distributions are contemplated by the
appointed liquidators and within the powers granted to
them.
|
||
|
Amendments
to the Bye-Laws and Memorandum of Association
|
Amendments
to the Memorandum of Association and Bye-Laws require:
· the
approval of the majority of holders present at the general meeting at
which two or more persons are present in person or by proxy representing
in excess of 50% of the total issued voting shares, and
·
the prior approval of at least seventy five per cent (75%) of the
directors in office.
|
Amendments
to the Articles require an extraordinary general meeting where at least
one half of the issued capital is represented, two shareholders are
present and at least two-thirds of the capital
present at such meeting votes in favor of the amendments. Where
the amendment, deletion or variation of the Articles relates to a clause
dealing with a super majority resolution requirement, the amendment,
variation or deletion will require that at least 75% of the capital
present at such meeting votes in favor of the
amendment.
The
approval of the Board of Directors for amendments to the Articles is not
necessary.
|
||
|
Transfer
Agent and Registrar
|
BNY
Mellon Shareowner Services.
|
BNY
Mellon Shareowner Services.
|
||
|
Listing
|
New
York Stock Exchange / Bermuda Stock Exchange.
|
New
York Stock Exchange / Bermuda Stock
Exchange.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Limitation
of Liability and Indemnification
|
The
directors, Secretary and other officers (such term to include any person
appointed to any committee by the Board) while acting in relation to any
of the affairs of the Company, any subsidiary thereof, and the liquidator
or trustees (if any) while 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, are 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 Flagstone (Bermuda) 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 Flagstone (Bermuda)
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. Each member
agrees to waive any claim or right of action such member might have,
whether individually or by or in the right of Flagstone (Bermuda), 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 Flagstone (Bermuda) 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.
|
Flagstone
(Luxembourg)’s limitations on liability and indemnification will be
substantially the same as Flagstone (Bermuda)’s.
Flagstone
(Luxembourg) may not indemnify a director or officer for criminal
liability, gross negligence, willful misconduct, or an intentional breach
of his statutory duties.
The
directors and other officers (such term to include any person appointed to
any committee by the Board) while acting in relation to any of the affairs
of Flagstone (Luxembourg), any subsidiary thereof, and the liquidator or
trustees (if any) while acting in relation to any of the affairs of
Flagstone (Luxembourg) 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 Flagstone (Luxembourg) 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 Flagstone
(Luxembourg) 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 Flagstone (Luxembourg) 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, dishonesty, gross negligence or willful misconduct. 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 Flagstone (Luxembourg) or any
subsidiary thereof, provided that such waiver shall not extend to any
matter in respect of any fraud or
dishonesty.
|
|
Flagstone
(Bermuda)
|
Flagstone
(Luxembourg)
|
|||
|
Accounting
Principles for SEC Reporting Purposes
|
U.S.
dollars and U.S. GAAP.
|
U.S.
dollars and U.S. GAAP.
|
General
In
connection with the Redomestication, the shareholders must approve the Company’s
new corporate name. The Articles provide that our new corporate name will be
“Flagstone Reinsurance Holdings, S.A.”
On
February 26, 2010, our Board of Directors approved a resolution declaring it
advisable that the corporate name be changed to Flagstone Reinsurance Holdings,
S.A.
As
required under our Bye-Laws, we are conditioning approval of this proposal on
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing, and which contains the proposed new Article
2 to the Articles, is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
immediately upon the Redomestication becoming effective under the laws of
Luxembourg on the Effective Date, the Company’s corporate name be changed to
Flagstone Reinsurance Holdings, S.A.”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and we will not proceed with the
Luxembourg Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 5. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
In order
to effect the Redomestication under Luxembourg law, the shareholders of a
Luxembourg corporation are required specifically to approve the purposes for
which the corporation has been organized. Our Memorandum of Association
currently enumerates various purposes for which we are established. The Articles
provide that our main purpose is to act as a holding company that owns
participations in and manages our various subsidiary companies as well as other
companies. We believe that this change, which is intended to conform our purpose
more closely with Luxembourg standard practice, will not limit the activities in
which we reasonably would expect to engage.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that the purposes for which we would be continued under Luxembourg law
as set forth in the Articles be as set forth below in the form of the proposal.
Our Board of Directors directed that approval of our corporate purpose be
submitted for consideration by our shareholders at the Annual General
Meeting.
As
required under our Bye-Laws, we are conditioning approval of this proposal on
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing, and which contains the proposed new Article
4 to the Articles, is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
effective immediately upon the Redomestication becoming effective under the laws
of Luxembourg on the Effective Date, the object clause of the Company is to read
as follows:
“The
object of the Company is the holding of participations, in any form whatsoever,
in other Luxembourg companies or foreign companies, the acquisition by purchase,
subscription, or in any other manner, as well as the transfer by sale, exchange
or otherwise of stocks, bonds, debentures, notes and other securities of any
kind, and the ownership, administration, development and management of its
portfolio. The Company may also hold interests in partnerships.
The
Company may borrow in any form and proceed to the issuance of bonds and
debentures. In a general fashion it may grant assistance to affiliated
companies, take any controlling and supervisory measures and carry out any
operation, which it may deem useful in the accomplishment and development of its
purposes.
The
Company may further carry out any commercial, industrial or financial
operations, as well as any transactions on real estate or on movable
property.
The
Company may give guarantees and other forms of security and pledge, transfer,
encumber or otherwise create and grant security over all or some of its assets
to guarantee its own obligations or undertakings, or the obligations of any
other company or person, where such guarantee is indirectly or directly in the
best interests of and for the corporate benefit of the Company.
The
Company shall have all such powers and shall be entitled to take all such action
and enter into any type of contract or arrangement as are necessary for the
accomplishment or development of its objects.”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and we will not proceed with the
Luxembourg Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 6. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
Under
Luxembourg law, the shareholders of a Luxembourg corporation are required to
approve the registered office of Flagstone (Luxembourg).
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that upon consummation of the Redomestication our principal place of
business shall be fixed in Luxembourg at 37 Val St André, L-1128, Luxembourg,
Grand Duchy of Luxembourg. While we may maintain offices in Bermuda, it is
important that formal steps, including this resolution, be taken to confirm that
our principal place of business will be in Luxembourg.
Our Board
of Directors directed that approval of Luxembourg as our registered office be
submitted for consideration by our shareholders at the Annual General Meeting.
As required under our Bye-Laws, we are conditioning approval of this proposal on
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, effective immediately upon the
Redomestication becoming effective under the laws of Luxembourg on the Effective
Date, the Company’s registered office be fixed in Luxembourg at 37 Val St André,
L-1128, Luxembourg, Grand Duchy of Luxembourg;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 7. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
Under
Luxembourg law, the shareholders of a Luxembourg corporation are required to
approve the form of the corporation’s articles of incorporation.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that the Articles in the form of Annex A to this Proxy Statement
be approved as our Articles following the Redomestication. Pursuant to
Luxembourg Law, the Company is required to also prepare its Articles in an
official language of Luxembourg. The Company will therefore have an English
version of its Articles and a French version of its Articles, which together
shall constitute the Articles of the Company. In the event of any discrepancies
between the English version and the French version of the Articles, the Articles
will provide that the English version will prevail. By approving the English
version of the Articles, shareholders will be deemed to have approved the
appropriate French translation. See “Proposal 4 - Approval of the
Redomestication—Description of Flagstone (Luxembourg) Shares” and “Proposal 4 -
Approval of the Redomestication—Comparison of Rights of Shareholders” for a
summary of the significant differences between our current Memorandum of
Association and Bye-Laws and the Luxembourg Articles as well as summary
comparison of Bermuda and Luxembourg law.
Our Board
of Directors directed that approval of the form of the Articles be submitted for
consideration by our shareholders at the Annual General Meeting. As required
under our Bye-Laws, we are conditioning approval of this proposal on the
approval of a majority of our shares present and voting at the meeting, whether
in person or by proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
immediately upon the Redomestication becoming effective under the laws of
Luxembourg on the Effective Date, the Articles of Incorporation, in the form of
the version attached as Annex A to the Proxy Statement and their French
translation (collectively, the “Articles”) be adopted as the Articles of
Incorporation of the Company, to the exclusion of and in place of the existing
Memorandum of Association and Bye-Laws of the Company;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4- Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 8. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
In order
to effect the Redomestication under Luxembourg law, the shareholders of a
Luxembourg corporation are required to approve the corporation’s issued share
capital.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that any issued Flagstone (Bermuda) common shares be included in the
issued share capital of Flagstone (Luxembourg).
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, on the Effective Date, the Company shall
have an issued share capital of US$849,852.19 represented by 84,985,219 fully
paid shares each with a nominal value of US$0.01 and with such rights and
obligations as set forth in the Articles;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 9. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
In order
to effect the Redomestication under Luxembourg law, the shareholders of a
Luxembourg corporation are required to approve the corporation’s authorized
share capital.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that the authorized share capital upon the Redomestication shall
remain US$ 3,000,000 represented by 300,000,000 shares, each with a nominal
value of US$ 0.01.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, on the Effective Date the Company shall
have an authorised share capital of US$ 3,000,000 represented by
300,000,000 shares, each with a nominal value of US$ 0.01;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 10. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
In order
to include the authority of the Board of Directors to issue new shares as is
prescribed in the Articles, under Luxembourg law, the shareholders are required
to waive the pre-emptive right to purchase new common shares of the corporation
issued for cash and acknowledge and approve the Board report attached as Annex B
to the Proxy Statement which identifies certain factors that the Board will
consider in setting the issue price for new shares issued for cash.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that shareholders waive any pre-emptive subscription rights that they
may be entitled to under Luxembourg law.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
effective immediately upon the Redomestication becoming effective under the laws
of Luxembourg on the Effective Date, any preferential or pre-emptive
subscription rights provided for by Luxembourg law, for the issue of shares
within the authorised share capital are waived and it is agreed to suppress and
waive any preferential pre-emptive subscription rights provided for by
Luxembourg law and authorise the Board to proceed to issue shares or any
securities or instruments giving rights to shares (by subscription, conversion,
exchange or otherwise) within the authorised unissued share capital against
contributions in cash, in kind, by way of incorporation of available premium or
reserves into shares or otherwise pursuant to the terms and conditions
determined by the Board or its delegate(s) while waiving, suppressing or
limiting any preferential or pre-emptive subscription rights as provided under
Luxembourg law to existing shareholders in the case of issues of shares within
the authorised share capital, for a period starting on the Effective Date and
ending on the fifth anniversary of the day of publication of the notarial deed
recording the Redomestication before a Luxembourg notary in the official gazette
of Luxembourg, the Mémorial; and FURTHER RESOLVED in relation thereto, that the
report by the Board pursuant to article 32-3 (5) of Luxembourg Company law on
the circumstances and proposed issue price of shares against cash without
preferential subscription rights as presented to the shareholders be and is
hereby acknowledged and approved;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 11. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
Under
Article 49-2 of the Luxembourg Law, in order for a corporation or its
wholly-owned subsidiaries to be able to acquire or own ordinary shares of the
corporation the shareholders must grant the applicable authority to the Company
to repurchase such ordinary shares.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that shareholders approve any acquisition or ownership of shares of
Flagstone (Luxembourg) by Flagstone (Luxembourg) or any of its wholly-owned
subsidiaries.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
effective immediately upon the Redomestication becoming effective under the laws
of Luxembourg on the Effective Date, the Company, be and is hereby generally
authorized from time to time to purchase, acquire, receive and/or hold shares in
the Company in conformity with the Articles and the Luxembourg Company law and
with all other applicable laws and regulations, such authorization commencing on
the Effective Date provided that:
|
|
·
|
The
maximum number of shares hereby authorized to be purchased shall not
exceed the number of fully paid up issued shares in the
Company;
|
|
|
·
|
The
maximum price which may be paid for each share shall be the Fair Market
Value;
|
|
|
·
|
The
minimum price which may be paid for each share shall be the par value of
US$0.01;
|
|
|
·
|
This
authority, (unless previously revoked, varied or renewed) shall expire on
the fifth anniversary of the date of the meeting held before a Luxembourg
notary for the purposes of recording the Redomestication of the Company,
except in relation to the purchase of shares the contract for which was
conducted before such date and which will or may be executed wholly or
partly after such date;
|
|
|
·
|
The
acquisitions, including the shares previously acquired by the Company and
held by it, and shares acquired by a person acting in his own name but on
the Company’s behalf, may not have the effect of reducing the net assets
of the Company below the amount mentioned in Article 72-1 of the
Luxembourg Company Law.
|
|
|
·
|
This
authority relates only to (i) one or more market purchases, (being a
purchase of shares by the Company of shares offered for sale by any
shareholder on the open market on which the shares are traded), as the
Board of Directors shall determine, and (ii) purchases effected in
circumstances where an offer on similar terms has been made by the Company
to sell up to the same number of shares of each shareholder appearing on
the register of shareholders immediately before the offer was made (or as
soon as, according to the Directors, may be practicable) other than
shareholders who have consented in writing to the offer not being extended
to them, and each shareholder concerned has either (a) accepted the offer
in writing, (b) declined the offer in writing, or (c) failed to respond to
the offer within the time allowed to do so under the terms of the offer.
Pursuant to, and in conformity with Article 49-2(2) of the Law and in
conformity with all the applicable laws and regulations, the Board be
authorized to repurchase such shares in the Company as the Board of
Directors may elect the Company should repurchase, but only in
circumstances where the acquisition of the Company’s own shares is
necessary to prevent imminent harm to the Company as such circumstances
are described more fully in the
Articles.
|
That for
Luxembourg Law purposes, the shares bought back in terms of this Resolution be
cancelled by the Company or held as treasury shares, and if such shares are
cancelled, any one director (or such directors duly elected attorney) be hereby
appointed to appear before a public notary in Luxembourg for the purposes of
amending the Articles to reflect the changes resulting from any cancellation of
any shares bought back in accordance with the terms of this resolution and for
the purposes of recording any transactions effected pursuant to this resolution
in or several notarial deeds ”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 12. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
Under
Luxembourg law, the shareholders must approve Flagstone (Luxembourg)’s fiscal
year.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that shareholders approve our fiscal year to run from January 1 to
December 31 of each calendar year.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, for statutory purposes the accounting
year of the Company will be from 1st January
of each year to 31st
December of the same year;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 13. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
Under
Luxembourg law, the shareholders of a corporation must approve the date and
time of the Company’s annual general
meeting.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that shareholders approve the annual general meeting date beginning in
2011 to be held on the second Thursday of the month of May at 2:00 p.m. (CET) of
each year and if such day is a legal holiday in Luxembourg, on the next
following normal business day.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
effective upon the Redomestication becoming effective under the laws of
Luxembourg on the Effective Date for any annual general meeting for 2011 or
thereafter, the annual general meeting of the shareholders of the Company shall
be held on the second Thursday of the month of May at 2:00 p.m. (CET) of each
year and if such day is a legal holiday in Luxembourg, on the next following
normal business day;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 14. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
In order
to effect the Redomestication under Luxembourg law, the shareholders must
confirm the appointment of the Company’s directors, including the directors
elected under Proposal 1. Our Articles will provide for a classified
Board of Directors, divided into three (3) classes as nearly equal in size as
possible. Each director will serve a three-year term.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that shareholders confirm all the directors serving as directors
immediately prior to the Effective Date of the Redomestication as continuing
directors of the Company after the Redomestication as members of the same the
class as they were previously serving in.
The
respective ages, business experience, directorships and committee memberships
for the nominees are set out in “Our Directors”. All of the nominees
currently serve as directors.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, upon recommendation of the Board and
effective as of the Effective Date, the Board shall be composed of no fewer than
ten (10) members or such number in excess thereof up to a maximum of twelve (12)
members. The Directors elected to the Board 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 the Shareholders in 2012; the initial Class B Directors shall serve for a
term expiring at the Annual General Meeting of Shareholders to be held in 2011
and the initial Class C Directors shall serve for a term expiring at the Annual
General Meeting of Shareholders to be held in 2013. Directors shall be elected
or appointed, save for the initial appointments, for a full three-year term, as
the case may be, to succeed those whose terms expire at such Annual General
Meeting according to the Class of Director. 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. The following persons (or the
applicable successor of any such person in place thereof) be and each of them
hereby is appointed as a Director of the Company for a term ending at the time
stated above for such Class of Director:
|
Name
|
Profession
|
Professional Address
|
Date of
Birth
|
Place of
Birth
|
Class
A,B,C
|
|||||
|
Mark
J. Byrne
|
Insurance
|
Crawford
House,
23
Church Street,
Hamilton
HM 11,
Bermuda
|
November
21, 1961
|
USA
|
A
|
|||||
|
Stewart
Gross
|
Investment
Asset Management
|
375
Park Avenue, 11th Floor
New
York, NY 10152
USA
|
August
29, 1959
|
New
York, NY,
USA
|
A
|
|||||
|
Anthony
P. Latham
|
Insurance
|
Wyngates,
Pennymead Drive,
East
Horsley, Surrey KT24 5AH
United
Kingdom
|
April
23, 1950
|
Dorking,
United Kingdom
|
A
|
|||||
|
E.
Daniel James
|
Investment
Asset Management
|
399
Park Ave, 15th Floor
New
York, NY 10022
USA
|
January
27, 1965
|
Bronx,
NY,
USA
|
A
|
|
Name
|
Profession
|
Professional Address
|
Date of
Birth
|
Place of
Birth
|
Class
A,B,C
|
|||||
|
Gary
Black
|
Insurance
|
Crawford
House,
23
Church Street,
Hamilton
HM 11,
Bermuda
|
October
5, 1945
|
Poplar
Bluff, MO,
USA
|
B
|
|||||
|
Thomas
Dickson
|
Investment
Advisory
|
311
California Street, Suite 750
San
Francisco, CA 94104
USA
|
October
22, 1962
|
New
York, NY,
USA
|
B
|
|||||
|
Jan
Spiering
|
Accounting
|
The
Kitson Group of Companies,
The
Kitson Building,
5
Reid Street,
Hamilton HM11
Bermuda
|
November
20, 1951
|
Jakarta,
Indonesia
|
B
|
|||||
|
Wray
T. Thorn
|
Investment
Asset Management
|
One
Bryant Park, 38th
Floor
New
York, NY 10036
USA
|
June
1, 1971
|
St.
Petersburg, FL,
USA
|
B
|
|||||
|
David
A. Brown
|
Insurance
|
Crawford
House,
23
Church Street,
Hamilton
HM 11,
Bermuda
|
October
12, 1957
|
Warrington,
United
Kingdom
|
C
|
|||||
|
Stephen
Coley
|
Consulting
|
Crawford
House,
23
Church Street,
Hamilton
HM 11,
Bermuda
|
March
1, 1945
|
California,
USA
|
C
|
|||||
|
Dr.
Anthony Knap
|
Ocean
Sciences
|
Bermuda
Institute of Ocean Sciences,
17
Biological Station,
Ferry
Reach,
St.
George’s GE 01
Bermuda
|
November
7, 1949
|
Ruislip,
United
Kingdom
|
C
|
|||||
|
Peter
F. Watson
|
|
Professional
Liability Insurance
|
|
12
Between the Walls,
Pembroke HM
06
Bermuda
|
|
September
24, 1942
|
|
Montreal,
Canada
|
|
C
|
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 15. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
In order
to effect the Redomestication under Luxembourg law, the shareholders must
separately confirm Deloitte & Touche as Flagstone (Luxembourg)’s independent
auditor of its consolidated accounts after the Redomestication. See “Proposal 2
- Auditor’s Proposal” for a discussion of the fees billed to us by Deloitte
& Touche during the 2009 fiscal year.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that the shareholders confirm Deloitte & Touche as the independent
auditor of Flagstone (Luxembourg) after the Redomestication. The independent
auditor will be responsible for auditing the consolidated accounts of the
Company.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, effective immediately upon the
Redomestication becoming effective under the laws of Luxembourg on the Effective
Date, the mandate of Deloitte & Touche as the current independent auditors
of the Company is terminated and Deloitte & Touche, is appointed as the
independent auditor of the Company for the period starting on the date of the
recording of the present resolution by notarial deed in Luxembourg and ending at
the general meeting of shareholders approving the financial statements of the
Company for the year ending 31st
December 2010;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 16. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
For SEC
reporting purposes, we prepare periodic consolidated financial statements for
the Company together with its consolidated subsidiaries in U.S. dollars pursuant
to U.S. GAAP and have our annual financial statements audited by an independent
auditor. After the Redomestication, Luxembourg law will require that we also
annually produce financial statements for the Company on a stand-alone basis
pursuant to Lux GAAP and have the Company audited by a statutory
auditor.
Under
Luxembourg law, our shareholders must elect a firm to audit Flagstone
(Luxembourg) and its statutory financial statements. In the event the Luxembourg
Organizational Proposals are approved and the Redomestication is effective, our
Board of Directors has recommended that Deloitte & Touche be elected as
Flagstone (Luxembourg)’s statutory auditor.
If the
Redomestication is approved, the election of Deloitte & Touche as Flagstone
(Luxembourg)’s statutory auditor for 2010 requires the affirmative vote of a
majority of the votes present at the Annual General Meeting. The election of
Deloitte & Touche is subject to, and effective only upon, the effectiveness
of our discontinuance from Bermuda and continuance to Luxembourg on the
Effective Date of the Redomestication.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that the shareholders confirm Deloitte & Touche as the statutory
auditor of the Company after the Redomestication.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the approval of a majority of our
shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, effective immediately upon the
Redomestication becoming effective under the laws of Luxembourg on the Effective
Date, Deloitte & Touche is appointed as the statutory auditor (Commissaire) of the Company
for the period starting on the date of the recording of the present resolution
by notarial deed in Luxembourg and ending at the general meeting of shareholders
approving the statutory financial statements of the Company for the year ending
31st
December 2010;”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 17. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
General
At the
Annual General Meeting we will present for acknowledgement by the shareholders a
report (the “Luxembourg Auditors’ Report”) prepared by a reputable public
accounting firm. The Luxembourg Auditors’ Report will reflect the net asset
value of the Company on a stand-alone basis shortly before the Redomestication.
Because Luxembourg law requires that the Luxembourg Auditors’ report reflect as
nearly as possible the net asset value at the time of Redomestication, the
Luxembourg Auditors’ Report will not be prepared until just shortly before the
Annual General Meeting.
On
February 26, 2010, our Board of Directors adopted a resolution declaring it
advisable that the shareholders acknowledge the Luxembourg Auditors’ Report to
be presented at the Annual General Meeting.
Our Board
of Directors directed that this resolution be submitted for consideration by our
shareholders at the Annual General Meeting. As required under our Bye-Laws, we
are conditioning approval of this proposal on the acknowledgment of a majority
of our shares present and voting at the meeting, whether in person or by
proxy.
Text
of the Shareholder Resolution
The
Resolution approving the foregoing is as follows:
“Now,
therefore, it is hereby RESOLVED THAT, the Auditors’ Report, the conclusion of
which reads as set forth below, (the blanks to be filled in at the Annual
General Meeting) be and is hereby acknowledged:
“Based on
the verification procedures applied as described above, nothing has come to our
attention that causes us to believe that the net asset value of the Company, as
calculated on the basis of the pro forma balance sheet, is not at least equal to
the total amount of the Shareholder’ equity of
the Company (including the share capital and the accumulated reserves)
amounting to USD [●];”
* * *
This
Shareholder Resolution will not be presented to the Annual General Meeting if
“Proposal 4 - Approval of the Redomestication” is not approved by the requisite
vote of our shareholders. If this proposal is not approved by the shareholders,
we will not effect the Redomestication and will not proceed with the Luxembourg
Organizational Proposals.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF PROPOSAL 18. Proxies will be so voted unless
shareholders specify otherwise in their proxies. As required under our Bye-Laws,
the approval of a majority of our shares present and voting at the meeting,
whether in person or by proxy, is required for approval of this
proposal.
The table
below sets forth the names, ages and positions of the current directors of the
Company:
|
Name
|
Age
|
Positions
|
||
|
Mark
J. Byrne
|
48
|
Chairman
of the Board of Directors
|
||
|
David
A. Brown
|
52
|
Chief
Executive Officer, Deputy Chairman and Director
|
||
|
Gary
Black
|
64
|
Director
|
||
|
Stephen
Coley
|
65
|
Director
|
||
|
Thomas
Dickson
|
47
|
Director
|
||
|
Stewart
Gross
|
50
|
Director
|
||
|
E.
Daniel James
|
45
|
Director
|
||
|
Anthony
P. Latham
|
59
|
Director
|
||
|
Dr.
Anthony Knap
|
60
|
Director
|
||
|
Jan
Spiering
|
58
|
Director
|
||
|
Wray
T. Thorn
|
38
|
Director
|
||
|
Peter
F. Watson
|
67
|
Director
|
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.
Class
C Directors with terms expiring at the 2010 Annual General Meeting
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. Mr. Brown’s extensive experience, credentials and
qualifications in the reinsurance industry, in corporate finance, strategic
planning and international operations led the Company to believe that he should
be proposed for re-election.
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 and as a Board Advisor to Havell Capital Management, a money
management firm in New York City. Mr. Coley’s extensive experience,
credentials and qualifications in finance led the Company to believe that he
should be proposed for re-election.
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. Mr. Knap’s extensive background in
environmental science, natural disasters and changing climate, as well as his
credentials and qualifications in the reinsurance industry, led the Company to
believe that he should be proposed for re-election.
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 comptables agree du Quebec. Mr. Watson’s extensive
experience, credentials and qualifications in accounting and in the insurance
industry led the Company to believe that he should be proposed for
re-election.
Class
B Directors with terms expiring at the 2011 Annual General Meeting
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. Mr. Black’s extensive experience,
credentials and qualifications in the insurance industry led the Company to
believe that he should serve as a director.
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 Investment Management (GP) Limited and Haverford Investment Advisors
(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. Mr. Dickson’s extensive experience, credentials and qualifications in
insurance, reinsurance and specialty finance led the Company to believe
that he should serve as a director.
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. Mr.
Spiering’s extensive experience, credentials and qualifications in accounting
and corporate finance led the Company to believe that he should serve as a
director.
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. Mr. Thorn’s extensive
experience, credentials and qualifications in corporate finance led the
Company to believe that he should serve as a director.
Class
A Directors with terms expiring at the 2012 Annual General Meeting
Mark J.
Byrne has been our Chairman since October 2005. Mr. Byrne also serves as
Chairman of Haverford, an affiliate of the Company due to common ownership (see
“Certain Relationships and Related Transactions”), 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. Mr.
Byrne’s extensive experience, credentials and qualifications in the reinsurance
industry, in corporate finance, strategic planning and international operations
led the Company to believe that he should serve as a director.
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, BAE Systems and Yodlee (a private company).
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.
Mr. Gross’ extensive experience, credentials and qualifications in corporate
finance and the financial services industry led the Company to believe that
he should serve as a director.
E. Daniel
James has been a director since December 2005. Mr. James is a founding
partner and head of North America of Trilantic Capital Partners. He
joined Trilantic Capital Partners in 1995. Prior to joining Trilantic Capital
Partners, 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. Mr. James’ extensive experience, credentials and
qualifications in the financial services industry led the Company to
believe that he should serve as a director.
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. Mr. Latham’s
extensive experience, credentials and qualifications in the reinsurance industry
led the Company to believe that he should serve as a director.
|
Name
|
Age
|
Positions
|
||
|
Mark
J. Byrne(1)
|
48
|
Chairman
of the Board of Directors
|
||
|
David
A. Brown(2)
|
52
|
Chief
Executive Officer, Deputy Chairman and Director
|
||
|
Patrick
Boisvert
|
36
|
Chief
Financial Officer
|
||
|
William
Fawcett
|
47
|
General
Counsel
|
||
|
David
Flitman
|
39
|
Chief
Actuary
|
||
|
Venkateswara
Rao Mandava
|
48
|
Chief
Information Officer
|
||
|
Gary
Prestia
|
49
|
Chief
Underwriting Officer – North America
|
||
|
Brenton
Slade
|
39
|
Chief
Marketing Officer
|
||
|
Guy
Swayne
|
46
|
Chief
Underwriting Officer – International
|
||
|
Frédéric
Traimond
|
41
|
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.
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 in 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, Tennessee.
Gary
Prestia has served as our Chief Underwriting Officer-North America since
December 2005. 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.
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 served as our Chief Underwriting Officer-International since December
2005. 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, 2009. 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. The transaction described below has been reviewed
by Audit Committee in accordance with this mandate.
|
|
·
|
On
March 6, 2009, the Company entered into a Share Purchase Agreement with
the Company’s Chairman Mark Byrne to acquire 100% of the issued and
outstanding common voting shares of IAL 7X Leasing Limited (“IAL 7X”) for
a cash purchase price of $10,000 IAL 7X owned, as its principal asset, a
delivery slot for a Dassault Falcon 7X aircraft (“7X Purchase
Agreement”). Mr. Byrne and the Company agreed that upon
delivery of the aircraft, the Company would either sell the aircraft or
retain it as determined by the Board of Directors according to the
Company’s needs at that time. The parties further agreed that any
gain on disposition or delivery would be split 85% to Mr. Byrne and 15% to
the Company, and any loss would be borne 100% by Mr. Byrne. On July 29,
2009, the Company elected to sell the aircraft back to Dassault Falcon Jet
Corp by terminating the 7X Purchase Agreement. In accordance with the
agreement between Mr. Byrne and the Company, the Company paid Mr. Byrne
$0.3 million, representing 85% of the gain on disposition of $0.35
million.
|
Overview
The named
executive officers, Messrs. Brown, Boisvert, Flitman, Prestia and Swayne,
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 five 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:
|
|
·
|
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.
|
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:
|
|
·
|
base
salary (and, in some cases, housing allowance or mortgage
subsidy);
|
|
|
·
|
annual
cash bonuses; and
|
|
|
·
|
long-term
incentive awards (in the form of Performance Share Units or
“PSUs”).
|
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 vest over three years (except for the special 2009 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 after December 2008 ranges 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.
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 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 2009, 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.
Named
Executive Officer Performance Assessment.
In
connection with its annual compensation determination process, the Compensation
Committee engages in a performance assessment of each of the Named Executive
Officers, focusing on each executive’s relative contribution during the fiscal
year, and if applicable, the level of achievement of any specific individual
goals tasked to a Named Executive Officer for such fiscal year. The Compensation
Committee principally uses a qualitative assessment, including factors such as
our progress towards implementing our key strategic and operational initiatives,
our investments in and improvements of technology and our key decision support
tools, such as our exposure-based underwriting models, our efforts to improve
the strength of our control and operating environments, and our efforts to
attract, retain, and motivate our global workforce. With respect to Named
Executive Officers other than the Chief Executive Officer, the Chief Executive
Officer presents the Compensation Committee with his assessment of each other
executive’s relative performance with respect to the above-mentioned categories
for such fiscal year.
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 2009 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 2009, 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.
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. The Compensation Committee
analyzes the information gathered from the surveys, recruitment agencies and
other companies set forth above in order to understand the general level of
compensation in the market and to determine whether the base salaries of the
Named Executive Officers are appropriate, but does not formally engage in
benchmarking of compensation levels.
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. We believe our cash bonus
component helps us to provide an element of our incentive compensation on a more
immediate basis than with Long-Term Incentive Awards. Annual bonus awards
for Named Executive Officers are determined by the Compensation Committee on a
discretionary basis, taking into account individual performance and Company
performance for the year using both subjective and objective
criteria.
Due to
the volatility of our industry and thus our financial results, the Compensation
Committee and management believe that pure quantitative performance measures are
not the most appropriate method of rewarding executive performance, and in light
of this, we do not provide for a formulaic bonus plan.
Our
current compensation structure establishes a “target bonus” amount for each
employee grade level, subject in certain cases to target bonus amounts that are
specifically provided in an individual’s employment agreement with the
Company.
Our
Chairman and our Chief Executive Officer agree with each of the other Named
Executive Officers upon short-term and long-term goals as part of an evaluation
process, and then subsequently rate each Named Executive Officer in writing
against those goals before deciding the bonus amount to recommend to the
Compensation Committee. The 2010 short-term and long-term goals for each Named
Executive Officer were based on specific confidential strategic objectives.
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
Chairman.
The Named
Executive Officer’s performance of non-goal specific items and the general
performance of the Company based on the financial statements for that year are
also taken into account, at the Compensation Committee’s discretion, in
determining the Named Executive Officer’s bonus. A Named Executive Officer’s
actual bonus amount may be adjusted by the Compensation Committee up or down
from the amount recommended by management in order to reflect individual
performance in a fiscal year that the Compensation Committee may determine
warrants specific recognition.
The
annual bonus is based on a variety of elements, including management’s
recommendation (which will generally be based upon actual financial results for
the completed fiscal year as well as other qualitative factors), the
Compensation Committee’s review of market performance as a whole and the
Company’s relative performance within it, management’s success with respect to
implementing strategic and operational goals, and extraordinary factors
applicable to such fiscal year.
The range
in the amount of bonuses 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 agreement for Mr. Brown does not
limit the amount of his annual bonus. The bonus allocation to executive
officers, other than Named Executive Officers, are set by the Chairman in
consultation with the Chief Executive Officer and approved by the Compensation
Committee. Mr. Brown plays no role in setting his bonus. Instead, his bonus is
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
2010.
Long-Term
Incentive Awards
PSUs. The
Company has adopted the Amended and Restated Performance Share Unit Plan (the
“PSU Plan”) to provide PSUs as incentive compensation to certain key employees
(including the Named Executive Officers) of the Company.
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:
|
|
·
|
2009-2011
(Series A, B and H): The multiplier is determined based on the arithmetic
average return on equity of the Company during the fiscal years 2009-2011
measured in accordance with U.S. GAAP on a fully diluted basis. The
multiplier is 100% if return on equity is 13.5%, 150% if return on equity
is 18.5% or greater, and 50% if return on equity is 8.5% or less.
The multiplier scales ratably between return on equity endpoints of 8.5%
and 18.5%.
|
|
|
·
|
2009-2010
(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%.
|
|
|
·
|
2010-2012
(Series A): The multiplier is determined based on the arithmetic average
return on equity of the Company during the fiscal years 2010-2012 measured
in accordance with U.S. GAAP on a fully diluted basis. The
multiplier is 100% if return on equity is 14.5%, 140% if return on equity
is 19.5% or greater, and 60% if return on equity is 9.5% or
less. The multiplier scales ratably between return on equity
endpoints of 9.5% and 19.5%.
|
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 currently 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. However in Proposal 3, the
Company is proposing to amend the PSU Plan so that in the event the Company is
required to make a financial restatement due to a material misstatement any PSU
grant based upon the erroneous financial statements is cancelled. 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 March 19, 2010, 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 at an exercise
price of $14.00 per share (subject to adjustment for share subdivisions, share
dividends, stock splits and similar events). Our 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”.
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.
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 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 2009, 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 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. Mr. Brown’s 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 him. In
the case of the other Named Executive Officers, severance payments include a
cash payment equal to six months’ salary and a bonus calculated by averaging the
sum of the most recent three bonuses paid to each of them.
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 (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 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 Mr. 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 were determined as follows: given the lengthy notice
period to which Mr. Brown is committed, a decision to resign would effectively
freeze his career for at least a year. Given the lengthy notice period to which
the other Named Executive Officers are committed, a decision to resign would
effectively freeze such executive officer’s career for at least six
months. Thus the payment of six months’ or 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 and Prestia, acting on the recommendation of our
Chairman, Mr. Byrne, with advice from our Chief Executive Officer, Mr. Brown.
Mr. Brown does not play a role in determining his bonus. Instead, his bonus is
set independently by 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, 2009 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
($)
|
|||||||||||||||||||
|
David
A. Brown
|
2009
|
650,000 | 601,250 | 1,709,750 | — | 46,958 | 3,007,958 | |||||||||||||||||||
|
Chief
Executive Officer
|
2008
|
650,000 | 422,500 | 8,168,670 | 261,708 | 46,958 | 9,549,836 | |||||||||||||||||||
|
2007
|
600,000 | 750,000 | 3,032,500 | — | 46,958 | 4,429,458 | ||||||||||||||||||||
|
Patrick
Boisvert
|
2009
|
378,471 | 230,775 | 619,900 | — | 85,431 | 1,314,577 | |||||||||||||||||||
|
Chief
Financial Officer(5)
|
2008
|
246,326 | 299,742 | 1,453,870 | — | 71,221 | 2,071,159 | |||||||||||||||||||
|
2007
|
200,000 | 100,000 | 280,000 | — | 72,000 | 652,000 | ||||||||||||||||||||
|
David
Flitman
|
2009
|
525,000 | 400,000 | 732,750 | — | 120,000 | 1,777,750 | |||||||||||||||||||
|
Chief
Actuary
|
2008
|
500,000 | 280,000 | 2,654,096 | — | 120,000 | 3,554,096 | |||||||||||||||||||
|
2007
|
383,333 | 325,000 | 1,277,500 | — | 103,333 | 2,089,166 | ||||||||||||||||||||
|
Gary
Prestia
|
2009
|
546,000 | 400,000 | 732,750 | — | 51,200 | 1,729,950 | |||||||||||||||||||
|
Chief
Underwriting Officer
|
2008
|
520,000 | 292,500 | 2,879,507 | — | 51,600 | 3,743,607 | |||||||||||||||||||
| North America |
2007
|
460,000 | 369,200 | 1,144,500 | — | 60,494 | 2,034,194 | |||||||||||||||||||
|
Guy
Swayne (6)
|
2009
|
478,800 | 400,000 | 732,750 | — | 117,154 | 1,728,704 | |||||||||||||||||||
|
Chief
Underwriting
|
2008
|
359,484 | 283,416 | 3,234,271 | — | 125,661 | 3,987,362 | |||||||||||||||||||
| Officer International |
2007
|
402,825 | 258,560 | 3,799,399 | — | 46,849 | 4,507,633 | |||||||||||||||||||
|
(1)
|
The
amounts shown in this column are bonuses paid in fiscal year 2010 and
reflecting performance in fiscal year 2009; and bonuses paid in fiscal
year 2009 reflecting performance in fiscal year 2008; and bonuses paid in
fiscal year 2008 reflecting performance in fiscal year
2007.
|
|
(2)
|
The
amounts shown is this column represent the grant date fair value of PSUs
granted during the fiscal year to the Named Executive Officers in
accordance with the Compensation – Stock Compensation Topic of the FASB
ASC. 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 in 2006, 2007 and January 2008 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 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 for 2008
include the grant date fair value of the PSUs granted in January 2008
(which were subsequently cancelled) and the grant date fair value of the
two special PSU series described
above.
|
|
(3)
|
The
amounts shown in this column represent the interests of Mr. Brown in
the fair value of the amendment to the Warrant during 2008, based upon his
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 2009 and 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 his housing allowance in U.S. dollars
from January 1, 2007 until June 30, 2008. Mr. Boisvert then
received his salary and his housing allowance in Swiss francs beginning
July 1, 2008. The Swiss franc amounts were converted into U.S.
dollars at an average foreign exchange rate for the 2008 period of
$0.89871 and for the 2009 period of
$0.91061.
|
|
(6)
|
Mr.
Swayne entered into an employment agreement effective September 1, 2007 to
serve as the Chief Executive Officer of Flagstone Reassurance Suisse S.A.
for a period of up to two years. This agreement concluded effective July
1, 2009 when Mr. Swayne entered into a new employment agreement to assume
the position of Chief Underwriting Officer - International for Flagstone
Réassurance
Suisse S.A. (Bermuda Branch). Mr. Swayne was paid a bonus in 2007 of
$215,000 to reflect his performance through August 31, 2007. In fiscal
year 2008, Mr. Swayne was paid a bonus of CHF 50,000 reflecting
performance for the last quarter of fiscal year 2007. In fiscal year 2009,
Mr. Swayne received performance bonuses of CHF 65,000 and $225,000
reflecting his performance for fiscal year 2008. The Swiss franc amounts
were converted into U.S. dollars at an average foreign exchange rate for
the 2007 period of $0.87229, for the 2008 period of $0.89871 and for the
2009 period of
$0.91061.
|
Grants
of Plan-Based Awards
The
Compensation Committee makes awards to all of our Named Executive
Officers.
In
December 2009 the Compensation Committee awarded PSUs for the 2010-2012
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 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 2009
year.
|
Estimated
future
payouts
under equity
incentive
plan awards (1)
|
||||||||||||||||||||
|
Name
|
Grant dates
|
Date of
Compensation
Committee
Action
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Grant Date
Fair Value
of Stock
and Option
Awards (2)
($)
|
||||||||||||||
|
David
Brown
|
January
1, 2009
|
November
13, 2008
|
87,500 | 175,000 | 262,500 | 1,709,750 | ||||||||||||||
|
Patrick
Boisvert
|
January
1, 2009
|
November
13, 2008
|
25,000 | 50,000 | 75,000 | 488,500 | ||||||||||||||
|
August
20, 2009
|
October
29, 2009
|
6,000 | 12,000 | 18,000 | 131,400 | |||||||||||||||
|
David
Flitman
|
January
1, 2009
|
November
13, 2008
|
37,500 | 75,000 | 112,500 | 732,750 | ||||||||||||||
|
Gary
Prestia
|
January
1, 2009
|
November
13, 2008
|
37,500 | 75,000 | 112,500 | 732,750 | ||||||||||||||
|
Guy
Swayne
|
January
1, 2009
|
November
13, 2008
|
37,500 | 75,000 | 112,500 | 732,750 | ||||||||||||||
|
(1)
|
“Minimum”
means the minimum number of common shares issuable under the award (factor
of 0.5); “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 common shares issuable under the award
(factor of 1.5).
|
|
(2)
|
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”.
|
Employment
Agreements
The
following paragraphs summarize the employment-related agreements for our Named
Executive Officers. The employment agreements for Messrs. Swayne and Boisvert
provide that either party may terminate the agreement upon 3 month’s advance
written notice to the other party and do not otherwise specify a termination
date. The employment agreements for Messrs. Flitman and Prestia
provide that either party may terminate the agreement upon 90 days’ advance
written notice to the other party and do not otherwise specify a termination
date. The employment agreement for Mr. Brown provides that either party may
terminate the agreement upon 365 days’ advanced written notice to the other
party and does not otherwise specify a termination date. The employment
agreement for each Named Executive Officer provides for a discretionary annual
bonus to be paid to each Named Executive Officer. The employment agreements for
Messrs. Swayne, Boisvert, Flitman and Prestia specify that the annual bonus
shall not exceed 75%, 75%, 60% and 75% of their annual salary, respectively. The
employment agreement for Mr. Brown does not limit the amount of his annual
bonus.
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.
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, 2009. 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, 2010 will be approximately
$1,000,000.
Patrick Boisvert. We 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 agreement, Mr. Boisvert was paid an annual salary of CHF410,000 for the year
ended December 31, 2009. 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, 2010 will be
approximately CHF 420,000.
David Flitman. We
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 agreement, Mr. Flitman was paid an
annual salary of $525,000 for the year ended December 31, 2009. 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, 2010 will
be approximately $565,000.
Gary Prestia. We
restated the employment agreement with Mr. Prestia, on March 31, 2009,
under which he has agreed to serve as our Chief Underwriting Officer - North
America. This employment agreement replaced the prior agreements with the
Company dated October 18, 2006 and August 26, 2008 between Flagstone Reinsurance
Limited and Mr. Prestia. Pursuant to the agreement, Mr. Prestia
was paid an annual salary of $546,000 for the year ended December 31, 2009.
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,
2010 will be approximately $565,000.
Guy Swayne. We
restated the employment agreement with Mr. Swayne, on June 29, 2009, under
which he has agreed to serve as our Chief Underwriting Officer - International.
This employment agreement replaced the prior agreements with the Company dated
August 26, 2007. Pursuant to the agreement, Mr. Swayne was paid
an annual salary of CHF411,600 for the first six
months of 2009 and $546,000 for the last six months of 2009. During 2009, Mr.
Swayne received a housing allowance of CHF63,000 and
$59,000. Mr. Swayne has agreed terms with the Company such
that his annual salary for the year ending December 31, 2010 will be
approximately $565,000.
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, 2009 was as follows: (i) Mr. Brown
722,586; (ii) Mr. Boisvert 151,734; (iii) Mr. Flitman 244,550; (iv)
Mr. Prestia 263,390; and (v) Mr. Swayne 394,592.
The
cumulative number of outstanding PSUs granted to each of the Named Executive
Officers as at January 1, 2010 was as follows: (i) Mr. Brown 888,586;
(ii) Mr. Boisvert 209,734; (iii) Mr. Flitman 319,550; (iv) Mr. Prestia
338,390; and (v) Mr. Swayne 469,592.
For the
Named Executive Officers, no PSUs vested during 2009. The
Compensation Committee of the Board of Directors of the Company reviews its
assumptions in relation to the PSUs on a quarterly basis.
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.
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, 2009.
|
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
($) (2)
|
Option
expiration
date
|
Equity
incentive
plan awards:
number of
unearned
shares, units
or other
rights that
have not
vested
(#) (3)
|
Equity
incentive
plan awards:
market or
payout value
of unearned
shares, units
or other
rights that
have not
vested ($) (4)
|
||||||||||||||||||||||
|
David
Brown
|
n/a | 630,194 | — | $ | 14.80 |
December
31, 2013
|
722,586 | $ | 7,905,091 | |||||||||||||||||||
|
Patrick
Boisvert
|
n/a | n/a | n/a | n/a | n/a | 151,734 | $ | 1,659,970 | ||||||||||||||||||||
|
David
Flitman
|
n/a | n/a | n/a | n/a | n/a | 244,550 | $ | 2,675,377 | ||||||||||||||||||||
|
Gary
Prestia
|
n/a | n/a | n/a | n/a | n/a | 263,390 | $ | 2,881,487 | ||||||||||||||||||||
|
Guy
Swayne
|
n/a | n/a | n/a | n/a | n/a | 394,592 | $ | 4,316,837 | ||||||||||||||||||||
|
(1)
|
The
amounts shown in this column represent the interests of Mr. Brown in the
Warrant, based upon his contributions to the capital of
Haverford.
|
|
(2)
|
Strike
price at expiration date will be $14.80 adjusted for all dividends paid by
the company from the issuance of the Warrant to its expiration
date.
|
|
(3)
|
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”.
|
|
(4)
|
Based
on the price per common share of $10.94 at December 31,
2009.
|
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.
|
David
Brown’s employment agreement provides that, in the event Mr. Brown is
terminated without cause not following a change of control of the Company,
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
(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, 2009,
the Company would be obligated to pay $3,134,251 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 paid to
him. Under this provision, for a termination as of December 31, 2009, the
Company would be obligated to pay $1,241,250 to Mr. Brown.
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 described below.
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 Mr. 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 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
a number of common shares equal to the maximum award for his unvested PSUs,
which is a number of common shares equal to 1.5 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, 2009 would be 1,083,879 shares to Mr. Brown,
227,601 shares to Mr. Boisvert, 366,825 shares to Mr. Flitman, 395,085 shares to
Mr. Prestia and 591,888 shares to Mr. Swayne. Based on the price per common
share of $10.94 at December 31, 2009, the value of those shares would be
$11,857,636, $2,489,955, $4,013,066, $4,322,230, and $6,475,255,
respectively.
Each of
these provisions of the PSU Plan provides for payment only upon a change of
control and another triggering event, such as a termination without cause. We
believe this “double trigger” requirement maximizes shareholder value because
this structure would prevent an unintended windfall to management in the event
of a friendly (non-hostile) change in control, which could be a transaction
maximizing shareholder value. Under this structure, shareholders would have the
ability to sell their common shares since the unvested PSUs would continue to
incentivize the Named Executive Officers to remain with the Company after the
friendly change in control.
If, by
contrast, the PSU plan had only a “single trigger”, and a friendly change of
control occurred, management’s PSUs would all vest immediately creating a
windfall, and the new owner would then likely find it necessary to replace the
compensation with fresh unvested compensation, in order to retain management.
This is why we believe a double trigger is more shareholder-friendly, and
thus more appropriate, than a single trigger.
The PSU
Plan also provides for payment in specified circumstances if the participant
shall retire under an approved retirement program of the Company. The Company
currently has no retirement program.
If the
amendments to the PSU Plan in Proposal 3 are adopted, employees will be required
to return PSU awards if those PSU awards are granted based upon erroneous
financial information.
Director
Compensation Table
The
following table summarizes the fees or other compensation that our directors
earned for services as members of the Board of Directors or any committee of the
Board of Directors during 2009.
|
Name
|
Fees earned
or paid in
cash ($)
|
Stock
awards
(1)($)
|
Total
($)
|
|||||||||
|
Gary
Black
|
21,000 | 78,000 | 99,000 | |||||||||
|
Stephen
Coley
|
31,000 | 83,000 | 114,000 | |||||||||
|
Thomas
Dickson(2)
|
72,500 | 41,500 | 114,000 | |||||||||
|
Stewart
Gross(3)
|
117,000 | 15,000 | 132,000 | |||||||||
|
E.
Daniel James(4)
|
35,000 | 86,000 | 121,000 | |||||||||
|
Dr.
Anthony Knap
|
56,000 | 70,000 | 126,000 | |||||||||
|
Anthony
P. Latham
|
78,000 | 25,000 | 103,000 | |||||||||
|
Jan
Spiering
|
40,000 | 184,000 | 224,000 | |||||||||
|
Wray
T. Thorn(5)
|
34,500 | 87,500 | 121,000 | |||||||||
|
Peter
F. Watson
|
75,500 | 40,500 | 116,000 | |||||||||
|
Mark
Byrne(6)
|
— | — | — | |||||||||
|
David
Brown(6)
|
— | — | — | |||||||||
|
(1)
|
The
amounts shown in this column are based on the dollar amount recognized for
financial statement reporting purposes for the 2009 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 2009. The aggregate number
of RSUs issued to each director during 2009 (all of which remained
outstanding as at December 31, 2009) was as follows:
Mr. Black—7,983 RSUs; Mr. Coley—8,495 RSUs;
Mr. Dickson—4,247 RSUs; Mr. Gross—1535 RSUs;
Mr. James—8802 RSUs; Dr. Knap—7164 RSUs; Mr. Latham—2558
RSUs; Mr. Spiering—18833 RSUs; Mr. Thorn—8904 RSUs; and
Mr. Watson—4145 RSUs.
|
|
(2)
|
As
noted in “Our Directors”, 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”, 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”, E. Daniel James is a founding partner and head
of North America of Trilantic Capital Partners. 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 Trilantic Capital Partners,
he is required to surrender to Trilantic Capital Partners 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 Trilantic entities. See “Security Ownership of Certain Beneficial
Owners, Management and Directors”.
|
|
(5)
|
As
noted in “Our Directors”, 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. Mr. Thorn’s
interest in the securities noted herein is limited to the extent of his
pecuniary interest in the Marathon Funds, if
any.
|
|
(6)
|
Currently,
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
non-employee director receives cash in the amount of $3,500 for each Board of
Director or committee meeting attended in person, and $2,000 for each meeting
attended by telephone. Each non-employee 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.
Beneficial
Ownership of Common Shares by Certain Beneficial Owners
The
following table sets forth information as at March 19, 2010 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.
|
Name of beneficial owner
|
Number of
Common
Shares
|
Percentage of
voting rights
(1)
|
||||||
|
Trilantic
entities(2)
|
10,000,000 | 12.5 | % | |||||
|
E.
Daniel James(3)
|
10,000,000 | 12.5 | % | |||||
|
Mark
J. Byrne(4)
|
9,923,760 | 12.4 | % | |||||
|
Silver
Creek entities(5)
|
6,241,612 | 7.8 | % | |||||
|
Lightyear
entities(6)
|
6,000,000 | 7.5 | % | |||||
|
Stewart
Gross(7)
|
6,000,000 | 7.5 | % | |||||
|
Neuberger
Berman entities(8)
|
5,657,818 | 7.1 | % | |||||
Beneficial
Ownership of Common Shares by Management
The
following table sets forth information as at March 19, 2010 regarding beneficial
ownership of common shares and the applicable voting rights attached to such
share ownership in accordance with our Bye-Laws by:
|
|
·
|
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)
|
||||||
|
E.
Daniel James(3)
|
10,000,000 | 12.5 | % | |||||
|
Mark
J. Byrne(4)
|
9,923,760 | 12.4 | % | |||||
|
Stewart
Gross(7)
|
6,000,000 | 7.5 | % | |||||
|
Thomas
Dickson(9)
|
2,510,802 | 3.1 | % | |||||
|
Wray
T. Thorn(10)
|
1,438,668 | 1.8 | % | |||||
|
David
A. Brown(11)
|
307,940 | * | ||||||
|
Guy
Swayne(12)
|
10,000 | * | ||||||
|
Jan
Spiering
|
10,000 | * | ||||||
|
Patrick
Boisvert
|
3,500 | * | ||||||
|
Dr.
Anthony Knap(13)
|
1,300 | * | ||||||
|
Gary
Prestia(14)
|
500 | * | ||||||
|
Peter
F. Watson
|
— | — | ||||||
|
Gary
Black
|
— | — | ||||||
|
Stephen
Coley
|
— | — | ||||||
|
Anthony
P. Latham
|
— | — | ||||||
|
David
Flitman
|
— | — | ||||||
|
All
directors and executive officers as a group (21 persons) (see notes
(3), (4), (7) and (9) through (14))
|
30,226,570 | 37.8 | % | |||||
|
|
* Represents less than
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. The figures presented
do not reflect the potential reduction in voting power. If the
Redomestication is completed, the total voting power of any shareholder
who is a U.S. person controlling more than 9.9% of our common shares will
no longer be reduced.
|
|
(2)
|
The
common shares are owned by Trilantic Capital Partners and its
affiliates. The address of the Trilantic entities is 399 Park Avenue, New
York, NY 10022.
|
|
(3)
|
Represents
shares held by Trilantic entities as described in note 2. Mr. James
disclaims beneficial ownership of all common shares owned by Trilantic
entities.
|
|
(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 2,718,604 common shares of the Company held of
record by Haverford (Bermuda) Ltd. These shares represent the indirect
proportionate interest of Mr. Byrne in the 2,934,109 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. The address of Mr. Byrne is Crawford House, 23 Church Street,
Hamilton HM 11, Bermuda.
|
|
(5)
|
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.
|
|
(6)
|
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.
|
|
(7)
|
Represents
the shares owned by certain Lightyear entities as described in note
6. Mr. Gross is a Managing Director and member of the
Investment Committee of Lightyear Capital, and he disclaims beneficial
ownerships of the shares owned by the Lightyear
entities.
|
|
(8)
|
On
May 4, 2009, Neuberger Berman Group LLC (“NBG”) acquired 4,705,737 common
shares previously owned by Lehman Brothers Co-Investment Partners L.P. and
Lehman Brothers Co-Investment Associates L.P. Pursuant to investment
management agreements, NB Alternatives advisers LLC (“NB Alternatives”)
maintains investment and voting power with respect to the securities held
by NB Co-Investment Partners L.P. (“NB Partners”) and certain affiliated
investment funds. NB Co-Investment Associates L.P. (“NB Associates”) is
the general partner of NB Partners and may be deemed to have beneficial
ownership of the securities held by NB Partners. NBG controls each of NB
Alternatives and NB Associates, and each of them may be deemed to
beneficially own such securities. The address of the Neuberger Berman
entities is 605 Third Avenue, New York, New York
10158.
|
|
(9)
|
Includes
2,500,000 shares held of record by HCP. Mr. Dickson disclaims
beneficial ownership of the shares held by
HCP.
|
|
(10)
|
Represents
shares held by Marathon Special Opportunity Master Fund, Ltd. and Marathon
Special Opportunity Liquidating Fund, Ltd. Mr. Thorn does not
individually or otherwise beneficially own any shares of the
Company.
|
|
(11)
|
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 215,505 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 2,934,109 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.
|
|
(12)
|
Represents
shares purchased through the Directed Share Program in connection with the
IPO of common shares of the Company by Louise Swayne, Mr. Swayne’s wife.
Mr. Swayne disclaims beneficial ownership of shares held by his
wife.
|
|
(13)
|
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.
|
|
(14)
|
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.
|
The
Board of Directors and its Committees
Our
Bye-Laws provide for a Board of Directors of no fewer than ten and no more than
twelve directors. The Board of Directors currently consists of twelve directors
pursuant to a resolution of the Board of Directors. The Board of
Directors met a total of 10 times in fiscal 2009 and
all incumbent directors attended at least 80% 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 2009 Annual
General Meeting.
Our Board
of Directors is divided into three classes: four Class C directors whose
current term will expire at the 2010 Annual General Meeting of our shareholders,
four Class B directors whose current term will expire at the 2011 Annual
General Meeting of our shareholders, and four Class A directors whose
current term will expire at the 2012 Annual General Meeting of our shareholders.
Directors 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 NYSE. 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 NYSE with respect to the
Company’s Audit Committee, and the audit committee independence rules of
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
NYSE 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 7.2% of the common stock of the
Company.
|
|
|
·
|
Mr.
E. Daniel James, a director of the Company since December 2005, is
a founding partner and head of North America of Trilantic Capital
Partners, which owns 9.5% of the common stock of the
Company.
|
|
|
·
|
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.
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 1.7% 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, 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.
Board
of Directors Role in Risk Oversight and Leadership Structure
The
day-to-day management of the Company, including the preparation of financial
statements and short-term and long-term strategic planning, is the
responsibility of management. The primary responsibility of the Board is to
oversee and review management’s performance of these functions in order to
advance the long-term interests of the Company and its members. The Board is
also responsible for ensuring the Company is run in compliance with all
applicable laws and regulations.
The
Chairman of the Board is selected by the Board of Directors from among its
members. The Board of Directors has no established policy with respect to
combining or separating the offices of Chairman and CEO. This decision is made
depending on what is in the Company’s best interests at any given point in
time.
The
Company currently divides the roles of Chairman of the Board of Directors and
CEO. Mark Byrne serves as the Chairman as well as an officer of the Company
while David Brown serves as CEO as well as a director. We believe the separation
of the roles of Chairman and CEO enhances the effectiveness of the Chairman and
CEO in their separate roles.
Committees
of the Board of Directors
As
of March 19, 2010, 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 7 times during fiscal
2009. 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;
|
|
|
·
|
receives
and considers 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 4 times during fiscal
2009.
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 3 times during fiscal
2009.
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 General 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. Accordingly, the Governance Committee will consider
the interplay of the candidate’s experience with the experience of other Board
members, the extent to which the candidate would be a desirable addition to the
Board of Director and any committees of the Board of Director and any other
factors it deems appropriate, including, among other things,
diversity. The Governance Committee views diversity broadly
encompassing differing viewpoints, professional experience, industry background,
education, geographical orientation and particular skill sets, as well as race
and gender.
Underwriting
Committee
The
Underwriting Committee met a total of 4 times during fiscal 2009. 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 3 times during fiscal 2009. 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 7 times during fiscal 2009 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
audits 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 October 2009 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, 2009 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.
Audit
Committee
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
October 2009, the Compensation Committee conducted an annual self-assessment in
accordance with the terms of its charter.
Compensation
Committee
E. Daniel
James, Chairman
Stewart
Gross
Dr.
Anthony Knap
Wray T.
Thorn
Section 16(a)
of the Exchange Act requires our directors, executive officers and 10%
stockholders to file reports of ownership and reports of changes in ownership of
our common stock and other equity securities with the SEC.
Based
solely on a review of such reports furnished to the Company, the Company
believes that, with respect to fiscal year 2009, all such filing requirements
were met.
The
financial statements, and the related financial statement schedules,
incorporated in this Proxy Statement by reference from the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009, and the effectiveness
of Flagstone Reinsurance Holdings Limited’s internal control over financial
reporting have been audited by Deloitte & Touche, an independent registered
public accounting firm, as stated in their reports, which are incorporated
herein by reference. Such financial statements and financial statement schedules
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The
validity of the shares in issue pursuant to the Redomestication under Luxembourg
law will be passed upon for us by M Partners, Luxembourg. Certain Luxembourg tax
matters will be passed upon for us by Tax S. Arts S.à.r.l, Luxembourg. Certain
Bermuda tax matters will be passed upon for us by Appleby, Hamilton, Bermuda.
Certain matters relating to U.S. federal taxes will be passed upon for us by
Baker & McKenzie LLP, Washington, D.C.
Shareholder
Proposals for 2011 Annual General Meeting of Shareholders
Shareholder
proposals must be received in writing by the Corporate Secretary of the Company
no later than December 20, 2010, and must comply with the requirements of the
SEC and our Bye-Laws (or if the Redomestication becomes effective, our Articles)
in order to be considered for inclusion in our Proxy Statement and proxy card
relating to the 2011 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 2011 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 March 1, 2011 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 2011 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.
A copy of
our financial statements for the year ended December 31, 2009 and the
independent auditors’ 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
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
The Bank
of New York, whose principal executive office is located at 1 Wall Street, New
York, NY 10004, has been appointed as Inspector of Election for the Annual
General Meeting. Representatives of The Bank of New York will attend the Annual
General Meeting to receive votes and ballots, supervise the counting and
tabulating of all votes and determine the results of the vote.
The
Company’s Annual Report, including its audited financial statements for the year
ended December 31, 2009, is being mailed to you along with this Proxy
Statement. In order to reduce printing and postage costs, only one Annual Report
or Proxy Statement, as applicable, will be mailed to multiple shareholders
sharing an address unless the Company receives contrary instructions from one or
more of the shareholders sharing an address. Each shareholder continues to
receive a separate proxy card. If your household has received only one Annual
Report and one Proxy Statement and you wish to request delivery of a separate
copy, or if your household is receiving multiple copies of the Company’s annual
reports or proxy statements and you wish to request delivery of a single copy,
you may send a written request to Bank of New York Mellon Shareowner Services,
PO Box 358015, Pittsburgh, PA 15252-8015, by e-mail at
shrrelations@bnymellon.com, or upon oral request by phone at 1-877-296-3711
(1-201-680-6685 outside the U.S.).
This
Proxy Statement is accompanied by our Annual Report. In addition, the SEC
allows certain information to be “incorporated by reference” into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document we have separately filed with the SEC.
The information incorporated by reference is deemed to be part of this Proxy
Statement, except for any information superseded by information contained
directly in this prospectus. This Proxy Statement incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about us, our business,
financial condition and results of operations:
|
|
·
|
Annual
Report on Form 10-K for the year ended December 31, 2009;
and
|
|
·
|
Current Report on Form 8-K filed on March 12, 2010. |
All
documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), from the date
of this Proxy Statement to the date on which the Annual General Meeting is held
or adjourned to shall also be deemed to be incorporated into this Proxy
Statement by reference (except for any information therein which has been
furnished rather than filed). Subsequent filings with the SEC will automatically
modify and supersede the information in this prospectus.
We file
annual, quarterly and current reports, proxy statements and other information
with the SEC under the Exchange Act. You may read and copy this
information at the SEC’s Public Reference Room, located at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also
obtain copies of this information by mail from the SEC at the above address, at
prescribed rates. The SEC also maintains a website that contains reports,
proxy statements and other information that we file electronically with the
SEC. The address of that website is http://www.sec.gov.
Documents
incorporated by reference are available without charge, upon written request to
Bank of New York Mellon Shareowner Services, PO Box 358015, Pittsburgh, PA
15252-8015, by e-mail at shrrelations@bnymellon.com, or upon oral request at
1-877-296-3711 (1-201-680-6685 outside the U.S.). In order to receive
timely delivery of those materials, you must make your requests no later than
five business days before the date of the Annual General
Meeting.
Statuts
Flagstone
Reinsurance Holdings S.A.
Société
Anonyme
Registered
office: 37 Val St André, L-1128, Luxembourg
R.C.S.
Luxembourg B (to be allocated)
Table
of Contents
|
1.
|
Interpretation
|
4
|
||
|
2.
|
Name
|
7
|
||
|
3.
|
Duration
|
7
|
||
|
4.
|
Corporate
objects
|
7
|
||
|
5.
|
Registered
Office
|
8
|
||
|
6.
|
Share
Capital
|
8
|
||
|
7.
|
Purchase
of Own shares
|
9
|
||
|
8.
|
Rights
of Share On Issue
|
11
|
||
|
9.
|
Shares
|
11
|
||
|
10.
|
Variation
of Rights
|
12
|
||
|
11.
|
Prohibition
On Financial Assistance
|
12
|
||
|
12.
|
Disclosure
of Interests
|
12
|
||
|
13.
|
Share
Certificates
|
15
|
||
|
14.
|
Making
of Calls
|
16
|
||
|
15.
|
Time
of Call
|
16
|
||
|
16.
|
Liability
of Joint Holders
|
16
|
||
|
17.
|
Interest
on Calls
|
16
|
||
|
18.
|
InstalLments
Treated as Calls
|
16
|
||
|
19.
|
Power
to Differentiate
|
17
|
||
|
20.
|
Notice
Requiring Payment
|
17
|
||
|
21.
|
Effect
of Forfeiture or Surrender
|
17
|
||
|
22.
|
Declaration
|
17
|
||
|
23.
|
Transfer
of Shares and Warrant and Restrictions On Transfer
|
18
|
||
|
24.
|
Absence
of Registration Fees
|
19
|
||
|
25.
|
Retention
of Transfer Instruments
|
19
|
||
|
26.
|
Transmission
of Shares
|
19
|
||
|
27.
|
Increase
of Capital
|
20
|
||
|
28.
|
Consolidation
and Sub-Division of Capital
|
20
|
||
|
29.
|
Fractions
on Consolidation
|
20
|
||
|
30.
|
Reduction
of Capital
|
21
|
||
|
32.
|
Powers
of the General Meeting
|
21
|
||
|
33.
|
Annual
General Meeting
|
21
|
||
|
34.
|
Ordinary
General Meetings
|
22
|
||
|
35.
|
Extraordinary
General Meeting
|
22
|
||
|
36.
|
Convening
of General Meetings
|
23
|
||
|
37.
|
Quorum
for General Meetings
|
23
|
||
|
38.
|
Chairman
of General Meetings
|
24
|
||
|
39.
|
General
Meeting By Conference Call, Video Conference, or Similar Means of
Communication Equipment Not Permitted
|
24
|
||
|
40.
|
Director’s
and Auditor’s Right to Attend General Meetings
|
24
|
||
|
41.
|
Adjournment
of General Meetings
|
24
|
||
|
42.
|
Votes
of Holders
|
24
|
||
|
43.
|
Voting
by Joint Holders
|
24
|
||
|
44.
|
Voting
by Incapacitated Holders
|
25
|
||
|
45.
|
Representation
of Corporate Holder
|
25
|
||
|
46.
|
Time
For Objection to Voting
|
25
|
||
|
47.
|
Appointment
of Proxy
|
25
|
||
|
48.
|
Deposit
of Proxy Instruments
|
26
|
||
|
49.
|
Effect
of Proxy Instruments
|
26
|
||
|
50.
|
Effect
of Revocation of Proxy
|
26
|
||
|
51.
|
Number
of Directors
|
27
|
||
|
52.
|
Appointment
of Directors
|
27
|
||
|
53.
|
Classification
of Directors
|
27
|
|
54.
|
Term
of Office of Directors
|
27
|
||
|
55.
|
Vacancy
in the Office of Director
|
27
|
||
|
57.
|
Termination
of a Director’s Mandate
|
28
|
||
|
58.
|
Ordinary
Remuneration of Directors
|
28
|
||
|
59.
|
Special
Remuneration of Directors
|
28
|
||
|
60.
|
Expenses
of Directors
|
28
|
||
|
61.
|
Directors'Powers
|
28
|
||
|
62.
|
Power
to Delegate and Local management
|
29
|
||
|
63.
|
Appointment
of Attorneys
|
29
|
||
|
64.
|
Borrowing
Powers
|
29
|
||
|
65.
|
Executive
Offices
|
29
|
||
|
66.
|
Directors’
Interests
|
30
|
||
|
67.
|
Directors
Insurance
|
30
|
||
|
68.
|
Convening
and Regulation of Directors’ Meetings
|
31
|
||
|
69.
|
Notice
of Board Meetings
|
31
|
||
|
70.
|
Quorum
for Directors' Meetings
|
31
|
||
|
71.
|
Voting
at Directors' Meetings
|
31
|
||
|
72.
|
Telecommunication
Meetings
|
31
|
||
|
73.
|
Chairman
of Board of Directors
|
32
|
||
|
74.
|
Validity
of Acts of Directors
|
32
|
||
|
75.
|
Directors'
Resolutions and Other Documents in Writing
|
32
|
||
|
76.
|
Accounting
Year
|
32
|
||
|
77.
|
Legal
Reserve
|
32
|
||
|
78.
|
Declaration
of Dividends
|
33
|
||
|
79.
|
Interim
and Fixed Dividends
|
33
|
||
|
80.
|
Reserves
|
33
|
||
|
81.
|
Apportionment
of Dividends
|
34
|
||
|
82.
|
Deductions
from Dividends
|
34
|
||
|
83.
|
Dividends
in Specie
|
34
|
||
|
84.
|
Payment
of Dividends and Other Moneys
|
34
|
||
|
85.
|
Dividends
Not to Bear Interest
|
35
|
||
|
86.
|
Capitalisation
of Distributable Profits and Reserves
|
35
|
||
|
87.
|
Implementations
of Capitalisation Issues
|
35
|
||
|
88.
|
Notices
in Writing
|
35
|
||
|
89.
|
Service
of Notices
|
36
|
||
|
90.
|
Service
on Joint Holders
|
37
|
||
|
91.
|
Service
on Transfer or Transmission of Shares
|
37
|
||
|
92.
|
Service
of Notices on the Company or the Board
|
38
|
||
|
93.
|
Signature
to Notices
|
38
|
||
|
94.
|
Deemed
Receipt of Notices
|
38
|
||
|
95.
|
Distribution
on Dissolution
|
38
|
||
|
96.
|
Distribution
in Specie
|
39
|
||
|
97.
|
Statutory
Auditor
|
39
|
||
|
98.
|
Independent
Auditor
|
40
|
||
|
99.
|
Indemnity
|
40
|
||
|
100.
|
|
Governing
Law
|
|
41
|
CHAPTER
1
PRELIMINARY
|
1.1
|
In
these Articles, the following words and expressions shall, where not
inconsistent with the context, have the following meanings,
respectively:
|
“Accounts” shall have the
meaning as such term is defined in Article 97.
“Affiliate” means, with respect
to any Person, any other Person that directly or indirectly, through one or more
intermediaries, Controls or is Controlled by, or is under common Control with
such Person.
“Annual General Meeting”, means
the Annual General Meeting of the Company required to be held according to
Article 33.
“Articles”, means these
Articles of Incorporation of the Company as originally adopted or as altered
from time to time.
“Board”, means the board of
Directors appointed or elected pursuant to these Articles, or the Directors
present at a meeting of Directors at which there is a required
quorum.
“Business Day”, means any day
other than a Saturday, Sunday or a public holiday in the Grand Duchy of
Luxembourg and the State of New York.
“Chairman” means the Chairman
(if appointed) appointed pursuant to the provisions of Article
65.1.
“Clear Days”, means in relation
to the period of a notice, that period excluding the day when the notice is
given or deemed to be given and the day for which it is given or on which it is
to take effect.
“Code”, means the United States
Internal Revenue Code of 1986, as amended.
“Company”, means Flagstone
Reinsurance Holdings S.A. the Company to which these Articles
relate.
“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.
“Director”, means a director
for the time being of the Company.
“Exchange Act” means the US
Securities Exchange Act of 1934, as amended.
“Extraordinary General
Meeting”, means a duly convened meeting of Holders as more particularly
described in Article 35.
“Fair Market Value” means, with
respect to a repurchase of any Shares of the Company in accordance with these
Articles, (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 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 Articles, or (b) with respect to a repurchase, if no
such closing sales or prices are available because such Shares are not publicly
traded, the value per Share as determined by an independent valuation conducted
by an independent valuation agent approved and appointed by the
Board.
“Financial Statements” shall
have the meaning as such term is defined in Article 98.
“General Meeting”, means an
Annual General Meeting, an Ordinary General Meeting or an Extraordinary General
Meeting.
“Holder”, means in relation to
any Share in the capital of the Company, the shareholder whose name is entered
in the Register as the holder of the Share 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 Holders as one of such joint Holders or all of such Persons
as the context so requires.
“Independent Auditor” means an
individual, partnership or company appointed as the independent auditor of the
Company pursuant to these Articles.
“Law”, means the Law of 10
August 1915 on Commercial Companies, as amended, from time to time.
“Mémorial”, means the Mémorial
C, Recueil Spécial des Sociétés et Associations, being the official daily
publication of the Luxembourg government.
“Office”, means the registered
office for the time being of the Company.
“Officer” means any Person
appointed by the Board to hold office in the Company.
“Ordinary General Meeting”,
means a duly convened meeting of Holders as more particularly described in
Article 34.
“Ordinary Resolution”, means a
resolution passed at an Ordinary General Meeting or at an Annual General Meeting
and which is described as such in the notice convening the relevant
meeting.
“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.
“Register”, means the register
of shareholders to be kept by the Company pursuant to the provisions of the
Law.
“Rule 144” means Rule 144 under
the Securities Act, or any successor rule thereto.
“RSU Plan” means the Company’s
employee restricted share unit plan as from time to time altered or
amended.
“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
such replacement U.S. federal statute.
“Shares”, means all of the
shares in issue in the capital of the Company from time to time subject to the
rights and obligations set out in these Articles.
“Special Resolution” means a
resolution passed at an Extraordinary General Meeting or at an Annual General
Meeting by a majority of two thirds (66,66%) of the Shares present or
represented at the said meeting and which is described as such in the notice
convening the relevant meeting.
“Statutory Auditor(s)” means an
individual, partnership or company appointed as the statutory auditor (‘Commissaire’) of the Company
pursuant to the provisions of the Law.
“Subsidiary” means any entity
of which a majority of the Voting Power (under ordinary circumstances) in
the entity, or in electing the board of directors or equivalent body of the
entity are, at the time at which any determination is being made, owned by the
Company, either directly or indirectly or pursuant to an agreement with any
other shareholders in that entity.
“Super Majority Resolution”
means a resolution passed at an Extraordinary General Meeting or at an Annual
General Meeting by a majority of three fourths (75%) of the Shares present or
represented at the said meeting and which is described as such in the notice
convening the relevant meeting.
“Treasury Shares” 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 U.S. 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.
“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 Holders of the total
number of issued shares of such Person carrying the right to vote.
“Warrant” means the amended and
restated warrant dated 17 November 2008 issued to Haverford (Bermuda) Limited, a
Bermuda exempt company, to purchase Shares in the Company on the terms and
conditions as contained in the warrant instrument, as amended from time to
time.
|
1.2
|
Expressions
in these Articles referring to writing shall be construed, unless the
contrary intention appears, as including references to printing,
lithography, photography and any other modes of representing or
reproducing words in a visible form. Expressions in these Articles
referring to execution of any document shall include any mode of execution
allowed by Law.
|
|
1.3
|
Unless
specifically defined herein or the context otherwise requires, words or
expressions contained in these Articles shall bear the same meaning as in
the Law but excluding any statutory modification thereof not in force when
these Articles become binding on the
Company.
|
|
1.4
|
References
to Articles are to Articles of these Articles and any reference in an
Article to a paragraph or sub-paragraph shall be a reference to a
paragraph or sub-paragraph of the Article in which the reference is
contained unless it appears from the context that a reference to some
other provision is intended.
|
|
1.5
|
The
headings and captions included in these Articles are inserted for
convenience of reference only and shall not be considered a part of or
affect the construction or interpretation of these
Articles.
|
|
1.6
|
References
in these Articles to any enactment or any section or provision thereof
shall mean such enactment, section or provision as the same may be amended
and may be from time to time and for the time being in
force.
|
|
1.7
|
In
these Articles the masculine gender shall include the feminine and neuter,
and vice versa, and the singular number shall include the plural, and vice
versa, and words importing persons shall include firms, partnerships,
associations and/or bodies corporate or entities of any description,
wherever registered or existing and whether incorporated or
unincorporated.
|
|
1.8
|
In
these Articles, the words:
|
|
1.8.1
|
“may”
shall be construed as permissive;
and
|
|
1.8.2
|
“shall”
shall be construed as
imperative.
|
CHAPTER
2
NAME,
DURATION, OBJECTS, REGISTERED OFFICE
|
2.
|
|
2.1
|
There
exists a company in the form of a Société Anonyme (public
limited liability company) under the name of “Flagstone Reinsurance
Holdings S.A.”.
|
|
3.
|
|
3.1
|
The
Company is established for an unlimited
duration.
|
|
4.1
|
The
object of the Company is the holding of participations, in any form
whatsoever, in other Luxembourg companies or foreign companies, the
acquisition by purchase, subscription, or in any other manner, as well as
the transfer by sale, exchange or otherwise of stocks, bonds, debentures,
notes and other securities of any kind, and the ownership, administration,
development and management of its portfolio. The Company may also hold
interests in partnerships.
|
|
4.2
|
The
Company may borrow in any form and proceed to the issuance of bonds and
debentures. In a general fashion it may grant assistance to affiliated
companies, take any controlling and supervisory measures and carry out any
operation, which it may deem useful in the accomplishment and development
of its purposes.
|
|
4.3
|
The
Company may further carry out any commercial, industrial or financial
operations, as well as any transactions on real estate or on movable
property.
|
|
4.4
|
The
Company may give guarantees and other forms of security and pledge,
transfer, encumber or otherwise create and grant security over all or some
of its assets to guarantee its own obligations or undertakings, or the
obligations of any other company or person, where such guarantee is
indirectly or directly in the best interests of and for the corporate
benefit of the Company.
|
|
4.5
|
The
Company shall have all such powers and shall be entitled to take all such
action and enter into any type of contract or arrangement as are necessary
for the accomplishment or development of its
objects.
|
|
5.1
|
The
Office is established in the municipality of Luxembourg and may by
resolution of the Board, be transferred from one address to another within
that municipality. Transfers to any other place within the Grand Duchy of
Luxembourg may be effected in accordance with the applicable provisions of
the Law.
|
|
5.2
|
The
Board may resolve that the Company establish branches or other offices
within the Grand Duchy of Luxembourg or in any other
country.
|
|
5.3
|
Should
extraordinary events of a political, economic or social nature, which
might impair the normal activities of the Office or the easy communication
between that Office and foreign countries, take place or be imminent, the
Office may be transferred temporarily abroad by resolution of the Board or
by declaration of a person duly authorised by the Board for such
purpose. Such temporary measures shall, however, have no effect on
the nationality of the Company which, notwithstanding such temporary
transfer of the Office, shall remain of Luxembourg
nationality.
|
CHAPTER
3
SHARE
CAPITAL AND RIGHTS
|
6.1
|
The
authorised share capital of the Company is set at US$3,000,000, divided
into 300,000,000 Shares with a par value of US$0.01
each.
|
|
6.2
|
The
issued share capital of the Company is set at US$ 849,852.19 divided into
84,985,219 Shares with a par value of US$0.01 each.
|
|
6.3
|
The
Board is generally and unconditionally authorised for a period of five
years from the date of publication of this amendment to the Articles in
the Mémorial C to
issue Shares up to a maximum of the authorised but as yet unissued share
capital of the Company to such persons and on such terms as they shall see
fit from time to time in the manner specified by these Articles and by
applicable Law, such shares to be paid up in cash, for compensation, by
contribution in kind, by conversion of shareholders’ claims or by
incorporation of profits or reserves into capital. The Company may make
any offer or agreement before the expiry of this authority which would or
might require Shares to be issued after the authority has expired and the
Board may issue Shares in pursuance of any such offer or agreement
notwithstanding that the authority hereby conferred has
expired.
|
|
6.4
|
The
Board is authorised to issue Shares for cash pursuant to the authority
conferred by Article 6.3 as if Luxembourg statutory pre-emption provisions
did not apply to any such issuance provided that this authority shall
expire on the fifth anniversary of the date of publication of this
amendment to the Articles in the Mémorial C, provided
further that the Company may before such expiry, make an offer or
agreement which would or might require Shares to be issued after such
expiry and the Board may issue Shares in pursuance of such offer or
agreement as if the power hereby conferred had not
expired.
|
|
6.5
|
The
Company has concluded the PSU Plan, the RSU Plan and the Warrant. It is
specifically recorded that the authority of the Board referred to in
Articles 6.4 and 6.5 above relates, (without in any way limiting such
authority) to the issue of Shares pursuant to the PSU Plan, the RSU Plan
and the Warrant, should the terms of the PSU Plan, the RSU Plan and the
Warrant so require that Shares be
issued.
|
|
6.6
|
When
the Board increases the issued share capital under Articles 6.3 or 6.4
they shall be obliged to take steps to amend the Articles in order to
record the increase of the issued share capital and the Board is
authorised to take or authorise the steps required for the execution and
publication of such amendment in accordance with the
Law.
|
|
6.7
|
Without
limiting the authority conferred on the Board by Articles 6.3 to 6.5, the
issued share capital and the authorised share capital of the Company may
be increased or reduced by a Special
Resolution.
|
|
6.8
|
In
addition to the Warrant, the Company may issue warrants to subscribe for
Shares (by whatever name they are called) to any person to whom the
Company has granted the right to subscribe for Shares certifying the right
of the registered holder thereof to subscribe for Shares upon such terms
and conditions as the right may have been
granted.
|
|
7.1
|
Pursuant
to and in conformity with the provisions of Article 49-2 of the Law and in
conformity with all other applicable laws and regulations, the Company is
generally authorised from time to time to purchase, acquire, receive
and/or hold Shares, provided that:
|
|
|
7.1.1
|
the
maximum number of Shares hereby authorised to be purchased does not exceed
the number of fully paid-up issued Shares in the
Company;
|
|
|
7.1.2
|
the
maximum price which may be paid for each Share shall be the Fair Market
Value;
|
|
|
7.1.3
|
the
minimum price which may be paid for each Share shall be the par value per
Share of US$0.01;
|
|
|
7.1.4
|
this
authority, (unless previously revoked, varied or renewed by Holders) shall
expire on the fifth anniversary of the date of the meeting held before a
Luxembourg notary for the purposes of recording the redomestication of the
Company except in relation to the purchase of Shares the contract for
which was concluded before such date and which will or may be executed
wholly or partly after such date;
|
|
|
7.1.5
|
the
acquisitions, including the Shares previously acquired by the Company and
held by it, and Shares acquired by a person acting in his own name but on
the Company’s behalf, may not have the effect of reducing the net assets
of the Company below the amount mentioned in Article 72-1 of the
Law;
|
|
|
7.1.6
|
this
authority relates only to:
|
|
|
(a)
|
one
or more market purchases, (being a purchase of Shares by the Company of
Shares offered for sale by any Holder on the open market on which the
Shares are traded), as the Board of Directors shall determine;
and
|
|
|
(b)
|
purchases
effected in circumstances where an offer on similar terms has been made by
the Company to sell up to the same number of Shares of each Holder
appearing on the Register immediately before the offer was made (or as
soon as, according to the Directors, may be practicable) other than
Holders who have consented in writing to the offer not being extended to
them, and each Holder concerned has
either:
|
|
|
(i)
|
accepted
the offer in writing;
|
|
(ii)
|
declined
the offer in writing; or
|
|
(iii)
|
failed
to respond to the offer within the time allowed to do so under the terms
of the offer.
|
|
7.2
|
Pursuant
to and in conformity with the provisions of Article 49-2(2) of the Law and
in conformity with all the applicable laws and regulations, where
the Board reasonably determines in good faith, based on the
opinion of counsel that share ownership, directly, indirectly or
constructively, by any Holder 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 it Holders (“Imminent Harm”),
the Company will be authorized and have the option, but not the
obligation, to repurchase the minimum number of Shares which is necessary
to avoid or cure such Imminent Harm (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 sums available for
distribution in accordance with Article 72-1 of the Law in an amount equal
to at least the Fair Market Value of such Shares on the date the Company
repurchases the Shares.
|
|
7.3
|
The
Board shall notify such Holder promptly if it has determined that the
provisions of Article 7.2 may apply to such Holder, and shall provide such
Holder with seventy-five (75) days (subject to any extension reasonably
necessary to obtain regulatory approvals necessary in connection with any
proposed sale by the Holder, if being diligently pursued, but in any event
not more than an additional ninety days (90)) prior to and in lieu of such
repurchase, to remedy the circumstances pursuant to which the ownership of
Shares by such Holder may result in adverse tax consequences or materially
adverse legal or regulatory treatment to the Company, any of its
subsidiaries, or any of its Holders (including by such Holder selling
shares to a third party, subject to any relevant provisions of these
Articles); provided that, for the avoidance of doubt, this Article does
not release such Holder from any contractual restriction on transfer to
which such Holder is subject.
|
|
7.4
|
If
a Holder subject to the application of Article 7.2 and Article 7.3 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, the Company shall notify each other
Holder of Shares, and shall permit the other Holders to purchase such
Shares at the Fair Market Value in its stead, pro rata, to the number of
shares then held by each such Holder, and then, to the extent that any
Holders fail to accept such offer, to the other Holders what have elected
to purchase their portion of such Shares. After offering the Shares to be
repurchased to the other Holders 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 Holder shall be bound by the determination of the Company to purchase
or assign its right to purchase such Holder’s Shares and, if so required
by the Company, shall sell the number of Shares that the Company requires
it to sell.
|
|
7.5
|
The
Board will use all reasonable efforts to exercise the option referred to
in Article 7.4 equitably, and to the extent possible, equally among
similarly situated Holders (to the extent possible under the
circumstances).
|
|
7.6
|
In
the event that the Holder(s) or the Company or its assignee(s) determine
to purchase any such Shares, the Company shall provide each Holder
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 Holder 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 Holder(s), the Company
or its assignee(s) pay for the Shares. The Board may authorise any person
to sign, on behalf of any Holder who is the subject of such Purchase
Notice, an instrument of transfer relating to any such Holder’s Shares
which the Company has an option to purchase. Payment of the Purchase Price
by the Holder(s), the Company or its assignee(s) shall be by wire transfer
or certified cheque and made at a closing to be held not less than five
(5) calendar days after receipt of the Purchase Notice by the selling
Holder.
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|
7.7
|
The
Board shall be authorised to appoint, in its absolute discretion, a
representative, to appear before a public notary in Luxembourg for the
purpose of amending the Articles to reflect the changes resulting from the
cancellation of any Shares repurchased in accordance with the terms of
this Article 7, if such election is made to cancel the
Shares.
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|
8.1
|
Without
prejudice to any special rights conferred on the Holders of any existing
Shares or class of Shares (which special rights shall not be affected,
modified or abrogated except with such consent or sanction as is provided
in these Articles), and subject to the provisions of the Law, any Share
may be issued either at par or at a premium and with such rights and/or
restrictions, whether in regard to dividend, voting, return of capital,
transferability or disposal or otherwise, as the Company may from time to
time direct.
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|
8.2
|
Any
share premium created upon the issue of Shares pursuant to Article 8.1
shall be available for repayment to the Holders of the Company, the
payment of which shall be within the absolute discretion of the Board.
The Board is in particular authorised to utilise share premium
for the purpose of carrying any share premium repayment to Holders or
repurchasing Shares of the Company in accordance with the provisions
of Article 7 and Article 78
respectively.
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|
8.3
|
All
of 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 Law, all Treasury Shares shall be excluded
from the calculation of any percentage or fraction of the share capital or
shares of the Company.
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|
9.
|
|
9.1
|
Shares
shall be issued in registered form only. The Board shall cause to be kept
in one or more books a Register and shall enter therein the particulars
required by the Law.
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|
9.2
|
The
Register shall be kept at the Office, where it will be available for
inspection by any Holder, without charge, 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.
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|
9.3
|
The
Register may be closed during such time as the Board thinks fit, not
exceeding a total of thirty days in each calendar
year.
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|
9.4
|
In
the case of joint Holders the Company shall regard the first named Holder
on the Register in respect of the Share(s) as having been appointed by the
joint Holders to receive all notices and to give a binding receipt for any
dividend(s) payable in respect of such Share(s) on behalf of all joint
Holders.
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|
9.5
|
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 recognize
any equitable claim or other claim to, or interest in, such share on the
part of any other Person.
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|
9.6
|
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
winding up.
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|
9.7
|
Where
Shares are recorded in the Register on behalf of one or more persons in
the name of a securities settlement system or the operator of such system,
or in the name of a professional depository of securities, or any other
depository (such systems, professionals or other depositories, being
referred to hereinafter as “Depositories”) or of a sub-depository
designated by one or more Depositories, the Company – subject to it having
received from the Depository with whom those Shares are kept in account a
certificate in proper form – will permit those persons to exercise the
rights attaching to those Shares, including admission to and voting at
general meetings, and shall consider those persons to be the Holders for
the purposes of these Articles. The Board may determine the formal
requirements with which such certificates must comply. Notwithstanding the
foregoing, the Company shall make payments, by way of dividends or
otherwise, in cash, shares or other assets as allowed for pursuant to
these Articles, only into the hands of the Depository or sub-depository
recorded in the Register or in accordance with their instructions, and
that payment shall release the Company from any and all obligations for
such payment.
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|
10.1
|
Whenever
the share capital of the Company is divided into different classes of
Shares, the rights attached to any class may (unless otherwise provided by
the terms of issue of the shares of that class) be varied or abrogated
with the sanction of a resolution passed at a separate meeting of the
Holders of the Shares of the class (at which meeting resolutions shall be
validly passed by a majority of three fourths (75%) of the issued Shares
of that class, at which meeting the necessary quorum shall be two persons
at least holding or representing by proxy one half of the issued Shares of
the class). Any variation or abrogation of the rights of the Holders of
the Shares of a class of Shares that requires an amendment to the Articles
shall only become effective once the Articles have been amended pursuant
to passing of a Special Resolution at an Extraordinary General Meeting or
at the Annual General Meeting of all the Holders, such meeting to be held
in the presence of a public notary in
Luxembourg.
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|
11.1
|
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.
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|
12.1
|
The
Board may, at any time and from time to time if in its absolute
discretion, it considers it to be in the interests of the Company to do
so, give a notice to the Holder or Holders of any Share (or any of them)
requiring such Holder or Holders to notify the Company in writing within
such period as may be specified in such notice of full and accurate
particulars of all or any of the following matters,
namely:
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|
|
12.1.1
|
the
interest of such Holder in such
Share;
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|
|
12.1.2
|
if
the interest in the Share does not consist of the entire beneficial
interest in it, the interests of all persons having any beneficial
interest (direct or indirect) in the Share (provided that one joint Holder
of a Share shall not be obliged to give particulars of interests of
persons in the Share which arise only through another joint Holder);
and
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|
|
12.1.3
|
any
arrangements (whether legally binding or not) entered into by such Holder
or any person having any beneficial interest in the Share whereby it has
been agreed or undertaken or the Holder of such Share can be required to
transfer the Share or any interest therein to any person (other than a
joint Holder of the Share) or to act in relation to any General Meeting or
of any class of Shares of the Company in a particular way or in accordance
with the wishes or directions of any other person (other than a person who
is a joint Holder of such Share).
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|
12.2
|
If,
pursuant to any notice given under Article 12.1, the person stated to own
any beneficial interest in a Share or the person in favour of whom any
Holder (or other person having any beneficial interest in the Share) has
entered into any arrangements referred to in sub-Article 12.1.3, is a body
corporate, trust, society or any other legal entity or association of
individuals and/or entities, the Board, at any time and from time to time
if, in its absolute discretion, it considers it to be in the best
interests of the Company to do so, may give a notice to the Holder or
Holders of such Share (or any of them) requiring such Holder or Holders to
notify the Company in writing, within such period as may be specified in
such notice, of full and accurate particulars of the name and addresses of
the individuals who control (whether directly or indirectly and through
any number of vehicles, entities or arrangements) the beneficial ownership
of all the Shares, interests, units or other measure of ownership of such
body corporate, trust, society or other entity or association wherever the
same shall be incorporated, registered or domiciled or wherever such
individuals shall reside; provided that, if at any stage of such chain of
ownership the beneficial interest in any Share shall be established to the
satisfaction of the Board to be in the ownership of (i) any body corporate
any of whose share capital is listed or dealt in on any bona fide stock
exchange, unlisted securities market or over-the-counter securities market
(ii) a mutual assurance company or (iii) a bona fide charitable trust or
foundation, it shall not be necessary to disclose details of the
individuals ultimately controlling the beneficial interests in the Shares
of such body corporate, trust society or other entity or
association.
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|
12.3
|
The
Board, if it thinks fit, may give notices under Articles 12.1 and 12.2 at
the same time on the basis that the notice given pursuant to Article 12.2
shall be contingent upon disclosure of certain facts pursuant to a notice
given pursuant to Article 12.1.
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|
12.4
|
The
Board may serve any notice pursuant to the terms of this Article 12
irrespective of whether or not the Holder on whom it shall be served may
be dead, bankrupt, insolvent or otherwise incapacitated and no such
incapacity or any unavailability of information or inconvenience or
hardship in obtaining the same shall be a satisfactory reason for failure
to comply with any such notice; provided that, if the Board in its
absolute discretion thinks fit, it may waive compliance in whole or in
part with any notice given under this Article 12 in respect of a Share in
any case of bona fide unavailability of information or genuine hardship or
where it otherwise thinks fit but no such waiver shall prejudice or affect
in any way any non-compliance not so waived whether by the Holder
concerned or any other joint Holder of the Share or by any person to whom
a notice may be given at any time.
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|
12.5
|
For
the purpose of establishing whether or not the terms of any notice served
under this Article shall have been complied with the decision of the Board
in this regard shall be final and conclusive and shall bind all persons
interested.
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|
12.6
|
The
provisions of this Article are in addition to, and do not limit, any other
right or power of the Company, including any right vested in or power
granted to the Company by any applicable
law.
|
|
12.7
|
Notwithstanding
the provisions of the preceding paragraphs of this Article 12 and in
addition thereto, 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 or 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 Article 12.7, 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 Article, 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.
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|
12.8
|
Any
information provided by any Holder to the Company pursuant to this Article
12 or other information provided pursuant to this Article shall be deemed
“confidential information” (the “Confidential Information”) and shall be
used by the Company solely for the purposes contemplated by those Articles
(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 Articles, (iii) to
officers and employees of the Company, as set forth this Article 12 as
otherwise required by law or
regulation.
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|
12.9
|
The
Company shall take all measures practicable to ensure the continued
confidentiality of the Confidential Information and shall grant the
Persons referred to in Article 12.8(ii) above access to the Confidential
Information only to the extent necessary to allow them to assist the
Company in any analysis required by these Articles, or to determine
whether the Company would realise any income that would be included in the
income of any Holder (or any interest holder, whether direct or indirect,
of any Holder) 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 Article 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 Holder by operation of section 953 (c) of the Code or to implement
this Article 12. At the written request of a Holder, the Confidential
Information of such Holder shall be destroyed or returned to such Holder
after the later to occur of (i) such Holder no longer being a Holder 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.
|
|
12.10
|
The
Company shall (i) notify a Holder 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 Holder and, prior to such disclosure, shall permit such
Holder a reasonable period of time to seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Article 12, 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 Holder notice of
the information to be disclosed as far in advance of its disclosure as
practicable and, upon the request of such Holder and at its expense, shall
use best efforts to ensure that confidential treatment will be accorded to
all such disclosed information.
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|
13.1
|
Unless
otherwise provided, the Company shall issue, without payment, to such
Holder of the Shares in respect of which such Holder is so registered, one
certificate reflecting all the Shares held by such Holder or several
certificates each for one or more of the Shares of such Holder upon
payment for every certificate after the first of such reasonable sum as
the Board may determine; provided that the Company shall not be bound to
issue more than one certificate for Shares held
jointly.
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|
13.2
|
In
the case provided for in Article 9.7 of the present Articles, a
certificate shall be issued to the Depositories or sub-depositories
recorded in the Register.
|
|
13.3
|
Delivery
of a certificate to one joint Holder shall be sufficient delivery to all
of them. A certificate issued to a Depository or sub-depository shall be
sufficient delivery to all Holders holding Shares through such Depository
or sub-depository.
|
|
13.4
|
Where
some only of the Shares comprised in a share certificate are transferred,
the old certificate shall be cancelled and a new certificate for the
balance of such Shares shall be issued in lieu without
charge.
|
|
13.5
|
If
a share certificate is defaced, worn out, lost, stolen or destroyed, it
may be replaced on such terms (if any) as to evidence and indemnity and
payment of any exceptional expenses incurred by the Company in
investigating evidence or in relation to any indemnity as the Board may
determine but otherwise free of charge, and (in the case of defacing or
wearing out) on delivery up of the old
certificate.
|
CHAPTER
4
CALLS
ON SHARES AND FORFEITURE
|
14.
|
|
14.1
|
Subject
to the terms of issue, the Board may make calls upon the Holders in
respect of any moneys (whether in respect of nominal value or premium)
unpaid on their Shares allotted to or held by such Holders, and each
Holder (subject to receiving at least fourteen Clear Days' notice
specifying when and where payment is to be made) shall pay to the Company
as required by the notice the amount called on the Shares of such
Holder. A call may be required to be paid by
instalments. A call may, before receipt by the Company of a sum
due thereunder, be revoked in whole or in part and payment of a call may
be postponed in whole or in part. A person upon whom a call is made shall
remain liable for calls made upon such person notwithstanding the
subsequent transfer of the Shares in respect of which the call was
made.
|
|
14.2
|
On
the trial or hearing of any action for the recovery of any money due for
any call, it shall be sufficient to prove that the name of the Holder sued
is entered in the Register as the Holder, or one of the Holders, of the
Shares in respect of which such debt accrued, that the resolution making
the call is duly recorded in the minute book and that notice of such call
was duly given to the Holder sued, in pursuance of these Articles, and it
shall not be necessary to prove the appointment of the Directors who made
such call nor any other matters whatsoever, but the proof of the matters
aforesaid shall be conclusive evidence of the
debt.
|
|
15.
|
A call
shall be deemed to have been made at the time when the resolution of the Board
authorising the call was passed.
The joint
Holders of a Share shall be jointly and severally liable to pay all calls in
respect thereof.
If a call
remains unpaid after it has become due and payable, the person from whom it is
due and payable shall pay interest on the amount unpaid from the day it became
due until it is paid at the rate fixed by the terms of issue of the Share or in
the notice of the call, but the Board may waive payment of the interest wholly
or in part.
An amount
payable in respect of a Share on issue or at any fixed date, whether in respect
of nominal value or premium or as an instalment of a call, shall be deemed to be
a call and if it is not paid the provisions of these Articles shall apply as if
that amount had become due and payable by virtue of a call.
Subject
to the terms of issue, the Board may make arrangements on the issue of Shares
for a difference between the Holders in the amounts and times of payment of
calls on their Shares.
|
20.1
|
If
a Holder fails to pay any call or instalment of a call on the day
appointed for payment thereof, the Board, at any time thereafter during
such times as any part of the call or instalment remains unpaid, may serve
a notice on such Holder requiring payment of so much of the call or
instalment as is unpaid together with any interest which may have
accrued.
|
|
20.2
|
The
notice shall name a day (not earlier than the expiration of fourteen Clear
Days from the date of service of the notice) on or before which the
payment required by the notice is to be made, and shall state that in the
event of non-payment at or before the time appointed any Share in respect
of which the call was made will be liable to be
forfeited.
|
|
20.3
|
If
the requirements of any such notice as aforesaid are not complied with
then, at any time thereafter before the payment required by the notice has
been made, any Share in respect of which the notice has been given may be
forfeited by a resolution of the Board to that effect. The
forfeiture shall include all dividends or other moneys payable in respect
of the forfeited Share and not paid before the forfeiture. The
Board may accept a surrender of any Share liable to be forfeited hereunder
on such terms and conditions as may have been agreed. Subject to those
terms and conditions, a surrendered Share shall be treated as if it had
been forfeited.
|
A Person
whose Shares have been forfeited or surrendered shall cease to be a Holder in
respect of such Shares and shall deliver to the Company for cancellation the
share certificate or certificates in respect of such Shares, but nevertheless
shall remain liable to pay to the Company all moneys which, at the date of
forfeiture or surrender, were payable by such Person to the Company in respect
of the Shares, but the liability of such Person shall cease if and when the
Company shall have received payment in full of all such moneys in respect of the
Shares.
|
22.
|
A
notarised declaration by a Director that a Share has been forfeited or
surrendered on a specified date shall be conclusive evidence of the facts stated
in it as against all persons claiming to be entitled to the Share and the
declaration shall, together with the receipt of the Company for the
consideration (if any) given for the Share on the sale or disposition thereof
and a certificate by the Company for the Share delivered to the Person to whom
the same is sold or disposed of, constitute a good title to the
Share.
CHAPTER
5
ISSUE,
TRANSFER AND TRANSMISSION OF SHARES
|
23.1
|
Subject
to the Law and to such other restrictions as are contained in these
Articles, and other than with respect to the procedures for transfer of
fungible Shares in the case provided for in Article 9.7 of the present
Articles, any Holder may transfer all or any part of his Shares by written
instrument of transfer, the form of such instrument of transfer being
available from the Company on request from the Holder wishing to transfer
all or part of his Shares. The Company may accept any other document,
instrument, writing or correspondence as sufficient proof of
transfer.
|
|
23.2
|
Any
instrument of transfer in writing shall be executed by or on behalf of the
transferor and the transferee.
|
|
23.3
|
The
transferor of any Share shall be deemed to remain the Holder of the Share
until the name of the transferee is inserted in the Register in respect
thereof.
|
|
23.4
|
The
Board may, in its absolute discretion and without giving any reason,
refuse to register any transfer of any Share unless the transfer is lodged
at the Office or at such other place as the Board may appoint and such
transfer is completed in accordance with the provisions of these Articles
and is accompanied by the certificate for the Shares to which it relates
and such other evidence as the Board may reasonably require to
show the right of the transferor to make the
transfer.
|
|
23.5
|
The
restrictions on transfer authorised or imposed by these Articles 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 Articles and resolutions of
the Board after a settlement has taken
place.
|
|
23.6
|
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) in a sale
by a Holder 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 Holder or any Subsidiary of the
Company, any Holder 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 or such warrants have been registered in the
applicable register of warrants.
|
|
23.7
|
Except
in connection with an effective registration statement, a sale
in accordance with Rule 144 of the Shares of the Company 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
Holder, or any Person proposing to acquire shares or warrants of the
Company, to provide the information required by Article 12. 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.
|
|
23.8
|
If
the Board refuses to register a transfer of any Share the Company 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.
|
|
23.9
|
Any
purported transfer (except by operation of Law) of any Shares in
contravention of any of the restrictions on transfer contained in these
Articles shall be void and of no
effect.
|
No fee
shall be charged for the registration of any instrument of transfer or other
document relating to or affecting the title to any Share.
The
Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the Board refuses to register
shall be returned to the person lodging it when notice of the refusal is
given.
|
26.1
|
Death
of a Holder
|
To the
extent permitted by applicable laws governing, in particular, successions and
inheritance, if a Holder dies, the survivor or survivors, where such Holder was
a joint Holder, and, where such Holder was a sole Holder or the only survivor of
joint Holders, the personal representatives of such Holder, shall be the only
persons recognised by the Company as having any title to the interest of such
Holder in the Shares; but nothing herein contained shall release the estate of a
deceased Holder from any liability in respect of any Share which had been
jointly held by such Holder.
|
26.2
|
Transmission
on death or bankruptcy
|
A person
becoming entitled to a Share in consequence of the death or bankruptcy of a
Holder may elect, upon such evidence being produced as the Board may properly
require, either to become the Holder of the Share or to have some person
nominated by him or her registered as the transferee. If the person elects to
become the Holder, such person shall give notice to the Company to that effect
in such form as the Company may from time to time determine. If such person
elects to have another person registered such person shall execute an instrument
of transfer of the Share to that person.
|
26.3
|
Rights
before registration
|
A person
becoming entitled to a Share by reason of death or bankruptcy of
a Holder (upon supplying to the Company such evidence as the Board
may reasonably require to show his title to the Share) shall have the rights to
which he would be entitled if he were the Holder of the Share, except that,
before being registered as the Holder of the Share, such person shall not be
entitled in respect of it to attend or vote at any General Meeting or at any
separate meeting of the Holders of any Shares in the Company.
|
26.4
|
On
the presentation of the before mentioned written transfer instrument 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
Holder. Notwithstanding the foregoing, the Board shall, in any case, have
he same right to decline or suspend registration as it would have had in
the case of a transfer of the Share(s) by that Holder before such Holder’s
death or bankruptcy, as the case may
be.
|
CHAPTER
6
ALTERATION
OF SHARE CAPITAL
|
27.1
|
The
Company from time to time by Special Resolution, and with the appropriate
required amendment to these Articles, may increase the share capital by
such sum, to be divided into Shares of such amount, as the relevant
resolution shall prescribe.
|
|
27.2
|
Except
so far as otherwise provided by the conditions of issue or by these
Articles, any capital raised by the creation of new Shares shall be
considered part of the pre-existing capital and shall be subject to the
provisions herein contained with reference to calls and instalments,
transfer and transmission, forfeiture, and
otherwise.
|
|
28.1
|
The
Company, by Special Resolution and with the appropriate amendment to these
Articles, may:
|
|
|
28.1.1
|
consolidate
and divide all or any of its share capital into Shares of larger amount;
or
|
|
|
28.1.2
|
subdivide
its Shares, or any of them, into Shares of smaller amount, so however that
in the sub-division the proportion between the amount paid and the amount,
if any, unpaid on each reduced Share shall be the same as it was in the
case of the Share from which the reduced Share is derived and so that the
resolution whereby any Share is sub-divided may determine that, as between
the Holders of the Shares resulting from such sub-division, one or more of
the Shares may have, as compared with the others, any such preferred,
deferred or other rights or be subject to any such restrictions as the
Company has power to attach to unissued or new
Shares.
|
Subject
to the provisions of these Articles, whenever as a result of a consolidation of
Shares any Holders would become entitled to fractions of a Share, the Board may,
on behalf of those Holders, sell the Shares representing the fractions for the
best price reasonably obtainable to any person and distribute the proceeds of
sale in due proportion among those Holders and the Board may authorise some
person to execute an instrument of transfer of the Shares to, or in accordance
with the directions of, the purchaser. The transferee shall not be bound to see
to the application of the purchase money nor shall title to the Shares be
affected by any irregularity in or invalidity of the proceedings in reference to
the sale.
The
Company, by Special Resolution and with the appropriate amendment to its
Articles, may reduce its share capital, any capital redemption reserve fund, or
any other similar reserve fund required by law to be created or maintained, in
any manner and with, and subject to, any incident authorised, and consent
required, by Law.
The
following matters shall be transacted by the Company only after the approval
thereof by Holders in terms of a Super Majority Resolution:
|
31.1
|
the
sale, lease or exchange of a substantial part of the Company’s
assets;
|
|
31.2
|
a
merger, de-merger or amalgamation involving the
Company;
|
|
31.3
|
any
amendment to these Articles, which amendment relates to the alteration,
deletion or amendment of this Article 31 or any amendment, alteration or
deletion of any requirement in these Articles for the passing of a Super
Majority Resolution.
|
CHAPTER
7
GENERAL
MEETINGS OF HOLDERS
Any
regularly constituted General Meeting shall represent the entire body of
shareholders of the Company. It shall have the broadest powers to order, carry
out or ratify acts relating to the operations of the Company.
|
33.1
|
The
Company shall hold in each year a meeting as its Annual General Meeting in
addition to any other meeting in that year and shall specify the meeting
as such in the notices calling it. The Annual General Meeting shall be
held in Luxembourg at the Office, or at such other place in Luxembourg as
may be specified in the notice of meeting on the second Thursday of the
month of May at 2pm (CET). If this day is not a
Business Day, the meeting shall be held on the next Business Day at the
same time.
|
|
33.2
|
The
Annual General Meeting shall be called in accordance with the provisions
of Article 89.
|
|
33.3
|
For
at least fifteen days prior to the Annual General Meeting each Holder may
obtain a copy of the Accounts and Financial Statements for the preceding
financial year at the Office and inspect all documents required by the Law
to be available for inspection.
|
|
33.4
|
At
every Annual General Meeting in each year, the Board shall present to the
meeting the Accounts and Financial Statements in respect of the preceding
financial year for adoption, and the meeting shall consider and, if
thought fit, adopt the Accounts and Financial
Statements.
|
|
33.5
|
After
adoption of the Accounts and Financial Statements, the Annual General
Meeting may, by separate vote, vote on the discharge of the Board,
Officers, the Statutory Auditors and the Independent Auditors of the
Company from any and all liability to the Company in respect of any loss
or damage arising out of or in connection with any acts or omissions by or
on the part of the Board, Officers or the Statutory Auditors and/or
Independent Auditors made or done in good faith without gross negligence.
A discharge shall not be valid should the Accounts and Financial
Statements contain any omission or any false or misleading information
distorting the real state of affairs of the Company or record the
execution of acts not permitted by these Articles, unless they have been
specifically indicated in the convening
notice.
|
|
33.6
|
Resolutions
to be passed at the Annual General Meeting shall be passed as Ordinary
Resolutions, unless the notice of the relevant Annual General Meeting
specifies that a particular resolution is to be passed as a Special
Resolution or as a Super Majority
Resolution.
|
|
33.7
|
The
quorum for Ordinary Resolutions to be passed at the Annual General Meeting
shall be as prescribed in Article 34.3 and the quorum for Special
Resolutions and for Super Majority Resolutions to be passed at the Annual
General Meeting shall be as prescribed in
Article 35.2.
|
|
34.1
|
Should
the Company need to transact any business, which business does not need to
be transacted in an Extraordinary General Meeting and which business needs
to be transacted before the next Annual General Meeting, the Company may
deal with such business in an Ordinary General
Meeting.
|
|
34.2
|
An
Ordinary General Meeting shall be called in accordance with the provisions
of Article 89.
|
|
34.3
|
Except
as provided in relation to an adjourned meeting, two persons entitled to
vote upon the business to be transacted, each being a Holder or a proxy
for a Holder or duly authorised representative of a corporate Holder shall
be a quorum.
|
|
34.4
|
Any
resolution put to the Ordinary General Meeting shall be validly passed by
a simple majority of the Shares present or represented at the said
meeting.
|
|
35.1
|
An
Extraordinary General Meeting shall be called in accordance with the
provisions of Article 89.
|
|
35.2
|
No
resolution shall be passed at an Extraordinary General Meeting unless a
quorum of such number of persons, each being a Holder, or a proxy for a
Holder or a duly authorised representative of a corporate Holder, together
holding more than one half of the total issued voting Shares of the
Company for the time being issued and outstanding is present but so that
such number of persons shall not in any event be less than two.
|
|
35.3
|
Any
resolution put to the Extraordinary General Meeting shall be validly
passed by a majority of:
|
|
|
35.3.1
|
two
thirds (66,66%) of the Shares present or represented at the said meeting
in the case of a Special Resolution;
and
|
|
|
35.3.2
|
three
fourths (75%) of the Shares present or represented at the said meeting in
the case of a Super Majority
Resolution.
|
|
35.4
|
In
addition to what is provided for otherwise pursuant to these Articles, any
Extraordinary General Meeting or Annual General Meeting of the Company at
which the Holders consider an amendment to the Articles shall be held in
the presence of a public notary in
Luxembourg.
|
|
36.1
|
The
Chairman, the Board or any two Directors may convene General Meetings.
Ordinary General Meetings and Extraordinary General Meetings shall be
convened by notice issued by:
|
|
|
36.1.1
|
the
Board, whenever in its judgment such a meeting is necessary, has been
requested by the Chairman or at least two Directors of the Company and the
agenda for such meeting set out in the notice shall be that approved by
the Board; or
|
|
|
36.1.2
|
the
Board, after deposit at the Office on a Business Day in Luxembourg of a
written requisition setting out an agenda and signed by Holders producing
evidence of title to the satisfaction of the Board that they hold Shares
representing not less than ten per cent of the outstanding issued share
capital of the Company, such meeting to be held within one month after
deposit of such requisition, and the agenda for such meeting set out in
the notice shall be that specified in the requisition;
or
|
|
|
36.1.3
|
the
Statutory Auditor, whenever in his judgment such a meeting is necessary,
and the agenda for such meeting set out in the notice shall be that
approved by the Statutory Auditor.
|
|
36.2
|
The
notice convening a General Meeting shall specify the time and place of the
meeting and the general nature of the business to be
transacted. It shall also give particulars of any Directors who
are to retire by rotation or otherwise at the meeting and of any persons
who are recommended by the Board for appointment or re-appointment as
Directors at the meeting, or in respect of whom notice has been duly given
to the Company of the intention to propose them for appointment or
re-appointment as Directors at the meeting, all in accordance with the
provisions of these Articles. Subject to restrictions imposed by any
Shares, the notice shall be given to all the Holders, to all persons
entitled to a Share by reason of death or bankruptcy of a Holder and to
the Board and the Statutory
Auditors.
|
|
36.3
|
The
Agenda for an Extraordinary General Meeting shall also describe any
proposed changes to the Articles and, in the case of a proposed change of
the objects or the form of the Company or a proposed increase of
commitments of Holders, set out the full text of the proposed
amendments.
|
|
36.4
|
The
accidental omission to give notice of a General Meeting to, or the non
receipt of the notice of a General Meeting by, any person entitled to
receive notice shall not invalidate the proceedings at the General
Meeting.
|
|
36.5
|
Where
all Holders are present or represented and acknowledge that they have had
prior notice of the agenda submitted for their consideration, the meeting
may take place without convening
notices.
|
CHAPTER
8
PROCEEDINGS
AT GENERAL MEETINGS
|
37.1
|
No
business other than the appointment of a chairman shall be transacted at
any General Meeting unless a quorum of Holders is present at the time when
the meeting proceeds to business.
|
|
37.2
|
If
such a quorum is not present within half an hour from the time appointed
for the meeting, or if during a meeting a quorum ceases to be present, the
meeting shall be dissolved. A second meeting may be convened in
accordance with the provisions of the Articles. At the second meeting, one
Holder present in person or by proxy shall be a
quorum.
|
|
38.1
|
The
Chairman of the Board or, in the absence of such Chairman, the Deputy
Chairman (if any) or in the absence of the Deputy Chairman (if any), some
other Director nominated by the Board shall preside as chairman at every
General Meeting. If at any General Meeting none of such persons
shall be present and willing to act within fifteen minutes after the time
appointed for the holding of the meeting, the Directors present shall
elect one of their number to be chairman of the meeting and, if there is
only one Director present and willing to act, such Director shall be
chairman.
|
|
38.2
|
If
at any meeting no Director is willing to act as chairman or if no Director
is present within fifteen minutes after the time appointed for holding the
meeting, the Holders present and entitled to vote shall choose one of the
Holders personally present to be chairman of the
meeting.
|
Holders
may participate in any General Meeting either by means of their physical
attendance at the meeting or by means of a proxy in accordance with Article 47,
and participation by telephonic, electronic or other communication facilities
shall not be permitted.
|
40.1
|
A
Director shall be entitled, notwithstanding that such Director is not a
Holder, to receive notice of and to attend and speak at any General
Meeting and at any separate meeting of the Holders of any Shares in the
Company.
|
|
40.2
|
The
Statutory Auditors and the Independent Auditors of the Company for the
time being appointed shall be entitled to attend any General Meeting and
to be heard on any part of the business of the meeting which concerns them
as the Statutory Auditors and Independent
Auditors.
|
Subject
to the Law, the Board may (and if so directed by Holders representing twenty per
cent of the Shares, shall) adjourn the meeting for four weeks, but no business
shall be transacted at any adjourned meeting other than business which might
properly have been transacted at the meeting had the adjournment not taken
place.
|
42.
|
Votes may
be given either personally or by proxy. Subject to any rights or restrictions
for the time being attached to any Shares, every Holder present in person or by
proxy shall have one vote for every Share carrying voting rights of which such
Holder is the Holder.
Where
there are joint Holders of a Share, the vote of the senior who tenders a vote,
whether in person or by proxy, in respect of such Share 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 of the Holders
stand in the Register in respect of the Share.
A Holder
of unsound mind, or in respect of whom an order has been made by any court
having jurisdiction (whether in Luxembourg or elsewhere) in matters concerning
mental disorder, may vote, by such Holder’s committee, receiver, guardian or
other person appointed by that court and any such committee, receiver, guardian
or other person may vote by proxy. Evidence to the satisfaction of the Board of
the authority of the person claiming to exercise the right to vote shall be
deposited at the Office or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than
forty-eight hours before the time appointed for holding the meeting or adjourned
meeting at which the right to vote is to be exercised and in default the right
to vote shall not be exercisable.
|
45.1
|
A
corporation which is a Holder may, by written instrument, authorise such
person or persons as it thinks fit to act as its representative at any
meeting of the Holders 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
Holder, and that Holder shall be deemed to be present in person at any
such meeting attended by its authorised representative or
representatives.
|
|
45.2
|
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
Holder.
|
No
objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting at which the vote objected to is tendered and every
vote not disallowed at such meeting shall be valid. Any such objection made in
due time shall be referred to the chairman of the meeting whose decision shall
be final and conclusive.
|
47.1
|
The
instrument appointing a proxy shall be in writing in substantially such
form as the Board may approve and shall be executed by or on behalf of the
appointer. A body corporate may execute a form of proxy under its common
seal or the hand of a duly authorised officer. The signature on such
instrument need not be witnessed. A proxy need not be a Holder of the
Company. A proxy may represent more than one
Holder.
|
|
47.2
|
The
instrument appointing a proxy shall be signed or, in the case of a
transmission by electronic mail, electronically signed in a manner
acceptable to the chairman of the
meeting.
|
|
47.3
|
A
Holder who is the holder of two or more Shares may appoint more than one
proxy to represent him and vote on his
behalf.
|
|
47.4
|
The
Board may send, at the expense of the Company, by post or otherwise, to
the Holders instruments of proxy (with or without stamped envelopes for
their return) for use at any General Meeting, either in blank or
nominating any one or more of the Directors or any other persons in the
alternative.
|
|
47.5
|
The
decision of the Chairman of any General Meeting as to the validity of any
appointment of a proxy shall be
final.
|
|
48.1
|
The
instrument appointing a proxy and any authority under which it is executed
or a copy, certified notarially or in some other way approved by the
Board, shall be deposited at the Office or (at the option of the Holder)
at such other place or places (if any) as may be specified for that
purpose in or by way of note to the notice convening the meeting not less
than forty-eight hours before the time appointed for the holding of the
meeting or adjourned meeting and in default shall not be treated as valid.
Provided that:
|
|
|
48.1.1
|
an
instrument of proxy relating to more than one meeting (including any
adjournment thereof) having once been so delivered for the purposes of any
meeting shall not require to be delivered again for the purposes of any
subsequent meeting to which it relates;
and
|
|
|
48.1.2
|
the
Board may accept proxy forms submitted by telefax provided such telefaxes
are received, to the satisfaction of the Board, in clear and legible form
not less than forty-eight hours before the time appointed as aforesaid and
provided the original proxy form is subsequently delivered to the
Office.
|
|
49.1
|
Deposit
of an instrument of proxy in respect of a meeting shall not preclude a
Holder from attending and voting at the meeting or at any adjournment
thereof. The instrument appointing a proxy shall be valid, unless the
contrary is stated therein, as well for any adjournment of the meeting as
for the meeting to which it
relates.
|
|
50.1
|
To
the extent permitted by applicable law, a vote given in accordance with
the terms of an instrument of proxy or a resolution authorising a
representative to act on behalf of a body corporate shall be valid
notwithstanding the death or insanity of the principal or the revocation
of the instrument of proxy or of the authority under which the instrument
of proxy was executed or the revocation or termination of the resolution
authorising the representative to act or the transfer of the Share in
respect of which the instrument of transfer or the authorisation of the
representative to act was given, unless notice in writing of any such
death, insanity, revocation, termination or transfer was (i) received by
the Company at the Office or at such other place or one of such other
places (if any), at which the instrument of proxy could have been duly
deposited in respect of such meeting, in any such case not later than the
close of business (local time) at the place where it was so received on
the day before the meeting to which it relates, (ii) handed to the
chairman of the meeting at the place of the meeting or adjourned meeting
at which the vote is to be given, before the commencement of such meeting
or adjourned meeting.
|
CHAPTER
9
BOARD
OF DIRECTORS
|
51.1
|
The
Company shall be managed by the Board which shall be composed of no less
than ten (10) Directors or such number in excess thereof up to a maximum
of twelve (12) Directors as the Holders may from time to time determine,
who shall be elected, except as in case of vacancy, by the Holders,
holding the votes cast in person or by proxy for a resolution approving
such Director, in accordance with and subject to the limitations in these
Articles. Except in the case of casual vacancy, Directors shall be elected
at the Annual General Meeting of the Holders, or at any General Meeting of
the Holders called for that
purpose.
|
The only
persons who shall be eligible for election as a Director in accordance with
Article 51.1 at any meeting of the Company shall be persons (i) whom the current
Directors have nominated to Holders at the appropriate General Meeting for
election by Holders as a Director; and/or (ii) for whom a written
notice of nomination signed by Holders holding in the aggregate not less than
ten percent (10%) 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, not later than five days after notice or public disclosure of the date
of such meting is given or made available to the Holders.
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 the Holders in 2012; the initial
Class B Directors shall serve for a term expiring at the Annual General Meeting
of Holders to be held in 2011 and the initial Class C Directors shall serve for
a term expiring at the Annual General Meeting of Holders to be held in
2013.
|
54.1
|
At
each Annual General Meeting of Holders, held after the classification and
election referred to in Article 53 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 Annual General 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.
|
|
55.1
|
The
office of Director shall be vacated if the
Director:
|
|
|
55.1.1
|
is
removed from office pursuant to these Articles or is prohibited from being
a Director by Law;
|
|
|
55.1.2
|
is
or becomes bankrupt, or makes an arrangement or composition with his
creditors generally;
|
|
|
55.1.3
|
is
or becomes of unsound mind or dies;
or
|
|
|
55.1.4
|
resigns
his office by notice in writing to the
Company.
|
|
The
Board may appoint a person who is willing to act to be a Director to fill
a vacancy on the Board occurring as a result of the death, disability,
disqualification or resignation of any Director. A Director so
appointed shall hold office only until the next following Annual General
Meeting. If not re-appointed at such Annual General Meeting,
such Director shall vacate office at the conclusion
thereof.
|
The
mandate of any Director may be terminated, at any time and without cause, by the
Holders, by means of the passing of an Ordinary Resolution at a General Meeting
of Holders, in favour of such termination. If such a Director holds an
appointment of an executive office, such removal shall have effect without
prejudice to any claim for damages for breach of any contract of service between
such Director and the Company.
The
remuneration (if any) of each Director shall be determined by the Board. In
each case, the applicable Director whose remuneration is to be determined by a
resolution of the Board, may not vote for the purposes of passing the resolution
determining his own remuneration, but may vote on all resolutions determining
the remuneration of the other Directors.
Any
Director who holds an executive office (including for this purpose the office of
Chairman or Deputy Chairman) or who serves on any committee, or who otherwise
performs services which in the opinion of the Board are outside the scope of the
ordinary duties of a Director, may be paid such extra remuneration by way of
salary, commission or otherwise as the Board may determine.
The
Directors may be paid all travelling, hotel and other expenses properly incurred
by them in connection with their attendance at meetings of the Board or
committees of the Board or General Meetings or separate meetings of the Holders
of any Class of Shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
|
61.
|
|
61.1
|
Subject
to the provisions of the Law and these Articles and to any directions by
the Holders, the business of the Company shall be managed by the Board who
may do all such acts and things and exercise all the powers of the Company
as are not by the Law or by these Articles required to be done or
exercised by the Company in a General Meeting. No alteration of these
Articles and no such direction shall invalidate any prior act of the Board
which would have been valid if that alteration had not been made or that
direction had not been given. The powers given by this Article shall not
be limited by any special power given to the Board by these Articles and a
meeting of the Board at which a quorum is present may exercise all powers
exercisable by the Board.
|
|
61.2
|
The
Board shall represent and bind the Company vis-à-vis third parties and
government or other public or state authorities and take any action, both
as plaintiff and as defendant before any court, obtain any judgments,
decrees, decisions, awards and proceed therewith to execution, acquiesce
in settlement, compound and compromise any claim in any manner determined
by them to be in the interest of the
Company.
|
|
61.3
|
Towards
third parties, the company is in all circumstances committed either by the
joint signatures of two Directors or by the sole signature of the delegate
of the Board acting within the limits of his powers. The provision of this
Article 61.3 are without prejudice to any special decisions that have been
reached concerning the authorized signatory of the Company in the case of
a delegation of powers or proxies given by the Board pursuant to any
provision of these Articles.
|
|
61.4
|
The
Board may appoint, suspend, or remove any manager, secretary, clerk, agent
or employee of the Company and may fix their remuneration and determine
their duties.
|
Without
prejudice to the generality of the last preceding Article, the Board may
delegate any of their powers and discretions to any Managing Director or any
other Director holding any other executive office as may be appointed by the
Board. The Board may establish any committees, local boards or
agencies for managing any of the affairs of the Company, either in Luxembourg or
elsewhere, and may appoint any persons to be members of such committees, local
boards or agencies and may fix their remuneration and may delegate to any
committee, local board or agent any of the powers, authorities and discretions
vested in the Board (subject to any limitations prescribed by the Law) with
power to sub-delegate and any such appointment or delegation may be made upon
such terms and subject to such conditions as the Board may think
fit.
The
Board, from time to time and at any time by power of attorney, may appoint any
person or persons (including any corporate entity), whether nominated directly
or indirectly by the Board, to be the attorney or attorneys of the Company for
such purposes and with such powers, authorities and discretions (not exceeding
those vested in or exercisable by the Board under these Articles) and for such
period and subject to such conditions as they may think fit. Any such
power of attorney may contain such provisions for the protection of persons
dealing with any such attorney as the Board may think fit and may authorise any
such attorney to sub-delegate all or any of the powers, authorities and
discretions vested in such attorney.
|
64.
|
Subject
as hereinafter provided, the Board may exercise all the powers of the Company to
borrow or raise money and to mortgage or charge its undertaking, property,
assets, and uncalled capital or any part thereof and to issue debentures,
debenture stock and other securities whether outright or as collateral security
for any debt, liability or obligation of the Company or of any third
party.
CHAPTER
10
DIRECTORS’
OFFICES AND INTERESTS
|
65.1
|
In
addition to, and as an extension to the provisions of Article 62, the
Board may appoint one or more of their body to the office of Chairman,
Deputy Chairman, Managing Director or to any other executive office under
the Company on such terms and for such period as they may determine and,
without prejudice to the terms of any contract entered into in any
particular case, may revoke any such appointment at any
time.
|
|
65.2
|
A
Director holding any such executive office shall receive such
remuneration, whether in addition to or in substitution for ordinary
remuneration as a Director and whether by way of salary, commission,
participation in profits or otherwise or partly in one way and partly in
another, as the Board may determine. In accordance with the Law, the
delegation in favor of a member of the Board shall entail an obligation
for the Board to report, each year, to the General Meeting on the
salaries, fees and advantages granted to the
delegate.
|
|
65.3
|
The
appointment of any Director to the office of Chairman, Deputy Chairman or
Managing Director shall automatically terminate if such Director ceases to
be a Director of the Company but without prejudice to any claim for
damages for breach of any contract of service between such Director and
the Company.
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|
65.4
|
The
appointment of any Director to any other executive office shall not
terminate automatically if such Director ceases from any cause to be a
Director of the Company unless the contract or resolution under which such
Director holds office shall expressly state otherwise, in which event such
termination shall be without prejudice to any claim for damages for breach
of any contract of service between such Director and the
Company.
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|
65.5
|
A
Director may hold any other office or place of profit under the Company
(except that of Statutory Auditor or Independent Auditor) in conjunction
with the office of Director, and may act in a professional capacity to the
Company, on such terms as to remuneration and otherwise as the Board shall
arrange.
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|
66.1
|
Subject
to the provisions of the Law, no Director or intending Director shall be
disqualified by his or her office from contracting with the Company either
as vendor, purchaser or otherwise, nor shall any such contract or any
contract or arrangement entered into by or on behalf of the other company
in which any Director shall be in any way interested be avoided nor shall
any Director so contracting or being so interested be liable to account to
the Company for any profit realised by any such contract or arrangement by
reason of such Director holding that office or of the fiduciary
relationship thereby established. The nature of a Director's
interest must be declared by such Director at the meeting of the Board at
which the question of entering into the contract or arrangement is first
taken into consideration, or if the Director was not at the date of that
meeting interested in the proposed contract or arrangement, at the next
meeting of the Board held after such Director became so interested, and in
a case where the Director becomes interested in a contract or arrangement
after it is made at the first meeting of the Board held after such
Director becomes so interested.
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|
66.2
|
Subject
to the Law, a Director may vote in respect of any contract, appointment,
arrangement or matter in which such Director is interested and shall be
counted in the quorum present at any relevant meeting of the Board or any
committee thereof.
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|
67.1
|
Without
prejudice to any indemnity given pursuant to Article 99, the Board shall
have the power to purchase and maintain insurance for the benefit of any
persons who are or were at any time Directors, Officers or employees of
the Company, or of any other company which is or was its holding company
or in which the Company or such holding company or any of the predecessors
of the Company or of such holding company has or had any interests whether
direct or indirect or which is or was in any way allied to or associated
with the Company, or of any company which is or was a subsidiary or
subsidiary undertaking of the Company or of such other company, including
(without limitation) insurance against any liability incurred by such
person in respect of any act or omission in the actual or purported
execution and/or discharge of their duties and/or the exercise or
purported exercise of their powers and/or otherwise in relation to or in
connection with their duties, powers of office in relation to the Company
or such other company or subsidiary or subsidiary
undertaking.
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CHAPTER
11
PROCEEDINGS
OF DIRECTORS
Subject
to the provisions of these Articles, the Directors may regulate their
proceedings, transact business, adjourn and otherwise regulate their meetings as
they think fit.
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69.1
|
The
Chairman, Deputy Chairman or any two (2) Directors may 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.
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|
69.2
|
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 legible and non-transitory form at such Director’s last known
address or 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.
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|
70.1
|
The
quorum for the transaction of the business of the Board shall be a
majority of the Directors then in office, present in person, provided that
at least two Directors are present.
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|
70.2
|
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 Articles, as
the quorum necessary for the transaction of business at meetings of the
Board, the continuing Directors or Director may act for the purposes of
(i) summoning a general meeting of the Company, or (iii) preserving the
assets of the Company.
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Questions
arising at any meeting of the Board shall be decided by a majority of votes of
the Directors present or represented at such meeting. Each Director present and
voting at any meeting shall have one vote. Where there is an equality of votes
the resolution shall fail.
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72.1
|
Any
Director may participate in a meeting of the Board or any committee of the
Board by means of conference telephone or other telecommunications
equipment by means of which all persons participating in the meeting can
hear each other speak and such participation in a meeting shall constitute
presence in person at the meeting.
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Subject
to any appointment to the office of Chairman made pursuant to these Articles,
the Directors may elect a chairman of their meetings and determine the period
for which such Director is to hold office, but if no such chairman is elected or
if at any meeting the chairman is unwilling to act or is not present within five
minutes after the time appointed for holding the same the Directors present may
choose one of their number to be chairman of the meeting.
All acts
done by any meeting of the Board or of a committee of Directors or by any person
acting as a Director, notwithstanding that it be afterwards discovered that
there was some defect in the appointment of any such Director or person acting
as aforesaid, or that they or any of them were disqualified from holding office
or had vacated office, shall be as valid as if every such person had been duly
appointed and was qualified and had continued to be a Director and had been
entitled to vote.
A
resolution or other document in writing signed by all the Directors entitled to
receive notice of a meeting of the Board or of a committee of the Board shall be
as valid as if it had been passed at a meeting of the Board or (as the case may
be) a committee of the Board duly convened and held and may consist of several
documents in the like form each signed by one or more Directors, (counterparts)
and such resolution or other document or documents when duly signed may be
delivered or transmitted (unless the Board shall otherwise determine either
generally or in any specific case) by facsimile transmission or some other
similar means of transmitting the contents of documents.
CHAPTER
12
FINANCIAL
YEAR, APPROPRIATION OF PROFITS AND LEGAL RESERVE
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76.
|
The
accounting year of the Company shall commence on 1 January and shall end on 31
December in each year.
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77.
|
The
Company shall be required to allocate a sum of at least five per cent (5%) of
its annual net profits to a legal reserve, until such time as the legal reserve
amounts to ten per cent (10%) of the nominal value of the issued
share capital of the Company. If and to the extent that this legal reserve falls
below the said ten per cent (10%) amount, the Company shall allocate a sum of at
least five per cent (5%) of its annual net profits to restore the legal reserve
to the minimum amount required by law.
CHAPTER
13
DIVIDENDS
Subject
to the provisions of the Law, the Company may by Ordinary Resolution declare
dividends in accordance with the respective rights of Holders, in proportion to
the number of Shares held by them, but no dividend shall exceed the amount
recommended by the Board.
|
79.1
|
Subject
to the provisions of the Law, the Board may declare and pay interim
dividends if it appears to them that they are justified by the
distributable reserves of the Company. If the share capital is divided
into different classes, the Board may declare and pay interim dividends on
Shares which confer deferred or non-preferred rights with regard to
dividend as well as on Shares which confer preferential rights with regard
to dividend, but subject always to any restrictions for the time being in
force (whether as a matter of law, under these Articles, under the terms
of issue of any Shares or under any agreement to which the Company is a
party, or otherwise) relating to the application, or the priority of
application, of the Company's profits available for distribution or to the
declaration or as the case may be the payment of dividends by the Company.
Subject as aforesaid, the Board may also pay at intervals settled by them
any dividend payable at a fixed rate if it appears to them that the
profits available for distribution justify the
payment. Provided the Board acts in good faith they shall not
incur any liability to the Holders of shares conferring preferred rights
for any loss they may suffer by the lawful payment of an interim dividend
on any shares having deferred or non-preferred
rights.
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|
79.2
|
For
purposes of Article 79.1, the Board may, as it deems appropriate and at
its absolute discretion, declare and pay a dividend in relation to any
classes of Shares or in relation to all classes of Shares,
provided always that all Shares within a particular class shall rank
pari passu for dividends.
|
|
80.
|
The Board
may before recommending any dividend, whether preferential or otherwise, propose
to Holders to carry to reserve, in addition to the legal reserve set out in
Article 77, out of the profits of the Company such sums as they think
proper. All sums standing to a reserve, other than the legal reserve
set out in Article 77, may be applied from time to time, at the discretion of
the Board for any purpose to which the profits of the Company may be properly
applied and pending such application may, at the like discretion, either be
employed in the business of the Company or invested in such investments as the
Board may lawfully determine. The Board may divide the reserve (other
than the legal reserve set out in Article 77) into such special funds as it
thinks fit and may consolidate into one fund any special funds or any parts of
any special funds into which the reserve may have been divided as they may
lawfully determine. The Board may also, without proposing to Holders
to place the same to reserve, carry forward any profits which it may think
prudent not to divide.
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81.1
|
Except
as otherwise provided by the rights attached to Shares, all dividends
shall be declared and paid according to the amounts paid up on the Shares
on which the dividend is paid. Subject as aforesaid, all
dividends shall be apportioned and paid proportionately to the amounts
paid or credited as paid on the Shares during any portion or portions of
the period in respect of which the dividend is paid; but, if any Share is
issued on terms providing that it shall rank for dividend as from a
particular date, such Share shall rank for dividend
accordingly. For the purposes of this Article, no amount paid
on a Share in advance of calls shall be treated as paid on a
Share.
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The Board
may deduct from any dividend or other moneys payable to any Holder in respect of
a Share any moneys presently payable by such Holder to the Company in respect of
that Share.
A General
Meeting declaring a dividend may direct, upon the recommendation of the Board,
that it shall be satisfied wholly or partly by the distribution of assets (and,
in particular, of paid up shares in the Company, debentures or debenture stock
of any other company or in any one or more of such ways) and the Board shall
give effect to such resolution. Where any difficulty arises in regard to the
distribution, the Board may settle the same as it thinks expedient and in
particular may issue fractional certificates and fix the value for distribution
of such specific assets or any part thereof in order to adjust the rights of all
the parties and may determine that cash payments shall be made to any Holders
upon the footing of the value so fixed and may vest any such specific assets in
trustees.
|
84.1
|
Any
dividend or other moneys payable in respect of any Share may be paid by
cheque or warrant sent by post, as determined by the Board at the risk of
the Holder or Holders entitled thereto, to the registered address of the
Holder or, where there are joint Holders, to the registered address of
that one of the joint Holders who is first named on the Register or to
such person and to such address as the Holder or joint Holders may in
writing direct. Every such cheque or warrant shall be made
payable to the order of the person to whom it is sent and payment of the
cheque or warrant shall be a good discharge to the Company. The
Board may also, in circumstances which they consider appropriate, arrange
for payment of dividends or any other payments to any particular Holder or
Holders by electronic funds transfer, bank transfer or by any other method
selected by the Board from time to time and in such event the debiting of
the Company's account in respect of the appropriate amount shall be deemed
a good discharge of the Company's obligations in respect of any payment
made by any such methods.
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|
84.2
|
Any
dividend or other payment to any particular Holder or Holders may be paid
in such currency or currencies as may from time to time be determined by
the Board under authority of the General Meeting, and any such payment
shall be made in accordance with such rules and regulations (including,
without limitation, in relation to the conversion rate or rates) as may be
determined by the Board under the authority of the General Meeting, in
relation thereto.
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|
84.3
|
Any
joint Holder or other person jointly entitled to a Share as aforesaid may
give receipts for any dividend or other moneys payable in respect of the
Share.
|
No
dividend or other moneys payable in respect of a Share shall bear interest
against the Company unless otherwise provided by the rights attached to the
Share.
CHAPTER
14
CAPITALISATION
OF PROFITS AND RESERVES
The
Company in a General Meeting may resolve, upon the recommendation of the Board,
that any sum for the time being standing to the credit of any of the Company's
reserves (including any capital redemption reserve fund or share premium
account, but excluding the legal reserve required to be maintained by the Law)
or to the credit of the profit and loss account be capitalised and applied on
behalf of the Holders who would have been entitled to receive that sum if it had
been distributed by way of dividend and in the same proportions either in or
towards paying up amounts for the time being unpaid on any Shares held by them
respectively, or in paying up in full unissued shares or debentures of the
Company of a nominal amount equal to the sum capitalised (such shares or
debentures to be issued and distributed credited as fully paid up to and amongst
such Holders in the proportions aforesaid) or partly in one way and partly in
another, so, however, that the only purposes for which sums standing to the
credit of the capital redemption reserve fund or the share premium account shall
be applied shall be those permitted by the Law.
Whenever
such a resolution is passed in pursuance of the immediately preceding Article
the Board shall make all appropriations and applications of the undivided
profits resolved to be capitalised thereby and all issues of fully paid shares
or debentures, if any, and generally shall do all acts and things required to
give effect thereto with full power to the Board to make such provisions as it
shall think fit for the case of shares or debentures becoming distributable in
fractions (and, in particular, without prejudice to the generality of the
foregoing, either to disregard such fractions or to sell the shares or
debentures represented by such fractions and distribute the net proceeds of such
sale to and for the benefit of the Company or to and for the benefit of the
Holders otherwise entitled to such fractions in due proportions) and to
authorise any person to enter on behalf of all the Holders concerned into an
agreement with the Company providing for the issue to them respectively,
credited as fully paid up, of any further shares or debentures to which they may
become entitled on such capitalisation or, as the case may require, for the
payment up by the application thereto of their respective proportions of the
profits resolved to be capitalised of the amounts remaining unpaid on their
existing Shares and any agreement made under such authority shall be binding on
all such Holders.
CHAPTER
15
NOTICES
Any
notice to be given, served or delivered pursuant to these Articles shall be in
writing.
|
89.1
|
A
notice (other than a notice convening a General Meeting) or document
(including a share certificate) to be given, served or delivered in
pursuance of these Articles may be given to, served on or delivered to any
Holder by the Company:
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|
|
89.1.1
|
by
handing same to such Holder or such Holder’s authorised agent;
or
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|
|
89.1.2
|
by
leaving the same at the registered address of such Holder;
or
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|
|
89.1.3
|
by
sending the same by the post in a pre-paid cover or by courier addressed
to such Holder at the registered address of such
Holder;
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|
|
89.1.4
|
by
transmitting it by electronic means (including facsimile and electronic
mail, but not by telephone) in accordance with the directions as may be
given by such Holder to the Company for such purpose;
or
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|
|
89.1.5
|
in
accordance with Article 89.8
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|
89.2
|
Where
a notice or document is given, served or delivered pursuant to
sub-Article89.1.1 or 89.1.2, the giving, service or delivery thereof shall
be deemed to have been effected at the time the same was handed to the
Holder or the authorised agent of such Holder, or left at the registered
address of such Holder (as the case may
be).
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|
89.3
|
Where
a notice or document is given, served or delivered pursuant to sub-Article
89.1.3, the giving, service or delivery thereof shall be deemed to have
been effected at the expiration of twenty-four hours after the cover
containing it was posted. In proving service or delivery it
shall be sufficient to prove that such cover was properly addressed,
stamped and posted.
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|
89.4
|
Where
a notice or document is given or delivered pursuant to sub-Article 92.1.4,
the giving, service or delivery thereof shall deemed to have been effected
at the time when 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 transmitted by electronic
means.
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|
89.5
|
Notwithstanding
any other provision of these Articles, a notice convening a General
Meeting or a notice containing any documents applicable to, or relevant
for the purposes of a General Meeting, shall either be
sent:
|
|
|
89.5.1
|
by
registered post in a pre-paid cover addressed to such Holder at the
registered address of such Holder on ten Clear Days’ notice;
or
|
|
|
89.5.2
|
sent
by ordinary post in a pre-paid cover addressed to such Holder at the
registered address of such Holder on ten Clear Days’ notice, and be
published by insertion twice eight days apart and at least eight days
before the General Meeting in the Mémorial and in a newspaper circulating
in Luxembourg.
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|
89.6
|
If
at any time by reason of the suspension or curtailment of postal services
within Luxembourg, the Company is unable effectively to convene a General
Meeting by notices sent through the post by registered mail, a General
Meeting may be convened by a notice advertised twice in at least one
leading national daily newspaper in Luxembourg and in the Mémorial at a
minimum interval of eight days and eight days before the meeting and in
that event such notice shall be deemed to have been duly served on all
Holders entitled thereto at noon on the day on which the said
advertisements shall appear. In any such case the Company shall (if or to
the extent that in the opinion of the Board it is practical so to do) send
confirmatory copies of the notice through the post to those Holders whose
registered addresses are outside Luxembourg or are in areas of Luxembourg
unaffected by such suspension or curtailment of postal services and if at
least ninety-six hours prior to the time appointed for the holding of the
meeting the posting of notices to Holders in Luxembourg, or any part
thereof which was previously affected, has again in the opinion of the
Board become practical the Board shall forthwith send confirmatory copies
of the notice by post to such Holders. The accidental omission to give any
such confirmatory copy of a notice of a meeting to, or the non-receipt of
any such confirmatory copy by, any person entitled to receive the same
shall not invalidate the proceedings at the
meeting.
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|
89.7
|
Notwithstanding
anything contained in this Article, the Company shall not be obliged to
take account of or make any investigations as to the existence of any
suspension or curtailment of postal services within or in relation to all
or any part of any jurisdiction or other area other than
Luxembourg.
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|
89.8
|
Save
for the provisions of Article 89.5, to the extent permitted by the Law
where a Holder 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 Holder 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.
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|
89.9
|
In
the case of information or documents delivered in accordance with Article
89.8, service shall be deemed to have occurred when (i) the Holder is
notified in accordance with the Article, and (ii) the information or
document is published on the
website.
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A notice
may be given by the Company to the joint Holders of a Share by giving the notice
to the joint Holder whose name stands in the Register in respect of the Share
and notice so given shall be sufficient notice to all the joint
Holders.
|
91.1
|
Every
person who becomes entitled to a Share shall be bound by any notice in
respect of that Share which, before the name of such person is entered in
the Register in respect of the Share, has been duly given to a person from
whom such person derives title.
|
|
91.2
|
Without
prejudice to the provisions of these Articles, a notice may be given by
the Company to the persons entitled to a Share in consequence of the death
or bankruptcy of a Holder by sending or delivering it, in any manner
authorised by these Articles for the giving of notice to a Holder,
addressed to them at the address, if any, supplied by them for that
purpose. Until such an address has been supplied, a notice may
be given in any manner in which it might have been given if the death or
bankruptcy had not occurred.
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|
91.3
|
In
addition to the provisions of Article 91.2, every legal personal
representative, committee, receiver, curator bonis or other legal curator,
assignee in bankruptcy or liquidator of a Holder shall be bound by a
notice given as aforesaid if sent to the last registered address of such
Holder, notwithstanding that the Company may have notice of the death,
lunacy, bankruptcy, liquidation or disability of such
Holder.
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|
92.1
|
A
notice to be given, served or delivered in pursuance of these Articles
shall be given to, served on or delivered to the Company or the Board by
any Holder:
|
|
|
92.1.1
|
by
handing it to an authorised person at the Office;
or
|
|
|
92.1.2
|
by
sending it by post in a pre-paid cover addressed to the Chairman at the
Office or at such other address for service of notices or documents of any
kind as may be determined by the Board from time to
time.
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|
92.2
|
Where
a notice or document is given, served or delivered pursuant to sub-Article
92.1.1, the giving, service or delivery thereof shall be deemed to have
been effected at the time it was handed to the said authorised person;
provided, however, that no Holder shall be entitled to accept as authority
of any authorised person for these purposes any evidence other than a
document in writing to such effect duly signed on behalf of the Company by
one of the Directors.
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|
92.3
|
Where
a notice or document is given, served or delivered pursuant to sub-Article
92.1.2, the giving, service or delivery thereof on the Company or the
Board (as the case may require) shall be deemed to have been effected only
on receipt of such notice or
document.
|
The
signature to any notice to be given by the Company may be written or
printed.
A Holder
present, either in person or by proxy, at any General Meeting or any meeting of
the Holders of any Class of Shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
CHAPTER
16
DISSOLUTION
|
95.1
|
The
Company may be dissolved at any time by the Holders by means of a Special
Resolution passed at an Extraordinary General Meeting of the Company. In
the event of a dissolution of the Company, liquidation shall be carried
out by one or more liquidators, who may be natural or legal persons,
appointed by the General Meeting, which shall determine the powers and
remuneration of such liquidators.
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|
95.2
|
If
the Company shall be dissolved and the assets available for distribution
among the Holders as such shall be insufficient to repay the whole of the
paid up or credited as paid up share capital, such assets shall be
distributed so that, as nearly as may be, the losses shall be borne by the
Holders in proportion to the capital paid up or credited as paid up at the
commencement of the dissolution on the Shares held by them respectively.
And if in a dissolution the assets available for distribution among the
Holders shall be more than sufficient to repay the whole of the share
capital paid up or credited as paid up at the commencement of the
dissolution, the excess shall be distributed among the Holders in
proportion to the capital at the commencement of the dissolution paid up
or credited as paid up on the said Shares held by them
respectively. Provided that this Article shall not affect the
rights of the Holders of Shares issued upon special terms and
conditions.
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|
95.3
|
After
payment of all debts and any charges against the Company and of the
expenses of the liquidation, the net liquidation proceeds shall be
distributed to the Holders in conformity with and so as to achieve on an
aggregate basis the same economic result as the distribution rules set for
dividend distributions
|
If the
Company is dissolved, the liquidator(s), with the sanction of a Special
Resolution, may divide among the Holders in specie or 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, for such purpose, may value any assets and determine how the
division shall be carried out as between the Holders or different classes of
Holders. The liquidator, with the like sanction, may vest the whole or any part
of such assets in trustees upon such trusts for the benefit of the
contributories as, with the like sanction, such liquidator determines, but so
that no Holder shall be compelled to accept any assets upon which there is a
liability.
CHAPTER
17
MISCELLANEOUS
|
97.1
|
Subject
to the provisions of any applicable Law, the balance sheet and profit and
loss account and any other accounts required by Law to be prepared by the
Company in respect of each financial year, (the “Accounts”) shall be
drawn up in accordance with the applicable accounting standards and the
Law, and such Accounts and the Company shall be audited at least once in
every year by the Statutory
Auditor.
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|
97.2
|
At
the Annual General Meeting or at a subsequent General Meeting in each
year, an independent representative of the Holders shall be appointed by
them as Statutory Auditor of the Accounts of the
Company.
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|
97.3
|
The
Statutory Auditor shall conduct its audit of the Accounts of the Company,
and its audit of the Company itself, in accordance with the requirements
as determined by the Law.
|
|
97.4
|
The
Statutory Auditor may be a Holder of Shares, but no Director, Officer or
employee of the Company shall, during his continuance in office, be
eligible to act as an Statutory Auditor of the
Company.
|
|
97.5
|
The
remuneration of the Statutory Auditor shall be fixed by the Holders at the
General Meeting at which the Statutory Auditor is
appointed.
|
|
97.6
|
The
Statutory 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 Statutory 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.
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|
97.7
|
The
report of the Statutory Auditor shall be distributed to the Holders with
the notice convening the General Meeting, as such notice is provided for
in these Articles.
|
|
97.8
|
If
the office of Statutory Auditor becomes vacant by the resignation or death
of the Statutory Auditor, or by the Statutory Auditor becoming incapable
of acting by reason of illness or other disability at a time when the
Statutory Auditor’s services are required, the Board shall, as soon as
practicable, convene an Extraordinary General Meeting to fill the vacancy
thereby created.
|
|
|
Such
Accounts shall be kept at the Office, or subject to the provisions of the
Law, at such place as the Board thinks fit, and shall be available for
inspection by the Holders during normal business hours on any Business
Day, with such reasonable restrictions as the Board may
impose.
|
|
97.9
|
In
the event that the criteria laid down by the Law are met, the Statutory
Auditor in the form of a Commissaire shall be
replaced by a “réviseur
d’entreprises” to be appointed by the General Meeting from the
members of the “Institut
des Réviseurs d’Entreprises”
|
|
98.1
|
Save
where the provisions of any Law provides otherwise, and in the sole
discretion of the Board, in addition to any audit conducted by the
Statutory Auditor, the financial statements of the Company, whether in the
form of stand alone financial statements or consolidated financial
statements (the “Financial Statements”)
may be audited at least once every year by an Independent
Auditor.
|
|
98.2
|
The
Financial Statements may be prepared, in the discretion of the Board,
using United States Generally Accepted Accounting
Principals.
|
|
98.3
|
The
Independent Auditor shall be appointed by the Board in its sole
discretion, save that the Independent Auditor may not be a Director,
Officer or employee of the Company.
|
|
98.4
|
The
remuneration of the Independent Auditor shall be fixed by the Board at the
meeting of Directors at which such Independent Auditor is
appointed.
|
|
98.5
|
The
Independent 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 Independent 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.
|
|
98.6
|
The
report of the Independent Auditor shall be distributed to the Holders with
the notice convening the General Meeting, as such notice is provided for
in these Articles.
|
|
98.7
|
Such
Financial Statements shall be kept at the Office, or subject to the
provisions of the Law, at such place as the Board thinks fit, and shall be
available for inspection by the Holders during normal business hours on
any Business Day, with such reasonable restrictions as the Board may
impose.
|
|
99.
|
The
Directors 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, gross negligence or wilful misconduct which may
attach to any of the said persons. Each Holder agrees to waive any
claim or right of action such Holder 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, gross negligence or wilful
misconduct which may attach to such Director or Officer.
|
100.
|
|
100.1
|
All
matters not governed by these Articles shall be determined in accordance
with the Laws of the Grand Duchy of
Luxembourg.
|
|
100.2
|
Notwithstanding
anything contained in these Articles, the provisions of these Articles are
subject to any applicable law and legislation, including the Law,
except where the Articles contain provisions which are stricter than those
required pursuant to any applicable law and legislation including the
Law.
|
|
100.3
|
Should
any clause of these Articles be declared null and void, this shall not
affect the validity of the other clauses of these
Articles.
|
|
100.4
|
In
the case of any divergences between the English and the French text, the
English text will prevail.
|
TO: The
Shareholders
Flagstone
Reinsurance Holdings Limited
Crawford
House
23 Church
Street
Hamilton
HM11
Bermuda
Report
of the Board of Directors of the Company pursuant to Article 32-3 (5) of the
Luxembourg Law of 10 August 1915 (as amended) on Commercial
Companies
We refer
to Proposal 11 as set out more fully in the Registration Statement under the
United States Securities Act of 1933 (the “Proxy Statement”) to be
adopted at the Company’s Annual General Meeting of Shareholders due to take
place on , 2010 (the “AGM”) in Bermuda.
The Proxy
Statement proposes to shareholders, amongst other items, to vote at the AGM for
(1) the discontinuance of the Company as an exempted company in Bermuda and (2)
the continuance of the Company as a société anonyme under the
laws of Luxembourg, (the “Redomestication”).
Following
the passing of the Proposals as contained in the Proxy Statement, any member of
the Board of Directors of the Company will be authorized by the shareholders to
appear before a Luxembourg public notary personally, (or by the appointment of a
duly authorized representative), to complete the Redomestication of the Company
from Bermuda to Luxembourg. One step in the completion of the
Redomestication is the adoption of the Luxembourg Articles of Incorporation of
the Company, (the “Articles”). See Proposal 8 of
the Proxy Statement.
Article
6.4 of the Articles will, upon completion of the Redomestication, read as
follows:
“6.4 The
Board is authorised to issue Shares for cash pursuant to the authority conferred
by Article 6.4, as if Luxembourg statutory pre-emption provisions did not apply
to any such issuance provided that this authority shall expire on the fifth
anniversary of the date of the adoption of these Articles, provided further that
the Company may before such expiry, make an offer or agreement which would or
might require Shares to be issued after such expiry and the Board may issue
Shares in pursuance of such offer or agreement as if the power hereby conferred
had not expired.”
Proposal
11 of the Proxy Statement specifically requests shareholders to vote in favor of
the waiver of their statutory preferential and preemptive rights as set out more
fully in Proposal 11 and as described in Article 6.5 of the Articles of the
Company.
The
Shareholders are hereby advised that the reason for including Proposal 11 in the
Proxy Statement and Article 6.5 in the Articles is to provide the Board of
Directors with:
(i) the
ability to issue shares pursuant to the Company’s obligations under the PSU Plan
(as such term is defined and such plan is described in the Proxy
Statement);
(ii) the
ability to issue shares pursuant to the Company’s obligations under the RSU Plan
(as such term is defined and such plan is described in the Proxy
Statement);
(iii) the
ability to issue shares pursuant to the Company’s obligations under the Warrant
(as such term is defined in the Proxy Statement) and any further warrants or
other financial instruments that the Company may grant or conclude in the
future; and
(iv)
greater flexibility in relation to the issue of Shares in the Company for the
future business interests of the Company.
The
Shareholders are hereby further advised that the issue price of the Shares to be
issued pursuant to Article 6.4 will be determined, for the corporate benefit and
in the best interests of the Company, by the Board of Directors, in its sole
discretion, and by reference to, inter alia, the average of the high and low
sales price of the Shares as reported by the New York Stock Exchange over a 5
day trading period, and taking into account any discount, (that the Board of
Directors may deem appropriate in the circumstances), offered on such Shares in
the best interests and for the corporate benefit of the Company.
By
order of the Board of Directors
/s/
William Fawcett
William
Fawcett
Corporate
Secretary
Hamilton,
Bermuda
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Indemnification
of Directors and Officers
We are a
Bermuda exempted company. Section 98 of the Companies Act provides
generally that a Bermuda company may indemnify its directors, officers and
auditors against any liability which by virtue of any rule of law would
otherwise be imposed on them in respect of any negligence, default, breach of
duty or breach of trust, except in cases where such liability arises from fraud
or dishonesty of which such director, officer or auditor may be guilty in
relation to the company. Section 98 further provides that a Bermuda
company may indemnify its directors, officers and auditors against any liability
incurred by them in defending any proceedings, whether civil or criminal, in
which judgment is awarded in their favor or in which they are acquitted or
granted relief by the Supreme Court of Bermuda pursuant to section 281 of
the Companies Act.
We have
adopted provisions in our Bye-Laws that provide that we shall indemnify our
officers and directors in respect of their actions and omissions, except in
respect of their fraud or dishonesty. Our Bye-Laws provide that the
shareholders waive all claims or rights of action that they might have,
individually or in right of the Company, against any of the Company’s directors
or officers for any act or failure to act in the performance of such director’s
or officer’s duties, except in respect of any fraud or dishonesty of such
director or officer. Section 98A of the Companies Act permits us to
purchase and maintain insurance for the benefit of any officer or director in
respect of any loss or liability attaching to him in respect of any negligence,
default, breach of duty or breach of trust, whether or not we may otherwise
indemnify such officer or director. We have purchased and maintain a
directors’ and officers’ liability policy for such a purpose.
The
potential liability of directors in a Luxembourg company is governed by the
Luxembourg Company Law and the Civil Code. The Luxembourg Company Law provides
that the directors of a company shall be liable to the company for the execution
of the mandate given to them and for any misconduct in the management of the
company’s affairs. The Luxembourg Company Law further provides that the
directors shall be jointly and severally liable both towards the company and any
third parties for damages resulting from the violation of the Luxembourg Company
Law or the Articles of the Company. The directors shall be discharged from
such liability in the case of a violation to which they were not a party
provided that no misconduct is attributable to them and they have reported such
violation to the first general meeting after they acquired knowledge thereof. It
is the Company which would have a claim against a director for any misconduct
and not an individual shareholder.
In
addition to the above, directors may be liable to an action from shareholders of
a company on the basis of the general principles of liability as set out in the
Civil Code, which may oblige a director to indemnify the shareholders for any
damages caused as a consequence of their own fault.
Directors
and officers insurance are permitted in addition to any indemnity granted by the
company to such directors or officers. Flagstone (Luxembourg) intends to
purchase and maintain a directors and officers liability policy for such a
purpose.
Flagstone
(Luxembourg) further proposes to adopt provisions in its Luxembourg Articles
that provide that the company will indemnify and hold harmless out of the assets
of the company, the directors and other officers of the Company, including any
person appointed to any committee of the board, from and against all actions,
costs, charges losses, damages and expenses which they or any one of them may
incur or sustain by reason of any act done in the execution of their duty in
their respective offices. This indemnity shall not extend to any matter in
respect of any fraud, dishonesty, gross negligence or wilful misconduct.
The provisions regarding director and officer indemnities in the proposed
Flagstone (Luxembourg) Articles are substantially similar to the provisions
currently in the Bye-Laws of Flagstone (Bermuda).
A
Luxembourg company may not indemnify its directors or officers against any
matter arising from a director or officer’s fraud, dishonesty, gross negligence
or wilful misconduct or any other criminal penalties.
Exhibits
and Financial Statement Schedules
(a) Exhibits:
|
Exhibit No.
|
Description
of Exhibit
|
|
|
3.1
|
Proposed
Luxembourg documentation (included in Annex A)
|
|
|
5.1
|
Opinion
of M Partners as to the registered shares
|
|
|
8.1
|
Tax
Opinion of Baker & McKenzie LLP (U.S. tax law)
|
|
|
8.2
|
Tax
Opinion of Tax S. Arts (Luxembourg tax law)
|
|
|
8.3
|
Tax
Opinion of Appleby (Bermuda tax law)
|
|
|
23.1
|
Consent
of Deloitte & Touche
|
|
|
23.2
|
Consent
of M Partners (included in Exhibit 5.1)
|
|
|
23.3
|
Consent
of Baker & McKenzie LLP (included in Exhibit
8.1)
|
|
|
23.4
|
Consent
of Tax S. Arts (included in Exhibit 8.2)
|
|
|
23.5
|
Consent
of Appleby (included in Exhibit 8.3)
|
|
|
24.1
|
Power
of Attorney (included on the signature page of this Registration
Statement)
|
|
|
99.1
|
|
Form
of proxy card (included in the Proxy
Statement)
|
(b) Financial
Statement Schedules: None.
Undertakings
The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The
undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The
undersigned registrant hereby undertakes as follows: That prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
The
registrant undertakes that every prospectus (i) that is filed pursuant to the
paragraph immediately preceding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The
undersigned registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The
undersigned registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hamilton, Bermuda, on March 19,
2010.
|
FLAGSTONE
REINSURANCE HOLDINGS LIMITED
|
|
|
By:
|
|
|
/s/ Mark J. Byrne
|
|
|
Name:
Mark J. Byrne
|
|
|
Title:
Executive Chairman
|
|
POWER
OF ATTORNEY
We, the
undersigned directors and officers of Flagstone Reinsurance Holdings Limited, do
hereby constitute and appoint Patrick Boisvert and William Fawcett, or any of
them, our true and lawful attorneys and agents, with full power of substitution,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
registrant to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this registration statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments and any related registration statement pursuant to Rule 462(b) under
the Securities Act of 1933, as amended) hereto and we do hereby ratify and
confirm that said attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities indicated and on the
dates indicated.
|
Signature
|
Title
|
Date
|
|||
|
/s/ Mark J. Byrne
|
Executive
Chairman and Director
|
March
19, 2010
|
|||
|
Name:
Mark J. Byrne
|
|||||
|
/s/ David A. Brown
|
Director
and Chief Executive Officer
|
March
19, 2010
|
|||
|
Name:
David A. Brown
|
(Principal Executive Officer) | ||||
|
/s/ Patrick Boisvert
|
Chief
Financial Officer (Principal Financial
|
March
19, 2010
|
|||
|
Name:
Patrick Boisvert
|
Officer and Principal Accounting Officer) | ||||
|
/s/ Gary Black
|
Director
|
March
19, 2010
|
|||
|
Name:
Gary Black
|
|||||
|
/s/ Peter Watson
|
Director
|
March
19, 2010
|
|||
|
Name:
Peter Watson
|
|||||
|
/s/ Stephen Coley
|
Director
|
March
19, 2010
|
|||
|
Name:
Stephen Coley
|
|||||
|
/s/ Thomas Dickson
|
Director
|
March
19, 2010
|
|||
|
Name:
Thomas Dickson
|
|||||
|
/s/ Stewart Gross
|
Director
|
March
19, 2010
|
|||
|
Name:
Stewart Gross
|
|||||
|
/s/ E. Daniel James
|
Director
|
March
19, 2010
|
|||
|
Name:
E. Daniel James
|
|||||
|
/s/ Anthony Knap
|
Director
|
March
19, 2010
|
|||
|
Name:
Anthony Knap
|
|||||
|
/s/ Anthony Latham
|
Director
|
March
19, 2010
|
|||
|
Name:
Anthony Latham
|
|||||
|
/s/ Jan Spiering
|
Director
|
March
19, 2010
|
|||
|
Name:
Jan Spiering
|
|||||
|
/s/ Wray Thorn
|
Director
|
March
19, 2010
|
|||
|
Name:
Wray Thorn
|
|||||
|
PUGLISI &
ASSOCIATES
|
March
19, 2010
|
||||
| By: | /s/ Donald J. Puglisi |
Authorized
Representative in the United States
|
|||
| Name: Donald J. Puglisi | |||||
| Title: Managing Director | |||||
II-5