Bermuda | 6331 | Not Applicable | ||
(State or other jurisdiction
of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Edward J. Noonan
Jeff Consolino Validus Holdings, Ltd. 19 Par-La-Ville Road Hamilton HM11 Bermuda (441) 278-9000 |
Michael A. Becker, Esq.
John Schuster, Esq. Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 (212) 701-3000 |
Gary I. Horowitz, Esq.
Simpson Thacher & Bartlett LLP 425 Lexington Ave. New York, New York 10017 (212) 455-2000 |
Proposed
|
Proposed Maximum
|
|||||||||||
Amount to be
|
Maximum Offering
|
Aggregate Offering
|
Amount of
|
|||||||||
Title of Each Class of Securities to be Registered | Registered | Price per Unit | Price(1)(2) | Registration Fee(2) | ||||||||
Common Shares, $0.10 par value per common share | $200,000,000 | $21,400 | ||||||||||
(1) | Includes shares to cover over-allotments, if any, pursuant to an over-allotment option granted to the underwriters. | |
(2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
The
information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
|
Per share | Total | |||||||
Initial public offering price
|
$ | $ | ||||||
Underwriting discount
|
$ | $ | ||||||
Proceeds, before expenses, to us
|
$ | $ | ||||||
Proceeds, before expenses, to the
selling shareholders
|
$ | $ |
Goldman, Sachs & Co. | Merrill Lynch & Co. |
ii
Table of Contents
1
Table of Contents
Focus on Short-Tail Lines of
Reinsurance.
Substantially all of our
$475.3 million in gross premiums written for the nine
months ended September 30, 2006 are in short-tail lines.
Since inception we have focused on writing short-tail
reinsurance risks, which is an area where we believe prices and
terms provide an attractive risk adjusted return and our
management team has proven expertise. We believe based on
industry data that rates for U.S.
property catastrophe
insurance
are at the highest levels recorded, as measured by
rate on line.
Conversely, we believe that rates for most
casualty
or
long-tail
lines of business are
declining and do not afford equivalent attractive risk adjusted
returns at this point in the
underwriting cycle
.
Management with Proven Industry Leadership
Experience.
Our executive management team has an
average of 21 years of industry experience and senior
expertise spanning multiple aspects of the global reinsurance
business. Edward J. Noonan, our chairman and chief executive
officer, has 27 years of industry experience and was
previously president and chief executive officer of American
Re-Insurance Company. George P. Reeth, our deputy chairman and
president, has 30 years of industry experience and
previously served as chairman and chief executive officer of
Willis Re Inc., a division of Willis Group Holdings Limited.
Conan M. Ward, our chief underwriting officer, has 15 years
of insurance industry experience and was previously executive
vice president of the Global Reinsurance division of Axis
Capital Holdings, Limited.
Highly Skilled Underwriters and Analytical
Staff.
Since the Companys inception,
managements objective has been to target underwriting and
technical staff who can differentiate our company through
expertise and experience and who can apply analytical rigor to
our goal of building a diversified portfolio of reinsurance
risks. We currently employ eight underwriters in the property
catastrophe, international property, marine and other
specialty lines
areas. These underwriters have an average
of 16 years of industry experience and have produced
$475.3 million in gross premiums written for the nine
months ended September 30, 2006 while evaluating over 3,000
submissions
and declining approximately 60% of the risks
presented to them. Our risk analytics staff is comprised of 14
individuals, many of whom have advanced technical degrees,
including four PhDs and three Masters degrees in related fields.
Concentrated Investor Group with Strong Industry Insight.
Aquiline Capital Partners and our five largest shareholders have
an equity ownership interest in our company of approximately
80.0%. Members of our investor group have been sponsoring
investors in previous Bermuda insurance and reinsurance
companies (including GCR Holdings Limited; AXIS Capital Holdings
Limited; Allied World Assurance Company Holdings, Limited; and
Montpelier Re Holdings Limited) and have participated in the
formation, governance, initial public offering and, in some
cases, sale processes for these entities. In addition,
management holds an approximate 5.5% ownership interest in the
company and has similar experience in the full range of such
activities at American Re-Insurance Company, Willis Group
Holdings Limited and AXIS Capital Holdings Limited, among other
companies.
Substantial Capital with No Prior Liabilities or
Contingencies.
We commenced operations with
approximately $1.0 billion of equity capital and augmented
our equity through the placement of $150.0 million of
Junior Subordinated Deferrable Debentures in June 2006. As we
are a newly formed company, our balance sheet is unencumbered by
any historical losses relating to the 2005 hurricane season, the
events of September 11, 2001, asbestos or other legacy
exposures affecting our industry. As a result, we have no risk
that deteriorating
loss reserves
related to legacy
exposures prior to our formation will impact our future
financial results.
Timely Response to Market Dislocation and Capacity
Shortage.
We entered the global reinsurance
market during a period of imbalance between the supply of
underwriting capacity
2
Table of Contents
available for reinsurance on catastrophe-exposed property,
marine and energy risks and demand for such reinsurance
coverage. Our business strategy was responsive to these capacity
needs and as of January 1, 2006 a significant portion of
our current underwriting and analytical staff was in place,
including six underwriters and four catastrophe modellers and
risk analytic experts. As a consequence, we believe we developed
an industry reputation for thorough and timely quotes for
difficult technical risks. A significant volume of property
catastrophe business is written in the January 1 renewal period
and we believe the combination of our available capacity,
staffing levels and management leadership permitted us to
underwrite an attractive portfolio of catastrophe-exposed risks
at January 1, 2006. Our gross premiums written for the
three months ended March 31, 2006 were $248.2 million,
of which $217.4 million was underwritten at January 1.
We believe based on publicly-available information that our
premium
volume at the January 1, 2006 renewal date
exceeded that of many of our competitors, many of whom we
believe were either capacity constrained based on their 2005
losses and reduced risk appetites or not yet adequately
organized to respond to submissions.
Balanced, Diverse Book of Short-Tail
Reinsurance.
We seek to balance and diversify our
portfolio both by line of business and by geography. Of our
$475.3 million in gross premiums written for the nine
months ended September 30, 2006, $230.2 million
(48.4%) is property catastrophe reinsurance. Among other
property coverages, we wrote $57.7 million (12.1%) of
property
pro rata
and $41.2 million (8.7%) of
property per risk. We also underwrote $98.0 million (20.6%)
of marine reinsurance and $48.2 million (10.2%) of other
specialty lines. The other specialty lines of reinsurance we
underwrite such as aerospace, life and
accident & health, terrorism and workers
compensation catastrophe coverages are short-tail
and provide us with risk diversification as they are generally
non-
accumulating
with our property risks. We actively
manage our exposures by geographic zone to maintain a diverse
portfolio of underlying risks. For the nine months ended
September 30, 2006, we wrote $214.2 million of gross
premiums written in the United States (45.1% of total gross
premiums written), $92.4 million in territories outside the
United States (19.4%) and $42.4 million on a worldwide
basis including the United States (8.9%). The remaining
$126.3 million of our gross premiums written (26.6%)
related to our marine and aerospace lines of business, which we
do not classify by geographic area as risks may span multiple
zones and risk exposures may not reside at fixed locations in
some cases.
Effective Use of Third-party Capital.
In May
2006, Validus entered into a collateralized quota share
retrocession
treaty
with Petrel Re Limited (Petrel
Re), a newly-formed Bermuda reinsurance company, pursuant
to which Petrel Re assumes a quota share of certain lines of
marine and energy and other lines of business underwritten by
the Company for the 2006 and 2007 underwriting years. Petrel Re
is a separate legal entity of which Validus has no equity
investment, management or board interests, or related
party relationships. This
sidecar
relationship provides the Company with the capacity to increase
premiums written in specific programs where favorable
underwriting opportunities are seen. A specified portion of this
incremental business is then
ceded
to Petrel Re and fees
are earned for the services provided in underwriting the
original business. The equity investor in Petrel Re is First
Reserve Corporation, a leading private equity firm with a
25-year
history of investing exclusively in the energy industry. We
believe that the quality of our underwriting and analytical
staff, as well as our management, was one of the primary reasons
that First Reserve Corporation selected us as the
cedant
to Petrel Re when it organized and funded the vehicle.
3
Table of Contents
Build on Our Already Established Market
Position.
We believe that our company is widely
accepted by intermediaries and ceding clients as an important
provider of targeted short-tail reinsurance lines. We base this
belief on subjective feedback we receive from intermediaries and
ceding clients as well as objective data such as our
$475.3 million in gross premiums written for the nine
months ended September 30, 2006 or over 3,000 submissions
received from inception to date. We approach the January 1
renewal season as the
incumbent
on contracts which
represented $217.4 million of gross premiums written to us
in 2006. Our intention is to build on our already established
market position to further establish ourselves as a premier
provider of global specialized short-tail reinsurance.
Assess Underwriting Decisions Based on Incremental Return on
Equity.
Our principal operating objective is to
utilize our capital efficiently by underwriting short-tail
reinsurance contracts with superior risk and return
characteristics. We have developed Validus Capital Allocation
and Pricing System (VCAPS), a proprietary
computer-based system for modeling, pricing, allocating capital
and analyzing catastrophe-exposed risks, and that also enables
us to model various contract features, all on an expedited
basis. VCAPS permits us to make underwriting decisions based on
incremental return on capital.
Prudently Manage Risk Accumulations.
We
believe expertise in risk management is intrinsic to building a
successful reinsurance organization. We have employed a chief
risk officer Stuart W. Mercer since the
formation of the company. Mr. Mercer manages a staff
of 13, including four PhDs. Our primary risk measure is the
aggregate amount of contractual limits to which we expose our
capital. While we believe this is a more conservative risk
tolerance than many of our competitors and while it may serve to
diminish our profit potential in low loss years, we believe in
higher loss years we will lose a smaller proportion of our
capital.
Employ All Forms of Capital Efficiently.
We
aim to underwrite as much attractively priced business as is
available and manage all forms of capital accordingly. In the
current hard market for catastrophe-exposed lines of
reinsurance, we have raised in excess of $1.0 billion in
common equity in our initial capitalization and then augmented
this capital with the creation of a $200.0 million
collateralized quota share sidecar facility, Petrel Re in May
2006 and the placement of $150.0 million of Junior
Subordinated Deferrable Debentures in June 2006. In addition to
the prudent use of financial leverage, we intend to actively
manage our capital by evaluating the returns available in the
short-tail reinsurance lines, assessing returns in complementary
lines of business and, where appropriate and subject to
applicable law and rating agency and other considerations,
returning excess capital to shareholders.
4
Table of Contents
We have a limited operating history and our historical
financial results do not accurately indicate our future
performance.
We were formed in October 2005 and
were fully operational by December 2005. We, therefore, have a
limited operating and financial history. We then began
underwriting with risks attaching no earlier than
January 1, 2006. It has been reported that among the last
20 years, 2006 has produced the third-lowest level of
insured losses, after 1997 and 1988. As of December 31,
2006, we have not experienced any catastrophe events such as
those experienced by the industry in 2004 and 2005 and the
events of September 11, 2001, and as a result we cannot
provide assurances as to how our business model or risk controls
would respond to such events. There is limited historical
financial and operating information available to help you
evaluate our past performance or make a decision about an
investment in our common shares. As a recently formed company,
we face substantial business and financial risks and may suffer
significant losses. As a result of these risks, it is possible
that we may not be successful in the continued implementation of
our business strategy or completing the development of the
infrastructure necessary to run our business. In addition,
particularly as a recently-formed company, our business strategy
may change and may be affected by acquisition, joint venture or
other business, investment
and/or
growth opportunities that may, in the future, become available
to us or that we may pursue.
Claims arising from unpredictable and severe catastrophic
events could adversely affect our financial condition or results
of operations.
Our reinsurance operations expose
us to
claims
arising out of unpredictable natural and
other catastrophic events, such as hurricanes, windstorms,
tsunamis, severe winter weather, earthquakes, floods, fires,
explosions, acts of terrorism and other natural and man-made
disasters. One or more catastrophic or other events could result
in claims that substantially exceed our expectations.
We depend on ratings by A.M. Best
Company.
Our financial strength rating could be
revised downward, which could affect our standing among
brokers
and customers and cause our premiums and earnings
to decrease. Third-party rating agencies, such as A.M. Best
Company, assess and rate the financial strength of insurers and
reinsurers based upon criteria established by the rating
agencies, which criteria are subject to change. Our financial
strength rating is subject to periodic review, and may be
revised downward or revoked at the sole discretion of
A.M. Best in response to a variety of factors, including a
minimum capital adequacy ratio, management, earnings,
capitalization and risk profile.
The reinsurance business is historically cyclical, and we
expect to experience periods with excess underwriting capacity
and unfavorable premium rates and policy terms and
conditions.
The reinsurance business historically
has been characterized by periods of intense competition on
price and policy terms due to excessive underwriting capacity as
well as periods when shortages of capacity permit favorable
premium rates and policy terms and conditions, and as a result
we may experience significant fluctuations in operating results.
5
Table of Contents
Issuer
Validus Holdings, Ltd.
Common shares offered by us
common
shares.
Common shares offered by the selling shareholders
common
shares(1).
Common shares to be outstanding immediately after this offering
common
shares(2).
Use of proceeds
We estimate that the net proceeds to us from this offering will
be approximately $ million,
based upon an assumed initial public offering price of
$ per common share,
representing the midpoint of the offering range set forth on the
cover of this prospectus, and after deducting the
underwriters discount and fees and expenses of the
offering. We intend to use such net proceeds for general
corporate purposes and to support future growth of our
reinsurance operations.
We will not receive any proceeds from the sale of common shares
by the selling shareholders.
Dividend policy
We intend to pay quarterly cash dividends on our common shares
at an initial rate of $ per
common share payable in the first full fiscal quarter end after
the date hereof. The timing and amount of any cash dividends,
however, will be at the discretion of our Board of Directors and
will depend upon our results of operations and cash flows, our
financial position and capital requirements, general business
conditions, legal, tax, regulatory, rating agency and
contractual constraints or restrictions and any other factors
that our Board of Directors deems relevant. See Dividend
Policy, Business Regulation and
Description of Share Capital Dividends.
Voting rights
Shareholders have one vote for each voting common share held by
them and are entitled to vote at all meetings of shareholders.
However, there are provisions in our Bye-laws that reduce the
voting rights of common shares that are owned, directly,
indirectly or by attribution, by a person or group to the extent
that such person or group holds more than 9.09% of the aggregate
voting power of all common shares entitled to vote on a matter.
NYSE symbol
Our common shares have been approved for listing on the
New York Stock Exchange under the symbol VR,
subject to official notice of issuance.
assumes no exercise of the underwriters over-allotment
option; and
assumes an initial public offering price of
$ per share, the midpoint of
the range set forth on the cover page of this prospectus.
(1)
Does not
include
common shares that the underwriters may purchase from the
selling shareholders upon the exercise by the underwriters of
their option to purchase additional common shares from the
selling shareholders.
6
Table of Contents
(2)
Of these
shares, will
be voting common shares
and will
be non-voting common shares. In addition, certain of our
shareholders have warrants to purchase in the aggregate
14,796,810 common shares, which may be voting or non-voting, and
certain of our employees have restricted shares and stock
options to acquire an aggregate of 6,165,337 voting common
shares as of September 30, 2006. Unvested restricted shares
are not considered to be outstanding in the above table but do
accumulate dividends and may be voted. See
Capitalization.
7
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
(unaudited)
(unaudited)
(Dollars in thousands, except share and per share amounts)
$
116,505
$
475,284
(38,892
)
(64,051
)
77,613
411,233
14,885
(209,872
)
92,498
201,361
16,272
40,369
(154
)
(894
)
369
1,061
108,985
241,897
11,577
67,058
10,638
24,574
13,641
31,007
3,453
5,136
77
39,309
127,852
69,676
114,045
7,353
190
154
894
$
77,183
$
115,129
102,344,600
102,331,833
102,623,533
102,511,504
$
0.68
$
1.11
$
0.68
$
1.11
12.5%
33.3%
11.5%
12.2%
14.8%
15.4%
26.3%
27.6%
38.8%
60.9%
25.8%
14.6%
8
Table of Contents
As of December
As of September 30, 2006
31, 2005
Actual
As adjusted(9)
Actual
(Dollars in thousands, except per share amounts)
$
1,279,614
$
$
610,800
87,457
398,488
1,624,890
1,014,453
244,172
244,172
63,211
63,211
150,000
150,000
1,121,707
999,806
$
10.96
$
$
9.78
10.70
9.67
Notes
(1)
General and administrative expenses for the three and nine
months ended September 30, 2006 include $250,000 and
$750,000, respectively, related to our Advisory Agreement with
Aquiline.
(2)
Stock options which carry an average exercise price of
$10.00 per option are anti-dilutive and consequently are
not included in weighted average diluted shares outstanding.
SFAS No. 123R requires that any unrecognized
stock-based compensation expense that will be recorded in future
periods be included as proceeds for purposes of treasury stock
repurchases, which is applied against the unvested restricted
shares balance.
(3)
Calculated by dividing
losses and loss expenses
by
net
premiums earned
.
(4)
Calculated by dividing policy
acquisition costs
by net
premiums earned.
(5)
Calculated by dividing general and administrative expenses by
net premiums earned.
(6)
Calculated by combining the policy acquisition cost ratio and
the general and administrative
expense ratio
.
(7)
Calculated by combining the
loss ratio
, the policy
acquisition cost ratio and the general and administrative
expense ratio.
(8)
Annualized return on average equity is calculated by dividing
the net income for the period by the average shareholders
equity during the period. Quarterly average shareholders
equity is the average of the beginning and ending
shareholders equity balances. Nine month average
shareholders equity is the average of the beginning,
ending and intervening quarter end shareholders equity
balances.
(9)
In the As Adjusted column, the calculation of basic
and diluted book value per share reflects payment of total fees
and expenses, including underwriting discounts and commissions
of $ million. The As
Adjusted column also gives effect to this offering of our
common shares at an assumed public offering price of
$ per share (the midpoint of
the price range set forth on the cover page of this prospectus)
and the application of the net proceeds thereof, as described
under Use of Proceeds.
(10)
Book value per common share is defined as total
shareholders equity divided by the number of common shares
outstanding as at the end of the period, giving no effect to
dilutive securities.
(11)
Diluted book value per common share is calculated based on total
shareholders equity plus the assumed proceeds from the
exercise of outstanding options and warrants, divided by the sum
of common shares, unvested restricted shares, options and
warrants outstanding (assuming their exercise).
9
Table of Contents
10
Table of Contents
11
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
15
Table of Contents
16
Table of Contents
17
Table of Contents
18
Table of Contents
19
Table of Contents
the perceived prospects for the insurance industry in general;
differences between our actual financial and operating results
and those expected by investors;
changes in the share price of public companies with which we
compete;
news about our industry and our competitors;
changes in general economic or market conditions;
broad market fluctuations; and
regulatory actions.
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
Table of Contents
unpredictability and severity of catastrophic events;
our ability to obtain and maintain ratings, which may be
affected by our ability to raise additional equity or debt
financings, as well as other factors described herein;
adequacy of our risk management and loss limitation methods;
cyclicality of demand and pricing in the reinsurance market;
our limited operating history;
our ability to successfully implement our business strategy
during soft as well as hard markets;
adequacy of our loss reserves;
continued availability of capital and financing;
our ability to identify, hire and retain, on a timely and
unimpeded basis and on anticipated economic and other terms,
experienced and capable senior management as well as
underwriters, claims professionals and support staff;
acceptance of our business strategy, security and financial
condition by rating agencies and regulators, as well as by
brokers and reinsureds;
competition, including increased competition, on the basis of
pricing, capacity, coverage terms or other factors;
potential loss of business from one or more major reinsurance
brokers;
our ability to implement, successfully and on a timely basis,
complex infrastructure, distribution capabilities, systems,
procedures and internal controls, and to develop accurate
actuarial data to support the business and regulatory and
reporting requirements;
general economic and market conditions (including inflation,
interest rates and foreign currency exchange rates) and
conditions specific to the reinsurance markets in which we
expect to operate;
the integration of businesses we may acquire;
accuracy of those estimates and judgments utilized in the
preparation of our financial statements, including those related
to revenue recognition, insurance and other reserves,
reinsurance recoverables, investment valuations, intangible
assets, bad debts, income taxes, contingencies, litigation and
any determination to use the deposit method of accounting,
which, for a relatively new insurance and reinsurance company
like our company, are even more difficult to make than those
made in a mature company because of limited historical
information;
acts of terrorism, political unrest and other hostilities or
other unforecasted and unpredictable events;
24
Table of Contents
availability to us of retrocessions to manage our gross and net
exposures and the cost of such retrocessions;
the failure of
retrocessionaires
, producers or others to
meet their obligations to us;
the timing of loss payments being faster or the receipt of
reinsurance recoverables being slower than anticipated by us;
changes in domestic or foreign laws or regulations, or their
interpretations;
changes in accounting principles or the application of such
principles by regulators; and
statutory or regulatory or rating agency developments, including
as to tax policy and matters and reinsurance and other
regulatory matters such as the adoption of proposed legislation
that would affect Bermuda-headquartered companies
and/or
Bermuda-based insurers or reinsurers.
25
Table of Contents
26
Table of Contents
27
Table of Contents
September 30, 2006
As
Actual
adjusted
(Dollars in thousands, except share and per share amounts)
$
$
150,000
150,000
150,000
150,000
10,234
1,045,947
1,189
64,337
1,121,707
$
1,271,707
$
$
10.96
$
$
10.70
$
11.8%
%
(1)
For a description of our credit facility, see Description
of Certain Indebtedness Credit Facilities.
(2)
For a description of our Junior Subordinated Deferrable
Debentures, see Description of Certain
Indebtedness Junior Subordinated Deferrable
Debentures.
(3)
Diluted book value per share is calculated based on total
shareholders equity plus the assumed proceeds from the
exercise of outstanding options and warrants, divided by the sum
of shares, options, warrants and unvested restricted shares
(assuming their exercise).
(4)
The ratio of debt to total capitalization, excluding the Junior
Subordinated Deferrable Debentures, is 0.0% actual and 0.0%, as
adjusted.
28
Table of Contents
$
$
10.96
$
Average
price per
Common shares issued
Total consideration
common
Number
Percent
Amount
Percent
share
102,344,600
%
$
1,023,446,000
%
$
10.00
100%
100%
29
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
(unaudited)
(unaudited)
(Dollars in thousands, except share and
per share amounts)
$
116,505
$
475,284
(38,892
)
(64,051
)
77,613
411,233
14,885
(209,872
)
92,498
201,361
16,272
40,369
(154
)
(894
)
369
1,061
108,985
241,897
11,577
67,058
10,638
24,574
13,641
31,007
3,453
5,136
77
39,309
127,852
69,676
114,045
7,353
190
154
894
$
77,183
$
115,129
102,344,600
102,331,833
102,623,533
102,511,504
$
0.68
$
1.11
$
0.68
$
1.11
12.5%
33.3%
11.5%
12.2%
14.8%
15.4%
26.3%
27.6%
38.8%
60.9%
25.8%
14.6%
30
Table of Contents
As of December 31,
As of September 30, 2006
2005
Actual
As adjusted(9)
Actual
(Dollars in thousands, except per share amounts)
$
1,279,614
$
$
610,800
87,457
398,488
1,624,890
1,014,453
244,172
244,172
63,211
63,211
150,000
150,000
1,121,707
999,806
$
10.96
$
$
9.78
10.70
9.67
(1)
General and administrative expenses for the three and nine
months ended September 30, 2006 include $250,000 and
$750,000, respectively, related to our Advisory Agreement with
Aquiline.
(2)
Stock options which carry an average exercise price of
$10.00 per option are anti-dilutive and consequently are
not included in weighted average diluted shares outstanding.
SFAS No. 123 requires that any unrecognized
stock-based compensation expense that will be recorded in future
periods be included as proceeds for purposes of treasury stock
repurchases, which is applied against the unvested restricted
shares balance.
(3)
Calculated by dividing losses and loss expenses by net premium
earned.
(4)
Calculated by dividing policy acquisition costs by net premium
earned.
(5)
Calculated by dividing general and administrative expenses by
net premium earned.
(6)
Calculated by combining the policy acquisition cost ratio and
the general and administrative expense ratio.
(7)
Calculated by combining the loss ratio, the policy acquisition
cost ratio and the general and administrative expense ratio.
(8)
Annualized return on average equity is calculated by dividing
the net income for the period by the average shareholders
equity during the period. Quarterly average shareholders
equity is the average of the beginning and ending
shareholders equity balances. Nine month average
shareholders equity is the average of the beginning,
ending and intervening quarter end shareholders equity
balances.
(9)
In the As Adjusted column, the calculation of basic
and diluted book value per share reflects payment of total fees
and expenses, including underwriting discounts and commissions
of $ million. The As
Adjusted column also gives effect to this offering of our
common shares at an assumed public offering price of
$ per share (the midpoint of
the price range set forth on the cover page of this prospectus)
and the application of the net proceeds thereof, as described
under Use of Proceeds.
(10)
Book value per common share is defined as total
shareholders equity divided by the number of common shares
outstanding as at the end of the period, giving no effect to
dilutive securities.
(11)
Diluted book value per common share is calculated based on total
shareholders equity plus the assumed proceeds from the
exercise of outstanding options and warrants, divided by the sum
of common shares, options, warrants and unvested restricted
shares outstanding (assuming their exercise).
31
Table of Contents
42
F-9
F-26
II-3
II-5
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
32
Table of Contents
33
Table of Contents
34
Table of Contents
35
Table of Contents
36
Table of Contents
loss emergence patterns
Reserve for losses
and loss expenses
(Dollars in millions)
$
56.9
60.1
63.2
66.4
69.5
expected loss ratios
Reserve for losses
and loss expenses
(Dollars in millions)
$
60.5
61.8
63.2
64.6
65.9
37
Table of Contents
At September 30, 2006
Total gross reserve
for losses and
Gross case reserves
Gross IBNR
loss expenses
(Dollars in thousands)
$
14,759
$
31,858
$
46,617
839
11,118
11,957
14
3,337
3,351
58
58
980
980
248
248
14
4,623
4,637
$
15,612
$
47,599
$
63,211
38
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
(unaudited)
(unaudited)
(Dollars in thousands)
$
116,505
$
475,284
(38,892
)
(64,051
)
77,613
411,233
14,885
(209,872
)
92,498
201,361
11,577
67,058
10,638
24,574
13,641
31,007
35,856
122,639
56,642
78,722
16,272
40,369
(3,453
)
(5,136
)
69,461
113,955
(77
)
(154
)
(894
)
369
1,061
69,676
114,045
7,353
190
154
894
$
77,183
$
115,129
66.6%
86.5%
12.5%
33.3%
11.5%
12.2%
14.8%
15.4%
26.3%
27.6%
38.8%
60.9%
39
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
Gross premiums
Gross premiums
written
Gross premiums
written
Gross premiums
(Dollars in thousands)
written (%)
(Dollars in thousands)
written (%)
$
80,078
68.8%
$
329,043
69.2%
28,463
24.4%
97,980
20.6%
5,670
4.9%
29,100
6.1%
154
0.1%
1,729
0.4%
1,055
0.9%
14,029
3.0%
1,085
0.9%
3,403
0.7%
7,964
6.8%
48,261
10.2%
$
116,505
100.0%
$
475,284
100.0%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
40
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
Net premiums written
Net premiums
Net premiums written
Net premiums
(Dollars in thousands)
written (%)
(Dollars in thousands)
written (%)
$
62,433
80.4%
$
295,853
72.0%
7,216
9.3%
67,119
16.3%
5,670
7.3%
29,100
7.1%
154
0.2%
1,729
0.4%
1,055
1.4%
14,029
3.4%
1,085
1.4%
3,403
0.8%
7,964
10.3%
48,261
11.7%
$
77,613
100.0%
$
411,233
100.0%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
41
Table of Contents
Loss ratio
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
13.7%
34.4%
6.5%
27.3%
20.3%
69.2%
(11.9)%
5.6%
10.0%
10.3%
16.6%
14.2%
14.9%
37.2%
12.5%
33.3%
(1)
The Marine line of business includes our offshore energy risks.
Gross reserve for losses and loss expenses
Incurred related to
Incurred related to
current year for
Gross paid during
prior years for the
the nine months
the nine months
Gross reserve at
nine months ended
ended
ended
Gross reserve at
December 31,
September 30,
September 30,
September 30,
September 30,
2005
2006
2006
2006
2006
(Dollars in thousands)
$
$
$
48,413
$
(1,796
)
$
46,617
12,184
(227
)
11,957
7,111
(3,760
)
3,351
58
58
980
980
248
248
8,397
(3,760
)
4,637
$
$
$
68,994
$
(5,783
)
$
63,211
(1)
The Marine line of business includes our offshore energy risks.
Net reserve for losses and loss expenses
Incurred related to
Incurred related to
current year for
Net paid during
prior years for the
the nine months
the nine months
Net reserve at
nine months ended
ended
ended
Net reserve at
December 31,
September 30,
September 30,
September 30,
September 30,
2005
2006
2006
2006
2006
(Dollars in thousands)
$
$
$
47,961
$
(1,796
)
$
46,165
10,700
(227
)
10,473
7,111
(3,760
)
3,351
58
58
980
980
248
248
8,397
(3,760
)
4,637
$
$
$
67,058
$
(5,783
)
$
61,275
(1)
The Marine line of business includes our offshore energy risks.
Table of Contents
Total gross reserve
for losses and loss
Gross case reserves
Gross IBNR
expenses
(Dollars in thousands)
$
14,759
$
31,858
$
46,617
839
11,118
11,957
14
3,337
3,351
58
58
980
980
248
248
14
4,623
4,637
$
15,612
$
47,599
$
63,211
(1)
The Marine line of business includes our offshore energy risks.
43
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
12.5%
33.3%
11.5%
12.2%
14.8%
15.4%
26.3%
27.6%
38.8%
60.9%
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
(Dollars in thousands)
$
15,799
$
36,026
1,150
5,770
16,949
41,796
(677
)
(1,427
)
$
16,272
$
40,369
44
Table of Contents
45
Table of Contents
Payment due by period
Less than
More than
Total
1 year
1-3 years
3-5 years
5 years
(Dollars in thousands)
$
63,211
$
33,479
$
21,883
$
6,151
$
1,698
214,617
13,604
27,207
23,806
150,000
3,538
222
1,658
1,658
$
281,366
$
47,305
$
50,748
$
31,615
$
151,698
(1)
The reserve for losses and loss expenses represents an estimate,
including actuarial and statistical projections at a given point
in time of an insurers or reinsurers expectations of
the ultimate settlement and administration costs of claims
incurred. As a result, it is likely that the ultimate liability
will differ from such estimates, perhaps significantly. Such
estimates are not precise in that, among other things, they are
based on predictions of future developments and estimates of
future trends in loss severity and frequency and other variable
factors such as inflation, litigation and tort reform. This
uncertainty is heightened by the short time in which the Company
has operated, thereby providing limited claims loss emergence
patterns specifically for the Company. The lack of historical
information for the Company has necessitated the use of industry
loss emergence patterns in deriving IBNR. Further, expected
losses and loss ratios are typically developed using vendor and
proprietary computer models and these expected loss ratios are a
material component in the calculation deriving IBNR. Actual loss
ratios will deviate from expected loss ratios and ultimate loss
ratios will be greater or less than expected loss ratios. During
the loss settlement period, it often becomes necessary to refine
and adjust the estimates of liability on a claim either upward
or downward. Even after such adjustments, ultimate liability
will exceed or be less than the revised estimates. The actual
payment of the reserve for losses and loss expenses will differ
from estimated payouts.
(2)
The Junior Subordinated Deferrable Debentures mature on
June 15, 2036.
46
Table of Contents
In use/
Commitment
outstanding
(Dollars in thousands)
$
150,000
$
150,000
100,000
200,000
$
450,000
$
150,000
47
Table of Contents
48
Table of Contents
loss experience for the industry in general, and for specific
lines of business or risks in particular,
natural and man-made disasters, such as hurricanes, windstorms,
earthquakes, floods, fires and acts of terrorism,
trends in the amounts of settlements and jury awards in cases
involving professionals and corporate directors and officers
covered by professional liability and directors and officers
liability insurance,
a growing trend of plaintiffs targeting property and casualty
insurers in class action litigation related to claims handling,
insurance sales practices and other practices related to the
insurance business,
development of reserves for mass tort liability, professional
liability and other long-tail lines of business,
investment results, including realized and unrealized gains and
losses on investment portfolios and annual investment yields, and
ratings and financial strength of market participants.
49
Table of Contents
50
Table of Contents
a well-developed hub for insurance and reinsurance services,
excellent professional and other business services,
a well-developed brokerage market offering worldwide risks to
Bermuda-based insurance and reinsurance companies,
political and economic stability, and
ease of access to global insurance markets.
51
Table of Contents
Focus on Short-Tail Lines of
Reinsurance.
Substantially all of our
$475.3 million in gross premiums written for the nine
months ended September 30, 2006 are in short-tail lines.
Since inception we have focused on writing short-tail
reinsurance risks, which is an area where we believe prices and
terms provide an attractive risk adjusted return and our
management team has proven expertise. We believe based on
industry data that rates for U.S. property catastrophe
insurance are at the highest levels recorded, as measured by
rate on line. Conversely, we believe that rates for most
casualty or long-tail lines of business are declining and do not
afford equivalent attractive risk adjusted returns at this point
in the underwriting cycle.
Management with Proven Industry Leadership
Experience.
Our executive management team has an
average of 21 years of industry experience and senior
expertise spanning multiple aspects of the global reinsurance
business. Edward J. Noonan, our chairman and chief executive
officer, has 27 years of industry experience and was
previously president and chief executive officer of American
Re-Insurance Company. George P. Reeth, our deputy chairman and
president, has
52
Table of Contents
30 years of industry experience and previously served as
chairman and chief executive officer of Willis Re Inc., a
division of Willis Group Holdings Limited. Conan M. Ward, our
chief underwriting officer, has 15 years of insurance
industry experience and was previously executive vice president
of the Global Reinsurance division of Axis Capital Holdings,
Limited.
Highly Skilled Underwriters and Analytical
Staff.
Since the Companys inception,
managements objective has been to target underwriting and
technical staff who can differentiate our company through
expertise and experience and who can apply analytical rigor to
our goal of building a diversified portfolio of reinsurance
risks. We currently employ eight underwriters in the property
catastrophe, international property, marine and other specialty
lines areas. These underwriters have an average of 16 years
of industry experience and have produced $475.3 million in
gross premiums written for the nine months ended
September 30, 2006 while evaluating over 3,000 submissions
and declining approximately 60% of the risks presented to them.
Our risk analytics staff is comprised of 14 individuals, many of
whom have advanced technical degrees, including four PhDs and
three Masters degrees in related fields.
Concentrated Investor Group with Strong Industry
Insight.
Aquiline Capital Partners and our five
largest shareholders have an equity ownership interest in our
company of approximately 80.0%. Members of our investor group
have been sponsoring investors in previous Bermuda insurance and
reinsurance companies (including GCR Holdings Limited; AXIS
Capital Holdings Limited; Allied World Assurance Company
Holdings, Limited; and Montpelier Re Holdings Limited) and have
participated in the formation, governance, initial public
offering and, in some cases, sale processes for these entities.
In addition, management holds an approximate 5.5% ownership
interest in the company and has similar experience in the full
range of such activities at American Re-Insurance Company,
Willis Group Holdings Limited and AXIS Capital Holdings Limited,
among other companies.
Substantial Capital with No Prior Liabilities or
Contingencies.
We commenced operations with
approximately $1.0 billion of equity capital and augmented
our equity through the placement of $150.0 million of
Junior Subordinated Deferrable Debentures in June 2006. As we
are a newly formed company, our balance sheet is unencumbered by
any historical losses relating to the 2005 hurricane season, the
events of September 11, 2001, asbestos or other legacy
exposures affecting our industry. As a result, we have no risk
that deteriorating loss reserves related to legacy exposures
prior to our formation will impact our future financial results.
Timely Response to Market Dislocation and Capacity
Shortage.
We entered the global reinsurance
market during a period of imbalance between the supply of
underwriting capacity available for reinsurance on
catastrophe-exposed property, marine and energy risks and demand
for such reinsurance coverage. Our business strategy was
responsive to these capacity needs and as of January 1,
2006 a significant portion of our current underwriting and
analytical staff was in place, including six underwriters and
four catastrophe modellers and risk analytic experts. As a
consequence, we believe we developed an industry reputation for
thorough and timely quotes for difficult technical risks. A
significant volume of property catastrophe business is written
in the January 1 renewal period and we believe the combination
of our available capacity, staffing levels and management
leadership permitted us to underwrite an attractive portfolio of
catastrophe-exposed risks at January 1, 2006. Our gross
premiums written for the three months ended March 31, 2006
were $248.2 million, of which $217.4 million was
underwritten at January 1. We believe based on
publicly-available information that our premium volume at the
January 1, 2006 renewal date exceeded that of many of our
competitors, many of whom we believe were either capacity
constrained based on their 2005 losses and reduced risk
appetites or not yet adequately organized to respond to
submissions.
Balanced, Diverse Book of Short-Tail
Reinsurance.
We seek to balance and diversify our
portfolio both by line of business and by geography. Of our
$475.3 million in gross premiums written for the nine
months ended September 30, 2006, $230.2 million
(48.4%) is property
53
Table of Contents
catastrophe reinsurance. Among other property coverages, we
wrote $57.7 million (12.1%) of property pro rata and
$41.2 million (8.7%) of property per risk. We also
underwrote $98.0 million (20.6%) of marine reinsurance and
$48.2 million (10.2%) of other specialty lines. The other
specialty lines of reinsurance we underwrite such as
aerospace, life and accident & health, terrorism and
workers compensation catastrophe coverages are
short-tail and provide us with risk diversification as they are
generally non-accumulating with our property risks. We actively
manage our exposures by geographic zone to maintain a diverse
portfolio of underlying risks. For the nine months ended
September 30, 2006, we wrote $214.2 million of gross
premiums written in the United States (45.1% of total gross
premiums written), $92.4 million in territories outside the
United States (19.4%) and $42.4 million on a worldwide
basis including the United States (8.9%). The remaining
$126.3 million of our gross premiums written (26.6%)
related to our marine and aerospace lines of business, which we
do not classify by geographic area as risks may span multiple
zones and risk exposures may not reside at fixed locations in
some cases.
Effective Use of Third-party Capital.
In May
2006, Validus entered into a collateralized quota share
retrocession treaty with Petrel Re, a newly-formed Bermuda
reinsurance company, pursuant to which Petrel Re assumes a quota
share of certain lines of marine and energy and other lines of
business underwritten by the Company for the 2006 and 2007
underwriting years. Petrel Re is a separate legal entity of
which Validus has no equity investment, management or board
interests, or related party relationships. This
sidecar relationship provides the Company with the
capacity to increase premiums written in specific programs where
favorable underwriting opportunities are seen. A specified
portion of this incremental business is then ceded to Petrel Re
and fees are earned for the services provided in underwriting
the original business. The equity investor in Petrel Re is First
Reserve Corporation, a leading private equity firm with a
25-year
history of investing exclusively in the energy industry. We
believe that the quality of our underwriting and analytical
staff, as well as our management, was one of the primary reasons
that First Reserve Corporation selected us as the cedant to
Petrel Re when it organized and funded the vehicle.
Build on Our Already Established Market
Position.
We believe that our company is widely
accepted by intermediaries and ceding clients as an important
provider of targeted short-tail reinsurance lines. We base this
belief on subjective feedback we receive from intermediaries and
ceding clients as well as objective data such as our
$475.3 million in gross premiums written for the nine
months ended September 30, 2006 or over 3,000 submissions
received from inception to date. We approach the January 1
renewal season as the incumbent on contracts which represented
$217.4 million of gross premiums written to us in 2006. Our
intention is to build on our already established market position
to further establish ourselves as a premier provider of global
specialized short-tail reinsurance.
Assess Underwriting Decisions Based on Incremental Return on
Equity.
Our principal operating objective is to
utilize our capital efficiently by underwriting short-tail
reinsurance contracts with superior risk and return
characteristics. We have developed Validus Capital Allocation
and Pricing System (VCAPS), a proprietary
computer-based system for modeling, pricing, allocating capital
and analyzing catastrophe-exposed risks, and that also enables
us to model various contract features, all on an expedited
basis. VCAPS permits us to make underwriting decisions based on
incremental return on capital.
Prudently Manage Risk Accumulations.
We
believe expertise in risk management is intrinsic to building a
successful reinsurance organization. We have employed a chief
risk officer Stuart W. Mercer since the
formation of the company. Mr. Mercer manages a staff
of 13, including four PhDs. Our primary risk measure is the
aggregate amount of contractual limits to
54
Table of Contents
which we expose our capital. While we believe this is a more
conservative risk tolerance than many of our competitors and
while it may serve to diminish our profit potential in low loss
years, we believe in higher loss years we will lose a smaller
proportion of our capital.
Employ All Forms of Capital Efficiently.
We
aim to underwrite as much attractively priced business as is
available and manage all forms of capital accordingly. In the
current hard market for catastrophe-exposed lines of
reinsurance, we have raised in excess of $1.0 billion in
common equity in our initial capitalization and then augmented
this capital with the creation of a $200.0 million
collateralized quota share sidecar facility, Petrel Re in May
2006 and the placement of $150.0 million of Junior
Subordinated Deferrable Debentures in June 2006. In addition to
the prudent use of financial leverage, we intend to actively
manage our capital by evaluating the returns available in the
short-tail reinsurance lines, assessing returns in complementary
lines of business and, where appropriate and subject to
applicable law and rating agency and other considerations,
returning excess capital to shareholders.
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
Gross
Gross
premiums
Gross
premiums
Gross
written
premiums
written
premiums
(Dollars in
written
(Dollars in
written
thousands)
(%)
thousands)
(%)
$
80,078
68.8%
$
329,043
69.2%
28,463
24.4%
97,980
20.6%
5,670
4.9%
29,100
6.1%
1,055
0.9%
14,029
3.0%
154
0.1%
1,729
0.4%
1,085
0.9%
3,403
0.7%
7,964
6.8%
48,261
10.2%
$
116,505
100.0%
$
475,284
100.0%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
55
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
Gross
Gross
premiums
premiums
written
Gross
written
Gross
(Dollars in
premiums
(Dollars in
premiums
thousands)
written (%)
thousands)
written (%)
(Dollars in thousands)
61,876
53.1%
258,280
54.3%
50,536
43.4%
129,522
27.3%
4,093
3.5%
87,482
18.4%
$
116,505
100.0%
$
475,284
100.0%
(1)
Catastrophe excess of loss is composed of catastrophe excess of
loss, aggregate excess of loss, reinstatement premium
protection, second event and third event covers.
(2)
Per Risk excess of loss is composed of per event excess of loss
and per risk excess of loss.
(3)
Proportional is composed of quota share and surplus share.
56
Table of Contents
57
Table of Contents
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
Gross
Gross
premiums
Gross
premiums
Gross
written
premiums
written
premiums
(Dollars in
written
(Dollars in
written
thousands)
(%)
thousands)
(%)
Catastrophe excess of loss(1)
$
55,191
47.4%
$
230,211
48.4%
Per Risk excess of loss(2)
21,154
18.2%
41,174
8.7%
Proportional(3)
3,733
3.2%
57,658
12.1%
80,078
68.8%
329,043
69.2%
Per Risk excess of loss(2)
32,338
27.8%
89,500
18.8%
Proportional(3)
(3,875
)
(3.3)%
8,480
1.8%
28,463
24.5%
97,980
20.6%
Per Risk excess of loss(2)
1,435
1.2%
7,756
1.6%
Proportional(3)
4,235
3.6%
21,344
4.5%
5,670
4.8%
29,100
6.1%
Catastrophe excess of loss(1)
154
0.1%
1,729
0.4%
Catastrophe excess of loss(1)
1,055
0.9%
13,926
2.9%
Per Risk excess of loss(2)
0.0%
103
0.1%
Proportional(3)
0.0%
0.0%
1,055
0.9%
14,029
3.0%
Catastrophe excess of loss(1)
1,085
0.9%
3,403
0.7%
$
116,505
100.0%
$
475,284
100.0%
(1)
Catastrophe excess of loss is composed of catastrophe excess of
loss, aggregate excess of loss, reinstatement premium
protection, second event and third event covers.
(2)
Per Risk excess of loss is composed of per event excess of loss
and per risk excess of loss.
(3)
Proportional is composed of quota share and surplus share.
58
Table of Contents
the lines of business that a particular underwriter is
authorized to write;
exposure limits by line of business;
contractual exposures and limits requiring mandatory referrals
to the Chief Underwriting Officer;
level of analysis to be performed by lines of business; and
minimum data requirements and data standards that help ensure
data integrity for purposes of modeling.
seek to reinsure ceding clients who have high quality underlying
data and good underwriting track records;
carefully evaluate the underlying data provided by cedants and
adjust such data where we believe it does not adequately reflect
the underlying exposure;
price each submission using multiple analytical models for
catastrophe-exposed risks;
ensure correct application of vendor models for each specific
data point and risk factor;
analyze the vendor model outputs utilizing the experience of our
risk analytics group;
integrate outputs from the vendor models, our underwriting
system and other data into VCAPS;
rank and select submissions using VCAPS in order to optimize our
portfolio; and
refer submissions to our Chief Underwriting Officer, Chief
Executive Officer and the Underwriting Committee of our Board of
Directors according to our underwriting guidelines.
59
Table of Contents
Ceding companies may often report insufficient data and many
reinsurers may not be sufficiently critical in their analysis of
this data. At Validus, we generally scrutinize data for
anomalies that may indicate insufficient data quality. We
address these circumstances by either declining the program or,
if the variances are manageable, by modifying the model output
and pricing to reflect insufficient data quality.
Prior to making overall adjustments for changes in climate
variables, we adjust other variables (for example, demand surge,
storm surge, and secondary uncertainty).
When pricing individual contracts, we frequently apply further
adjustments to the three vendor models. Examples include bias in
damage curves for commercial structures and occupancies and
frequency of specific perils.
VCAPS takes into account annual limits, event/franchise/annual
aggregate deductibles, and reinstatement premiums. This allows
us to more accurately evaluate treaties with a broad range of
features, including both common (reinstatement premium and
annual limits) and complex features (second or third event
coverage, aggregate excess of loss, attritional loss components
covers with varying attachment across different geographical
zones or lines of businesses and covers with complicated
structures).
VCAPS use of
100,000-year
simulation enables robust pricing of catastrophe-exposed
business. This is possible in real-time operation because we
have designed our computing hardware platform and software
environment to accommodate our significant computing needs.
60
Table of Contents
Gross
premiums
written
Gross
(Dollars in
premiums
thousands)
written (%)
$
214,178
45.1%
37,614
7.9%
28,885
6.1%
15,917
3.3%
6,510
1.4%
3,467
0.7%
92,393
19.4%
42,435
8.9%
126,278
26.6%
$
475,284
100.0%
(1)
Represents risks in two or more geographic zones.
(2)
Not classified by geographic area as marine and aerospace risks
can span multiple geographic areas and are not fixed locations
in some instances.
61
Table of Contents
Nine months ended September 30, 2006
Gross premiums written
Gross premiums
(Dollars in thousands)
written (%)
$
170,100
35.8
%
100,497
21.1
%
81,203
17.1
%
66,600
14.0
%
418,400
88.0
%
56,884
12.0
%
$
475,284
100.0
%
62
Table of Contents
At September 30, 2006
Reinsurance
Gross
recoverable
Net
(Dollars in thousands)
$
46,617
$
452
$
46,165
11,957
1,484
10,473
3,351
3,351
980
980
58
58
248
248
4,637
4,637
$
63,211
$
1,936
$
61,275
(1)
The Marine line of business includes our offshore energy risks.
At September 30, 2006
Total gross
reserve for
Gross case
losses and loss
reserves
Gross IBNR
expenses
(Dollars in thousands)
$
14,759
$
31,858
$
46,617
839
11,118
11,957
14
3,337
3,351
980
980
58
58
248
248
14
4,623
4,637
$
15,612
$
47,599
$
63,211
(1)
The Marine line of business includes our offshore energy risks.
63
Table of Contents
September 30, 2006
December 31, 2005
Fair value
Fair value
(Dollars in
(Dollars in
thousands)
Fair value (%)
thousands)
Fair value (%)
$
157,938
11.6%
$
98,187
9.7%
202,624
14.8%
53,866
5.3%
471,168
34.4%
84,695
8.4%
831,730
60.8%
236,748
23.4%
447,884
32.8%
374,052
37.1%
1,279,614
93.6%
610,800
60.5%
87,457
6.4%
398,488
39.5%
$
1,367,071
100.0%
$
1,009,288
100.0%
64
Table of Contents
September 30, 2006
December 31, 2005
Fair value
Fair value
(Dollars in
(Dollars in
thousands)
Fair value (%)
thousands)
Fair value (%)
$
341,396
41.1%
$
140,601
59.4%
5,208
0.6%
8,315
3.5%
13,958
1.7%
3,137
1.3%
360,562
43.4%
152,053
64.2%
471,168
56.6%
84,695
35.8%
$
831,730
100.0%
$
236,748
100.0%
September 30, 2006
December 31, 2005
Fair value
Fair value
(Dollars in
(Dollars in
thousands)
Fair value (%)
thousands)
Fair value (%)
$
642,790
77.3%
$
192,627
81.4%
63,774
7.7%
9,861
4.2%
60,775
7.3%
17,538
7.4%
34,400
4.1%
9,779
4.1%
21,874
2.6%
2,770
1.2%
8,117
1.0%
4,173
1.7%
$
831,730
100.0%
$
236,748
100.0%
(a)
Lower of Moodys or Standard & Poors rating
for each investment security, presented in Standard &
Poors equivalent rating.
65
Table of Contents
66
Table of Contents
1.
Validus Re is required to maintain a minimum statutory capital
and surplus equal to the greatest of:
(A)
$100,000,000,
(B)
50% of its net premiums written for general business that year
(being gross premiums written less any premiums ceded for
reinsurance, provided they do not exceed 25% of gross premiums
written), and
67
Table of Contents
(C)
15% of its net loss and loss expense provisions and other
insurance reserves;
2.
Validus Re is prohibited from declaring or paying any dividends
during any financial year if it is in breach of its minimum
solvency margin or minimum liquidity ratio or if the declaration
or payment of such dividends would cause it to fail to meet such
margin or ratio (if it has failed to meet its minimum solvency
margin or minimum liquidity ratio on the last day of any
financial year, the insurer will be prohibited, without the
approval of the BMA, from declaring or paying any dividends
during the next financial year);
3.
Validus Re is prohibited from declaring or paying in any
financial year dividends of more than 25% of its total statutory
capital and surplus (as shown on its previous statutory balance
sheet) unless it files with the BMA an affidavit stating that it
will continue to meet the required margins;
4.
Validus Re is prohibited, without the approval of the BMA, from
reducing by 15% or more its total statutory capital, as set out
in its previous years financial statements and any
application for such approval must include an affidavit stating
that it will continue to meet the required margins; and
5.
Validus Re is required, at any time it fails to meet its
solvency margin, within 30 days (45 days where total
statutory capital and surplus falls to $75 million or less)
after becoming aware of that failure or having reason to believe
that such failure has occurred, to file with the BMA a written
report containing certain information.
Relevant assets include cash and time deposits, quoted
investments, unquoted bonds and debentures, first liens on real
estate, investment income due and accrued, accounts and premiums
receivable and reinsurance balances receivable. There are
certain categories of assets which, unless specifically
permitted by the BMA, do not automatically qualify as relevant
assets, such as unquoted equity securities, investments in and
advances to affiliates and real estate and collateral loans.
The relevant liabilities are total general business insurance
reserves and total other liabilities less deferred income tax
and sundry liabilities (by interpretation, those not
specifically defined).
68
Table of Contents
69
Table of Contents
70
Table of Contents
48
Chairman of the Board of Directors
and Chief Executive Officer
50
President and Deputy Chairman
40
Executive Vice President and Chief
Financial Officer
47
Executive Vice President and Chief
Risk Officer
39
Executive Vice President and Chief
Underwriting Officer
45
Director
55
Director
46
Director
37
Director
45
Director
57
Director
46
Director
52
Director
56
Director
71
Table of Contents
72
Table of Contents
Audit
Compensation
Executive
Finance
Governance
Underwriting
ü
ü
ü
ü
ü
Chair
Chair
ü
ü
Chair
ü
ü
ü
ü
ü
ü
ü
ü
ü
Chair
ü
ü
ü
ü
ü
Chair
ü
ü
Chair
73
Table of Contents
74
Table of Contents
salary;
annual incentive compensation (bonus award); and
long-term incentive compensation (options and restricted shares).
75
Table of Contents
76
Table of Contents
The restricted shares vest on a three year cliff
basis.
Stock option grants vest equally over five years (20% each
year). The stock option grants to our named executive officers
have an exercise price of $10.00 per share, which is equal
to the price per share paid by our investors in our initial
capitalization.
Change in
pension
Non-equity
value and
incentive
non-qualified
plan
deferred
All other
Stock
Option
compen-
compensation
compen-
Year
Salary(1)
Bonus
awards
awards
sation
earnings
sation
Total
2006
2006
2006
2006
2006
(1)
The numbers presented represent earned salary.
77
Table of Contents
Option awards
Stock awards
Equity
incentive
plan
Equity
awards:
incentive
market or
plan
payout
awards:
value of
Equity
Market
number
unearned
incentive
value of
of unearned
shares,
plan
Number
shares or
shares,
units or
Number of
Number of
awards:
of shares
units of
units or
other
securities
securities
number
or units
stock
other
rights
underlying
underlying
of securities
of stock
held that
rights
that
unexercised
unexercised
underlying
Option
Option
that
have not
that have
have
options (#)
options (#)
unearned
exercise
expiration
have not
vested
not
not
exercisable
unexercisable
options (#)
price ($)
date
vested (#)
($)
vested (#)
vested ($)
78
Table of Contents
Executive
Registrant
Aggregate
contributions in
contributions in
Aggregate earnings
withdrawals/
Aggregate
last FY
last FY
in last FY
distributions
balance at last FYE
($)
($)
($)
($)
($)
79
Table of Contents
80
Table of Contents
81
Table of Contents
82
Table of Contents
each person known by us to beneficially own more than 5% of our
outstanding common shares,
each of our directors,
each of our named executive officers, and
all of our directors and executive officers as a group.
Assuming full
Pre-offering
exercise of
Unvested
underwriters
restricted
Post-offering
over-allotment
Total
shares and
Fully-diluted
Total
Fully-diluted
Total
Fully-diluted
Shares subject to
beneficial
shares subject to
total beneficial
Shares
beneficial
total beneficial
beneficial
total beneficial
Common
exercise of
ownership
exercise of
ownership
offered
ownership
ownership
ownership
ownership
shares
warrants
(%)(2)
unvested options
%(3)
hereby
(%)(2)
%(3)
(%)(2)
%(3)
24,600,000
2,725,079
26.01
%
22.16
%
12,000,000
5,116,860
15.93
%
13.88
%
15,000,000
1,652,310
16.01
%
13.50
%
12,000,000
1,331,713
12.86
%
10.81
%
by Merrill Lynch affiliates(4),(9)
10,000,000
1,812,609
11.34
%
9.58
%
10,000,000
1,233,068
10.85
%
9.11
%
300,000
49,323
0.34
%
1,664,641
1.63
%
100,000
12,331
0.11
%
832,320
0.77
%
554,881
0.45
%
554,881
0.45
%
75,000
0.07
%
554,881
0.51
%
12,000,000
5,123,655
15.93
%
13.89
%
12,000,000
5,133,848
15.94
%
13.90
%
123,307
0.12
%
0.10
%
24,600,000
2,725,079
26.01
%
22.16
%
15,000,000
1,652,310
16.01
%
13.50
%
10,000,000
1,812,609
11.34
%
9.58
%
12,000,000
1,331,713
12.86
%
10.81
%
12,000,000
5,127,053
15.94
%
13.89
%
475,000
218,937
0.68
%
4,161,604
3.94
%
83
Table of Contents
(1)
All holdings in this beneficial ownership table have been
rounded to the nearest whole share.
(2)
The percentage of beneficial ownership for all holders has been
rounded to the nearest 1/10th of a percentage. Total beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes common shares
issuable within 60 days of September 30, 2006 upon the
exercise of all options and warrants and other rights
beneficially owned by the indicated person on that date. Under
our bye-laws, if, and for so long as, the common shares of a
shareholder, including any votes conferred by controlled
shares, would otherwise represent more than 9.09% of the
aggregate voting power of all common shares entitled to vote on
a matter, including an election of directors, the votes
conferred by such shares will be reduced by whatever amount is
necessary such that, after giving effect to any such reduction
(and any other reductions in voting power required by our
bye-laws), the votes conferred by such shares represent 9.09% of
the aggregate voting power of all common shares entitled to vote
on such matter.
(3)
The percentage of beneficial ownership for all holders has been
rounded to the nearest 1/10th of a percentage.
Fully-diluted total beneficial ownership is based upon all
common shares and all common shares subject to exercise of
options and warrants outstanding at September 30, 2006.
Under our bye-laws, if, and for so long as, the common shares of
a shareholder, including any votes conferred by controlled
shares, would otherwise represent more than 9.09% of the
aggregate voting power of all common shares entitled to vote on
a matter, including an election of directors, the votes
conferred by such shares will be reduced by whatever amount is
necessary such that, after giving effect to any such reduction
(and any other reductions in voting power required by our
bye-laws), the votes conferred by such shares represent 9.09% of
the aggregate voting power of all common shares entitled to vote
on such matter.
(4)
All of the common shares beneficially owned by funds affiliated
with or managed by The Goldman Sachs Group, Inc. and Goldman,
Sachs & Co. and entities affiliated with Merrill Lynch
or managed by Merrill Lynch affiliates are non-voting.
(5)
Funds affiliated with or managed by Goldman, Sachs &
Co. are GSCP V AIV, L.P. (8,396,540 shares and 1,084,360
warrants), GS Capital Partners V Employees Fund, L.P.
(2,713,878 shares and 350,561 warrants), GS Capital
Partners V Offshore, L.P. (5,739,178 shares and 741,197
warrants), GS Capital Partners V GmbH & Co. KG
(440,490 shares and 56,968 warrants), GSCP V Institutional
AIV, LTD. (3,809,914 shares and 491,994 warrants), GS
Private Equity Partners 1999, L.P. (1,819,313.6 shares), GS
Private Equity 1999 Offshore, L.P. (290,751.4 shares), GS
Private Equity Partners 1999 Direct Investments
Funds, L.P. (52,011.2 shares), GS Private Equity Partners
2000, L.P. (768,764 shares), GS Private Equity Partners
2000 Offshore Holdings, L.P. (270,597.4 shares) and GS
Private Equity Partners 2000 Direct Investment Fund,
L.P. (298,562.3 shares). The Goldman Sachs Group, Inc., and
certain affiliates, including Goldman, Sachs & Co.
(whom we refer to in this prospectus as Goldman Sachs), which is
an underwriter for this offering and a broker-dealer, and the
Goldman Sachs Funds may be deemed to directly or indirectly
beneficially own in the aggregate 24,600,000 of our common
shares and 2,725,079 warrants which are owned directly or
indirectly by the Goldman Sachs Funds. Affiliates of The Goldman
Sachs Group, Inc. and Goldman Sachs are the general partner,
managing general partner or managing limited partner of the
Goldman Sachs Funds. Goldman Sachs is the investment manager for
certain of the Goldman Sachs Funds. Goldman Sachs is a direct
and indirect, wholly owned subsidiary of The Goldman Sachs
Group, Inc. The Goldman Sachs Group, Inc., Goldman,
Sachs & Co. and the Goldman Sachs Funds share voting
power and investment power with certain of their respective
affiliates. Stuart A. Katz is a managing director of Goldman
Sachs. Mr. Katz, The Goldman Sachs Group, Inc. and Goldman,
Sachs each disclaims beneficial ownership of the common shares
owned directly or indirectly by the Goldman Sachs Funds, except
to the extent of their pecuniary interest therein, if any. The
address for the Goldman Sachs Funds and their affiliates is 85
Broad Street, 10th Floor, New York, New York 10004.
(6)
Matthew J. Grayson and Christopher E. Watson are senior
principals at Aquiline Capital Partners and Jeffrey W. Greenberg
is the managing principal of Aquiline Capital Partners.
(7)
Funds affiliated with or managed by Vestar Capital Partners are
Vestar AIV Employees Validus Ltd. (158,234 shares and
17,386 warrants), Vestar AIV Holdings B L.P.
(125,192 shares and 13,810 warrants),
84
Table of Contents
and Vestar AIV Holdings A L.P. (14,716,574 shares and
1,621,114 warrants). Sander M. Levy is a managing director of
Vestar Capital Partners.
(8)
Funds affiliated with or managed by New Mountain are New
Mountain Partners II (Cayman), L.P.
(10,959,145.3 shares and 1,216,051 warrants), Allegheny New
Mountain Partners (Cayman), L.P. (848,124.5 shares and
94,206 warrants) and New Mountain Affiliated Investors II
(Cayman), L.P. (192,730.2 shares and 21,455 warrants). Alok
Singh is a managing director of New Mountain Capital, LLC.
(9)
Entities affiliated with Merrill Lynch or managed by Merrill
Lynch affiliates are ML Global Private Equity Fund, L.P.
(7,500,000 shares and 619,616 warrants), Merrill Lynch
Ventures L.P. 2001 (2,500,000 shares and 206,539 warrants)
and GMI Investments, Inc. (986,454 warrants).
The general partner of ML Global Private Equity Fund, L.P. is
MLGPE LTD., a Cayman Islands exempted company whose sole
shareholder is ML Global Private Equity Partners, L.P, a Cayman
Islands exempted limited partnership (ML Partners).
The investment committee of ML Partners, which is composed of
Merrill Lynch GP, Inc., a Delaware corporation, as the general
partner of ML Partners, and certain investment professionals who
are actively performing services for ML Global Private Equity
Fund, L.P., retains decision-making power over the disposition
and voting of shares of portfolio investments of ML Global
Private Equity Fund, L.P. The consent of Merrill Lynch GP, Inc.,
as ML Partners general partner, is required for any such
vote. Merrill Lynch GP, Inc. is a wholly-owned subsidiary of
Merrill Lynch Group, Inc., a Delaware corporation, which in turn
is a wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. MLGPE LTD., as general partner of ML Global Private Equity
Fund, L.P.; ML Partners, the special limited partner of ML
Global Private Equity Fund, L.P.; Merrill Lynch GP, Inc., by
virtue of its right to consent to the voting of shares of
portfolio investments of ML Global Private Equity Fund, L.P.;
the individuals who are members of the investment committee of
ML Partners; and each of Merrill Lynch Group, Inc. and Merrill
Lynch & Co., Inc., because they control Merrill Lynch
GP, Inc., may therefore be deemed to beneficially own the shares
that ML Global Private Equity Fund, L.P. holds of record or may
be deemed to beneficially own. Each such entity or individual
expressly disclaims beneficial ownership of these shares.
The general partner of Merrill Lynch Ventures L.P. 2001 is
Merrill Lynch Ventures, L.L.C. (ML Ventures), which
is a wholly-owned subsidiary of Merrill Lynch Group, Inc.
Decisions regarding the voting or disposition of shares of
portfolio investments of Merrill Lynch Ventures L.P. 2001 are
made by the management and investment committee of the board of
directors of ML Ventures, which is composed of three
individuals. Each of ML Ventures, because it is the general
partner of Merrill Lynch Ventures L.P. 2001; Merrill Lynch
Group, Inc. and Merrill Lynch & Co., Inc., because they
control ML Ventures; and the three members of the ML Ventures
investment committee, by virtue of their shared decision making
power, may be deemed to beneficially own the shares held by
Merrill Lynch Ventures L.P. 2001. Such entities and individuals
expressly disclaim beneficial ownership of the shares that
Merrill Lynch Ventures L.P. 2001 holds of record or may be
deemed to beneficially own.
Merrill Lynch Ventures L.P. 2001 disclaims beneficial ownership
of the shares that ML Global Private Equity Fund, L.P. holds of
record or may be deemed to beneficially own. ML Global Private
Equity Fund, L.P. disclaims beneficial ownership of the shares
that Merrill Lynch Ventures, L.P. 2001 holds of record or may be
deemed to beneficially own. The address for the Merrill Lynch
Funds and their affiliates is 4 World Financial Center,
23rd Floor, New York, NY 10080. Mandakini Puri is a
managing director of Merrill Lynch Global Private Equity.
(10)
Unvested restricted shares held by our named executive officers
and included in common shares accumulate dividends and may be
voted. Unvested restricted shares held by our named executive
officers are Mr. Noonan (369,920 shares),
Mr. Reeth (184,960 shares), Mr. Consolino
(123,307 shares), Mr. Mercer (123,307 shares) and
Mr. Ward (123,307 shares).
(11)
See Management Directors for biographies
of the directors, including their relationships with certain
beneficial owners of common shares listed in this table.
(12)
Includes shares, options and warrants beneficially owned by
Aquiline Financial Services Fund L.P. and its management company
and affiliated companies. Mr. Grayson, Mr. Greenberg
and Mr. Watson each
85
Table of Contents
disclaim existence of a group and beneficial ownership of the
shares, options and warrants owned by Aquiline Financial
Services Fund L.P. and its management company and affiliated
companies.
(13)
Includes shares, options and warrants beneficially owned by
entities affiliated with or managed by Vestar Capital Partners.
Mr. Levy disclaims existence of a group and disclaims
beneficial ownership of the shares, options and warrants owned
by entities affiliated with or managed by Vestar Capital
Partners.
(14)
Includes shares, options and warrants beneficially owned by
entities affiliated with Merrill Lynch or managed by Merrill
Lynch affiliates. Ms. Puri disclaims existence of a group
and disclaims beneficial ownership of the shares, options and
warrants owned by Merrill Lynch or managed by Merrill Lynch
affiliates.
(15)
Includes shares, options and warrants beneficially owned by
entities affiliated with or managed by New Mountain Capital LLC.
Mr. Singh disclaims existence of a group and disclaims
beneficial ownership of the shares, options and warrants owned
by entities affiliated with or managed by New Mountain Capital
Group, LLC.
(16)
Excludes shares as to which beneficial ownership is disclaimed.
(17)
The addresses of each beneficial owner are as follows: Funds
affiliated with or managed by Goldman Sachs & Company,
c/o Goldman, Sachs & Co., 85 Broad Street, New
York, NY 10004; Aquiline Financial Services Fund L.P.,
c/o Aquiline Capital Partners LLC, 535 Madison Avenue, New
York, NY 10022; Funds affiliated with or managed by Vestar,
c/o Vestar Capital Partners, 245 Park Avenue,
41st Floor, New York, NY 10167; Funds affiliated with or
managed by New Mountain Capital, LLC, c/o New Mountain Capital,
LLC, 787 Seventh Avenue, 49th Floor, New York, NY 10019;
Funds Affiliated with or managed by Merrill Lynch Global Private
Equity, c/o Merrill Lynch Global Private Equity, 4 World
Financial Center, 23rd Floor, New York, NY 10080; Caisse de
Depot et Placement de Quebec, Centre CDP Capital, 1000, place
Jean-Paul-Riopolle, Montreal Quebec, Canada H2Z 2B3; The
addresses of each other beneficial owner listed are
c/o Validus Holdings Ltd., 19 Par-La-Ville Road, Hamilton
HM11 Bermuda.
86
Table of Contents
Sponsors.
Our shareholders agreement defines
Aquiline, Goldman Sachs Capital Partners, Vestar Capital
Partners, New Mountain Capital and Merrill Lynch Global Private
Equity as Sponsors. So long as a Sponsor continues
to beneficially hold at least 1/3 of its original shares of
common stock, a Sponsor is deemed to be a Qualified
Sponsor. The shareholders agreement permits Qualified
Sponsors to make up to four demand registrations.
Major Investors.
Our shareholders agreement
defines a Major Investor as a Qualified Sponsor and any other
party who (a) either acquired $100 million of our
common stock at our formation or (b) beneficially owns at
least 10% of our company on a fully-diluted basis at our
formation or prior to our initial public offering. As of the
date hereof, the Qualified Sponsors named above and Caisse de
Depot et Placement de Quebec are Major Investors and
would be entitled to two demand registrations.
87
Table of Contents
88
Table of Contents
89
Table of Contents
90
Table of Contents
Warrants to acquire
Percentage of fully
common shares(1)
diluted shares(1)
Exercise price
Expiration
5,116,860
4.15%
$
10.00
December 12, 2015
2,725,079
2.21%
10.00
December 12, 2015
1,812,609
1.47%
10.00
December 12, 2015
1,652,310
1.34%
10.00
December 12, 2015
1,331,713
1.08%
10.00
December 12, 2015
1,233,068
1.00%
10.00
December 12, 2015
123,307
0.10%
10.00
December 12, 2015
49,323
0.04%
10.00
December 12, 2015
12,330
0.01%
10.00
December 12, 2015
6,795
0.01%
10.00
December 12, 2015
16,988
0.01%
10.00
December 12, 2015
10,193
0.01%
10.00
December 12, 2015
706,235
0.57%
10.00
December 12, 2015
14,796,810
12.00%
(1)
Warrants for Aquiline Financial Services Fund L.P., Caisse de
Depot et Placement de Quebec and Edward J. Noonan have been
rounded up to the next full share to better reflect total
outstanding warrants. Other warrants reflected in the table have
been rounded to the nearest full share.
(2)
Our director, John J. Hendrickson, is the Managing Director of
SFRi Consultants LLC.
91
Table of Contents
a duty to act in good faith in the best interests of such
company;
a duty not to make a personal profit from opportunities that
arise from the office of director;
a duty to avoid conflicts of interest; and
a duty to exercise powers for the purpose for which such powers
were intended.
to act honestly and in good faith, with a view to the best
interests of such company; and
to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances.
92
Table of Contents
93
Table of Contents
94
Table of Contents
95
Table of Contents
96
Table of Contents
at any time that an Event of Default (defined to include payment
and covenant defaults on the Junior Subordinated Deferrable
Debentures and the occurrence of certain bankruptcy events
affecting us) has occurred and is continuing, or
at any time that any of our material insurance subsidiaries
receives a financial strength rating from A.M. Best of B or
below (or if AM Best withdraws its rating of any of our material
insurance subsidiaries), or
during any period in which we have elected to defer interest
payments on the Junior Subordinated Deferrable Debentures.
97
Table of Contents
98
Table of Contents
99
Table of Contents
100
Table of Contents
101
Table of Contents
102
Table of Contents
Limitation of benefits.
An insurance
enterprise resident in Bermuda generally will be entitled to the
benefits of the Bermuda Treaty only if (i) more than 50% of
its shares are owned beneficially, directly or indirectly, by
individual residents of the U.S. or Bermuda, or
U.S. citizens; and (ii) its income is not used in
substantial part, directly or indirectly, to make
disproportionate distributions to, or to meet certain
liabilities of, persons who are neither resident of the
U.S. or Bermuda nor U.S. citizens. The 50% test is
generally based on ultimate beneficial ownership of individuals,
i.e.
, by looking through any shareholders that are
entities, such as Validus. We believe that Validus Re is
eligible for the benefits of the Bermuda Treaty. Because of the
factual and legal uncertainties regarding the residency and
citizenship of the direct and indirect shareholders of Validus,
however, we cannot assure you that Validus Re is, or will
continue to be, entitled to the benefits of the Bermuda Treaty.
Premium and investment income.
The Bermuda
Treaty clearly applies to premium income, but may be construed
as not protecting investment income. Several practitioners and
commentators have asserted that, as a policy matter, the Bermuda
Treaty should be construed to protect investment income to the
same extent as premium income. Because there are no cases or
rulings interpreting this treaty language, the answer is unclear
and Cahill is unable to render an opinion on this issue. If
Validus Re were considered to be engaged in a U.S. trade or
business and were entitled to the benefits of the Bermuda Treaty
in general, but the Bermuda Treaty were found not to protect
investment income, a portion of Validus Res investment
income could be subject to U.S. federal income tax.
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
107
Table of Contents
108
Table of Contents
109
Table of Contents
110
Table of Contents
Number of
common shares
No
Full
Per share
exercise
exercise
$
$
$
$
$
$
$
$
$
$
$
$
111
Table of Contents
112
Table of Contents
113
Table of Contents
114
Table of Contents
115
Table of Contents
19 Par-La-Ville Road, Third Floor
Hamilton HM11 Bermuda
(441) 278-9000
116
Table of Contents
UNITED STATES FEDERAL SECURITIES LAWS AND OTHER
MATTERS
117
Table of Contents
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-17
F-18
F-19
F-20
F-21
F-1
Table of Contents
Hamilton, Bermuda
March 22, 2006
F-2
Table of Contents
CONSOLIDATED BALANCE SHEET
As at December 31, 2005
(Expressed in thousands of U.S. dollars, except share
amounts)
F-3
Table of Contents
CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE LOSS
For the Period from October 19, 2005 (Date of
Incorporation) to December 31, 2005
(Expressed in thousands of U.S. dollars)
Period ended
December 31,
2005
$
2,032
39
$
2,071
2,367
49,122
290
$
(51,779
)
$
(49,708
)
105
$
(49,603
)
102,240,600
102,240,600
$
(0.49
)
$
(0.49
)
F-4
Table of Contents
CONSOLIDATED STATEMENT OF SHAREHOLDERS
EQUITY
For the Period from October 19, 2005 (Date of
Incorporation) to December 31, 2005
(Expressed in thousands of U.S. dollars)
Period ended
December 31,
2005
$
10,224
$
10,224
$
1,012,182
154
136
(48,378
)
75,091
$
1,039,185
$
105
$
105
$
$
(49,708
)
$
(49,708
)
$
999,806
F-5
Table of Contents
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Period from October 19, 2005 (Date of
Incorporation) to December 31, 2005
(Expressed in thousands of U.S. dollars)
Period ended
December 31,
2005
$
(49,708
)
(39
)
(937
)
290
49,122
(3,233
)
(1,038
)
1,167
(4,376
)
(2,747,059
)
(450
)
344,441
1,792,900
(610,168
)
1,013,032
1,013,032
$
398,488
F-6
Table of Contents
1.
Nature of
the business
2.
Significant
accounting policies
F-7
Table of Contents
2.
Significant
accounting
policies
(Continued)
(f)
Earnings
per share
3.
Investments
F-8
Table of Contents
3.
Investments
(Continued)
Period ended
December 31,
2005
$
1,266
834
2,100
(68
)
$
2,032
Period ended
December 31,
2005
$
39
39
105
$
144
Estimated
Amortized
Unrealized
Unrealized
fair
cost
gain
loss
value
$
98,136
$
82
$
(31
)
$
98,187
53,807
83
(24
)
53,866
84,700
70
(75
)
84,695
236,643
235
(130
)
236,748
374,052
374,052
$
610,695
$
235
$
(130
)
$
610,800
Table of Contents
3.
Investments
(Continued)
December 31, 2005
Estimated
fair
% of
value
total
$
192,627
81.4%
9,861
4.2%
17,538
7.4%
9,779
4.1%
2,770
1.2%
4,173
1.7%
$
236,748
100.00%
(a)
Carried at the lower of Standard & Poors or
Moodys rating, presented in Standard &
Poors equivalent rating.
December 31, 2005
Estimated
Amortized
fair
cost
value
$
140,508
$
140,601
8,301
8,315
3,134
3,137
151,943
152,053
84,700
84,695
$
236,643
$
236,748
4.
Share
capital
(
a)
Authorized
and issued
F-10
Table of Contents
(
b)
Warrants
(
c)
Dividends
5.
Retirement
plans
F-11
Table of Contents
6.
Stock
compensation plans
Weighted average
Weighted average
grant date fair
grant date
Options
value
exercise price
$
$
3,880,216
4.20
10.00
3,880,216
$
4.20
$
10.00
$
$
F-12
Table of Contents
Weighted
Restricted
average grant
shares
date fair value
$
1,108,633
10.00
1,108,633
$
10.00
$
F-13
Table of Contents
December 31,
2005
$
122
137
152
$
411
F-14
Table of Contents
Period ended
December 31,
2005
$
(49,708
)
102,240,600
102,240,600
$
(0.49
)
$
(0.49
)
F-15
Table of Contents
F-16
Table of Contents
CONSOLIDATED BALANCE SHEETS
As at September 30, 2006 (Unaudited) and
December 31, 2005
(Expressed in thousands of U.S. dollars, except share
amounts)
September 30,
December 31,
2006
2005
(unaudited)
$
831,730
$
236,748
447,884
374,052
87,457
398,488
1,367,071
1,009,288
177,634
30,611
34,300
1,936
5,572
3,233
7,766
1,932
$
1,624,890
$
1,014,453
$
244,172
$
63,211
22,298
12,944
10,558
14,647
150,000
$
503,183
$
14,647
$
10,234
$
10,224
1,045,947
1,039,185
1,189
105
64,337
(49,708
)
1,121,707
999,806
$
1,624,890
$
1,014,453
F-17
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
For the Three Months and Nine Months Ended
September 30, 2006 (Unaudited)
(Expressed in thousands of U.S. dollars, except share
amounts)
Three months ended
Nine months ended
September 30,
September 30,
2006
2006
(unaudited)
(unaudited)
$
116,505
$
475,284
(38,892
)
(64,051
)
77,613
411,233
14,885
(209,872
)
92,498
201,361
16,272
40,369
(154
)
(894
)
369
1,061
108,985
241,897
11,577
67,058
10,638
24,574
13,641
31,007
3,453
5,136
77
39,309
127,852
$
69,676
$
114,045
7,353
190
154
894
$
77,183
$
115,129
102,344,600
102,331,833
102,623,533
102,511,504
$
0.68
$
1.11
$
0.68
$
1.11
F-18
Table of Contents
CONSOLIDATED STATEMENT OF SHAREHOLDERS
EQUITY
For the Nine Months Ended September 30, 2006
(Unaudited)
(Expressed in thousands of U.S. dollars)
Nine months
ended
September 30,
2006
(unaudited)
$
10,224
10
$
10,234
$
1,039,185
1,030
2,649
77
3,006
$
1,045,947
$
105
1,084
$
1,189
$
(49,708
)
114,045
$
64,337
$
1,121,707
F-19
Table of Contents
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2006
(Unaudited)
(Expressed in thousands of U.S. dollars)
Nine months ended
September 30,
2006
(unaudited)
$
114,045
5,657
894
77
(7,568
)
(177,634
)
(30,611
)
(34,300
)
(1,936
)
(2,338
)
(2,085
)
244,172
63,211
22,298
(4,090
)
189,792
361,507
(910,714
)
(98,906
)
(648,113
)
146,250
1,040
147,290
(311,031
)
398,488
$
87,457
$
3,401
F-20
Table of Contents
F-21
Table of Contents
F-22
Table of Contents
F-23
Table of Contents
Three months ended
Nine months ended
September 30,
September 30,
2006
2006
$
15,799
$
36,026
1,150
5,770
16,949
41,796
(677
)
(1,427
)
$
16,272
$
40,369
Three months ended
Nine months ended
September 30,
September 30,
2006
2006
$
1
$
31
(155
)
(925
)
(154
)
(894
)
7,507
1,084
$
7,353
$
190
Amortized
Unrealized
Unrealized
Estimated
cost
gain
loss
fair value
$
157,906
$
364
$
(332
)
$
157,938
202,446
590
(412
)
202,624
470,181
1,682
(695
)
471,168
830,533
2,636
(1,439
)
831,730
447,893
(9
)
447,884
$
1,278,426
$
2,636
$
(1,448
)
$
1,279,614
F-24
Table of Contents
Amortized
Unrealized
Unrealized
Estimated
cost
gain
loss
fair value
$
98,136
$
82
$
(31
)
$
98,187
53,807
83
(24
)
53,866
84,700
70
(75
)
84,695
236,643
235
(130
)
236,748
374,052
374,052
$
610,695
$
235
$
(130
)
$
610,800
September 30, 2006
December 31, 2005
Estimated
% of
Estimated
% of
fair value
total
fair value
total
$
642,790
77.3%
$
192,627
81.4%
63,774
7.7%
9,861
4.2%
60,775
7.3%
17,538
7.4%
34,400
4.1%
9,779
4.1%
21,874
2.6%
2,770
1.2%
8,117
1.0%
4,173
1.7%
$
831,730
100.0%
$
236,748
100.0%
(a)
Carried at the lower of Standard & Poors or
Moodys rating, presented in Standard &
Poors equivalent rating.
F-25
Table of Contents
September 30, 2006
December 31, 2005
Amortized
Estimated
Amortized
Estimated
cost
fair value
cost
fair value
$
341,433
$
341,396
$
140,508
$
140,601
4,966
5,208
8,301
8,315
13,953
13,958
3,134
3,137
360,352
360,562
151,943
152,053
470,181
471,168
84,700
84,695
$
830,533
$
831,730
$
236,643
$
236,748
Table of Contents
Three months ended
Nine months ended
September 30,
September 30,
2006
2006
$
50,872
$
11,577
67,058
11,577
67,058
(1,174
)
(5,783
)
(1,174
)
(5,783
)
61,275
61,275
1,936
1,936
$
63,211
$
63,211
Three months ended
Nine months ended
September 30, 2006
September 30, 2006
Written
Earned
Written
Earned
$
$
$
$
116,505
116,930
475,284
231,112
(38,892
)
(24,432
)
(64,051
)
(29,751
)
$
77,613
$
92,498
$
411,233
$
201,361
F-27
Table of Contents
F-28
Table of Contents
F-29
Table of Contents
Weighted
Weighted
average
average grant
grant date
Options
date fair value
exercise price
3,880,216
$
4.20
$
10.00
457,099
4.20
10.00
4,337,315
$
4.20
$
10.00
$
$
4,337,315
$
4.20
$
10.00
64,737
4.28
10.19
4,402,052
$
4.20
$
10.00
$
$
F-30
Table of Contents
Weighted
Restricted
average grant
shares
date fair value
1,108,633
$
10.00
130,600
10.00
1,239,233
$
10.00
$
1,239,233
$
10.00
18,495
10.19
1,257,728
$
10.00
$
F-31
Table of Contents
In use/
Commitment
outstanding
$
150,000
$
150,000
100,000
200,000
$
450,000
$
150,000
F-32
Table of Contents
September 30,
2006
$
222
829
829
829
829
$
3,538
F-33
Table of Contents
Three months
Nine months
ended Sept. 30,
ended Sept. 30,
2006
2006
$
69,676
$
114,045
102,344,600
102,331,833
278,933
179,671
102,623,533
102,511,504
$
0.68
$
1.11
$
0.68
$
1.11
F-34
Table of Contents
Accumulation/accumulating
All the risks that could be affected by the same event or all
the underwritten lines regarding the same risk.
Acquisition expenses or acquisition costs
The aggregate expenses incurred by a company acquiring new
business, including commissions, brokerage and U.S. federal
excise tax.
Additional case reserves
Additional case reserves represent managements estimate of
reserves for claims and claim expenses that are allocated to
specific contracts, less paid and reported losses by the client.
Aggregate excess of loss
A form of excess of loss reinsurance in which the excess and the
limit of liability are expressed as annual aggregate amounts.
Attachment point
The dollar amount of loss (per occurrence or in the aggregate,
as the case may be) above which excess of loss reinsurance
becomes operative.
Broker/Intermediary
An intermediary who negotiates contracts of insurance or
reinsurance, receiving a commission for placement and other
services rendered, between (1) a policyholder and a primary
insurer, on behalf of the insured party, (2) a primary
insurer and reinsurer, on behalf of the primary insurer, or
(3) a reinsurer and a retrocessionaire, on behalf of the
reinsurer.
Capacity or underwriting capacity
The percentage of surplus, or the dollar amount of exposure,
that an insurer or reinsurer is willing or able to place at
risk. Capacity may apply to a single risk, a program, a line of
business or an entire book of business. Capacity may be
constrained by legal restrictions, corporate restrictions or
indirect restrictions. Reinsurance serves to increase a
companys underwriting capacity by reducing its exposure
from particular risks.
Case reserves
Loss reserves, established with respect to specific, individual
reported claims.
Casualty insurance or reinsurance
Insurance or reinsurance that is primarily concerned with the
losses caused by injuries to third persons and their property
(in other words, persons other than the policyholder) and the
legal liability imposed on the insured resulting therefrom. Also
referred to as liability insurance.
Catastrophe
A severe loss, typically involving multiple claimants. Common
perils include earthquakes, hurricanes, hailstorms, severe
winter weather, floods, fires, tornadoes, explosions and other
natural or man-made disasters. Catastrophe losses may also arise
from acts of war, acts of terrorism and political instability.
G-1
Table of Contents
Catastrophe excess of loss reinsurance
A form of excess of loss reinsurance that, subject to a
specified limit, indemnifies the ceding company for the amount
of loss in excess of a specified retention with respect to an
accumulation of losses resulting from a catastrophe.
Cede, cedant, ceding company
When a party reinsures its liability with another, it
cedes business and is referred to as the
cedant or ceding company.
Claim
Request by an insured or reinsured for indemnification by an
insurance company or a reinsurance company for loss incurred
from an insured peril or event.
Class 4 reinsurer
Those underwriting direct excess liability
and/or
property catastrophe reinsurance risk in Bermuda. The minimum
capital and surplus requirement is $100,000,000 and the
actuarial certification requirement is yearly. This class is
reserved for highly capitalized companies.
Combined ratio
The combined ratio is the sum of the losses and expenses ratio
and the expense ratio. A combined ratio below 100% generally
indicates profitable underwriting prior to the consideration of
investment income. A combined ratio over 100% generally
indicates unprofitable underwriting prior to the consideration
of investment income.
Demand surge
The temporary inflation of costs for building materials and
labor resulting from increased demand for rebuilding services in
the aftermath of a disaster.
Excess of loss
Insurance or reinsurance that indemnifies the insured or
reinsured against all or a specified portion of losses on
underlying insurance policies in excess of a specified amount,
which is called a level or retention.
Also known as
non-proportional reinsurance
. Excess of
loss reinsurance is written in layers. A reinsurer or group of
reinsurers accepts a band of coverage up to a specified amount.
The total coverage purchased by the cedant is referred to as a
program and will typically be placed with
predetermined reinsurers in pre-negotiated layers. Any liability
exceeding the outer limit of the program reverts to the ceding
company, which also bears the credit risk of a reinsurers
insolvency.
Excess of loss reinsurance
A generic term describing reinsurance that indemnifies the
reinsured against all or a specified portion of losses on
underlying insurance policies in excess of a specified amount,
which is called a level or retention.
Also known as non-proportional reinsurance. Excess of loss
reinsurance is written in layers. A reinsurer or group of
reinsurers accepts a bank of coverage up to a specified amount.
The total coverage purchased by the
G-2
Table of Contents
cedant is referred to as a program and will
typically be placed with predetermined reinsurers in
pre-negotiated layers. Any liability exceeding the out limit of
the program reverts to the ceding company, which also bears the
credit risk of a reinsurers insolvency.
Exclusions
Those risks, perils, or classes of insurance with respect to
which the reinsurer will not pay loss or provide reinsurance,
notwithstanding the other terms and conditions of reinsurance.
Expense ratio
The ratio of the sum of the acquisition expenses and operational
expenses to net premiums earned.
First-Party Risk
Property risk and other reinsurance lines commonly referred to
as short-tail in nature.
Frequency
The number of claims occurring during a given coverage period.
Gross premiums written
Total premiums for insurance written and assumed reinsurance
during a given period.
Incumbent
A reinsurer who is on risk on the policy that is being renewed.
Incurred but not reported (IBNR)
Reserves for estimated losses that have been incurred by
insureds and reinsureds but not yet reported to the insurer or
reinsurer including unknown future developments on losses that
are known to the insurer or reinsurer.
Industry loss warranty
A reinsurance contract in which the payout is dependent on two
triggers. The first trigger is the insured loss of the purchaser
and the second is the industry wide loss. Both triggers need to
be impacted for a payout to occur.
Layer
The interval between the retention or attachment point and the
maximum limit of indemnity for which a reinsurer is responsible.
Limits
The maximum amount that an insurer or reinsurer will insure or
reinsure for a specified risk or portfolio of risks. The term
also refers to the maximum amount of benefit payable for a given
claim or occurrence.
Long-tail
An insurance coverage that has a lengthy period between the
occurrence and final settlement of a claim.
Loss; losses
An occurrence that is the basis for submission
and/or
payment of a claim. Whether losses are covered, limited or
excluded from coverage is dependent on the terms of the policy.
G-3
Table of Contents
Loss adjustment expense
The expenses of settling claims, including legal and other fees
and the portion of general expenses allocated to claim
settlement costs.
Loss emergence patterns
A development pattern used to project current reported or paid
loss amounts to their ultimate settlement value or amount.
Loss reserves
See Reserves.
Losses and loss expenses ratio; Loss ratio
The ratio of incurred losses and loss expenses to net premiums
earned. Incurred losses include a provision for IBNR.
Losses occurring basis
Insurance or Reinsurance coverage with respect to losses that
occur during the policy period.
Net premiums earned
The portion of net premiums written during or prior to a given
period that was actually recognized as income during such period.
Net premiums written
Gross premiums written for a given period less premiums ceded to
reinsurers and retrocessionaires during such period.
Non-proportional reinsurance
See Excess of loss reinsurance.
Perils
This term refers to the causes of possible loss in
property
insurance
and reinsurance, such as fire, windstorm,
collision, hail, etc. In casualty insurance and reinsurance, the
term hazard is more frequently used.
Premiums; written, earned and unearned
The amount charged during the term on policies and contracts
issued, renewed or reinsured by an insurance company or
reinsurance company. Written premium is premium registered on
the books of an issuer or reinsurer at the time a policy is
issued and paid for. Unearned premium is premium for a future
exposure period. Earned premium is written premium minus
unearned premium for an individual policy.
Probable Maximum Loss (PML)
The maximum amount of loss expected from a reinsurance contract
measured over various return periods (e.g., once in
100 years) or measured probabilistically (e.g., 1%
probability).
Property catastrophe insurance
Insurance that provides coverage to a person with an insurable
interest in tangible property for that persons property
loss, damage or loss of use resulting from a catastrophic event.
Property insurance or reinsurance
Insurance or reinsurance that provides coverage to a person with
an insurable interest in tangible property for that
persons property loss, damage or loss of use.
G-4
Table of Contents
Proportional reinsurance
A generic term describing all forms of reinsurance in which the
reinsurer shares a proportional part of the original premiums
and losses of the reinsured. Also known as pro rata reinsurance,
quota share reinsurance or participating reinsurance. In
proportional reinsurance the reinsurer generally pays the ceding
company a ceding commission. The ceding commission generally is
based on the ceding companys cost of acquiring the
business being reinsured (including commissions, premium taxes,
assessments and miscellaneous administrative expenses) and also
may include a profit factor.
Pro rata
Pro Rata Reinsurance is a type of reinsurance whereby the
reinsurer, in return for a predetermined portion or share of the
insurance premium charged by the ceding company, indemnifies the
ceding company against a predetermined portion of losses and
loss adjustment expenses of the ceding company under the covered
policies or policy.
Quota share reinsurance
A form of
proportional reinsurance
in which the reinsurer
assumes an agreed percentage of each insurance being reinsured
and shares all premiums and losses in accordance with the
reinsured percentage. See also Proportional
Reinsurance and Surplus Share Reinsurance.
Rate on line
The premium paid by an insurer to a reinsurer as a percentage of
the reinsurers exposure.
Reinstatement premium
The premium charged for the restoration of the reinsurance limit
of a catastrophe contract to its full amount after payment by
the reinsurer of losses as a result of an occurrence.
Reinstatement premium protection
Coverage offered to protect the reinsured against the
contingency of having to pay reinstatement premiums.
Reinsurance
An arrangement in which an insurance company, the reinsurer,
agrees to indemnify another insurance or reinsurance company,
the ceding company, against all or a portion of the insurance or
reinsurance risks underwritten by the ceding company under one
or more policies. Reinsurance can provide a ceding company with
several benefits, including a reduction in net liability on
individual risks and catastrophe protection from large or
multiple losses. Reinsurance also provides a ceding company with
additional underwriting capacity by permitting it to accept
larger risks and write more business than would be possible
without a concomitant increase in capital and surplus, and
facilitates the maintenance of acceptable financial ratios by
the ceding company.
G-5
Table of Contents
Reinsurance treaties
The reinsurance of a specified type or category of risk defined
in a reinsurance agreement between an insurer or other reinsured
and a reinsurer. Typically, in treaty reinsurance, the primary
insurer or reinsured is obligated to offer and the reinsurer is
obligated to accept a specified portion of all of that type or
category of risks originally written by the insurer or reinsured.
Reserves or loss reserves
Liabilities established by insurers and reinsurers to reflect
the estimated costs of claim payments and the related expenses
that the insurer or reinsurer will ultimately be required to pay
in respect of insurance or reinsurance it has written. Reserves
are established for losses, for loss adjustment expenses
(LAE) and for unearned premiums. Loss reserves
consist of case reserves, or reserves established
with respect to individual reported claims, and IBNR
reserves. For reinsurers, LAE reserves are generally not
significant because substantially all of the LAE associated with
particular claims are incurred by the primary insurer and
reported to reinsurers as losses. Unearned premium reserves
constitute the portion of premium paid in advance for insurance
or reinsurance that has not yet been provided. See also
Claim reserves.
Retention
The amount or portion of risk that an insurer retains for its
own account. Losses in excess of the retention level up to the
outer limit of the program, if any, are paid by the reinsurer.
In proportional treaties, the retention may be a percentage of
the original policys limit. In excess of loss business,
the retention is a dollar amount of loss, a loss ratio or a
percentage.
Retrocessional reinsurance; retrocessionaire
The transaction whereby a reinsurer cedes to another reinsurer
(the retrocessionaire) all or part of the
reinsurance it has assumed. Retrocessional reinsurance does not
legally discharge the ceding reinsurer from its liability with
respect to its obligations to the reinsured. Reinsurance
companies cede risks to retrocessionaires for reasons similar to
those that cause primary insurers to purchase reinsurance: to
reduce net liability on individual risks, to protect against
catastrophic losses, to stabilize financial ratios and to obtain
additional underwriting capacity.
Risk excess of loss reinsurance
A form of excess of loss reinsurance that covers a loss of the
reinsured on a single risk in excess of its
retention level, rather than the aggregate losses for all
covered risks, as does catastrophic excess of loss reinsurance.
A risk in this context might mean the insurance
coverage on one building or a group of buildings or the
insurance coverage under a single policy that the reinsured
treats as a single risk.
G-6
Table of Contents
Risks
A term used to denote the physical units of property at risk or
the object of insurance protection that are not perils or
hazards. Also defined as chance of loss or uncertainty of loss.
Risks attaching basis
Contracts that cover claims that arise on underlying insurance
policies that incept during the term of the reinsurance contract.
Saffir-Simpson Hurricane Scale
The Saffir-Simpson Hurricane Scale is a 1-5 rating based on the
hurricanes present intensity. This is used to give an
estimate of the potential property damage and flooding expected
along the coast from a hurricane landfall. Wind speed is the
determining factor in the scale, as follows:
Severity
The magnitude of claims occurring during a given coverage period.
Short-tail
An insurance coverage that has a brief period between the
occurrence and payment of a claim.
Sidecar
Special purpose reinsurer created to provide quota share
retrocession to an insurer or reinsurer for specific lines or
risks.
Specialty lines
Lines of insurance and reinsurance that provide coverage for
risks that are often unusual or difficult to place and do not
fit the underwriting criteria of standard commercial products
carriers.
Submission
An unprocessed application for (i) insurance coverage
forwarded to a primary insurer by a prospective policyholder or
by a broker on behalf of such prospective policyholder,
(ii) reinsurance coverage forwarded to a reinsurer by a
prospective ceding insurer or by a broker or intermediary on
behalf of such prospective ceding insurer or
(iii) retrocessional coverage forwarded to a
retrocessionaire by a prospective ceding reinsurer or by a
broker or intermediary on behalf of such prospective ceding
reinsurer.
Surplus share reinsurance
A form of pro rata reinsurance (proportional) indemnifying the
ceding company against loss to the extent of
G-7
Table of Contents
the surplus insurance liability ceded, on a share basis similar
to quota share. See also Proportional Reinsurance
and Quota Share Reinsurance.
Third-party liability
The obligation to compensate another person harmed or injured by
a negligent or wrongful act or omission. A person other than the
parties to a liability policy (
i.e
., not the insurer nor
the policyholder) is a third-party. When an insured (the first
party) causes a loss, the insurer (the second party) assumes the
insureds liability up to the policy limit.
Treaty
A reinsurance agreement covering a book or class of business
that is automatically accepted on a bulk basis by a reinsurer. A
treaty contains common contract terms along with a specific risk
definition, data on limit and retention, and provisions for
premium and duration.
Underwriting
The insurers or reinsurers process of reviewing
submissions for insurance coverage, deciding whether to accept
all or part of the coverage requested and determining the
applicable premiums.
Underwriting cycle
An insurance business cycle, where rates and premiums (and
therefore profits) alternately rise and fall, rather than
growing smoothly. Causes of these cycles are interest rate and
stock market fluctuations, flow of excessive new capital into
the insurance industry during profitable years, social and
economic inflation, catastrophic losses, and competition.
U.S. GAAP
Accounting principles generally accepted in the United States,
as defined by the Financial Accounting Standards Board. U.S.
GAAP is the method of accounting to be used by the Company for
reporting to shareholders.
G-8
Table of Contents
Table of Contents
$
21,400
*
*
*
*
*
*
*
*
$
*
*
To be provided by amendment.
II-1
Table of Contents
Exhibit
1
.1
Form of Underwriting Agreement*
3
.1
Memorandum of Association dated
October 10, 2005
3
.2
Amended and Restated Bye-laws*
4
.1
Specimen Common Share Certificate*
4
.2
Certificate of Deposit of
Memorandum of Increase of Share Capital dated October 28,
2005
5
.1
Opinion of Conyers Dill &
Pearman dated December 12, 2005*
8
.1
Opinion of Cahill
Gordon & Reindel
llp
as to certain tax matters*
8
.2
Opinion of Conyers Dill &
Pearman as to certain tax matters*
10
.1
Shareholders Agreement dated
as of December 12, 2005 among Validus Holdings, Ltd. and
the Shareholders Named Herein
10
.2
Founder Agreement with Aquiline
Capital Partners LLC dated December 7, 2005
10
.3
Advisory Agreement with Aquiline
Capital Partners LLC dated December 7, 2005
10
.4
Form of Warrant
10
.5
Letter of Credit Facility
Agreement*
10
.6
364-Day
Revolving Credit Facility Agreement*
10
.7
First Amendment to each of the
above two facilities dated September 8, 2006*
10
.8
9.069% Junior Subordinated
Deferrable Debentures Indenture as of June 15, 2006
10
.9
First Supplemental Indenture to
the above Indenture dated as of September 15, 2006
10
.10
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and Edward
J. Noonan*
10
.11
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and George
P. Reeth*
10
.12
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and Jeff Consolino*
10
.13
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and Stuart
W. Mercer*
10
.14
Amended and Restated Employment
Agreement between Validus Reinsurance, Ltd. and Conan M. Ward*
10
.15
Investment Manager Agreement with
BlackRock Financial Management, Inc.
10
.16
Risk Reporting & Investment
Accounting Services Agreement with BlackRock Financial
Management, Inc.
10
.17
Discretionary Advisory Agreement
with Goldman Sachs Asset Management
II-2
Table of Contents
Exhibit
10
.18
Validus Holdings, Ltd. 2005
Amended & Restated Long Term Incentive Plan*
10
.19
Form of Restricted Share Agreement
for employee without Employment Agreement
10
.20
Form of Restricted Share Agreement
for employee with Employment Agreement
10
.21
Form of Stock Option Agreement for
employee without Employment Agreement
10
.22
Form of Stock Option Agreement for
employee with Employment Agreement
10
.23
Non-qualified Deferred
Compensation Plan*
10
.24
Director Stock Compensation Plan*
21
.1
Subsidiaries of the Registrant
23
.1
Consent of Conyers Dill &
Pearman (included in Exhibits 5.1 and 8.2)*
23
.2
Consent of Cahill
Gordon & Reindel
llp
(included in Exhibit 8.1)*
23
.3
Consent of PricewaterhouseCoopers
24
.1
Power of Attorney (included as
part of the signature pages)
99
.1
Audit Committee Charter*
99
.2
Compensation Committee Charter*
99
.3
Corporate Governance and
Nominating Committee Charter*
*
To be filed by Amendment.
Table of Contents
By:
Chairman of the Board of Directors
and Chief Executive Officer (Principal Executive Officer)
January 16, 2007
Deputy Chairman and President
January 16, 2007
Chief Financial Officer and
Executive Vice President (Principal Financial Officer and
Principal Accounting Officer)
January 16, 2007
Director
January 16, 2007
Director
January 16, 2007
Director
January 16, 2007
Director
January 16, 2007
II-4
Table of Contents
Director
January 16, 2007
Director
January 16, 2007
Director
January 16, 2007
Director
January 16, 2007
Director
January 16, 2007
Table of Contents
Exhibit
1
.1
Form of Underwriting Agreement*
3
.1
Memorandum of Association dated
October 10, 2005
3
.2
Amended and Restated Bye-laws*
4
.1
Specimen Common Share Certificate*
4
.2
Certificate of Deposit of
Memorandum of Increase of Share Capital dated October 28,
2005
5
.1
Opinion of Conyers Dill &
Pearman dated December 12, 2005*
8
.1
Opinion of Cahill
Gordon & Reindel
llp
as to certain tax matters*
8
.2
Opinion of Conyers Dill &
Pearman as to certain tax matters*
10
.1
Shareholders Agreement dated
as of December 12, 2005 among Validus Holdings, Ltd. and
the Shareholders Named Herein
10
.2
Founder Agreement with Aquiline
Capital Partners LLC dated December 7, 2005
10
.3
Advisory Agreement with Aquiline
Capital Partners LLC dated December 7, 2005
10
.4
Form of Warrant
10
.5
Letter of Credit Facility
Agreement*
10
.6
364-Day
Revolving Credit Facility Agreement*
10
.7
First Amendment to each of the
above two facilities dated September 8, 2006*
10
.8
9.069% Junior Subordinated
Deferrable Debentures Indenture as of June 15, 2006
10
.9
First Supplemental Indenture to
the above Indenture dated as of September 15, 2006
10
.10
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and Edward J. Noonan*
10
.11
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and George P. Reeth*
10
.12
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and Jeff Consolino*
10
.13
Amended and Restated Employment
Agreement between Validus Holdings, Ltd. and Stuart W. Mercer*
10
.14
Amended and Restated Employment
Agreement between Validus Reinsurance, Ltd. and Conan M. Ward*
10
.15
Investment Manager Agreement with
BlackRock Financial Management, Inc.
10
.16
Risk Reporting & Investment
Accounting Services Agreement with BlackRock Financial
Management, Inc.
10
.17
Discretionary Advisory Agreement
with Goldman Sachs Asset Management
10
.18
Validus Holdings, Ltd. 2005
Amended & Restated Long Term Incentive Plan*
10
.19
Form of Restricted Share Agreement
for employee without Employment Agreement
10
.20
Form of Restricted Share Agreement
for employee with Employment Agreement
10
.21
Form of Stock Option Agreement for
employee without Employment Agreement
10
.22
Form of Stock Option Agreement for
employee with Employment Agreement
10
.23
Non-qualified Deferred
Compensation Plan*
10
.24
Director Stock Compensation Plan*
21
.1
Subsidiaries of the Registrant
23
.1
Consent of Conyers Dill &
Pearman (included in Exhibits 5.1 and 8.2)*
23
.2
Consent of Cahill
Gordon & Reindel
llp
(included in Exhibit 8.1)*
23
.3
Consent of PricewaterhouseCoopers
24
.1
Power of Attorney (included as
part of the signature pages)
99
.1
Audit Committee Charter*
99
.2
Compensation Committee Charter*
99
.3
Corporate Governance and
Nominating Committee Charter*
*
To be filed by Amendment.
[Exhibit 3.1]
FORM NO. 2
(GRAPHIC)
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(SECTION 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
VALIDUS HOLDINGS, LTD.
(HEREINAFTER REFERRED TO AS "THE COMPANY")
1. The liability of the members of the Company is limited to the amount (if any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
BERMUDIAN NUMBER OF STATUS SHARES NAME ADDRESS (YES/NO) NATIONALITY SUBSCRIBED Alison R. Guilfoyle Clarendon House 2 Church Street Hamilton, HM 11 Bermuda No British One Graham B.R. Collis Clarendon House 2 Church Street Hamilton, HM 11 Bermuda Yes British One Christopher G. Garrod Clarendon House 2 Church Street Hamilton, HM 11 Bermuda Yes British One |
DO HEREBY RESPECTIVELY AGREE TO TAKE SUCH NUMBER OF SHARES OF THE COMPANY AS MAY BE ALLOTTED TO US RESPECTIVELY BY THE PROVISIONAL DIRECTORS OF THE COMPANY, NOT EXCEEDING THE NUMBER OF SHARES FOR WHICH WE HAVE RESPECTIVELY SUBSCRIBED, AND TO SATISFY SUCH CALLS AS MAY BE MADE BY THE DIRECTORS, PROVISIONAL DIRECTORS OR PROMOTERS OF THE COMPANY IN RESPECT OF THE SHARES ALLOTTED TO US RESPECTIVELY.
3. The Company is to be an exempted Company as defined by the Companies Act 1981.
4. The Company, with the consent of the Minister of Finance, has power to hold land situate in Bermuda not exceeding ________ in all, including the following parcels:-
N/A
5. The authorised share capital of the Company is US$120,000 divided into shares of US$0.10 each. The minimum subscribed share capital of the Company is US$ 12,000.
6. The objects for which the Company is formed and incorporated are -
(1) To acquire by purchase or otherwise, buy, own, hold, create, market, design, assemble, manufacture, repair, lease, hire, let, sell, dispose of (with or without consideration or benefit), maintain, improve, develop, manage, invent, build, construct, operate, package and otherwise trade, invest or deal in and with products, financial instruments, goods, and real and personal property of all kinds whatsoever and wheresoever situated, and enter into arrangements for or with respect to any of the foregoing;
(2) To perform, provide, procure, market and deal in services and undertakings of all kinds;
(3) To advise and act as consultants and managers of all kinds and, without limiting the generality of the foregoing, to provide investment and financial advice, consultation and management services;
(4) To research, create, develop, invent, improve, discover, design, collate and draft original works, software, inventions, designs, concepts, formulas, processes, strategies, methodologies and the like, and acquire, build, own, hold, sell, lease, license, dispose of (with or without consideration or benefit), market, franchise, and otherwise exploit and deal in or with all intellectual and intangible property rights pertaining thereto whether registered or not, including but not limited to trade and service marks, trade names, copyrights, computer software, inventions, designs, patents, provisional patents, utility models, trade secrets, confidential information, know how, get-up and any other rights and privileges vesting in or attaching thereto;
(5) To explore for, drill for, mine for, quarry for, move, transport, and refine metals, minerals, fossil fuel, petroleum, hydrocarbon products including without limiting the generality of the foregoing, oil and oil products, and precious stones of all kinds and to prepare the same for sale or use;
(6) To enter into any guarantee, contract of indemnity or suretyship and to assure, support or secure with or without consideration or benefit the performance of any obligations of any person or persons and to guarantee the fidelity of individuals filling or about to fill situations of trust or confidence;
(7) To own, manage, operate, act as agents with respect to, build, repair, acquire, own, sell, charter, or deal in ships and aircraft;
(8) To lend to or deposit with any person funds, property or assets and to provide collateral or credit enhancement for loans, leasing or other forms of financing, with or without consideration or benefit;
(9) To create, enter into, undertake, procure, arrange for, acquire by purchase or otherwise, buy, own, hold, sell or otherwise dispose of (with or without consideration or benefit), trade, invest and or otherwise deal in, whether on a speculative basis or otherwise, all and or any kind of (including without limitation all and or any combinations of and all and or any rights or interests under) instrument, agreement, contract, covenant and undertaking, including without limiting the generality of the foregoing, derivative instrument, agreement or contract, option, swap option contract, bond, warrant, debenture, equity, forward exchange contract, forward rate contract, future, hedge, security, note, certificate of deposit, unit, guarantee and or financial instrument; and
(10) To carry on any trade or business which can, in the opinion of the board of directors, be advantageously carried on by the Company.
7. Powers of the Company
1. The Company shall, pursuant to the Section 42 of the Companies Act 1981, have the power to issue preference shares which are, at the option of the holder, liable to be redeemed.
2. The Company shall, pursuant to Section 42A of the Companies Act 1981, have the power to purchase its own shares.
SIGNED BY EACH SUBSCRIBER IN THE PRESENCE OF AT LEAST ONE WITNESS ATTESTING THE SIGNATURE THEREOF --------------------------------- ---------------------------------- --------------------------------- ---------------------------------- --------------------------------- ---------------------------------- --------------------------------- ---------------------------------- (Subscribers) (Witnesses) |
SUBSCRIBED this 10th day of October, 2005.
THE COMPANIES ACT 1981
FIRST SCHEDULE
A company limited by shares, or other company having a share capital, may exercise all or any of the following powers subject to any provision of the law or its memorandum:
1. [Deleted]
2. to acquire or undertake the whole or any part of the business, property and liabilities of any person carrying on any business that the company is authorised to carry on;
3. to apply for register, purchase, lease, acquire, hold, use, control, licence, sell, assign or dispose of patents, patent rights, copyrights, trade makers, formulae, licences, inventions, processes, distinctive makers and similar rights;
4. to enter into partnership or into any arrangement for sharing of profits, union of interests, cooperation, joint venture, reciprocal concession or otherwise with any person carrying on or engaged in or about to carry on or engage in any business or transaction that the company is authorised to carry on or engage in or any business or transaction capable of being conducted so as to benefit the company;
5. to take or otherwise acquire and hold securities in any other body corporate having objects altogether or in part similar to those of the company or carrying on any business capable of being conducted so as to benefit the company;
6. subject to section 96 to lend money to any employee or to any person having dealings with the company or with whom the company proposes to have dealings or to any other body corporate any of those shares are held by the company;
7. to apply for, secure or acquire by grant, legislative enactment, assignment transfer, purchase or otherwise and to exercise, carry out and enjoy any charter, licence, power, authority, franchise, concession, right or privilege, that any government or authority or any body corporation or other public body may be-empowered-to grant and to pay for, aid in and contribute toward carrying it into effect and to assume any liabilities or obligations incidental thereto;
8. to establish and support or aid in the establishment and support of associations, institutions, funds or trusts for the benefit of employees or former employees of the company or its predecessors, or the dependants or connections of such employees or former employees, and grant pensions and allowances, and make payments towards insurance or for any object similar to those set forth in this paragraph, and to subscribe or guarantee money for charitable, benevolent, educational and religious objects or for any exhibition or for any public, general or useful objects;
9. to promote any company for the purpose of acquiring or taking over any of the property and liabilities of the company or for any other purpose that may benefit the company;
10. to purchase, lease, take in exchange, hire or otherwise acquire any personal property and any rights or privileges that the company considers necessary or convenient for the purposes of its business;
11. to construct, maintain, alter, renovate and demolish any buildings or works necessary or convenient for its objects;
12. to take land in Bermuda by way of lease or leasing agreement for a term not exceeding fifty years, being land "bona fide" required for the purposes of the business of the company and with the consent of the Minister granted in his discretion to take land in Bermuda by way of lease or leasing agreement for a term not exceeding twenty-one years in order to provide accommodation or recreational facilities for its officers and employees and when no longer necessary for any of the above purposes to terminate or transfer the lease or letting agreement;
13. except to the extent, if any, as may be otherwise expressly provided in its incorporating Act or memorandum and subject to the provisions of this Act every company shall have power to invest the moneys of the Company by way of mortgage of real or personal property of every description in Bermuda or elsewhere and to sell, exchange, vary, or dispose of such mortgage as the company shall from time to time determine;
14. to construct, improve, maintain, work, manage, carry out or control any roads, ways, tramways, branches or sidings, bridges, reservoirs, watercourses, wharves, factories, warehouses, electric works, shops, stores and other works and conveniences that may advance the interests of the company and contribute to, subsidise or otherwise assist or take part in the construction, improvement, maintenance, working, management, carrying out or control thereof;
15. to raise and assist in raising money for, and aid by way of bonus, loan, promise, endorsement, guarantee or otherwise, any person and guarantee the performance or fulfilment of any contracts or obligations of any person, and in particular guarantee the-payment of the principal of and interest on the debt obligations of any such person;
16. to borrow or raise or secure the payment of money in such manner as the company may think fit;
17. to draw, make, accept, endorse, discount, execute and issue bills of exchange, promissory notes, bills of lading, warrants and other negotiable or transferable instruments;
18. when properly authorised to do so, to sell, lease, exchange or otherwise dispose of the undertaking of the company or any part thereof as an entirety or substantially as an entirety for such consideration as the company thinks fit;
19. to sell, improve, manage, develop, exchange, lease, dispose of, turn to account or otherwise deal with the property of the company in the ordinary course of its business;
20. to adopt such means of making known the products of the company as may seem expedient, and in particular by advertising, by purchase and exhibition of works of art or interest, by publication of books and periodicals and by granting prizes and rewards and making donations;
21. to cause the company to be registered and recognised in any foreign jurisdiction, and designate persons therein according to the laws of that foreign jurisdiction or to represent the company and to accept service for and on behalf of the company of any process or suit;
22. to allot and issue fully-paid shares of the company in payment or part payment of any property purchase or otherwise acquired by the company or for any past services performed for the company;
23. to distribute among the members of the company in cash, kind, specie or otherwise as may be resolved, by way of dividend, bonus or in any other manner considered advisable, any property of the company, but not so as to decrease the capital of the company unless the distribution is made for the purpose of enabling the company to be dissolved or the distribution, apart from this paragraph, would be otherwise lawful;
24. to establish agencies and branches;
25. to take or hold mortgages, hypothecs, liens and charges to secure payment of the purchase price, or of any unpaid balance of the purchase price, of any part of the property of the company of whatsoever kind sold by the company, or for any money due to the company from purchasers and others and to sell or otherwise dispose of any such mortgage, hypothec, lien or charge;
26. to pay all costs and expenses of or incidental to the incorporation and organisation of the company;
27. to invest and deal with the moneys of the company not immediately required for the objects of the company in such manner as may be determined;
28. to do any of the things authorised by this subsection and all things authorised by its memorandum as principals, agents, contractors, trustees or otherwise, and either alone or in conjunction with others;
29. to do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the company.
Every company may exercise its powers beyond the boundaries of Bermuda to the extent to which the laws in force where the powers are sought to be exercised permit.
[Exhibit 4.2]
FORM NO. 7a REGISTRATION NO. 37417
(GRAPHIC)
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital of
VALIDUS HOLDINGS, LTD.
was delivered to the Registrar of Companies on the 21ST of OCTOBER, 2005 in accordance with section 45(3) of THE COMPANIES ACT 1981 ("the Act").
(SEAL) Given under my hand and Seal of the REGISTRAR OF COMPANIES this 28TH day of OCTOBER, 2005 |
ACTING REGISTRAR OF COMPANIES
Capital prior to increase: US$ 120,000.00 --------------------------- Amount of increase: US$ 99,880,000.00 --------------------------- Present Capital: US$ 100,000,000.00 --------------------------- |
EXECUTION VERSION
[Exhibit 10.1]
SHAREHOLDERS' AGREEMENT
DATED AS OF
DECEMBER 12, 2005
AMONG
VALIDUS HOLDINGS, LTD.
AND
THE SHAREHOLDERS NAMED HEREIN
TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINITIONS SECTION 1.1 Definitions................................................. 1 ARTICLE II. REGISTRATION RIGHTS SECTION 2.1 Demand Registration......................................... 6 SECTION 2.2 Piggyback Registration...................................... 8 SECTION 2.3 Lock-Up Agreements.......................................... 9 SECTION 2.4 Registration Procedures..................................... 9 SECTION 2.5 Indemnification by the Company.............................. 13 SECTION 2.6 Indemnification by Participating Shareholders............... 14 SECTION 2.7 Conduct of Indemnification Proceedings...................... 14 SECTION 2.8 Contribution................................................ 15 SECTION 2.9 Participation in Public Offering............................ 16 SECTION 2.10 Other Indemnification....................................... 16 SECTION 2.11 Exchange Act Filings, Rule 144.............................. 16 SECTION 2.12 Termination of Registration Rights.......................... 16 SECTION 2.13 Black-Out Period............................................ 16 ARTICLE III. CERTAIN COVENANTS AND AGREEMENTS SECTION 3.1 Restrictions................................................ 17 SECTION 3.1A Business Activities......................................... 18 SECTION 3.2 Special Actions............................................. 18 SECTION 3.3 Confidentiality............................................. 18 SECTION 3.4 Conflicting Agreements...................................... 19 SECTION 3.5 Acknowledgment.............................................. 19 SECTION 3.6 Competition; No Fiduciary Duties............................ 19 SECTION 3.7 Accounting; Financial Statements and other Information...... 20 SECTION 3.8 Insurance................................................... 20 SECTION 3.9 Certain Tax Matters......................................... 20 SECTION 3.10 Ratification of Board....................................... 21 SECTION 3.11 Listed Transactions......................................... 21 ARTICLE IV. MISCELLANEOUS SECTION 4.1 Binding Effect; Assignability; Benefit...................... 21 |
PAGE ---- SECTION 4.2 Notices..................................................... 21 SECTION 4.3 Waiver; Amendment; Termination.............................. 22 SECTION 4.4 Governing Law............................................... 22 SECTION 4.5 Jurisdiction................................................ 22 SECTION 4.6 Waiver of Jury Trial........................................ 23 SECTION 4.7 Specific Enforcement........................................ 23 SECTION 4.8 Counterparts; Effectiveness................................. 23 SECTION 4.9 Entire Agreement............................................ 23 SECTION 4.10 Captions.................................................... 23 SECTION 4.11 Severability................................................ 24 SECTION 4.12 Foreign Registration........................................ 24 Exhibit A Joinder Agreement........................................... A-1 Exhibit B Form of Investor Election................................... B-1 |
SHAREHOLDERS' AGREEMENT
This AGREEMENT dated as of December 12, 2005 is made among VALIDUS HOLDINGS, LTD., a company with limited liability organized under the laws of Bermuda (the "Company"), and the Persons listed on the signature pages attached hereto.
WITNESSETH:
WHEREAS, each of the Shareholders (as defined below) has subscribed to purchase Voting Common Stock or Non-Voting Common Stock (each, as defined below) (such shares of all Shareholders, together with any additional shares of Common Stock hereafter acquired by such Shareholders in any manner, and any Warrants (as defined below) held or hereafter acquired by such Shareholders, being referred to herein as the "Shares");
WHEREAS, the Company owns the entire outstanding capital stock of Validus Reinsurance, Ltd., a limited liability company organized under the laws of Bermuda (the "Operating Company");
WHEREAS, each of the Shareholders desires to promote the interests of the Company and the mutual interests of the Shareholders by establishing herein certain terms and conditions upon which the Shares will be held, including provisions relating to approval of various corporate actions;
WHEREAS, each of the Shareholders has agreed that each of the Qualified Sponsors (as defined below) shall be entitled to certain rights set forth herein in recognition of their commitments to the Company, which rights are acknowledged by the Shareholders; and
WHEREAS, the execution of this Agreement is a condition precedent to the purchase and sale of the Shares as contemplated in the Subscription Agreements (as defined below).
NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Definitions.
(a) The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person; provided that no securityholder of the Company shall be deemed an Affiliate of any other securityholder solely by reason of any investment in the Company. For the purpose of this definition, the term "Control" (including, with correlative meanings, the terms "Controlling", "Controlled By" and "Under Common Control With"), as used with respect to any Person, shall mean 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.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York or Bermuda are not open for business.
"Bye-laws" means the Bye-laws of the Company, as amended from time to time.
"Code" means the United States Internal Revenue Code of 1986, as amended, and any successor thereto and the rules and regulations promulgated thereunder from time to time.
"Common Stock" means, collectively, the Voting Common Stock and the Non-Voting Common Stock.
"Company Securities" means (i) the Common Stock, (ii) securities convertible into or exchangeable for Common Stock, and (iii) options, warrants (including the Warrants) or other rights to acquire Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, of the United States of America and the rules and regulations promulgated thereunder.
"First Public Offering" means the first Public Offering after the date hereof.
"Founder" means, collectively, the group of funds affiliated with Aquiline Capital Partners LLC which are holders of Company Securities.
"Fully-Diluted" means, with respect to Company Securities, all outstanding shares and all shares issuable in respect of securities convertible into or exchangeable for such shares, all stock appreciation rights, options, warrants (including the Warrants) and other rights to purchase or subscribe for such Company Securities or securities convertible into or exchangeable for such Company Securities; provided that, if any of the foregoing stock appreciation rights, options, warrants or other rights to purchase or subscribe for such Company Securities are subject to vesting, the Company Securities subject to vesting shall be included in the definition of "Fully-Diluted" only upon and to the extent of such vesting.
"Group" means a group of related persons for purposes of Section 13(d) of the Exchange Act.
"GSCP V" means, collectively, the group of funds administered by the Principal Investment Area of The Goldman Sachs Group, Inc. which are holders of Company Securities.
"Major Investor" means (a) each Qualified Sponsor, (b) each Shareholder who acquired at least $100 million of Common Stock on the date hereof, and (c) each Shareholder who, or a group of Shareholders acting together who in the aggregate, beneficially owns more than ten percent (10%) of the Company Securities, on a Fully Diluted basis either (x) immediately prior to the commencement of the First Public Offering or (y) on the date it purchased its Common Stock pursuant to the offering described in the Offering Memorandum. For the purposes of this definition, "beneficial ownership" shall include ownership by one or more Affiliates of such Shareholder.
"Majority of the Qualified Sponsors" means a majority in number (i.e., initially 3 out of 5) of the Qualified Sponsors.
"Memorandum" means the Amended and Restated Memorandum of Association of the Company, as amended from time to time.
"Merrill" means, collectively, the group of funds/entities affiliated with Merrill Lynch, Pierce, Fenner & Smith Incorporated which are holders of Company Securities.
"NASD" means the United States National Association of Securities Dealers, Inc.
"New Mountain" means, collectively, the group of funds affiliated with New Mountain Capital, L.L.C. which are holders of Company Securities.
"Non-Voting Common Stock" means the non-voting common shares, par value $0.10 per share, of the Company and any shares into which such shares may thereafter be converted or changed.
"Offering Memorandum" means the Confidential Memorandum dated October 13, 2005, as supplemented on November 21, 2005 and December 5, 2005, and includes all exhibits, annexes and appendices thereto and any further amendments thereof and modifications and supplements thereto as may be made from time to time on or prior to the date hereof and delivered to the Shareholders.
"Participating Shareholders" means the Shareholders that participate in any registration of Registrable Securities pursuant to Section 2.1 or Section 2.2, including any Requesting Shareholder.
"Permitted Transferee" has the meaning set forth in the Bye-laws.
"Person" means an individual, corporation, limited liability company, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"Plan Options" means options issued by the Company pursuant to any stock option or similar plan (and any shares of Common Stock issuable upon exercise thereof or thereunder) approved by the Board where the primary purpose of such issuance is not to raise additional equity capital for the Company.
"Public Offering" means a public offering of Common Stock pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form F-4 or Form F-8 or any similar or successor form.
"Qualified Public Offering" means the first Public Offering in which gross proceeds of not less than $150.0 million (at a per share price of not less than $10 per share, as adjusted to give effect to stock splits, recombinations and other reclassifications) are raised for the Company and/or for selling shareholders after the date hereof.
"Qualified Sponsor" means each Sponsor, except that, with respect to each Sponsor individually, a Sponsor shall cease to be a Qualified Sponsor from and after the date on which such Sponsor ceases to "beneficially own" (as such term is defined in Rule 13d-3 of the Exchange Act), as a result of a Transfer (excluding Transfers in accordance with clause (i) of the definition of Permitted Transferee), at least 33-1/3% of the number of shares of Common Stock (after giving effect to stock splits, recombination and other similar reclassifications) such Sponsor purchased in the offering described in the Offering Memorandum.
"Registrable Securities" means, at any time, any Common Stock and any securities issued or issuable in respect of such Common Stock by way of conversion, exchange, stock dividend, split or combination, recapitalization, merger, consolidation, other reorganization or otherwise until (i) a registration statement covering such Common Stock has been declared effective by the SEC and such Common
Stock has been disposed of pursuant to such effective registration statement,
(ii) such Common Stock is sold under circumstances in which all of the
applicable conditions of Rule 144 are met or such securities may be sold
pursuant to Rule 144(k) (or any similar provisions then in force) under the
Securities Act or (iii) such Common Stock is otherwise Transferred, the Company
has delivered a new certificate or other evidence of ownership for such Common
Stock not bearing the legend required pursuant to this Agreement and such Common
Stock may be freely resold without subsequent registration under the Securities
Act.
"Registration Expenses" means any and all expenses incident to the
performance of or compliance with any registration or marketing of securities,
including all (i) registration and filing fees, and all other fees and expenses
payable in connection with the listing of securities on any securities exchange
or automated interdealer quotation system, (ii) fees and expenses of compliance
with any securities or "blue sky" laws (including reasonable fees and
disbursements of counsel in connection with "blue sky" qualifications of the
securities registered), (iii) expenses in connection with the preparation,
printing, mailing and delivery of any registration statements, prospectuses and
other documents in connection therewith and any amendments or supplements
thereto, (iv) security engraving and printing expenses, (v) internal expenses of
the Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), (vi) reasonable
fees and disbursements of counsel for the Company and customary fees and
expenses for independent certified public accountants retained by the Company
(including the expenses relating to any comfort letters or costs associated with
the delivery by independent certified public accountants of any comfort letters
requested pursuant to Section 2.4(h)), (vii) reasonable fees and expenses of any
special experts retained by the Company in connection with such registration,
(viii) reasonable fees and expenses of counsel for the Shareholders
participating in the offering, (ix) fees and expenses in connection with any
review by the NASD of the underwriting arrangements or other terms of the
offering, and all fees and expenses of any "qualified independent underwriter,"
including the fees and expenses of any counsel thereto, (x) fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding any underwriting fees, discounts and commissions
attributable to the sale of Registrable Securities, (xi) costs of printing and
producing any agreements among underwriters, underwriting agreements, any "blue
sky" or legal investment memoranda and any selling agreements and other
documents in connection with the offering, sale or delivery of the Registrable
Securities, (xii) transfer agents' and registrars' fees and expenses and the
fees and expenses of any other agent or trustee appointed in connection with
such offering, (xiii) expenses relating to any analyst or investor presentations
or any "road shows" undertaken in connection with the registration, marketing or
selling of the Registrable Securities, (xiv) fees and expenses payable in
connection with any ratings of the Registrable Securities, including expenses
relating to any presentations to rating agencies and (xv) all out-of-pocket
costs and expenses incurred by the Company or its appropriate officers in
connection with their compliance with Section 2.4(m). Except as set forth above,
Registration Expenses shall not include any out-of-pocket expenses of the
Shareholders (or the agents who manage their accounts).
"Rule 144" means Rule 144 and Rule 144A (or any successor provisions) under the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, of the United States of America and the rules and regulations promulgated thereunder.
"Shareholder" means each Person (other than the Company) who shall be a party to this Agreement, whether in connection with the execution and delivery hereof as of the date hereof, pursuant
to Section 4.1 or otherwise, so long as such Person shall "beneficially own" (as such term is defined in Rule 13d-3 of the Exchange Act) any Company Securities.
"Sponsor" means, individually, Founder, GSCP V, New Mountain, Vestar and Merrill.
"Subscription Agreements" means, collectively, the subscription agreements pursuant to which Shares of the Company were purchased or otherwise acquired and all substantially identical agreements dated as of other dates.
"Subsidiary" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.
"Supermajority of the Qualified Sponsors" means not less than 80% in number (i.e., initially 4 out of 5) of the Qualified Sponsors.
"Transfer" means, with respect to any Company Securities, (i) when used as a verb, to sell, assign, dispose of, exchange or otherwise transfer such Company Securities or any participation or interest therein, whether directly or indirectly, or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange or other transfer of such Company Securities or any participation or interest therein or any agreement or commitment to do any of the foregoing.
"U.S. GAAP" means United States generally accepted accounting principles.
"Vestar" means, collectively, the group of funds affiliated with Vestar Capital Partners which are holders of Company Securities.
"Voting Common Stock" means shares of voting common shares, par value $0.10 per share, of the Company and any shares into which such shares may thereafter be converted or changed.
"Warrants" mean any warrants to purchase Common Stock held by a Shareholder.
(b) In addition, each of the following terms is defined in the Section set forth opposite such term:
TERM SECTION ---- -------- Black-Out Period 2.13 Company Preamble Confidential Information 3.3(b) Damages 2.5 Demand Registration 2.1(a) Indemnified Party 2.7 Indemnifying Party 2.7 Inspectors 2.4(g) Maximum Offering Size 2.1(e) Operating Company Recitals Partner Distribution 2.1(a) Piggyback Registration 2.2(a) Records 2.4(g) Representatives 3.3(b) |
TERM SECTION ---- -------- Requesting Shareholder 2.1(a) Shares Recitals |
ARTICLE II.
REGISTRATION RIGHTS
SECTION 2.1 Demand Registration.
(a) If, at any time following the earlier of 180 days after the effective date of the registration statement for the First Public Offering and the expiration of the period during which the managing underwriters for the First Public Offering shall prohibit the Company from effecting any other public sale or distribution of Company Securities, the Company shall receive a request from a Major Investor (the "Requesting Shareholder") that the Company effect the registration under the Securities Act of all or any portion of such Requesting Shareholder's Registrable Securities, and specifying the intended method of disposition thereof, then the Company shall promptly give notice of such requested registration (each, a "Demand Registration") at least 15 Business Days prior to the effective date of the registration statement relating to such Demand Registration to the other Shareholders holding Registrable Securities and thereupon shall use its commercially reasonable efforts to effect, as expeditiously as possible, subject to Section 2.1(e), the registration under the Securities Act of:
(i) all Registrable Securities for which the Requesting Shareholder has requested registration under this Section 2.1, and
(ii) all other Registrable Securities that any other Shareholder has requested the Company to register by written request received by the Company within ten (10) Business Days after such Shareholder receives the Company's notice of the Demand Registration, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered;
provided that, other than any Demand Registration to be effected pursuant to a Registration Statement on Form F-3 or S-3, as applicable (or any successor thereto), for which an unlimited number of Demand Registrations shall be permitted, and subject to Section 2.1(d), the Company shall not be obligated to effect more than (i) four (4) Demand Registrations in the aggregate, in the case of the Qualified Sponsors, and (ii) two (2) Demand Registrations in the aggregate, in the case of all other Major Investors; provided, further, that the Company shall not be obligated to effect a Demand Registration unless the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be included in such Demand Registration equals or exceeds $35,000,000. For the avoidance of doubt, a Participating Shareholder shall not be deemed to have made a Demand Registration request solely as a result of participating in a registration statement effected pursuant to a Demand Registration of another Requesting Shareholder.
Notwithstanding anything contained herein to the contrary, the Company shall, at the request of any Major Investor seeking to effect a distribution to, and resale by, the members or partners of such Major Investor (a "Partner Distribution"), file at such Major Shareholder's cost and expense any prospectus supplement or post-effective amendments and otherwise take any action reasonably necessary to include therein all disclosure and language reasonably deemed necessary or advisable by such Shareholder if such disclosure or language was not included in the initial registration statement, or revise such disclosure or language if reasonably deemed necessary or advisable by such Major Investor, to disclose
the Partner Distribution; provided that the Company shall not be required to take such action more than once a year with respect to any Shareholder.
In no event shall the Company be required to effect more than one Demand Registration hereunder within any six month period.
(b) Promptly after the expiration of the 10 Business Day period referred to in Section 2.1(a)(ii), the Company will notify all Participating Shareholders of the identities of the other Participating Shareholders and the number of shares of Registrable Securities requested to be included therein. At any time prior to the effective date of the registration statement relating to such registration, the Requesting Shareholder may revoke such request, without liability to any of the other Participating Shareholders, by providing a notice to the Company revoking such request. Subject to Section 2.1(d), a request, so revoked, shall be considered to be a Demand Registration unless (i) such revocation arose out of the fault of the Company (in which case the Company shall be obligated to pay all Registration Expenses in connection with such revoked request), (ii) after the date of the Demand Registration request, the Company postponed effecting the registration pursuant to clause (f) below and the Requesting Shareholder thereafter revoked such request (in which case the Company shall be obligated to pay all Registration Expenses in connection with such revoked request), or (iii) the Requesting Shareholder reimburses the Company for all Registration Expenses of such revoked request. The Company agrees to use commercially reasonable efforts to notify the Participating Shareholders if the price for any Company Securities to be registered for sale for the account of the Company is expected to occur outside of any expected pricing range disclosed to the Participating Shareholders; provided that the Company shall not have any such obligation with respect to any registration involving the registration of Company Securities only for the account of parties other than the Company.
(c) The Company shall be liable for and pay all Registration Expenses in connection with any Demand Registration, regardless of whether such Registration is effected, except as set forth in Section 2.1(b)(iii).
(d) A Demand Registration shall not be deemed to have occurred:
(i) unless the registration statement relating thereto has become effective under the Securities Act and has remained effective for a period of at least 180 days (or such shorter period in which all Registrable Securities of the Participating Shareholders included in such registration have actually been sold thereunder); provided that such registration statement shall not be considered a Demand Registration if, after such registration statement becomes effective, (i) such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court and (ii) less than 75% of the Registrable Securities of the Requesting Shareholder sought to be included in such registration statement have been sold thereunder; or
(ii) if the Maximum Offering Size is reduced in accordance with
Section 2.1(e) such that less than 75% of the Registrable Securities of the
Requesting Shareholder sought to be included in such registration are
included.
(e) If a Demand Registration involves an underwritten Public Offering and the managing underwriter advises the Company and the Requesting Shareholder that, in its view, the number of shares of Registrable Securities requested to be included in such registration (including any securities that the Company proposes to be included that are not Registrable Securities) exceeds the largest number of shares that can be sold without having an adverse effect on such offering, including the price at which
such shares can be sold (the "Maximum Offering Size"), the Company shall include in such registration, in the priority listed below, up to the Maximum Offering Size:
(i) first, all Registrable Securities requested to be registered by the Participating Shareholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such entities on the basis of the relative number of Registrable Securities owned by the Participating Shareholders), provided that no Shareholder who is an employee of the Company or its subsidiaries shall be entitled to sell pursuant to this Section 2.1 any Common Stock received pursuant to an employment agreement or a long term incentive plan approved by the Board until 180 days following the First Public Offering, and
(ii) second, any securities proposed to be registered by the Company or any securities proposed to be registered for the account of any other Persons (including the Company), with such priorities among them as the Company shall determine.
(f) Upon notice to the Requesting Shareholder, the Company may postpone effecting a registration pursuant to this Section 2.1 on one occasion during any period of six consecutive months for a reasonable time specified in the notice but not exceeding 90 days (which period may not be extended or renewed), if (i) Merrill Lynch, Pierce, Fenner & Smith Incorporated or another investment banking firm of recognized national standing shall advise the Company and the Requesting Shareholder in writing that effecting the registration would materially and adversely affect an offering of securities of the Company the preparation of which had then been commenced or (ii) the Company is in possession of material non-public information the disclosure of which during the period specified in such notice the Company reasonably believes would not be in the best interests of the Company.
SECTION 2.2 Piggyback Registration.
(a) Except in connection with any Demand Registration pursuant to
Section 2.1 hereof, if the Company proposes, at any time after the First Public
Offering, to register any Common Stock under the Securities Act (other than a
registration on Form F-8 or F-4, or S-8 or S-4, as applicable, or any successor
forms, relating to Shares issuable upon exercise of employee stock options or in
connection with any employee benefit or similar plan of the Company or in
connection with a direct or indirect acquisition by the Company of another
Person), whether or not for sale for its own account, the Company shall each
such time give prompt notice at least 15 Business Days prior to the effective
date of the registration statement relating to such registration to each
Shareholder, which notice shall set forth such Shareholder's rights under this
Section 2.2 and shall offer such Shareholder the opportunity to include in such
registration statement the number of shares of Common Stock as each such
Shareholder may request (a "Piggyback Registration"), subject to the provisions
of Section 2.2(b) (it being understood that the rights of each Shareholder set
forth in this Section 2.2 shall also be applicable to the First Public Offering
if the shares of any Shareholder are included in the First Public Offering).
Upon the request of any such Shareholder made within 10 Business Days after the
receipt of notice from the Company (which request shall specify the number of
shares of Common Stock intended to be registered by such Shareholder), the
Company shall use all reasonable efforts to effect the registration under the
Securities Act of all Common Stock that the Company has been so requested to
register by all such Shareholders, to the extent requisite to permit the
disposition of the shares of Common Stock so to be registered; provided that (i)
if such registration involves an underwritten Public Offering, all such
Shareholders requesting to be included in the Company's registration must sell
their Common Stock to the underwriters selected as provided in Section 2.4(f) on
the same terms and conditions as apply to the Company or the Shareholder
requesting such registration, as applicable, and (ii) if, at any time after
giving notice of its intention to register any Common Stock pursuant to this
Section 2.2(a) and prior to the effective date of the registration statement
filed
in connection with such registration, the Company shall determine for any reason not to register such Common Stock, the Company shall give notice to all such Shareholders and, thereupon, shall be relieved of its obligation to register any Common Stock in connection with such registration. The Company shall notify the Participating Shareholders if the price for Common Stock to be registered for sale for the account of the Company is expected by the Company to occur outside of any previously publicly announced range; provided that the Company shall not have any such obligation with respect to any registration involving the registration of Common Stock only for the account of parties other than the Company. No registration effected under this Section 2.2 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 2.1. The Company shall pay all Registration Expenses in connection with each Piggyback Registration. For the avoidance of doubt, participation in a Piggyback Registration shall not in and of itself be deemed to be an exercise of a Shareholder's Demand Registration rights.
(b) In any Piggyback Registration (other than any Demand Registration, in which case the provisions with respect to priority of inclusion in such offering set forth in Section 2.1(e) shall apply), if the Company determines, or if Merrill Lynch, Pierce, Fenner & Smith Incorporated or another investment banking firm of recognized national standing shall advise the Company, that the number of shares of Common Stock that the Company and such Shareholders intend to include in such registration exceeds the Maximum Offering Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:
(i) first, so much of the Common Stock proposed to be registered for the account of the Company as would not cause the offering to exceed the Maximum Offering Size,
(ii) second, all Common Stock requested to be included in such registration by any Shareholders pursuant to this Section 2.2 (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Shareholders on the basis of the relative number of shares of Common Stock owned by such Shareholders), provided that no Shareholder who is an employee of the Company or its subsidiaries shall be entitled to sell pursuant to this Section 2.2 any Common Stock received pursuant to an employment agreement or a long term incentive plan approved by the Board until 180 days following the First Public Offering, and
(iii) third, any securities proposed to be registered for the account of any other Persons with such priorities among them as the Company shall determine.
SECTION 2.3 Lock-Up Agreements.
In connection with any Public Offering, neither the Company nor any Shareholder shall effect any public sale or distribution of any Company Securities or other security of the Company (except as part of such Public Offering) during the period beginning 14 days prior to the effective date of the applicable registration statement until the earlier of (i) such time as the Company and the lead managing underwriter shall agree and (ii) 180 days in the case of the First Public Offering and 90 days in the case of any subsequent Public Offering.
SECTION 2.4 Registration Procedures.
Whenever Shareholders request that any Registrable Securities be registered pursuant to Sections 2.1 or 2.2, subject to the provisions of such Sections, the Company shall use all reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any such request:
(a) The Company shall as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof (including Partner Distributions) (and if at such time the Company is a "well known seasoned issuer" (within the meaning of the Securities Act), the Company shall file an automatic shelf registration (unless one is already filed and effective) for Shareholders to use for the sale of their Registrable Securities) and use all reasonable efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days, or in the case of a shelf registration statement, two years (or such shorter period in which all of the Registrable Securities of the Participating Shareholders included in such registration statement shall have actually been sold thereunder).
(b) Prior to filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall, if requested, furnish to each Participating Shareholder and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed for their reasonable and timely review and comment, and thereafter the Company shall furnish to such Shareholder and underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 or Rule 430A under the Securities Act and such other documents as such Shareholder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Shareholder. Each Participating Shareholder shall have the right to request that the Company modify any information contained in such registration statement, amendment and supplement thereto pertaining to such Shareholder and the Company shall use all reasonable efforts to comply with such request; provided, however, that the Company shall not have any obligation so to modify any information if the Company reasonably expects that so doing would cause the prospectus to contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.
(c) After the filing of the registration statement, the Company shall
(i) cause the related prospectus to be amended or supplemented by any
required prospectus amendment or supplement, and, as so amended or
supplemented, to be filed pursuant to Rule 424 under the Securities Act,
(ii) comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration
statement during the applicable period in accordance with the intended
methods of disposition by the Participating Shareholders set forth in such
registration statement or amendment or supplement to such prospectus and
(iii) promptly notify each Participating Shareholder holding Registrable
Securities covered by such registration statement of any stop order issued
or threatened by the SEC or any state securities commission and use
commercially reasonable best efforts to prevent the entry of such stop
order or to remove it if entered.
(d) The Company shall use all reasonable efforts to (i) register or qualify the Registrable Securities covered by such registration statement under such other securities or "blue sky" laws of such jurisdictions in the United States as any Participating Shareholder holding such Registrable Securities reasonably (in light of such Shareholder's intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations
of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Shareholder to consummate the disposition of the Registrable Securities owned by such Shareholder; provided that the Company shall not be required to (1) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2.4(d), (2) subject itself to taxation in any such jurisdiction or (3) consent to general service of process in any such jurisdiction.
(e) The Company shall, subject to Section 2.13, immediately notify each Participating Shareholder holding such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and make available to each such Shareholder and file with the SEC any such supplement or amendment.
(f) The Company shall have the right to select the underwriter or underwriters in connection with any underwritten Public Offering resulting from the exercise by any Major Investor of a Demand Registration or in connection with any other underwritten Public Offering, provided that the lead underwriter shall, in the case of an underwritten Public Offering effected pursuant to Section 2.1, be reasonably acceptable to the Shareholders holding a majority of the Registrable Securities proposed to be sold in such underwritten Public Offering; and provided, further, that in connection with the First Public Offering and any Public Offering effected pursuant to Section 2.1, each of GSCP V and Merrill shall be entitled to require that the Company appoint Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, respectively, to act as a lead managing underwriter for the First Public Offering and any such Public Offering, provided that, with respect to each such underwriter individually (a) each such underwriter shall be at such time recognized as a leading underwriter for such securities and (b) GSCP V and Merrill, as applicable, shall be Qualified Sponsors at such time, provided the terms offered are market terms. In connection with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take such all other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities in any such Public Offering, including the engagement of a "qualified independent underwriter" in connection with the qualification of the underwriting arrangements with the NASD. In connection with any Public Offering for which Goldman, Sachs & Co. and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as an underwriter, the Public Offering shall be effected in such a manner that at no time shall Goldman, Sachs & Co. and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated hold any shares of Voting Common Stock of the Company.
(g) Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make available for inspection by any Participating Shareholder and any underwriter participating in any disposition pursuant to a registration statement being filed by the Company pursuant to this Section 2.4 and any attorney, accountant or other professional retained by any such Shareholder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records") as shall be reasonably necessary or desirable to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records that the Company determines, in good faith, to be confidential
and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is required pursuant to applicable law or regulation or judicial process. Each Participating Shareholder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Company Securities unless and until such information is made generally available to the public. Each Participating Shareholder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. The provisions of this Section 2.4(g) shall not be interpreted as requiring any Participating Shareholder to conduct due diligence or imparting any due diligence responsibility, unless and only to the extent imposed by applicable law.
(h) The Company shall (i) furnish to each Participating Shareholder and to each such underwriter, if any, a signed counterpart, addressed to such Shareholder or underwriter, of an opinion or opinions of counsel to the Company and (ii) in the case of an underwritten offering, furnish to each underwriter and use commercially reasonable efforts to furnish to each Participating Shareholder a comfort letter or comfort letters from the Company's independent public accountants addressed to such underwriter or Shareholder, each in customary form and covering such matters of the kind customarily covered by opinions or comfort letters, as the case may be, as Shareholders holding a majority of the Registrable Securities being sold in the offering or the managing underwriter therefore reasonably requests.
(i) The Company shall otherwise use all reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement or such other document that shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
(j) The Company may require each such Participating Shareholder promptly to furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.
(k) Each such Participating Shareholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.4(e) or 2.13, such Shareholder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Shareholder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.4(e), and, if so directed by the Company, such Shareholder shall deliver to the Company all copies, other than any permanent file copies then in such Shareholder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. If the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 2.4(a) or 2.13, as applicable) by the number of days during the period from and including the date of the giving of notice pursuant to Section 2.4(e) or 2.13, as applicable, to the date when the Company shall make available to such Shareholder a prospectus supplemented or amended to conform with the requirements of Section 2.4(e).
(l) The Company shall use commercially reasonable best efforts to list all Registrable Securities covered by such registration statement on any securities exchange or quotation system on which any of the Registrable Securities are then listed or traded.
(m) The Company shall have appropriate officers of the Company (i) prepare and make presentations at any "road shows" and before analysts and rating agencies, as the case may be, (ii) take other actions to obtain ratings for any Registrable Securities and (iii) otherwise use their reasonable efforts to cooperate as reasonably requested by the underwriters in the offering, marketing or selling of the Registrable Securities, including, without limitation, by executing customary underwriting agreements.
(n) The Company shall appoint a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement.
(o) The Company shall endeavor to deliver to each Participating Shareholder and each underwriter, if any, copies of all correspondence between the SEC and the Company when all such comments have been substantially completed, except to the extent that such correspondence contains, in the judgment of the Company, confidential or sensitive information.
(p) The Company shall provide a CUSIP number for all Registrable Securities, not later than the effective date of the registration statement.
(q) The Company shall reasonably cooperate with the Participating Shareholders and the lead underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement or, if not an underwritten offering, in accordance with the reasonable instructions of the Participating Shareholders at least one Business Day prior to any sale of Registrable Securities and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof.
If any registration statement or comparable statement under state "blue sky" laws refers to any Shareholder by name or otherwise as the Shareholder of any securities of the Company, then such Shareholder shall have the right to require, subject to applicable law and requirements imposed, required or requested by any governmental authority, (i) the insertion therein of language to the effect that the holding by Shareholders of such securities is not to be construed as a recommendation by any Shareholders of the investment quality of the Company's securities covered thereby and that such holding does not imply that any Shareholder will assist in meeting any future financial requirements of the Company, or (ii) the deletion of the reference to such Shareholder.
SECTION 2.5 Indemnification by the Company.
The Company agrees to indemnify and hold harmless each Participating
Shareholder holding Registrable Securities covered by a registration statement,
its affiliates, and its and their respective officers, directors, employees,
members, managers, shareholders, partners, representatives, advisors and agents,
and each Person, if any, who controls such Shareholder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable expenses of investigation and reasonable attorneys' fees and
expenses) ("Damages") caused by or relating to any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities
(as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by or relating to any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company, except insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to the Company by such Shareholder or on such Shareholder's behalf expressly for use therein.
The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Shareholders provided in this Section 2.5 or otherwise on commercially reasonable terms negotiated on an arm's length basis with such underwriters.
SECTION 2.6 Indemnification by Participating Shareholders.
Each Participating Shareholder holding Registrable Securities included in a registration statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Shareholder, but only with respect to information furnished in writing by such Shareholder or on such Shareholder's behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each such Shareholder also agrees to indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 2.6. As a condition to including Registrable Securities in any registration statement filed in accordance with Article 2, the Company may require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent customarily provided by underwriters with respect to similar securities. No Participating Shareholder shall be liable under this Section 2.6 for any Damages in excess of the net proceeds realized by such Shareholder in the sale of Registrable Securities of such Shareholder to which such Damages relate.
SECTION 2.7 Conduct of Indemnification Proceedings.
If any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Article 2, such Person (an "Indemnified Party") shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Party") in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent and only to the extent that the Indemnifying Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.
It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.
SECTION 2.8 Contribution.
If the indemnification provided for in this Article 2 is unavailable to the Indemnified Parties in respect of any Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages (i) as between the Company and the Participating Shareholders holding Registrable Securities covered by a registration statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such Shareholders on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Shareholders on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each such Shareholder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each such Shareholder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and such Shareholders on the one hand and such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and such Shareholders bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and such Shareholders on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and such Shareholders or by such underwriters. The relative fault of the Company on the one hand and of each such Shareholder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Participating Shareholders agree that it would not be just and equitable if contribution pursuant to this Section 2.8 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 2.8, no Participating Shareholder shall be required to contribute any amount for Damages in excess of the net proceeds realized by such Shareholder in the sale of Registrable Securities of such Shareholder to which such Damages relate. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Participating Shareholder's obligation to contribute pursuant to this Section 2.8 is several in the proportion that the net proceeds of the offering received by such Shareholder bears to the total net proceeds of the offering received by all such Participating Shareholders and not joint.
SECTION 2.9 Participation in Public Offering.
No Person may participate in any Public Offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights.
SECTION 2.10 Other Indemnification.
Indemnification similar to that specified herein (with appropriate modifications) shall be given by the Company and each Participating Shareholder with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.
SECTION 2.11 Exchange Act Filings, Rule 144.
If at any time the Company registers any of the Shares pursuant to
Section 12(b) or 12(g) of the Exchange Act, the Company will thereafter (until
such time, if any, as the Shares are deregistered under the Exchange Act) use
commercially reasonable efforts to file reports in compliance with the Exchange
Act and will, at the Company' expense, forthwith upon the reasonable request of
any Shareholder seeking to transfer Shares, deliver to such Shareholder a
certificate, signed by an officer of the Company, containing (to the extent
applicable) the statement contemplated by the third sentence of paragraph (c)(1)
of Rule 144 (unless the Company has already made the statement contemplated by
the second sentence of said paragraph (c)(1)).
SECTION 2.12 Termination of Registration Rights.
On and after the fifth anniversary of the date of the Qualified Public Offering, the rights granted under Section 2.2 shall apply only to Registrable Securities held by the Shareholders and the provisions of Section 2.3 shall apply only to Shareholders that hold Registrable Securities.
SECTION 2.13 Black-Out Period.
Upon notice to Shareholders with Common Stock registered under a registration statement effected pursuant to Section 2.1 or 2.2, the Company may suspend the use of the prospectus included in such registration statement in the event that and for a period of time (the "Black-Out Period") not to exceed an aggregate of 90 days during any twelve-month period if the Company is in possession of material non-public information the disclosure of which during the period specified in such notice the Company reasonably believes would not be in the best interest of the Company. Upon receiving such
notice, each Shareholder agrees not to use such prospectus until the earlier of the expiration of such 90 day period or the date such Shareholder receives notice from the Company that the Black-Out Period has expired.
ARTICLE III.
CERTAIN COVENANTS AND AGREEMENTS
SECTION 3.1 Restrictions.
Prior to the Qualified Public Offering, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, take any of the following actions without the prior written consent of a Majority of the Qualified Sponsors:
(a) issue, repurchase, sell or grant, or enter into any agreement
providing for the issuance (contingent or otherwise) of, any of its capital
stock or other equity securities (including, without limitation, any notes
or debt securities, in each case, containing equity features, and any of
its Company Securities) except for (A) the issuance of or payment of
dividends or other distributions payable on the Common Stock solely in the
form of additional shares of Common Stock, (B) the issuance of shares of
Common Stock upon the conversion, exchange or exercise of any Company
Securities outstanding as of the date hereof or issued in a transaction
that was otherwise subject to this Section 3.1, (C) the issuance of Plan
Options and/or Common Stock or rights to receive Common Stock under any
long term incentive plan established by the Board not to exceed 5% of the
equity of the Company outstanding as of the date of completion of the
offering contemplated by the Offering Memorandum and the issuance of Common
Stock upon the conversion, exchange or exercise of Plan Options or rights
issued under such long term incentive plan, (D) the issuance of Company
Securities as contemplated by the Offering Memorandum or this Agreement,
(E) to the extent such transaction is between and among the Company and its
Subsidiaries and (F) securities issued upon the conversion, exchange and/or
the exercise of any securities the creation, designation, authorization,
issuance, sale or grant of which is approved or permitted pursuant to this
Section 3.1;
(b) except for letter of credit and similar facilities in support of
the ordinary course insurance and/or reinsurance operations of the Company
and its Subsidiaries, create, incur or assume (A) indebtedness (other than
intercompany indebtedness) for borrowed money or funded indebtedness, (B)
any lease obligations that would be required to be reflected as a liability
on the face of the consolidated balance sheet of the Company prepared in
accordance with U.S. GAAP, (C) any indebtedness described in (A) or (B)
above guaranteed by the Company or any Subsidiary of the Company (excluding
intercompany debt and guarantees and guarantees by the Company or any
Subsidiary of the Company of performance obligations of any of the Company
or its Subsidiaries), (D) any obligations under, or associated with, any
hedging or swap agreements, and (E) any obligation owed for all or any part
of the deferred purchase price of property or services, in each case, which
(a) would reasonably be likely to result in a ratings downgrade from A.M.
Best Company to a rating lower than "A-" or (b) in the aggregate exceeds
$150.0 million in principal amount; or
(c) engage in any line of business other than the business described in the Offering Memorandum and businesses reasonably related thereto.
SECTION 3.1A Business Activities.
Unless it has obtained the specific consent of the Board in advance, the Company will (and will cause its Subsidiaries to) use commercially reasonable efforts (i) to conduct its operations and the operations of its non-U.S. Subsidiaries in Bermuda or elsewhere outside the United States and to limit its activities and the activities of its non-U.S. Subsidiaries such that neither it nor its non-U.S. Subsidiaries would reasonably be expected to be considered engaged in a U.S. trade or business for U.S. federal income tax purposes; (ii) to conduct its business and the business of its Subsidiaries and to manage its income and assets and those of its Subsidiaries in such a manner that it and its non-U.S. Subsidiaries would not reasonably be expected to be considered "passive foreign investment companies" for U.S. federal income tax purposes; and (iii) to conduct its business and the business of its Subsidiaries such that no direct or indirect beneficial owner of Company Securities known to the Company (after reasonable inquiry) would reasonably be expected to have "related party insurance income" inclusions for U.S. federal income tax purposes as a result of being such a direct or indirect beneficial owner (assuming that the relevant Shareholder has provided all relevant information to the Company upon written request of the Company). For the avoidance of doubt, commercially reasonable efforts will include, when appropriate, consulting with advisors with respect to the matters described in this covenant.
SECTION 3.2 Special Actions.
Commencing with the eighteen-month anniversary of the date hereof, if the Qualified Public Offering has not occurred, the Company will take such steps as are reasonably requested by a Majority of the Qualified Sponsors to effectuate an initial public offering or, at the Board's option, such other transaction as will result in Liquidity for all the Common Stock. "Liquidity" for this purpose shall mean publicly-traded stock or securities or cash.
SECTION 3.3 Confidentiality.
(a) Each Shareholder agrees that Confidential Information furnished and to be furnished to it was and shall be made available in connection with such Shareholder's investment in the Company. Each Shareholder agrees that it shall use, and that it shall cause any Person to whom Confidential Information is disclosed pursuant to clause (i) below to use, the Confidential Information only in connection with its investment in the Company and not for any other purpose (including to disadvantage competitively the Company or any other Shareholder). Each Shareholder further acknowledges and agrees that it shall not disclose any Confidential Information to any Person, except that Confidential Information may be disclosed:
(i) to such Shareholder's Representatives in the normal course of the performance of their duties to such shareholder or to any financial institution providing credit to such Shareholder,
(ii) to the extent required by applicable law, rule or regulation (including complying with any oral or written questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process to which a Shareholder is subject); provided that such Shareholder give the Company prompt notice of such request(s), to the extent practicable, so that the Company may seek an appropriate protective order or similar relief (and the Shareholder shall cooperate with such efforts by the Company, and shall in any event make only the minimum disclosure required by such law, rule or regulation)),
(iii) to any regulatory authority to which the Shareholder or any of its affiliates is subject or with which it has regular dealings, as long as such authority or agency is advised of the confidential nature of such information, or
(iv) if the prior written consent of the Board shall have been obtained.
(b) "Confidential Information" means any information concerning the
Sponsors or the Company, the Operating Company or any Persons that are or become
its Subsidiaries or the financial condition, business, operations or prospects
of the Company or any such Persons in the possession of or furnished to any
Shareholder; provided that the term "Confidential Information" does not include
information that (i) is or becomes generally available to the public other than
as a result of a disclosure by a Shareholder or its partners, shareholders,
members, directors, officers, employees, agents, counsel, investment advisers or
representatives (all such persons being collectively referred to as
"Representatives") in violation of the applicable agreement, such as the
Subscription Agreement or this Agreement, (ii) is or was available to such
Shareholder on a non-confidential basis prior to its disclosure to such
Shareholder or its Representatives by the Company or the Operating Company,
(iii) was or becomes available to such Shareholder on a non-confidential basis
from a source other than the Company or the Operating Company, which source is
or was (at the time of receipt of the relevant information) not, to the best of
such Shareholder's knowledge, bound by a confidentiality agreement with (or
other confidentiality obligation to) the Company or another Person.
SECTION 3.4 Conflicting Agreements.
This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, understandings and arrangements, oral or written, by or among the parties hereto with respect to the subject matter hereof, other than the Subscription Agreements, the Bye-laws and the Memorandum.
SECTION 3.5 Acknowledgment.
Each Shareholder acknowledges and agrees that none of the Sponsors nor any of their respective Affiliates is a guarantor of, or is otherwise responsible for, the Company's profitability or viability.
SECTION 3.6 Competition; No Fiduciary Duties.
(a) The Company and each Shareholder acknowledges and agrees that each Shareholder, its Affiliates and their respective officers, directors, employees and agents may, alone or in combination with any other person, engage in activities or businesses, make investments in and acquisitions of any person, and enter into partnerships and joint ventures with any person, whether or not competitive now or in the future with the businesses or activities of the Company, and neither the Company nor any Shareholder shall have the right to disclosure of any information in regard thereto (except to the extent required by, or reasonably necessary to ensure each Shareholder's and the Company's compliance with, applicable law, including the Code or as required by the Company's Bye-Laws relating to disclosure by directors of conflicts of interest), to participate therein, or to derive any profits therefrom. Notwithstanding the foregoing, this Section 3.6 shall not permit any Shareholder to use Confidential Information in a manner prohibited by Section 3.3 or other applicable law.
(b) The Company and each Shareholder acknowledges and agrees that no Shareholder, nor any of its Affiliates or any of their respective officers, directors, employees and agents, shall
have any obligation to refer to the Company any business opportunities presented or developed by any of them.
(c) The Company and each Shareholder acknowledges and agrees that certain Shareholders are, and may in the future be, engaged in businesses and activities which, directly or indirectly, compete with the businesses of the Company or its Subsidiaries. The Shareholders agree that no violation of this Agreement shall exist as a result of: (i) the fact that a director, officer or employee of a Shareholder or any Affiliate thereof that is familiar with the activities and operations of the Company or its Subsidiaries (as a director, officer or employee of the Company or the Operating Company or otherwise) engages in, or participates in a supervisory capacity relating to, a similar or competing activity (it being understood that such circumstances are expected to occur); or (ii) the existence of any activity or business of any Shareholder or Affiliate thereof which is similar to or competes with, directly or indirectly, the business of the Company or the Operating Company.
(d) The Company and each Shareholder acknowledges and agrees that no Shareholder shall have any fiduciary duties to the Company or to any other Shareholder with respect to the matters covered by this Section 3.6.
(e) For the avoidance of doubt, the provisions of this Section 3.6 shall not in any way affect or diminish any separate undertaking under any separate agreement entered into between the Company or its Subsidiaries, on the one hand, and any other Person, on the other, or any obligation or duty owed as a result of a Person's capacity as an employee, director, consultant or agent or any similar capacity of the Company or its Subsidiaries.
SECTION 3.7 Accounting; Financial Statements and other Information.
(a) The Company will maintain a system of accounting established and administered in accordance with U.S. GAAP. During any period when the Company is not subject to the reporting obligations of Section 15(d) of the Exchange Act, the Company agrees to provide to each Shareholder as promptly as practicable following (a) the end of each of the first three fiscal quarters of the year (commencing with the quarter ending March 31, 2006) an unaudited quarterly report setting forth its balance sheet as of the end of such period, its statement of income for such period and its statement of cash flows for such period, in each case prepared in accordance with U.S. GAAP and (b) the end of each fiscal year of the Company (commencing with the fiscal year ending December 31, 2006), an audited annual report setting forth its balance sheet as of the end of such period, its statement of income for such period, statement of changes in shareholders' equity for such period and its statement of cash flows for such period, in each case prepared in accordance with U.S. GAAP.
SECTION 3.8 Insurance.
The Company shall obtain and maintain directors' and officers' liability insurance for the benefit of all the directors and officers (and, if the Board so determines in its sole discretion, any employees of the Company or the Operating Company), in each case on such terms and conditions as the Board shall approve in its sole discretion.
SECTION 3.9 Certain Tax Matters.
At the end of each fiscal year, the Company will provide to each Shareholder a statement of whether the Company believes that it is or is not a "passive foreign investment company" or "PFIC" for U.S. federal income tax purposes. If the Company believes that it is a PFIC, it will take commercially
reasonable efforts to provide Shareholders with the necessary information for Shareholders to make the "qualified electing fund" election described in Section 1295(b) of the Code.
SECTION 3.10 Ratification of Board.
Each Shareholder shall have the right to ratify the directors and Designated Company Directors (as defined in the Bye-laws) of the Company by delivering the investor election set forth as Exhibit B hereto.
SECTION 3.11 Listed Transactions.
It is the intention of the Company that neither the Company nor any of its Subsidiaries will enter into any transaction that is, at the time such transaction is entered into, a "listed transaction" within the meaning of U.S. Treasury regulations promulgated under Section 6011 of the Code and, if the Company or any of its Subsidiaries participate in a reportable transaction described in the aforesaid U.S. Treasury regulations, the Company will provide to the Shareholders information sufficient for the Shareholders to timely comply with any resulting U.S. tax reporting obligations.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1 Binding Effect; Assignability; Benefit.
(a) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, successors, legal representatives
and permitted assigns; provided, however, that this Agreement shall not inure to
the benefit of or be binding on, or be assignable or transferable by any
Shareholder to, any Person acquiring Company Securities in any Public Offering
or pursuant to Rule 144. Any Shareholder that ceases to own beneficially any
Company Securities shall cease to be bound by the terms hereof (other than (i)
the provisions of Sections 2.5, 2.6, 2.7, 2.8 and 2.10 applicable to such
Shareholder with respect to any offering of Registrable Securities completed
before the date such Shareholder ceased to own any Company Securities, (ii)
Section 3.3 and (iii) this Article IV.
(b) Notwithstanding the provisions of Section 4.1(a), additional holders of Company Securities may be added to and bound by this Agreement as a "Shareholder" upon the signing and delivery by the Company of an agreement of joinder in the form attached hereto as Exhibit A and the acceptance thereof by such additional holders.
(c) Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 4.2 Notices.
All notices, requests and other communications to any party shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission, if to the Company to:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HM08 Bermuda
Attention: Edward Noonan
with a copy to:
Cahill Gordon & Reindel LLP
80 Pine Street
New York, New York 10005
Attention: Michael A. Becker, Esq.
John Schuster, Esq.
Facsimile: (212) 269-5420
and if to a Shareholder, at such Shareholder's address as set forth in the Register of Members (as defined in the Bye-laws) maintained by the Company. Any Person that becomes a Shareholder shall promptly provide its address and fax number to the Company.
All notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. Any notice, request or other written communication sent by facsimile transmission shall be confirmed by certified or registered mail, return receipt requested, posted within one Business Day, or by personal delivery, whether courier or otherwise, made within two Business Days after the date of such facsimile transmissions.
SECTION 4.3 Waiver; Amendment; Termination.
(a) No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective. No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by the Company with approval of the Board, a Supermajority of the Qualified Sponsors and Shareholders holding at least a majority of the outstanding Shares held by the parties hereto at the time of such proposed amendment or modification.
(b) In addition, any amendment or modification of any provision of this Agreement that would adversely affect a Shareholder in a manner different from any other Shareholder may be effected only with the consent of such Shareholder.
SECTION 4.4 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to the principles of conflicts of laws thereof.
SECTION 4.5 Jurisdiction.
The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in the United States District Court for the
Southern District of New York or any New York State court sitting in New York
City, so long as one of such courts shall have subject matter jurisdiction over
such suit, action or proceeding, and that any cause of action arising out of
this Agreement shall be deemed to have arisen from a transaction of business in
the State of New York, and each of the parties hereby irrevocably consents to
the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient form. Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. Without limiting the foregoing,
each party agrees that service of process on such party as provided in Section
4.2 shall be deemed effective service of process on such party; provided that,
in lieu of being subject to service of process by the methods provided in
Section 4.2, each Shareholder, by providing written notice to the Company, may
designate an agent with an office in New York City (or other location approved
by the Company) to receive service of process on behalf of such Shareholder.
SECTION 4.6 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 4.7 Specific Enforcement.
Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies that may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available.
SECTION 4.8 Counterparts; Effectiveness.
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto.
SECTION 4.9 Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereto and supersedes all prior and contemporaneous agreements and understandings, both oral and written, among the parties hereto with respect to the subject matter hereof.
SECTION 4.10 Captions.
The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.
SECTION 4.11 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
SECTION 4.12 Foreign Registration.
In the event Securities are to be registered in a jurisdiction other than the United States, the parties hereto agree to negotiate in good faith to amend this agreement as necessary in order to provide for rights and benefits with respect to such registration comparable to those contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
VALIDUS HOLDINGS, LTD.
SHAREHOLDERS
Name of Shareholder:
EXHIBIT A
JOINDER TO SHAREHOLDERS' AGREEMENT
This Joinder Agreement (this "Joinder Agreement") is made as of the date written below by the undersigned (the "Joining Party") in accordance with the Shareholders' Agreement dated as of December 12, 2005 (the "Shareholders' Agreement") among Validus Holdings, Ltd. and the Shareholders party thereto, as the same may be amended from time to time. Capitalized terms used, but not defined, herein shall have the meaning ascribed to such terms in the Shareholders' Agreement.
The Joining Party hereby acknowledges, agrees and confirms that, by its execution of this Joinder Agreement, the Joining Party shall be deemed to be a party to the Shareholders' Agreement as of the date hereof and shall have all of the rights and obligations of a "Shareholder" thereunder as if it had executed the Shareholders' Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Shareholders' Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the date written below.
Date: ___________ ___, _____
[NAME OF JOINING PARTY]
EXHIBIT B
INVESTOR ELECTION
By checking one of the boxes below, the undersigned Shareholder hereby either
(i) ratifies the Directors and Alternate Directors of Validus Holdings, Ltd. and
the Directors of Validus Reinsurance, Ltd. named in the Offering Memorandum, as
supplemented to the date hereof or (ii) withholds from doing so.
VALIDUS HOLDINGS, LTD.:
APPROVED: [ ]
WITHHELD: [ ]
VALIDUS REINSURANCE, LTD.:
APPROVED: [ ]
WITHHELD: [ ]
Dated: December _______, 2005.
[Exhibit 10.2]
FOUNDER AGREEMENT
THIS FOUNDER AGREEMENT (the "Agreement") is made as of the 7th day of December, 2005, between Validus Holdings, Ltd. (including its successors and assigns, the "Company"), a company with limited liability organized under the laws of Bermuda, and Aquiline Capital Partners LLC (the "Founder"), a Delaware limited liability company.
The parties hereto hereby agree as follows:
1. Services Rendered by the Founder to the Company. The Founder has rendered services to the Company prior to the date hereof in connection with the formation and initial capitalization of the Company and its subsidiaries (the "Services").
2. Fees. In consideration the Services, the Company agrees to pay to the Founder (or its designee) a founder's fee (the "Founder's Fee"), such Founder's Fee consisting of the following:
(a) $12,103,366.81, such amount being due in full on the date that is thirty days following the first funding of the Company's offering of common shares; and
(b) warrants issued to the Founder (or its designee), substantially in the form of warrant attached hereto as Exhibit A (the "Warrants"), to purchase 4.15% of the Company's fully diluted common shares, such Warrants to be issued and delivered concurrently herewith.
3. Term. This Agreement shall become effective upon its execution, and shall automatically terminate upon payment of the Founder's Fee in full in accordance with the terms of Section 2. Notwithstanding the foregoing, the provisions of Section 4 shall survive the termination of this Agreement.
4. Indemnity. In consideration of the execution and delivery of this Agreement by the Founder, the Company hereby agrees to indemnify, exonerate and hold each of the Founder and its affiliates, and each of their respective, equityholders, directors, officers, fiduciaries, employees and agents (collectively, the "Indemnitees") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to the execution, delivery, performance, enforcement or existence of this Agreement or the transactions contemplated hereby or thereby except for any such Indemnified Liabilities arising solely on account of such Indemnitee's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. None of the Indemnitees shall be liable to the Company or any of its affiliates for any act or omission suffered or taken by such Indemnitee that does not constitute gross negligence or willful misconduct
5. Miscellaneous.
(a) No amendment or waiver of any term, provision or condition of this Agreement shall be effective, unless in writing and executed by each of the Founder and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.
(b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.
(c) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto. The fees set forth herein are in addition to the fees set forth in the Advisory Agreement of even date herewith between the Company and Aquiline Capital Partners LLC.
(d) All notices, demands, and communications of any kind which any party may require or desire to serve upon any other party under this Agreement shall be in writing and shall be served upon such other party as specified below by personal delivery to the address set forth for it below or to such other address as such party shall have specified by notice to each other party or by mailing a copy thereof by certified or registered mail, or by any reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party and copied persons at such addresses. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In case of service by mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party or copied person of change of address shall be deemed complete only upon actual receipt by an officer or agent of such party or copied person.
If to the Company, at:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HM08 Bermuda
Attention: Edward Noonan
If to the Founder, at:
Aquiline Capital Partners, LLC
275 Madison Avenue, 38th Floor
New York, New York 10022
Attn: Matthew J. Grayson
Facsimile: (212) 624-9510
(e) If in any judicial proceedings a court shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced.
(f) This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement.
[signature page follows]
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written.
VALIDUS HOLDINGS, LTD.
AQUILINE CAPITAL PARTNERS LLC
[Exhibit 10.3]
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT (the "Agreement") is made as of the 7th day of December, 2005, between Validus Holdings, Ltd. (including its successors and assigns, the "Company"), a company with limited liability organized under the laws of Bermuda, and Aquiline Capital Partners LLC (the "Advisor"), a Delaware limited liability company.
The parties hereto hereby agree as follows:
1. Services Rendered by the Advisor to the Company. The Advisor has and shall continue to, by and through itself and its officers, employees and representatives as it shall designate in its sole discretion from time to time, provide advisory and consulting services in relation to the affairs of the Company and its subsidiaries with respect to:
(a) the formation and initial capitalization of the Company and its subsidiaries;
(b) subject to the authority of the Company's board of directors (the "Board"), the structure and timing of public and private offerings of debt and equity securities of the Company and its subsidiaries and other financings;
(c) subject to the authority of the Board, property dispositions or acquisitions; and
(d) such other advice directly related or ancillary to the advisory services, in the case of (a)-(c) above, as may be mutually agreeable to each of them and the Board.
The Advisor shall at all times be an independent contractor and nothing in this Agreement shall be construed to constitute the Advisor as an agent or a partner of the Company.
2. Fees. In consideration for services rendered to date, as well as services to be rendered, the Company agrees to pay an advisory fee (the "Advisory Fee") to the Advisor (or its designee) in an amount equal to $1,000,000 per annum, such fee being being due in full on the date that is thirty days following the first funding of the Company's offering of common shares and each anniversary of the date hereof.
3. Term. This Agreement shall become effective upon its execution, and shall automatically terminate on the day before the fifth anniversary of the date hereof (the "Termination Date"); provided, that the Company may terminate this Agreement at any time after the date hereof upon payment in full to the Advisor of the remaining Advisory Fees that would otherwise be paid by the Company if the Agreement were terminated on the Termination Date. Notwithstanding the foregoing, the provisions of Paragraph 6 shall survive the termination date.
4. Change of Control; First Public Offering. Prior to the Termination Date, upon the earlier to occur of (a) a Change of Control (as defined in the Bye-laws of the Company (the "Bye-laws") and (b) the First Public Offering (as defined in the Bye-laws), the Company shall immediately pay in full to the Advisor the remaining Advisory Fees that would otherwise be paid by the Company if the Agreement were terminated on the Termination Date and this Agreement shall terminate.
5. Expenses. The Company agrees to pay on demand all of the Advisor's reasonable documented out-of-pocket expenses directly incurred in connection with providing services under this Agreement.
6. Indemnity. In consideration of the execution and delivery of this Agreement by the Advisor, the Company hereby agrees to indemnify, exonerate and hold each of the Advisor and its affiliates, and each of their respective, equityholders, directors, officers, fiduciaries, employees and agents (collectively, the "Indemnitees") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to the execution, delivery, performance, enforcement or existence of this Agreement or the transactions contemplated hereby or thereby except for any such Indemnified Liabilities arising solely on account of such Indemnitee's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. None of the Indemnitees shall be liable to the Company or any of its affiliates for any act or omission suffered or taken by such Indemnitee that does not constitute gross negligence or willful misconduct
7. Miscellaneous.
(a) No amendment or waiver of any term, provision or condition of this Agreement shall be effective, unless in writing and executed by each of the Advisor and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.
(b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.
(c) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto.
(d) All notices, demands, and communications of any kind which any party may require or desire to serve upon any other party under this Agreement shall be in writing and shall be served upon such other party as specified below by personal delivery to the address set forth for it below or to such other address as such party shall have specified by notice to each other party or by mailing a copy thereof by certified or registered mail, or by any reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party and copied persons at such addresses. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In case of service by mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party or copied person of change of address shall be deemed complete only upon actual receipt by an officer or agent of such party or copied person.
If to the Company, at:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HMO8 Bermuda
Attn: Edward Noonan
If to the Advisor, at:
Aquiline Capital Partners, LLC
275 Madison Avenue, 38th Floor
New York, New York 10022
Attn: Matthew J. Grayson
Facsimile: (212) 624-9510
(e) If in any judicial proceedings a court shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced.
(f) This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement.
[signature page follows]
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written.
VALIDUS HOLDINGS, LTD.
AQUILINE CAPITAL PARTNERS LLC
[Exhibit 10.4]
FORM OF [SERIES A][SERIES B] WARRANT(1)
VALIDUS HOLDINGS, LTD.
[SERIES A][SERIES B] WARRANT FOR THE PURCHASE OF COMMON STOCK
OF VALIDUS HOLDINGS, LTD.
NO. [A][B]-[_____]
[SERIES A][SERIES B] WARRANT TO PURCHASE
SHARES EQUAL TO HOLDER'S WARRANT AMOUNT
(AS DEFINED BELOW)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY CANNOT BE OFFERED, TRANSFERRED OR SOLD UNLESS (I) A REGISTRATION STATEMENT UNDER SUCH ACT IS IN EFFECT WITH RESPECT TO THIS SECURITY OR A WRITTEN OPINION FROM COUNSEL ACCEPTABLE TO THE COMPANY IS OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED AND (II) THE TRANSFEREE IS APPROVED BY APPLICABLE REGULATORY AUTHORITIES, IF SUCH APPROVAL IS REQUIRED. TRANSFERS OF THIS SECURITY ARE SUBJECT TO THE APPROVAL OF THE BOARD OF DIRECTORS OF THE COMPANY, IN ITS SOLE DISCRETION. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, VOTING AND OTHER MATTERS AS SET FORTH IN THE COMPANY'S BYE-LAWS AND ANY SHAREHOLDER'S AGREEMENT TO WHICH THE HOLDER MAY BE (OR BECOME) A PARTY.
FOR VALUE RECEIVED, Validus Holdings, Ltd., an exempt company incorporated in Bermuda with limited liability (the "Company"), hereby certifies that [_____], its successor or permitted assigns (the "Holder") is entitled, subject to the terms hereof, to purchase a number of fully paid and nonassessable shares of [Voting][Non-Voting] Common Stock of the Company, par value $0.10 per share (the "Warrant Shares"), equal to the Holder's Warrant Amount (as defined herein), at a purchase price per share equal to the Exercise Price (as defined herein). The number of Warrant Shares to be received upon the exercise of this Warrant and the price to be paid for such shares are subject to adjustment from time to time as hereinafter set forth.
1. Definitions. The following terms, as used herein, have the following meanings:
"Acquisition Event" means (i) any amalgamation, merger, scheme of arrangement, consolidation, or other similar transactions as a result of which the Members of the Company immediately prior to such transaction shall, in the aggregate, beneficially own (as such term is defined in Rule 13d promulgated under the United States Securities Exchange Act of 1934, as amended) immediately following the consummation thereof (x) less than 50% of the Common Stock of the Company if the Company is the entity surviving such amalgamation, scheme of arrangement or consolidation or (y) less than 50% of
the common equity of the entity surviving such amalgamation or formed by such scheme of arrangement or consolidation if the Company is not the entity surviving such amalgamation, scheme of arrangement or consolidation or (ii) any transaction or circumstance approved by at least two-thirds of the Directors of the Company and Holders of a majority of then outstanding Warrants and identified as an Acquisition Event for purposes of the Company's Warrants.
"Affiliate" shall have the meaning given to such term in Rule 12b-2 promulgated under the United States Securities Exchange Act of 1934, as amended.
"Board of Directors" means the board of directors of the Company.
"Bye-laws" means the Bye-laws of the Company, as amended from time to time.
"Common Stock" means, collectively, the Voting Common Stock and the Non-Voting Common Stock.
"Exercise Price" means $10.00 per share.
"Exercised Percentage" with respect to any exercise of a portion of this Warrant as of any particular date, means a percentage equal to the product of (i) 100% and (ii) a fraction, the numerator of which shall be the number of shares of Common Stock issued upon the exercise of such portion of this Warrant as of such date of partial exercise, and the denominator of which shall be the number of shares of Common Stock outstanding as of such date of partial exercise (calculated on a fully diluted basis and assuming that all options, warrants, including this Warrant, and any other rights to purchase Common Stock outstanding on such date shall have been exercised on such date).
"Expiration Date" means December [__], 2015 at 5:00 p.m. New York City time.
"Initial Public Offering" means the first registered public offering of the Common Stock under the United States securities laws after the date hereof or any amalgamation, scheme of arrangement or consolidation as a result of which the Members of the Company receive, as the consideration in such amalgamation, scheme of arrangement or consolidation, equity securities of a class that (i) has been registered as part of a public offering under the United States securities laws and (ii) is publicly traded on a securities exchange in or outside the United States.
"Non-Voting Common Stock" means the shares of Non-Voting Common Stock, par value $0.10 per share, of the Company.
"Series A Warrants" means the Company's Series A Warrants to purchase Voting Common Stock[, of which this Warrant is one].
"Series B Warrants" means the Company's Series B Warrants to purchase Non-Voting Common Stock[, of which this Warrant is one].
"Voting Common Stock" means the shares of Voting Common Stock, par value $0.10 per share, of the Company.
"Warrant Amount" as of any exercise date, means a number of Warrant Shares equal to:
(i) the Warrant Percentage for this Warrant as of such exercise date; multiplied by
(ii) the aggregate number of shares of Common Stock which would be outstanding on such date on a fully diluted basis and assuming that all options, warrants (including this Warrant and each other Warrant of the Company) and any other rights to purchase Common Stock outstanding on such date shall have been exercised on such date (whether or not then exercisable),
provided, however, that the Warrant Amount shall be fixed in accordance with the foregoing formula (subject to changes pursuant to Section 6 or 7 hereof) at the close of business on the day immediately preceding the date of consummation of an Initial Public Offering, if any, or the close of business on the day immediately preceding the date of consummation of an Acquisition Event, if any, whichever first occurs.
"Warrant Percentage" as of any exercise date, means [_____]% less (i) in any case when a portion of this Warrant shall have been previously exercised on one specific occasion, the Exercised Percentage, or (ii) in the event that a portion of this Warrant shall have been previously exercised on more than one occasion, the sum of the Exercised Percentages calculated with respect to each such prior exercise. In the event that, as of any exercise date, a portion of this Warrant shall have been previously exercised on more than one occasion, the calculation of the Exercised Percentage with respect to each such prior exercise shall be made successively, commencing with the earliest such prior exercise.
"Warrants" means, collectively, Series A Warrants and Series B Warrants.
2. Exercise of Warrant.
(a) The Holder is entitled to exercise this Warrant in whole or in part at any time, or from time to time, until the Expiration Date, for the Holder's Warrant Amount on such exercise date. To exercise this Warrant, the Holder shall execute and deliver to the Company a Warrant Exercise Notice substantially in the form attached hereto. Subject to Section 2(d) below, no earlier than ten days after delivery of the Warrant Exercise Notice, the Holder shall deliver to the Company this Warrant Certificate, including the Warrant Exercise Subscription Form attached hereto duly executed by the Holder, together with payment of the applicable Exercise Price. Upon such delivery and payment, the Holder shall be deemed to be the holder of record of the Warrant Shares subject to such exercise, notwithstanding that the register of members of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder.
(b) Subject to Section 2(d) below, the Exercise Price may be paid in cash or by certified or official bank check or bank cashier's check payable to the order of the Company or by any combination of such cash or check. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of the Warrant Shares.
(c) Upon surrender of this Warrant Certificate in conformity with the provisions hereunder, the Company shall transfer to the Holder appropriate evidence of ownership of the Warrant Shares or any other securities or property (including any money) to which the Holder is entitled, registered or otherwise placed in, or payable to the order of, the name or names of the Holder or such transferee as may be directed in writing by the Holder, and shall deliver such evidence of ownership and any other securities or property (including any money) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share as provided in Section 3 below.
(d) In lieu of making the cash payment required to exercise this Warrant pursuant to this Section 2, the Holder may elect to (i) deliver as payment, in whole or in part of the aggregate Exercise Price, Common Stock having a value calculated by reference to the aggregate Daily Price (as defined below) on the day immediately preceding the date on which the Holder delivers written notice to the
Company pursuant to Section 2(a) equal to or in excess of the applicable portion of the aggregate Exercise Price for the Warrant Shares or (ii) exchange this Warrant for Common Stock, in which event the Company will issue to the Holder the number of shares of Common Stock equal to the result obtained by (A) subtracting the Exercise Price from the Daily Price, (B) multiplying the difference by the number of Warrant Shares for which this Warrant is being exercised, and (C) dividing the product by the Daily Price as set forth in the following equation:
X = the number of shares of Common Stock issuable upon exercise pursuant to this Section 2(d)
A = the Daily Price (as defined below) on the day immediately preceding the date on which the Holder delivers written notice to the Company pursuant to Section 2(a).
B = the Exercise Price.
C = the number of Shares for which this Warrant is being exercised.
If the foregoing calculation results in a negative number, then no Common Stock shall be issued upon exercise pursuant to this Section 2(d)(ii). Such issue of Common Stock shall be effected pursuant to applicable Bermuda law and the Company may effect such an issue of Common Stock in any matter permitted under Bermuda law.
3. No Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon the exercise of this Warrant. If any fractional interest in a share of Common Stock would be deliverable upon the exercise of this Warrant in whole or in part, the Company, in lieu of delivering any such fractional share, shall pay an amount in cash equal to the book value per share at the end of the most recent fiscal quarter multiplied by the fraction of the fractional share which would otherwise have been issued hereunder. The Company agrees that it will not change the par value of the Common Stock from par value $0.10 per share to any higher par value which exceeds the Exercise Price then in effect, and will reduce the par value of the Common Stock upon any event that would, but for this provision, reduce the Exercise Price below the par value of the Common Stock.
4. Reservation of Shares. The Company agrees that it will at all times reserve for issuance and delivery upon exercise of this Warrant such number of shares of its authorized but unissued Common Stock sufficient to permit the exercise in full of this Warrant. All such shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale, except to the extent set forth in the Bye-laws or to the extent the Holder is a party to a shareholders' agreement with respect to the Company's Common Stock.
5. Transfer Restrictions.
(a) Neither this Warrant nor any of the Warrant Shares, nor any interest in either, may be sold, assigned, pledged, hypothecated, encumbered or in any other manner transferred or disposed of, in whole or in part, except in compliance with the terms, conditions and restrictions as set forth in the Bye-laws of the Company, any shareholders' agreement with respect to the Company's Common Stock to which the Holder may be (or become) a party, applicable United States federal and state securities laws and the terms and conditions hereof. Each certificate for Warrant Shares issued upon exercise of this
Warrant, unless at the time of exercise such Warrant Shares are registered under the United States Securities Act of 1933, as amended, shall bear the following legend:
"These securities have not been registered under the United States Securities Act of 1933, as amended. These securities cannot be offered, transferred or sold unless (i) a registration statement under such Act is in effect with respect to such securities or a written opinion from counsel acceptable to the Company is obtained to the effect that no such registration is required and (ii) the transferee is approved by applicable regulatory authorities, if such approval is required. The Company reserves the right to refuse the transfer of such securities until such conditions have been fulfilled. In all events, transfers of these securities are subject to the approval of the Board of Directors of the Company, in its sole discretion. The Bye-laws of the Company contain other significant restrictions on transfers of shares of the Company."
(b) Notwithstanding the foregoing, in the event that the laws of any jurisdiction to which the Holder, or any Affiliate of the Holder, is subject make it illegal for such entity to hold this Warrant or the Warrant Shares, the Company shall use its best efforts to facilitate, and shall not unreasonably withhold its permission to allow for, the transfer, sale or assignment of this Warrant and/or the Warrant Shares.
6. Anti-Dilution Provisions.
(a) In case the Company shall (i) declare a dividend or make a distribution on Common Stock payable in Common Stock, (ii) subdivide or split the outstanding Common Stock, (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of Common Stock (including any such reclassification in connection with a consolidation, scheme of arrangement or amalgamation in which the Company is the surviving entity), the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, split, combination or reclassification shall be proportionately adjusted so that, giving effect to Section 6(i), the exercise of this Warrant after such time shall entitle the Holder to receive the aggregate number of shares of Common Stock or other securities of the Company (or shares of any security into which such Common Stock have been reclassified) which, if this Warrant had been exercised immediately prior to such time, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, split, combination, amalgamation, scheme of arrangement or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or sell any Common Stock (other
than Common Stock issued (i) upon exercise of the Warrants, (ii) pursuant to the
Company's stock option plan or pursuant to any similar Common Stock-related
employee compensation plan of the Company approved by the Company's Board of
Directors or (iii) upon exercise or conversion of any security the issuance of
which caused an adjustment under paragraph (c) or (d) hereof) without
consideration or for a consideration per share less than the Current Market
Price per share of Common Stock (as defined in paragraph (f)) immediately
preceding such issuance or sale or immediately preceding the announcement
thereof, if earlier, the Exercise Price to be in effect after such issuance or
sale shall be determined by multiplying the Exercise Price in effect immediately
prior to such issuance or sale or immediately preceding the announcement
thereof, if earlier, as the case may be, by a fraction, the numerator of which
shall be the sum of (x) the number of shares of Common Stock outstanding
immediately prior to the time of such issuance or sale multiplied by the Current
Market Price per share of Common Stock immediately prior to such issuance or
sale or immediately preceding the announcement thereof, as the case may be, and
(y) the aggregate consideration, if any, to be received by the Company upon such
issuance or sale, and the denominator of
which shall be the product of the aggregate number of shares of Common Stock outstanding immediately after such issuance or sale and the Current Market Price per share of Common Stock immediately prior to such issuance or sale or immediately preceding the announcement thereof, as the case may be. In case any portion of the consideration to be received by the Company shall be in a form other than cash, the fair market value of such noncash consideration shall be utilized in the foregoing computation. Such fair market value shall be determined by the Board of Directors of the Company; provided that if the Holder shall object to any such determination, the Board of Directors shall retain an independent appraiser reasonably satisfactory to the Holder to determine such fair market value. The Holder shall be notified promptly of any consideration other than cash to be received by the Company and furnished with a description of the consideration and the fair market value thereof as determined by the Board of Directors.
(c) In case the Company shall fix a record date for the issuance of rights, options or warrants to the holders of its Common Stock or other securities entitling such holders to subscribe for or purchase for a period expiring within 60 days of such record date Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share, if a security convertible into Common Stock) less than the Current Market Price per share on such record date or immediately preceding the announcement thereof, if earlier, the maximum number of shares of Common Stock issuable upon exercise of such rights, options or warrants (or conversion of such convertible securities) shall be deemed to have been issued and outstanding as of such record date and the Exercise Price shall be adjusted pursuant to paragraph (b) hereof as though such maximum number of shares of Common Stock had been so issued for an aggregate consideration payable by the holders of such rights, options, warrants or convertible securities prior to their receipt of such Common Stock. In case any portion of such consideration shall be in a form other than cash, the fair market value of such noncash consideration shall be determined as set forth in paragraph (b) hereof. Such adjustment shall be made successively whenever such record date is fixed; and in the event that such rights, options or warrants are not so issued or expire unexercised, or in the event of a change in the number of shares of Common Stock to which the holders of such rights, options or warrants are entitled (other than pursuant to adjustment provisions therein comparable to those contained in this Section 6), the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed, in the former event, or the Exercise Price which would then be in effect if such holder had initially been entitled to such changed number of shares of Common Stock, in the latter event.
(d) In case the Company shall issue rights, options (other than options issued pursuant to a plan described in clause (b)(ii) above) or warrants entitling the holders thereof to subscribe for or purchase Common Stock (or securities convertible into Common Stock) or shall issue convertible securities, and the price per share of such rights, options, warrants or convertible securities (including, in the case of rights, options or warrants, the price at which they may be exercised) is less than the Current Market Price per share of Common Stock immediately preceding such issuance of rights, options or warrants or immediately preceding the announcement thereof, if earlier, the maximum number of shares of Common Stock issuable upon exercise of such rights, options or warrants or upon conversion of such convertible securities shall be deemed to have been issued and outstanding as of the date of such sale or issuance, and the Exercise Price shall be adjusted pursuant to paragraph (b) hereof as though such maximum number of shares of Common Stock had been so issued for an aggregate consideration equal to the aggregate consideration paid for such rights, options, warrants or convertible securities and the aggregate consideration payable by the holders of such rights, options, warrants or convertible securities prior to their receipt of such Common Stock. In case any portion of such consideration shall be in a form other than cash, the fair market value of such noncash consideration shall be determined as set forth in paragraph (b) hereof. Such adjustment shall be made successively whenever such rights, options, warrants or convertible securities are issued; and in the event that such rights, options or warrants expire unexercised, or in the event of a change in the number of shares of Common Stock to which the holders of such rights, options,
warrants or convertible securities are entitled (other than pursuant to adjustment provisions therein comparable to those contained in this Section 6), the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such rights, options, warrants or convertible securities had not been issued, in the former event, or the Exercise Price which would then be in effect if such holders had initially been entitled to such changed number of shares of Common Stock, in the latter event. No adjustment of the Exercise Price shall be made pursuant to this paragraph (d) to the extent that the Exercise Price shall have been adjusted pursuant to paragraph (c) upon the setting of any record date relating to such rights, options, warrants or convertible securities and such adjustment fully reflects the number of shares of Common Stock to which the holders of such rights, options, warrants or convertible securities are entitled and the price payable therefor.
(e) (A) In case the Company shall fix a record date for the making of a distribution to holders of Common Stock (including any such distribution made in connection with a consolidation, scheme of arrangement or amalgamation in which the Company is the surviving entity, but not including any distribution that is a return of capital, which distribution shall be governed by subparagraph (B) of this paragraph (e)) of evidences of indebtedness, assets or other property (other than dividends payable in Common Stock or rights, options or warrants referred to in, and for which an adjustment is made pursuant to, paragraph (c) hereof), the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date or immediately preceding the announcement thereof, by a fraction, the numerator of which shall be the Current Market Price per share of Common Stock on such record date, less the fair market value (determined as set forth in paragraph (b) hereof) of the portion of the assets, other property or evidences of indebtedness so to be distributed which is applicable to one share of Common Stock, and the denominator of which shall be such Current Market Price per share of Common Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed.
(B) In case the Company shall fix a record date for the making of a distribution to holders of Common Stock which is a return of capital (including any such distribution made in connection with a consolidation, scheme of arrangement or amalgamation in which the Company is the surviving entity) of evidences of indebtedness, assets or other property (other than dividends payable in Common Stock or rights, options or warrants referred to in, and for which an adjustment is made pursuant to, paragraph (c) hereof), the Exercise Price to be in effect after such record date shall be determined by subtracting the fair market value (determined as set forth in paragraph (b) hereof) of the portion of the assets, other property or evidences of indebtedness so to be distributed which is applicable to one share of Common Stock from the Exercise Price in effect immediately prior to such record date or immediately preceding the announcement thereof. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed. Notwithstanding the foregoing, if an adjustment pursuant to this subparagraph (B) (alone or together with any adjustments required under paragraph (g)) would result in an Exercise Price of less than zero, the Exercise Price shall be zero.
(f) For the purpose of any computation under this Section 6, on any determination date (i) on or prior to the initial public offering of the Company's Common Stock registered under the United States Securities Act of 1933, as amended, the Current Market Price per share shall, subject to the penultimate sentence of this paragraph (f), be the fair market value per share of the applicable class of Common Stock as reasonably determined by the Board of Directors of the Company, and (ii) after such registered public offering, the Current Market Price per share shall be deemed to be the average (weighted
by daily trading volume) of the Daily Prices (as defined below) per share of the applicable class of Common Stock for the 20 consecutive trading days immediately prior to such date. "Daily Price" means (A) if the shares of such class of Common Stock are then listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the closing price on the NYSE on such day as reported on the NYSE Composite Transactions Tape; (B) if the shares of such class of Common Stock are then not listed and traded on the NYSE, the closing price on such day as reported by the principal national securities exchange on which the shares are listed and traded; (C) if the shares of such class of Common Stock are then not listed and traded on the NYSE or any such national securities exchange, the last reported sale price on such day on the National Market of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); or (D) if the shares of such class of Common Stock are then not listed and traded on the NYSE or any national securities exchange or traded on the NASDAQ National Market, the average of the highest reported bid and lowest reported asked price on such day as reported by NASDAQ. If on any determination date the shares of such class of Common Stock are not quoted by any such organization, the Current Market Price per share shall be the fair market value of such shares on such determination date as determined by the Board of Directors. If the Holder shall object to any determination by the Board of Directors of the Current Market Price per share, the Current Market Price per share shall be the fair market value per share of the applicable class of Common Stock as determined by an independent appraiser retained by the Company at its expense and reasonably acceptable to the Holder. For purposes of any computation under this Section 6, the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company.
(g) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one percent in such price; provided that any adjustments which by reason of this paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6 shall be made to the nearest one tenth of a cent or to the nearest hundredth of a share, as the case may be.
(h) In the event that, at any time as a result of the provisions of this Section 6, the Holder of this Warrant upon subsequent exercise shall become entitled to receive any shares of capital stock of the Company other than Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein.
(i) (A) Upon each adjustment of the Exercise Price as a result of the
calculations made in this Section 6, the number of shares for which this Warrant
is exercisable immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares of Common Stock obtained by (i) multiplying the number of
shares covered by this Warrant immediately prior to this adjustment of the
number of shares by the Exercise Price in effect immediately prior to such
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price; provided that no adjustment shall be necessary pursuant to this paragraph
(i) (x) to the extent (but only to the extent) that the number of shares of
Common Stock for which this Warrant is exercisable has already increased (or
would increase, if such Warrant were actually exercised) as a result of the
transaction in question by operation of the definition of "Warrant Amount" or
(y) in connection with an adjustment to the Exercise Price pursuant to
subparagraph (e)(B).
(B) To the extent that any distribution described in subparagraph
(e)(B) did not result in a reduction of the Exercise Price because the Exercise
Price had already been reduced to zero, there shall be an adjustment made, as
determined by the Board of Directors of the Company (which
determination shall be final and binding), to the number of shares for which this Warrant is exercisable so as to preserve for the Holder the economics of this Warrant.
(j) Not less than 10 nor more than 30 days prior to the record date of any action which requires an adjustment pursuant to this Section 6, the Company shall file in the custody of the secretary of the Company at its principal executive office an officer's certificate signed by the chairman, president or chief financial officer of the Company showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the computation of such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder and the Company shall, promptly after such adjustment, mail a copy, by first-class mail, of such certificate to the Holder.
(k) The Holder shall, at its option, be entitled to receive, in lieu of the adjustment pursuant to this Section 6 otherwise required, on the date of exercise of this Warrant, the evidences of indebtedness, assets or other property which such Holder would have been entitled to receive if it had exercised its Warrant for Common Stock immediately prior to the record date with respect to such distribution. The Holder may exercise its option under this paragraph (k) by written notice to the Company within 14 days of its receipt of the certificate of adjustment required pursuant to paragraph (j) above to be delivered by the Company in connection with such distribution.
7. Consolidation, Scheme of Arrangement, Amalgamation or Sale of
Assets. In case of any consolidation of the Company with, or amalgamation of the
Company into, any other Person, any amalgamation of another Person into the
Company (other than an amalgamation which does not result in any
reclassification, conversion, exchange or cancellation of outstanding Common
Stock), any scheme of arrangement, or any sale or transfer of all or
substantially all of the assets, or any similar or analogous procedure or
transaction howsoever described under the law of incorporation of the Company or
any other relevant law, of the Company or of the Person formed by such
consolidation or resulting from such amalgamation or which acquires such assets,
as the case may be, the Holder shall have the right thereafter to exercise this
Warrant for the kind and amount of securities, cash and other property
receivable upon such consolidation, scheme of arrangement, amalgamation, sale or
transfer by a holder of the number of shares of Common Stock for which this
Warrant may have been exercised immediately prior to such consolidation, scheme
of arrangement, amalgamation, sale or transfer, assuming (i) such holder of
Common Stock is not a Person with which the Company consolidated or into which
the Company amalgamated or which amalgamated into the Company or to which such
sale or transfer was made, as the case may be ("Constituent Person"), or an
Affiliate of a Constituent Person and (ii) in the case of a consolidation,
amalgamation, sale or transfer which includes an election as to the
consideration to be received by the holders, such holder of Common Stock failed
to exercise its rights of election as to the kind or amount of securities, cash
and other property receivable upon such consolidation, amalgamation, sale or
transfer (provided that if the kind or amount of securities, cash and other
property receivable upon such consolidation, amalgamation, sale or transfer is
not the same for each share of Common Stock held immediately prior to such
consolidation, amalgamation, sale or transfer by other than a Constituent Person
or an Affiliate thereof and in respect of which such rights of election shall
not have been exercised ("Non-Electing Share"), then for the purpose of this
Section the kind and amount of securities, cash and other property receivable
upon such consolidation, amalgamation, sale or transfer by each Non-Electing
Share shall be deemed to be the kind and amount so receivable per share by a
plurality of the Non-Electing Shares). Adjustments for events subsequent to the
effective date of such a consolidation, amalgamation and sale of assets shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Warrant. In any such event, effective provisions shall be made in the
certificate or articles of incorporation of the resulting or surviving
corporation, in any contract of sale, conveyance, lease or transfer, or
otherwise so that the provisions set forth herein for the protection of the
rights of the Holder shall thereafter continue to
be applicable; and the entity whose securities, cash or other property for which this Warrant shall have become exercisable shall expressly assume the obligation to deliver, upon exercise, such securities, cash or other property. The provisions of this Section 7 shall similarly apply to successive consolidations, amalgamations, sales, leases or transfers.
8. Loss or Destruction of Warrant. Upon receipt by the Company of evidence satisfactory to it (in the exercise of its reasonable discretion) of the loss, theft, destruction or mutilation of this Warrant Certificate, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant Certificate, if mutilated, the Company shall execute and deliver a new Warrant Certificate of like tenor and date.
9. Notices. Any notice, demand or delivery authorized by this Warrant Certificate shall be in writing and shall be given to the Holder or the Company, as the case may be, at its address (or facsimile number) set forth below, or such other address (or facsimile number) as shall have been furnished to the party giving or making such notice, demand or delivery:
IF TO THE COMPANY:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HM08 Bermuda
Attention: Edward Noonan
with a copy to:
Cahill Gordon & Reindel LLP
80 Pine Street
New York, New York 10005
Attn: Michael A. Becker, Esq.
John Schuster, Esq.
Facsimile: (212) 269-5420
IF TO THE HOLDER:
[_______]
Each such notice, demand or delivery shall be effective (i) if given by facsimile, when receipt acknowledged or (ii) if given by any other means, when received at the address specified herein.
10. Rights of the Holder. Prior to the exercise of any Warrant, the Holder shall not, by virtue hereof, be entitled to any rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends or other distributions, or to receive any notice of meetings of shareholders or any notice of any proceedings of the Company except as may be specifically provided for herein.
11. Governing Law. THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
12. Amendments; Waivers. Any provision of this Warrant may be amended or waived if, and only if, such amendment or waiver is in writing and signed by the Company and Holders of a majority of then outstanding Warrants and such amendment, by its terms, applies to all then outstanding Warrants; provided, that immaterial waivers may be approved by the party against whom the waiver is to be effective. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
13. Entire Agreement; Supersession of Prior Warrant. The Company and the Holder hereby acknowledge and agree that this Warrant constitutes the entire agreement between them with respect to the subject matter of this Warrant, and this Warrant shall supersede all contemporaneous oral and all prior oral and written agreements and understandings with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed and attested by its duly authorized officers and to be dated as of December 12, 2005
VALIDUS HOLDINGS, LTD.
WARRANT EXERCISE OR EXCHANGE NOTICE
(To be delivered prior to exercise of the Warrant by execution of the Warrant Exercise Subscription Form)
To: Validus Holdings, Ltd.
The undersigned hereby notifies you of its intention to exercise or exchange the Warrant to purchase [Voting][Non-Voting] Common Stock, par value $0.10 per share, of Validus Holdings, Ltd.
The undersigned intends to exercise the Warrant to purchase
[Voting][Non-Voting] Common Stock (the "Shares") at $__________ per Share (the
Exercise Price currently in effect pursuant to the Warrant). The undersigned
intends to pay the aggregate Exercise Price for the Shares in cash, certified or
official bank or bank cashier's check (or a combination of cash and check) as
indicated below.
-OR-
The undersigned intends to exercise the Warrant to purchase __________ shares of [Voting][Non-Voting] Common Stock (the "Shares") and wishes, in lieu of paying the Exercise Price of $___________ per Share currently in effect pursuant to the Warrant, to receive that number of shares reduced by a number of shares of [Voting][Non-Voting] Common Stock having a value calculated by reference to the aggregate Daily Price (as defined in the Warrant) equal to the aggregate Exercise Price for the Shares.
-OR-
The undersigned intends pursuant to Section 2(d)(ii) of the Warrant to
exchange the Warrant (or a portion thereof), insofar as it relates _________ to
[Voting][Non-Voting] Common Stock, for the number of shares of [Voting]
[Non-Voting] Common Stock determined pursuant to such Section 2(d)(ii).
-OR-
The undersigned intends to exercise the Warrant to purchase [Voting]
[Non-Voting] Common Stock (the "Shares") at the Exercise Price of $_________ per
share currently in effect pursuant to the Warrant, and intends to pay
$__________ of the aggregate Exercise Price for the Shares in cash, certified or
official bank or bank cashier's check (or a combination of cash and check) as
indicated below, and to deliver as payment of $__________ of the aggregate
Exercise Price that number of shares of [Voting] [Non-Voting] Common Stock
having a value calculated by reference to the aggregate Daily Price (as defined
in the Warrant) equal to or in excess of such portion of the aggregate Exercise
Price for the Shares.
Payment: $_______ cash
$_______ check
________ Common Stock having a Daily Price of $_____________
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant after delivery of Warrant Exercise Notice)
To: Validus Holdings, Ltd.
The undersigned irrevocably exercises the Warrant for the purchase of
[Voting] [Non-Voting] Common Stock (the "Shares"), par value $0.10 per share, of
Validus Holdings, Ltd. (the "Company") at $_________ per Share (the Exercise
Price currently in effect pursuant to the Warrant) and herewith makes payment of
$_________ (such payment being made in cash or by certified or official bank or
bank cashier's check payable to the order of the Company or by any permitted
combination of such cash or check), all on the terms and conditions specified in
the within Warrant Certificate, surrenders this Warrant Certificate and all
right, title and interest therein to the Company and directs that the Shares
deliverable upon the exercise of this Warrant be registered or placed in the
name and at the address specified below and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
[Voting] [Non-Voting] Common Stock (the "Shares"), par value $0.10 per share, of
Validus Holdings, Ltd. (the "Company") at $_________ per Share (the Exercise
Price currently in effect pursuant to the Warrant) (provided that in lieu of
payment of $_________, the undersigned will receive a number of Shares reduced
by a number of shares of [Voting] [Non-Voting] Common Stock having a value
calculated by reference to the aggregate Daily Price (as defined in the Warrant)
equal to the aggregate Exercise Price for the Shares), all on the terms and
conditions specified in the Warrant Certificate, surrenders this Warrant
Certificate and all right, title and interest therein to the Company and directs
that the Shares deliverable upon the exercise of this Warrant be registered or
placed in the name and at the address specified below and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
[Voting] [Non-Voting] Common Stock (the "Shares"), par value $0.10 per share, of
Validus Holdings, Ltd. (the "Company") at $_________ per share (the Exercise
Price currently in effect pursuant to the Warrant) (such payment being made by
delivering that number of shares of [Voting] [Non-Voting] Common Stock having a
value calculated by reference to the aggregate Daily Price (as defined in the
Warrant) equal to or in excess of the aggregate Exercise Price for the Shares),
all on the terms and conditions specified in the Warrant Certificate, surrenders
this Warrant Certificate and all right, title and interest therein to the
Company and directs that the Shares deliverable upon the exercise of this
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase
[Voting] [Non-Voting] Common Stock (the "Shares"); par value $0.10 per share, of
Validus Holdings, Ltd. (the "Company") at $_________ per Share (the Exercise
Price currently in effect pursuant to the Warrant), and herewith makes payment
of $_________ of the aggregate Exercise Price for the Shares in cash, certified
or official bank or bank cashier's check (or a combination of cash and check),
and herewith delivers as payment of $_________ of the aggregate Exercise Price
that number of shares of [Voting] [Non-Voting] Common Stock having a value
calculated by reference to the aggregate Daily Price (as defined in the Warrant)
equal to or in excess of such portion of the aggregate Exercise Price for the
Shares, all on the
terms and conditions specified in the Warrant Certificate, surrenders this Warrant Certificate and all right, title and interest therein to the Company and directs that the Shares deliverable upon the exercise of this Warrant be registered or placed in the name and at the address specified below and delivered thereto.
Securities and/or check to be issued to:
Please insert social security or identifying number: ___________________________
Name: __________________________________________________________________________
Street Address: ________________________________________________________________
City, State and Zip Code: ______________________________________________________
Any unexercised portion of the Warrant evidenced by the within Warrant Certificate to be issued to:
Please insert social security or identifying number: ___________________________
Name: __________________________________________________________________________
Street Address: ________________________________________________________________
City, State and Zip Code: ______________________________________________________
WARRANT ASSIGNMENT FORM
Date:_____________
FOR VALUE RECEIVED, ______________________________________ hereby sells, assigns and transfers unto _______________________________________ (the "Assignee"),
(please type or print in block letters)
its right to purchase up to ____________ shares of [Voting] [Non-Voting] Common Stock, par value $0.10 per share, of Validus Holdings, Ltd. (the "Company") represented by this Warrant and does hereby irrevocably constitute and appoint __________ Attorney to transfer the same on the books of the Company, with full power of substitution in the premises.
EXECUTION COPY
[Exhibit 10.8]
JUNIOR SUBORDINATED INDENTURE
between
VALIDUS HOLDINGS, LTD.
and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Trustee
Dated as of June 15, 2006
TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions............................................. 1 Section 1.2. Compliance Certificate and Opinions..................... 10 Section 1.3. Forms of Documents Delivered to Trustee................. 10 Section 1.4. Acts of Holders......................................... 11 Section 1.5. Notices, Etc. to Trustee and Company.................... 13 Section 1.6. Notice to Holders; Waiver............................... 13 Section 1.7. Effect of Headings and Table of Contents................ 13 Section 1.8. Successors and Assigns.................................. 13 Section 1.9. Separability Clause..................................... 14 Section 1.10. Benefits of Indenture................................... 14 Section 1.11. Governing Law........................................... 14 Section 1.12. Submission to Jurisdiction.............................. 14 Section 1.13. Non-Business Days....................................... 14 ARTICLE II SECURITY FORMS Section 2.1. Form of Security........................................ 15 Section 2.2. Restricted Legend....................................... 20 Section 2.3. Form of Trustee's Certificate of Authentication......... 22 Section 2.4. Temporary Securities.................................... 23 Section 2.5. Definitive Securities................................... 23 ARTICLE III THE SECURITIES Section 3.1. Payment of Principal and Interest....................... 23 Section 3.2. Denominations........................................... 25 Section 3.3. Execution, Authentication, Delivery and Dating.......... 25 Section 3.4. Global Securities....................................... 26 Section 3.5. Registration, Transfer and Exchange Generally........... 28 Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities........ 29 Section 3.7. Persons Deemed Owners................................... 30 |
TABLE OF CONTENTS
(continued)
PAGE ---- Section 3.8. Cancellation............................................ 30 Section 3.9. Deferrals of Interest Payment Dates..................... 30 Section 3.10. Right of Set-Off........................................ 31 Section 3.11. Agreed Tax Treatment.................................... 31 Section 3.12. CUSIP Numbers........................................... 31 ARTICLE IV SATISFACTION AND DISCHARGE Section 4.1. Satisfaction and Discharge of Indenture................. 32 Section 4.2. Application of Trust Money.............................. 33 ARTICLE V REMEDIES Section 5.1. Events of Default....................................... 33 Section 5.2. Acceleration of Maturity; Rescission and Annulment...... 34 Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee................................................. 35 Section 5.4. Trustee May File Proofs of Claim........................ 36 Section 5.5. Trustee May Enforce Claim Without Possession of Securities.............................................. 36 Section 5.6. Application of Money Collected.......................... 36 Section 5.7. Limitation on Suits..................................... 37 Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest.................................... 38 Section 5.9. Restoration of Rights and Remedies...................... 38 Section 5.10. Rights and Remedies Cumulative.......................... 38 Section 5.11. Delay or Omission Not Waiver............................ 38 Section 5.12. Control by Holders...................................... 38 Section 5.13. Waiver of Past Defaults................................. 39 Section 5.14. Undertaking for Costs................................... 39 Section 5.15. Waiver of Usury, Stay or Extension Laws................. 40 ARTICLE VI THE TRUSTEE Section 6.1. Corporate Trustee Required.............................. 40 Section 6.2. Certain Duties and Responsibilities..................... 40 |
TABLE OF CONTENTS
(continued)
PAGE ---- Section 6.3. Notice of Defaults...................................... 41 Section 6.4. Certain Rights of Trustee............................... 42 Section 6.5. May Hold Securities..................................... 43 Section 6.6. Compensation; Reimbursement; Indemnity.................. 44 Section 6.7. Resignation and Removal; Appointment of Successor....... 45 Section 6.8. Acceptance of Appointment by Successor.................. 45 Section 6.9. Merger, Conversion, Consolidation or Succession to Business................................................ 46 Section 6.10. Not Responsible for Recitals or Issuance of Securities.. 46 Section 6.11. Appointment of Authenticating Agent..................... 46 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.1. Company to Furnish Trustee Names and Addresses of Holders................................................. 48 Section 7.2. Preservation of Information, Communications to Holders.. 48 Section 7.3. Reports by Company...................................... 48 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.1. Company May Consolidate, Etc., Only on Certain Terms.... 49 Section 8.2. Successor Company Substituted........................... 49 ARTICLE IX SUPPLEMENTAL INDENTURES Section 9.1. Supplemental Indentures without Consent of Holders...... 50 Section 9.2. Supplemental Indentures with Consent of Holders......... 51 Section 9.3. Execution of Supplemental Indentures.................... 52 Section 9.4. Effect of Supplemental Indentures....................... 52 Section 9.5. Reference in Securities to Supplemental Indentures...... 52 ARTICLE X COVENANTS Section 10.1. Payment of Principal, Premium and Interest.............. 52 Section 10.2. Money for Security Payments to be Held in Trust......... 52 Section 10.3. Statement as to Compliance.............................. 54 Section 10.4. Calculation Agent....................................... 54 |
TABLE OF CONTENTS
(continued)
PAGE ---- Section 10.5. Additional Amounts...................................... 54 Section 10.6. Additional Covenants.................................... 55 Section 10.7. Waiver of Covenants..................................... 56 Section 10.8. Treatment of Securities................................. 56 ARTICLE XI REDEMPTION OF SECURITIES Section 11.1. Optional Redemption..................................... 56 Section 11.2. Special Event Redemption................................ 56 Section 11.3. Election to Redeem; Notice to Trustee................... 57 Section 11.4. Selection of Securities to be Redeemed.................. 57 Section 11.5. Notice of Redemption.................................... 57 Section 11.6. Deposit of Redemption Price............................. 58 Section 11.7. Payment of Securities Called for Redemption............. 58 ARTICLE XII SUBORDINATION OF SECURITIES Section 12.1. Securities Subordinate to Senior Debt................... 59 Section 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc.......................... 59 Section 12.3. Payment Permitted If No Default......................... 61 Section 12.4. Subrogation to Rights of Holders of Senior Debt......... 61 Section 12.5. Provisions Solely to Define Relative Rights............. 61 Section 12.6. Trustee to Effectuate Subordination..................... 62 Section 12.7. No Waiver of Subordination Provisions................... 62 Section 12.8. Notice to Trustee....................................... 62 Section 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent................................................... 63 Section 12.10. Trustee Not Fiduciary for Holders of Senior Debt........ 63 Section 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights..................................... 63 Section 12.12. Article Applicable to Paying Agents..................... 63 |
SCHEDULES
Schedule A - Determination of LIBOR
Exhibit A - Form of Officer's Financial Certificate
JUNIOR SUBORDINATED INDENTURE, dated as of June 15, 2006, between VALIDUS HOLDINGS, LTD., a company with limited liability organized under the laws of Bermuda (the "Company"), and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee (in such capacity, the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its unsecured junior subordinated deferrable interest debentures designated "Junior Subordinated Deferrable Interest Debentures due 2036" (the "Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, this Indenture Witnesseth:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to them in this Article I;
(b) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation";
(c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;
(d) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture;
(e) the words "hereby", "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders.
"Act" when used with respect to any Holder, has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any amounts payable on the Securities, the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security, in each case to the extent legally enforceable.
"Additional Amounts" has the meaning specified in Section 10.5.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Depositary Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time.
"Applicable Insurance Regulatory Authority" means, when used with respect
to any Regulated Insurance Company, (x) the insurance department or similar
administrative authority or agency located in each state or jurisdiction
(foreign or domestic) in which such Regulated Insurance Company is domiciled or
(y) to the extent asserting regulatory jurisdiction over such Regulated
Insurance Company, the insurance department, authority or agency in each state
or jurisdiction (foreign or domestic) in which such Regulated Insurance Company
is licensed, and shall include any Federal or national insurance regulatory
department, authority or agency that may be created and that asserts insurance
regulatory jurisdiction over such Regulated Insurance Company.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.11 to act on behalf of the Trustee to authenticate the Securities.
"Bankruptcy Code" means Title 11 of the United States Code or any successor statute(s) thereto, or any similar federal or state law for the relief of debtors, in each case as amended from time to time.
"Board of Directors" means the board of directors of the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business.
"Calculation Agent" has the meaning specified in Section 10.4.
"Common Securities" has the meaning specified in the first recital of this Indenture.
"Common Shares" means the common shares, par value $0.10 per share, of the Company.
"Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written request or order signed in the name of the Company by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its Chief Executive Officer, President or a Vice President, and by its Chief Financial Officer, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of this Indenture is located at 600 Travis, 50th Floor, Houston, Texas 77002, Attn: Worldwide Securities Services--Validus Holdings, Ltd.. Initially, all notices and correspondence shall be addressed to Mudassir Mohamed (telephone: 713-216-2826).
"Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or other accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii).
"Defaulted Interest" has the meaning specified in Section 3.1.
"Depositary" means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto.
"Depositary Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
"Dollar" or "$" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation, or any successor thereto.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section 3.9.
"GAAP" means United States generally accepted accounting principles, consistently applied, from time to time in effect.
"Global Security" means a Security that evidences all or part of the Securities, the ownership and transfers of which shall be made through book entries by a Depositary.
"Government Obligation" means (a) any security that is (i) a direct
obligation of the United States of America of which the full faith and credit of
the United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (b) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any
Government Obligation that is specified in clause (a) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any Government Obligation
that is so specified and held, provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of principal or
interest evidenced by such depositary receipt.
"Holder" means a Person in whose name a Security is registered in the Securities Register.
"Indenture" means this instrument as originally executed or as it may from time to time be amended or supplemented by one or more amendments or indentures supplemental hereto entered into pursuant to the applicable provisions hereof.
"Insurance Business" means one or more aspects of the business of selling, issuing or underwriting insurance or reinsurance.
"Interest Payment Date" means March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2006, during the term of this Indenture, as such dates may be adjusted pursuant to Section 1.13.
"Investment Company Act" means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation (including any announced prospective change) or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Company is or, within ninety (90) days of the date of such opinion will be, considered an "investment company" that is required to be registered under the Investment Company Act, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Securities.
"LIBOR" has the meaning specified in Schedule A.
"LIBOR Business Day" has the meaning specified in Schedule A.
"LIBOR Determination Date" has the meaning specified in Schedule A.
"Maturity," when used with respect to any Security, means the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"New York Court" has the meaning specified in Section 1.12.
"Notice of Default" means a written notice of the kind specified in Section 5.1(c).
"Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee.
"Operative Documents" means the Indenture, the Purchase Agreement and the Securities.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Company or any Affiliate of the Company.
"Optional Redemption Price" has the meaning set forth in Section 11.1.
"Original Issue Date" means the date of original issuance of each Security.
"Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii) Securities that have been paid or in substitution for or in lieu of which other Securities have been authenticated and delivered pursuant to the provisions of this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company;
provided, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor.
"Paying Agent" means the Trustee or any Person authorized by the Company to pay the principal of or any premium or interest on, or other amounts in respect of, any Securities on behalf of the Company.
"Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, government or any agency or political subdivision thereof, or any other entity of whatever nature.
"Place of Payment" means, with respect to the Securities, the Corporate Trust Office of the Trustee.
"Policies" means all insurance policies, annuity contracts, guaranteed interest contracts and funding agreements (including riders to any such policies or contracts, certificates issued with respect to group life insurance or annuity contracts and assumption certificates issued or to be issued (or filed pending current review by applicable governmental authorities) by any
Regulated Insurance Company and any coinsurance agreements entered into or to be entered into by any Regulated Insurance Company.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 12.2.
"Purchase Agreement" means the agreement, dated as of the date hereof, between the Company and First Tennessee Bank National Association, Preferred Term Securities XXII, Ltd., Bear, Stearns & Co. Inc., Merrill Lynch International and Merrill Lynch International.
"Redemption Date" means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to be redeemed, in whole or in part, the Special Redemption Price or the Optional Redemption Price, as applicable, at which such Security or portion thereof is to be redeemed as fixed by or pursuant to this Indenture.
"Reference Banks" has the meaning specified in Schedule A.
"Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen (15) days preceding such Interest Payment Date (whether or not a Business Day).
"Regulated Insurance Company" means any Subsidiary of the Company, whether now owned or hereafter acquired, that is authorized or admitted to carry on or transact Insurance Business in any jurisdiction (foreign or domestic) and is regulated by any Applicable Insurance Regulatory Authority.
"Responsible Officer" means, when used with respect to the Trustee, the officer in the Worldwide Securities Services department of the Trustee having direct responsibility for the administration of this Indenture.
"Rights Plan" means a plan of the Company providing for the issuance by the Company to all holders of its Common Shares of rights entitling the holders thereof to subscribe for or purchase shares of any class or series of capital stock of the Company which rights (i) are deemed to be transferred with such shares of such Common Shares and (ii) are also issued in respect of future issuances of such Common Shares, in each case until the occurrence of a specified event or events.
"Securities" or "Security" means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time.
"Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5.
"Senior Debt" means the principal of and any premium and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not such claim for post-petition interest is allowed in such proceeding) all Debt (including, without limitation, insurance obligations including obligations with respect to Policies and guarantees thereof) of the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Securities issued under this Indenture; provided, however, that Senior Debt shall not be deemed to include any other debt securities and guarantees in respect of such debt securities issued to any trust (or a trustee of any such trust), partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities that are treated as equity capital for regulatory capital purposes guaranteed by the Company pursuant to an instrument that ranks pari passu with or junior in right of payment to this Indenture.
"Significant Subsidiary(ies)" has the meaning set forth in Section 10.6.
"Special Event" means the occurrence of an Investment Company Event or a Tax Event.
"Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.1.
"Special Redemption Price" has the meaning set forth in Section 11.2.
"Stated Maturity" means June 15, 2036.
"Subsidiary" means a Person more than fifty percent (50%) of the outstanding voting stock or other voting interests of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For purposes of this definition, "voting stock" means stock that ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.
"Tax Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of (a) any amendment to or change (including any announced prospective change) in the treaties or laws or any regulations thereunder of Bermuda or any taxing jurisdiction having jurisdiction over the Company or any political subdivision or taxing authority thereof or therein or any change in the application or official interpretation of such treaties, laws or regulations or (b) any judicial decision or any official administrative pronouncement or regulatory procedure, including any notice or announcement of intent to adopt any such pronouncement or procedure (an "Administrative Action"), regardless of whether such judicial decision or Administrative Action is issued to or in connection with a proceeding involving the Company and whether or not subject to review or appeal, which amendment,
change, judicial decision or Administrative Action is enacted, promulgated or announced, in each case, on or after the date of issuance of the Securities, there is more than an insubstantial risk that (i) the Company is, or will be as of the next Interest Payment Date, required to pay to any Holder of Securities Additional Amounts as provided in Section 10.5 hereunder, or (ii) interest payable by the Company on the Securities is not, or as of the next Interest Payment Date, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes.
"Transfer" means, the voluntarily or involuntarily to transfer, sell, pledge or hypothecation or otherwise dispose of, whether directly or indirectly and whether through one or a series of transactions.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and, thereafter, "Trustee" shall mean or include each Person who is then a Trustee hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date as of this Indenture.
SECTION 1.2. Compliance Certificate and Opinions.
(a) Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and, if so requested by the Trustee, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with.
(b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificate provided pursuant to Section 10.3) shall include:
(i) a statement by each individual signing such certificate or opinion that such individual has read such covenant or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
(a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to such matters are erroneous.
(c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
(d) Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officers' Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally received in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments (including any appointment of an agent) is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine.
(c) The ownership of Securities shall be proved by the Securities Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
(e) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.
(f) Except as set forth in paragraph (g) of this Section 1.4, the Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined in Section 1.4(h)) by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6.
(g) The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration or rescission or annulment thereof referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(b) or (iv) any direction referred to in Section 5.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on
or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.6.
(h) With respect to any record date set pursuant to paragraph (f) or (g) of this Section 1.4, the party hereto that sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided, that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section 1.4, the party hereto that set such record date shall be deemed to have initially designated the ninetieth (90th) day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the one hundred eightieth (180th) day after the applicable record date.
SECTION 1.5. Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver, Act of Holders, or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with and received by the Trustee at its Corporate Trust Office, or
(b) the Company by the Trustee or any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at Validus Holdings, Ltd., Mintflower Place, 8 Par-La-Ville Road, Third Floor, Hamilton HM08 Bermuda, Attention: Chief Financial Officer (facsimile: (441 278-9090), with a copy to Cahill Gordon & Reindel llp, 80 Pine Street, New York, New York 10005, Attention: Michael A. Becker, Esq. (facsimile: (212) 296-5420) or at any other address previously furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class, postage prepaid, to each Holder affected by such event to the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail
notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction of this Indenture.
SECTION 1.8. Successors and Assigns.
This Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law. Except in connection with a transaction involving the Company that is permitted under Article VIII and pursuant to which the assignee agrees in writing to perform the Company's obligations hereunder, the Company shall not assign its obligations hereunder.
SECTION 1.9. Separability Clause.
If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.
SECTION 1.10. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of the Securities and any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.11. Governing Law.
THIS INDENTURE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE COMPANY AND THE TRUSTEE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
SECTION 1.12. Submission to Jurisdiction.
ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH
RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT
IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN) (COLLECTIVELY, "NEW YORK COURT"). BY EXECUTION AND DELIVERY OF THIS INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest, premium, if any, or principal or other amounts in respect of such Security shall not be made on such date, but shall be made on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, through but excluding such next succeeding Business Day) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity.
SECTION 1.14. No Recourse Against Others. No director, officer, employee incorporator, Affiliate or stockholder of the Company shall have any liability for any obligations of the Company under the Securities or the Indenture or for a claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities.
SECTION 1.15. Agent for Service of Process.
The Company will designate and appoint CT Corporation System in New York City as its process agent (the "Process Agent") upon which process may be served in any action arising out of or relating to this Indenture which may be instituted in any New York Court by the Trustee or the Holders, in accordance with legal procedures prescribed for such courts within fifteen (15) days of execution of the Indenture by the parties hereto, and will expressly consent to the non-exclusive jurisdiction of any such court in respect of any such action, and waive any other requirements of or objections to personal jurisdiction with respect thereto. Such appointment shall be irrevocable. Service of process upon the Process Agent and written notice of such service of process to it shall be deemed, in every respect, effective service of process upon the Company. Nothing herein shall in any way be deemed to limit the ability of the Trustee or the Holders to serve any such legal process, summons, notices and documents in any other manner permitted by applicable law or to obtain jurisdiction over the Company or to bring actions, suits or proceedings against the Company in such other jurisdictions, and in such manner, as may be permitted by applicable law.
SECTION 1.16. Currency Indemnity.
If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to any payment due hereunder, it becomes necessary to convert into the currency of such jurisdiction (the "Judgment Currency") any amount due hereunder in any currency other than the Judgment Currency (the "Currency Due"), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given. For this purpose, "rate of exchange" means the rate at which the Trustee is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of payment of the amount due, the Company will, on the day of payment, pay such additional amount, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount paid on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of payment is the amount then due hereunder in the Currency Due. If the amount of the Currency Due which the Trustee would be able to purchase at such rate of exchange is less than the amount of the Currency Due originally due to it, the Company shall indemnify and save the Trustee and the Holders harmless from and against loss or damage arising as a result of such deficiency. If the amount of the Currency Due which the Trustee would be able to purchase at such rate of exchange is greater than the amount of the Currency Due originally due to it, the Trustee shall promptly pay to the Company in U.S. dollars an amount equal to such excess. This indemnity shall constitute an obligation separate and independent from the other obligations contained herein, shall give rise to a separate and independent cause of action and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.
ARTICLE II
SECURITY FORMS
SECTION 2.1. Form of Security.
Any Security issued hereunder shall be in substantially the following form:
VALIDUS HOLDINGS, LTD.
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2036
No. [__] $[____________]
Validus Holdings, Ltd., a company with limited liability organized under the laws of Bermuda (hereinafter called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to [____________], or registered assigns, the principal sum of [____________] ($[____________]) in accordance with the Indenture on June 15 2036. The Company further promises to pay interest on said principal sum from June 15, 2006, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June15, September 15 and December 15 of each year,
commencing September 15, 2006, or if any such day is not a Business Day, on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date through but excluding such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 9.069% per annum through but excluding June 15, 2011 and thereafter at a variable rate equal to LIBOR plus 3.55% per annum, together with Additional Amounts, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further, that any overdue principal, premium, if any, or Additional Amounts and any overdue installment of interest shall bear Additional Interest at a fixed rate equal to 9.069% through but excluding June 15, 2011 and thereafter at a variable rate equal to LIBOR plus 3.55% per annum; (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.
The amount of interest payable shall be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.
So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of this Security, to defer the payment of interest on this Security for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), no interest shall be due and payable (except any Additional Amounts that may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date, and no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. No interest shall be due and payable during an Extension Period (except any Additional Amounts that may be due and payable), except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 9.069% per annum through but excluding June 15, 2011 and thereafter at a variable rate equal to LIBOR plus 3.55% per annum; compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or made available for payment. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on this Security, together with such Additional Interest to Holders of record of this Security as of the record date established for the Interest Payment Date coinciding with the end of such Extension Period (regardless of who the Holders of record may have been on any date during
such Extension Period). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest; provided, that (i) all
such previous and further extensions comprising such Extension Period do not
exceed twenty (20) consecutive quarterly interest payment periods, (ii) no
Extension Period shall end on a date other than an Interest Payment Date and
(iii) no Extension Period shall extend beyond the Stated Maturity of the
principal of this Security. Upon the termination of any such Extension Period
and upon the payment of all accrued and unpaid interest and any Additional
Interest then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period; provided, that (i) such Extension Period does not exceed
twenty (20) consecutive quarterly interest payment periods, (ii) no Extension
Period shall end on a date other than an Interest Payment Date and (iii) no
Extension Period shall extend beyond the Stated Maturity of the principal of
this Security. The Company shall give the Holder of this Security and the
Trustee written notice of its election to begin any such Extension Period at
least five (5) Business Days prior to the next succeeding Interest Payment Date
on which interest on this Security would be payable but for such deferral.
During any such Extension Period, the Company shall not, and shall not
permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's or such subsidiary's capital stock (other
than payments of dividends or distributions to the Company) or make any
guarantee payments with respect to the foregoing, (ii) make any payment of
principal of or any interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company that rank pari passu in all respects
with or junior in interest to this Security (other than, with respect to clauses
(i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares
of capital stock of the Company or any subsidiary of the Company in connection
with (1) any employment contract, benefit plan or other similar arrangement with
or for the benefit of any one or more employees, officers, directors or
consultants, (2) a dividend reinvestment or stockholder stock purchase plan
and/or (3) the issuance of capital stock of the Company or of such subsidiary
(or securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a subsidiary of
the Company) for any class or series of the Company's capital stock (or, in the
case of a subsidiary of the Company, any class or series of such subsidiary's
capital stock)or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock (or in the case of indebtedness
of a subsidiary of the Company, of any class or series of such subsidiary's
indebtedness for any class or series of such subsidiary's capital stock), (c)
the purchase of fractional interests in shares of the Company's capital stock
(or the capital stock of a subsidiary of the Company) pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any Rights Plan,
the issuance of rights, stock or other property under any Rights Plan, or the
redemption or repurchase of rights pursuant thereto or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith or (f) any repurchases, redemptions or other
acquisitions of shares of capital stock of the Company or any subsidiary of the
Company made by the Company or such subsidiary, which the Company's Board of
Directors determine in good faith are necessary or advisable in order to avoid,
ameliorate or limit any material adverse tax or regulatory consequences for the
Company or its
shareholders) or (iii) enter into any new (as opposed to existing) contracts on less than an arm's-length negotiation basis with shareholders holding more than 10% of the outstanding shares of Common Shares of the Company.
Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Debt, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the Company (the "Securities") issued under the Junior Subordinated Indenture, dated as of June 15, 2006 (the "Indenture"), between the Company and JPMorgan Chase Bank, National Association, as Trustee (in such capacity, the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.
All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
The Company may, on any Interest Payment Date, at its option and in accordance with the Indenture, on or after June 15, 2011 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together,
in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date.
In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option and in accordance with the Indenture, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to
TIME PERIOD PERCENTAGE ----------- ---------- June 15, 2006 - June 14, 2007 105% June 15, 2007 - June 14, 2008 103.75% June 15, 2008 - June 14, 2009 102.5% June 15, 2009 - June 14, 2010 101.25% June 15, 2010 and thereafter 100% |
together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date.
In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security.
The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest, including any Additional Interest (to the
extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this ____ day of __________, 20__.
VALIDUS HOLDINGS, LTD.
SECTION 2.2. Restricted Legend.
(a) Any Security issued hereunder shall bear a legend in substantially the following form:
"[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF
(III) OR (V), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF
COUNSEL AND OTHER INFORMATION SATISFACTORY TO IT AND (B) THE HOLDER WILL
NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.
NOTWITHSTANDING THE FOREGOING, HOLDERS OF THIS SECURITY AND/OR BENEFICIAL
INTERESTS THEREIN ARE LIMITED AS SET FORTH IN SECTION 2.6 OF THE INDENTURE.
HOLDERS OF THIS SECURITY AND/OR BENEFICIAL INTERESTS THEREIN ARE SUBJECT TO THE CONFIDENTIALITY PROVISIONS AS SET FORTH IN SECTION 7.3 OF THE INDENTURE."
(b) The above legends shall not be removed from any Security unless there is delivered to the Company satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under or violation of the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, the Company shall execute and deliver to the Trustee, and the Trustee shall deliver, upon receipt of a Company Order directing it to do so, a Security that does not bear the legend.
SECTION 2.3. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the following form:
This is one of the Securities referred to in the within-mentioned Indenture.
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, as Trustee
SECTION 2.4. Temporary Securities.
(a) Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.
(b) If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so
exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.5. Definitive Securities.
The Securities issued on the Original Issue Date shall be in definitive form. The definitive Securities shall be printed, lithographed or engraved, or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.
SECTION 2.6. Limited Holders.
Notwithstanding anything contained in this Indenture or the Securities to
the contrary, for until the earlier of (i) June 15, 2011, (ii) the date on which
Standard & Poors ("S&P") issues any public rating on the Company or any
Significant Subsidiary for any reason or (iii) the first date on which the
Company elects to defer interest pursuant to Section 3.9, no Holder may Transfer
its Security or a beneficial interest therein if after giving effect to such
Transfer there would be greater than twenty (20) Holders of the Securities
(and/or of beneficial interests in the Securities) (the "Limited Holder
Restriction") without the prior written consent of the Company ("Limited Holder
Company Consent"), which Limited Holder Company Consent shall not be
unreasonably withheld or delayed; provided, however, that no Limited Holder
Company Consent shall be required if the Transfer of such Security or beneficial
interest in a Security is being made pursuant to the terms of the documents
governing the duties with respect to credit deterioration or substitution of a
collateral manager or trustee of a collateralized debt obligor Holder. The
Company shall notify the Trustee of the occurrence of item (ii) above. Neither
the Trustee nor the Securities Registrar shall be responsible for monitoring
compliance with any of the above limitations; provided, that the Trustee and the
Securities Registrar shall promptly respond to a Company request to identify the
Holders of the Securities. Any Transfer made in violation of the terms of this
Section 2.6 shall be an ineffective Transfer and shall be null and void.
ARTICLE III
THE SECURITIES
SECTION 3.1. Payment of Principal and Interest.
(a) The unpaid principal amount of the Securities shall bear interest at a fixed rate equal to 9.069% per annum through but excluding June 15, 2011 and thereafter at a variable rate of LIBOR plus 3.55% per annum until paid or duly provided for; such interest to accrue from the Original Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, and any overdue principal, premium, if any, or Additional Amounts and any overdue installment of interest shall bear Additional Interest at the rate equal to a fixed rate equal to 9.069% per annum through but excluding June 15, 2011 and thereafter at a variable rate of LIBOR plus 3.55% per annum; compounded quarterly from the dates such amounts are due until they are paid or funds for the payment thereof are made available for payment.
(b) Interest and Additional Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest and any Additional Interest payable on the Stated Maturity (or any date of principal repayment upon early maturity) of the principal of a Security or on a Redemption Date shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security that is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security.
(c) Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest (a "Special Record Date"),
which shall be fixed in the following manner. At least thirty (30) days
prior to the date of the proposed payment, the Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same time
the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest, which shall be not more than fifteen
(15) days and not less than ten (10) days prior to the date of the proposed
payment and not less than ten (10) days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class,
postage prepaid, to each Holder of a Security at the address of such Holder
as it appears in the Securities Register not less than ten (10) days prior
to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered
on such Special Record Date; or
(ii) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee.
(d) Payments of interest on the Securities shall include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for the Securities shall be computed and paid on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period.
(e) Payment of principal of, premium, if any, and interest on the Securities shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of such Securities shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent and payments of interest shall be made subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.
(f) Subject to the foregoing provisions of this Section 3.1, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security.
SECTION 3.2. Denominations.
The Securities shall be in registered form without coupons and shall be issuable in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
(a) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities in an aggregate principal amount (including all then Outstanding Securities) not in excess of One Hundred Fifty Million Dollars ($150,000,000) executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and shall be fully protected in relying upon:
(i) a copy of any Board Resolution relating thereto; and
(ii) an Opinion of Counsel substantially to the effect that: (1) such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute, and the Indenture constitutes, valid and legally binding obligations of the Company, each enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (2) the Securities have been duly authorized and executed by the Company and have been delivered to the Trustee for authentication in accordance with this Indenture; (3) the
Securities are not required to be registered under the Securities Act; and
(4) the Indenture is not required to be qualified under the Trust Indenture
Act.
(b) The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its Chief Financial Officer, its President or one of its Vice Presidents. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
(c) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.8, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
(d) Each Security shall be dated the date of its authentication.
SECTION 3.4. Global Securities.
(a) Upon the election of the Holder after the Original Issue Date, which election need not be in writing, the Securities owned by such Holder shall be issued in the form of one or more Global Securities registered in the name of the Depositary or its nominee. Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for registered Securities, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee and the Company in
writing that such Depositary is no longer willing or able to properly discharge
its responsibilities as Depositary with respect to such Global Security, and no
qualified successor is appointed by the Company within ninety (90) days of
receipt by the Company of such notice, (ii) such Depositary ceases to be a
clearing agency registered under the Exchange Act and no successor is appointed
by the Company within ninety (90) days after obtaining knowledge of such event,
(iii) the Company executes and delivers to the Trustee a Company Order stating
that the Company elects to terminate the book-entry system through the
Depositary or (iv) an Event of Default shall have occurred and be continuing.
Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv)
above, the Trustee shall notify the Depositary and instruct the
Depositary to notify all owners of beneficial interests in such Global Security of the occurrence of such event and of the availability of Securities to such owners of beneficial interests requesting the same. The Trustee may conclusively rely, and be protected in relying, upon the written identification of the owners of beneficial interests furnished by the Depositary, and shall not be liable for any delay resulting from a delay by the Depositary. Upon the issuance of such Securities and the registration in the Securities Register of such Securities in the names of the Holders of the beneficial interests therein, the Trustees shall recognize such holders of beneficial interests as Holders.
(c) If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced or increased by an amount equal to (x) the portion thereof to be so exchanged or canceled, or (y) the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Company shall execute and the Trustee shall authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.
(d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof.
(e) [Reserved].
(f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Depositary Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Securities Registrar and the Trustee shall be entitled to deal with the Depositary for all purposes of this Indenture relating to a Global Security (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole Holder of the Security and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants.
(h) No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security.
SECTION 3.5. Registration, Transfer and Exchange Generally.
(a) The Trustee shall cause to be kept at the Corporate Trust Office a register (the "Securities Register") in which the registrar and transfer agent with respect to the Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee shall at all times also be the Securities Registrar. The provisions of Article VI shall apply to the Trustee in its role as Securities Registrar.
(b) Subject to compliance with Section 2.2(b), upon surrender for registration of transfer of any Security at the offices or agencies of the Company designated for that purpose the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations of like tenor and aggregate principal amount.
(c) At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive.
(d) All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.
(e) Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing.
(f) No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities.
(g) Neither the Company nor the Trustee shall be required pursuant to the provisions of this Section 3.5 (g): (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed.
(h) The Company shall designate an office or offices or agency or agencies where Securities may be surrendered for registration or transfer or exchange. The Company initially designates the Corporate Trust Office as its office and agency for such purposes. The Company shall give prompt written notice to the Trustee and to the Holders of any change in the location of any such office or agency.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
(a) If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Trustee to save the Company and the Trustee harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and aggregate principal amount and bearing a number not contemporaneously outstanding.
(b) If there shall be delivered to the Trustee (i) evidence to its satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by it to save each of the Company and the Trustee harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding.
(c) If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.
(d) Upon the issuance of any new Security under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
(e) Every new Security issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.
(f) The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any interest on such Security and for all other purposes whatsoever, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.8. Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.8, except as expressly permitted by this Indenture. All canceled Securities shall be retained or disposed of by the Trustee in accordance with its customary practices and the Trustee shall deliver to the Company a certificate of such disposition.
SECTION 3.9. Deferrals of Interest Payment Dates.
(a) So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Security, to defer the payment of interest on the Securities for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), the Company shall have the right to make no payments or partial payments of interest on any Interest Payment Date (except any Additional Amounts that otherwise may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date and no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. No interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at the rate equal to a fixed rate equal to 9.069% per annum through but excluding June 15, 2011 and thereafter at a variable rate equal to LIBOR plus 3.55% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or until funds for the payment thereof have been made available for payment. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on the Securities together with such Additional Interest. Prior to the termination of any such Extension Period, the Company may extend such Extension Period and further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) consecutive quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company
may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) consecutive quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. The Company shall notify (i) the Holders of the Securities at the address provided upon request to the Securities Registrar, (ii) the Trustee at its Corporate Trust Office and (iii) Cohen Bros. Financial Management LLC at Cira Centre, 2929 Arch Street, Suite 1703, Philadelphia, PA 19104, (215) 861-7868, in writing and by telephone (except in the case of notice to the Holders) of its election to begin any such Extension Period at least five (5) Business Days prior to the next succeeding Interest Payment Date on which interest on the Securities would be payable but for such deferral.
(b) In connection with any such Extension Period, the Company shall be subject to the restrictions set forth in Section 10.6(a).
SECTION 3.10. [Reserved].
SECTION 3.11. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by its acceptance or acquisition of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a direct or indirect beneficial interest in, such Security, intend and agree to treat such Security as indebtedness of the Company for United States Federal, state and local tax purposes. The provisions of this Indenture shall be interpreted to further this intention and agreement of the parties.
SECTION 3.12. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided, that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(a) either
(i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been mutilated, destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.6 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 10.2) have been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity within one year of the date of deposit, or
(C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose (x) an amount in the currency or currencies in which the Securities are payable, (y) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (z) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity (or any date of principal repayment upon early maturity) or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6, the obligations of
the Company to any Authenticating Agent under Section 6.11 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 4.1, the obligations of the Trustee under Section 4.2 and Section
10.2(e) shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of Section 10.2(e), all money or Government Obligations deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the
Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment in accordance with Section 3.1, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest (including any Additional Interest) for the payment of which such money or obligations have been deposited with or received by the Trustee. Moneys held by the Trustee under this Section 4.2 shall not be subject to the claims of holders of Senior Debt under Article XII.
SECTION 4.3. Defeasance and Discharge of Indenture.
The Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities on the first date all the conditions set forth in the proviso below are satisfied, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to:
(a) the rights of Holders of Securities to receive, from the trust funds described in subparagraph (1) hereof, payment of the principal of (and premium, if any) and each installment of principal of (and premium, if any) or interest on the Securities on the Stated Maturity of such principal or installment of principal or interest or on a Redemption Date in accordance with the terms of this Indenture and the Securities;
(b) the Company's obligations with respect to such Securities under Sections 2.4, 3.5, 3.6, 4.2, 4.5, 7.1 and 10.2; and
(c) the obligations of the Company to the Trustee under Section 6.6, provided that the following conditions shall have been satisfied:
(i) the Company has or caused to be irrevocably deposited (except as provided in Section 4.2) with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities,
(A) money in the currency or currencies in which the Securities are payable in an amount of the applicable currency) in an amount sufficient, or
(B) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph money in an amount, or (b) a combination of such money and such Government Obligations, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee,
to pay and discharge the principal of (and premium, if any) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest or on the applicable Redemption Date in accordance with the terms of this Indenture and of the Securities;
(ii) such deposit will not result in a breach or violation of, or constitute a default under, any applicable laws, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(iii) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and
(iv) if the deposit referred to in subparagraph (1) of this section is to be made on or prior to one year from the Stated Maturity for payment of principal of the Outstanding Securities, the Company has delivered to the Trustee an Opinion of Counsel or a favorable ruling of the Internal Revenue Service, in either case to the effect that Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred.
SECTION 4.4. Defeasance of Certain Obligations.
The Company may omit to comply with any term, provision or condition set forth in the sections of this Indenture or such Security with respect to the Securities ("Covenant Defeasance") if:
(a) with reference to this section, the Company has deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series,
(i) money in the currency or currencies in which the Securities are payable in an amount sufficient, or
(ii) (a) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph money in an amount, or (b) a combination of such money and such Government Obligation, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee,
to pay and discharge the principal of (and premium, if any) and each installment of principal (and premium, if any) and interest on the Outstanding Securities of that series on the Stated Maturity of such principal or installment of principal or interest;
(b) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(c) if the deposit referred to in subparagraph (1) of this section is to be made on or prior to one year from the Stated Maturity for payment of principal of the Outstanding Securities, the Company has delivered to the Trustee an Opinion of Counsel or a favorable ruling of the Internal Revenue Service, in either case to the effect that Holders of the Securities will not
recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and defeasance had not occurred;
(d) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and
(e) the Company has delivered to the Trustee an Officers' Certificate (upon which the Trustee may conclusively rely) stating that all conditions precedent herein provided for relating to the defeasance contemplated by this section have been complied with.
SECTION 4.5. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or Government Obligations in accordance with Section 4.1, 4.3 or 4.4 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities of the applicable series shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.1, 4.3 or 4.4, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Obligations in accordance with Section 4.1, 4.3 or 4.4; provided that, if the Company has made any payment of principal of or interest on the Securities of any series because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or Government Obligations held by the Trustee or Paying Agent.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default" means, wherever used herein with respect to the Securities, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of thirty (30) days (subject to the deferral of any due date in the case of an Extension Period); or
(b) default in the payment of the principal of or any premium on any Security at its Maturity; or
(c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture and continuance of such default or breach for a period of thirty (30)
days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least twenty five percent (25%) in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder;
(d) the entry by a court having jurisdiction in the premises of a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days;
(e) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company to the institution of bankruptcy or insolvency proceedings against it, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by the Company in furtherance of any such action; or
(f) [Reserved]; or
(g) any representation, warranty, certification or statement of fact made or deemed made by the Company herein or in any other Operative Document or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any materially adverse respect when made.
SECTION 5.2. Acceleration of Maturity; Rescission, Annulment, Audit Rights and Additional Reports.
(a) If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than twenty five percent (25%) in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders).
(b) At any time after such a declaration of acceleration with respect to Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article V, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Trustee, may rescind and annul such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum sufficient to pay:
(A) all overdue installments of interest on all Securities,
(B) any accrued Additional Interest on all Securities,
(C) the principal of and any premium on any Securities that have become due otherwise than by such declaration of acceleration and interest (including any Additional Interest) thereon at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel; and
(ii) all Events of Default with respect to Securities, other than the non-payment of the principal of Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13;
No such rescission shall affect any subsequent default or impair any right consequent thereon.
(c) In the event that either (a) an Event of Default has occurred and is continuing or (b) the Company has elected to defer payments of interest on the Securities by extending the interest payment period (as provided for in Section 3.9 hereof), Holders of not less than twenty five percent (25%) in aggregate principal amount of the Outstanding Securities may audit the quarterly and annual financial statements and statutory statements of the Company.
(d) In the event that either (a) an Event of Default has occurred and is continuing or (b) the Company has elected to defer payments of interest on the Securities by extending the interest payment period (as provided for in Section 3.9 hereof), the Company shall provide to the Trustee and the Holders quarterly and annual statutory statements, as well as quarterly updates on any of its subsidiaries or affiliates, which may be in liquidation, under supervisory regulation or in runoff.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
(a) The Company covenants that if:
(i) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of thirty
(30) days, or
(ii) default is made in the payment of the principal of and any premium on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest (including any Additional Interest) and, in addition thereto, all amounts owing the Trustee under Section 6.6.
(b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for
the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated.
(c) If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or similar judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, at the Company's expense, by intervention in such proceeding or otherwise, to take any and all actions authorized hereunder in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to first pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6.
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XII and after provision for the payment of all the amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee, any predecessor Trustee and other Persons under Section 6.6;
SECOND: To the payment of all Senior Debt of the Company if and to the extent required by Article XII;
THIRD: Subject to Article XII, to the payment of the amounts then due and unpaid upon the Securities for principal and any premium and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium and interest (including any Additional Interest), respectively; and
FOURTH: The balance, if any, to the Company.
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities;
(b) the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding for sixty (60) days; and
(e) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and
any premium on such Security at its Maturity and payment of interest (including any Additional Interest) on such Security when due and payable and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. The rights of any Holder hereunder or under any other Operative Document may be exercised by such Holder or any collateral manager thereof.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or such Holder, then and in every such case the Company, the Trustee and such Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in Section 3.6(f), no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or the Holders, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided, that:
(a) such direction shall not be in conflict with any rule of law or with this Indenture,
(b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.2, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith,
reasonably determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability.
SECTION 5.13. Waiver of Past Defaults.
(a) The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may waive any past Event of Default hereunder and its consequences except an Event of Default:
(i) in the payment of the principal of or any premium or interest (including any Additional Interest) on any Security (unless such Event of Default has been cured and the Company has paid to or deposited with the Trustee a sum sufficient to pay all installments of interest (including any Additional Interest) due and past due and all principal of and any premium on all Securities due otherwise than by acceleration), or
(ii) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security.
(b) Any such waiver shall be deemed to be on behalf of the Holders of all the Securities.
(c) Upon any such waiver, such Event of Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or any premium on the Security after the Stated Maturity or any interest (including any Additional Interest) on any Security after it is due and payable.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Corporate Trustee Required.
There shall at all times be a Trustee hereunder with respect to the Securities. The Trustee shall be a corporation organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or state authority and having an office within the United States. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 6.1, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.1, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI.
SECTION 6.2. Certain Duties and Responsibilities.
Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform on their face to the requirements of this Indenture.
(b) If an Event of Default known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from the Holders of at least a majority in aggregate principal amount of the Outstanding Securities, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(c) Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.2. To the extent that, at law or in equity, the Trustee has duties and liabilities relating to the Holders, the Trustee shall not be liable to any Holder for the Trustee's good faith reliance on the provisions of this Indenture. The provisions of this Indenture, to the extent that they restrict the duties and liabilities of the Trustee otherwise existing at law or in equity, are agreed by the Company and the Holders to replace such other duties and liabilities of the Trustee.
(d) No provisions of this Indenture shall be construed to relieve the Trustee from liability with respect to matters that are within the authority of the Trustee under this Indenture for its own negligent action, negligent failure to act or willful misconduct, except that:
(i) the Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee under this Indenture; and
(iii) the Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company and money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law.
SECTION 6.3. Notice of Defaults.
Within ninety (90) days after the occurrence of any default actually known to the Trustee, the Trustee shall give the Holders notice of such default unless such default shall have been cured or waived; provided, that except in the case of a default in the payment of the principal of or any premium or interest on any Securities, the Trustee shall be fully protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of holders of Securities; and provided, further, that in the case of any default of the character specified in Section 5.1(c), no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof. For the purpose of this Section 6.3, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default.
SECTION 6.4. Certain Rights of Trustee.
Subject to the provisions of Section 6.2:
(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Indenture the Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Indenture the Trustee finds ambiguous or inconsistent with any other provisions contained herein or (iii) the Trustee is unsure of the application of any provision of this Indenture, then, except as to any matter as to which the Holders are entitled to decide under the terms of this Indenture, the Trustee shall deliver a notice to the Company requesting the Company's written instruction as to the course of action to be taken and the Trustee shall take such action, or refrain from taking such action, as the Trustee shall be instructed in writing to take, or to refrain from taking, by the Company; provided, that if the Trustee does not receive such instructions from the Company within ten Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice the Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Trustee shall deem advisable and in the best interests of the Holders, in which event the Trustee shall have no liability except for its own negligence, bad faith or willful misconduct;
(c) any request or direction of the Company shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(d) the Trustee may consult with counsel (which counsel may be counsel to the Trustee, the Company or any of its Affiliates, and may include any of its employees) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Trustee;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, note or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder;
(h) whenever in the administration of this Indenture the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action with respect to enforcing any remedy or right hereunder, the Trustees (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same aggregate principal amount of Outstanding Securities as would be entitled to direct the Trustee under this Indenture in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions;
(i) except as otherwise expressly provided by this Indenture, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Indenture;
(j) without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with any bankruptcy, insolvency or other proceeding referred to in clauses (d) or (e) of the definition of Event of Default, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy laws or law relating to creditors rights generally;
(k) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate addressing such matter, which, upon receipt of such request, shall be promptly delivered by the Company;
(l) the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge or (ii) the Trustee shall have received written notice thereof from the Company or a Holder; and
(m) in the event that the Trustee is also acting as Paying Agent, Authenticating Agent or Securities Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VI shall also be afforded such Paying Agent, Authenticating Agent, or Securities Registrar.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent.
SECTION 6.6. Compensation; Reimbursement; Indemnity.
(a) The Company agrees:
(i) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall
agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(ii) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct; and
(iii) to the fullest extent permitted by applicable law, to indemnify the Trustee and its Affiliates, and their officers, directors, shareholders, agents, representatives and employees for, and to hold them harmless against, any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to (i) or (ii) hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part arising out of or in connection with the acceptance or administration of this trust or the performance of the Trustee's duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
(b) To secure the Company's payment obligations in this Section 6.6, the Company hereby grants and pledges to the Trustee and the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, other than money or property held in trust to pay principal and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee.
(c) The obligations of the Company under this Section 6.6 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal of the Trustee.
(d) In no event shall the Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(e) In no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture.
SECTION 6.7. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.8.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 6.8 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series. If the acceptance of appointment is substantially
contemporaneous with the resignation, then the notice called for by the first
sentence of this subsection may be combined with the instrument called for by
Section 6.8.
(c) Unless an Event of Default shall have occurred and be continuing, the Trustee may be removed at any time by the Company by a Board Resolution. If an Event of Default shall have occurred and be continuing, the Trustee may be removed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company.
(d) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Company, by a Board Resolution, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when an Event of Default shall have occurred and be continuing, the Holders, by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment within sixty (60) days after the giving of a notice of resignation by the Trustee or the removal of the Trustee in the manner required by Section 6.8, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, and any resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) The Company shall give notice to all Holders in the manner provided in
Section 1.6 of each resignation and each removal of the Trustee and each
appointment of a successor Trustee. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.8. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee, each successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) of this Section 6.8.
(c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI.
SECTION 6.9. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, provided,
that such Person shall be otherwise qualified and eligible under this Article
VI. In case any Securities shall have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or consolidation
or as otherwise provided above in this Section 6.9 to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated, and in case any Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor Trustee or in the name of such successor Trustee, and in all
cases the certificate of authentication shall have the full force which it is
provided anywhere in the Securities or in this Indenture that the certificate of
the Trustee shall have.
SECTION 6.10. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof.
SECTION 6.11. Appointment of Authenticating Agent.
(a) The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any State or Territory thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or state authority. If such
Authenticating Agent publishes reports of condition at least annually pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 6.11 the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.11.
(b) Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to all or substantially all of the corporate
trust business of an Authenticating Agent shall be the successor Authenticating
Agent hereunder, provided such Person shall be otherwise eligible under this
Section 6.11, without the execution or filing of any paper or any further act on
the part of the Trustee or the Authenticating Agent.
(c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, the Trustee may appoint a successor Authenticating Agent eligible under the provisions of this Section 6.11, which shall be acceptable to the Company, and shall give notice of such appointment to all Holders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.
(d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.11 in such amounts as the Company and the Authenticating Agent shall agree from time to time.
(e) If an appointment of an Authenticating Agent is made pursuant to this
Section 6.11, the Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Securities referred to in the within mentioned Indenture.
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, as Trustee
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than fifteen (15) days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing, within thirty (30) days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished,
in each case to the extent such information is in the possession or control of the Company and has not otherwise been received by the Trustee in its capacity as Securities Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Company.
(a) The Company shall furnish to (i) the Trustee, (ii) Cohen Bros. Financial Management LLC and (iii) prospective purchasers of Securities (the "Prospective Purchasers"), upon their written request, the information required to be furnished pursuant to Rule 144A(d)(4) under the Securities Act. The delivery requirements of the Company set forth in the preceding sentence may be satisfied by compliance with Section 7.3(b) hereof by the Company.
(b) The Company shall furnish to each of (i) the Trustee, (ii) Cohen Bros.
Financial Management LLC (at Cira Centre, 2929 Arch Street, Suite 1703,
Philadelphia, PA 19104, Attn: Matthew Mueller or such other address as
designated by Cohen Bros. Financial Management LLC), (iii) First Tennessee Bank
National Association and (iv) any beneficial owner of the Securities who
requests the same (the Persons set forth in (b)(i) - (iv), each, a "Recipient"
and, collectively, the "Recipients"), a duly completed and executed certificate
substantially and substantively in the form attached hereto as Exhibit A,
including all of the Company's financial statements referenced in such Exhibit,
which certificate and financial statements shall be so furnished by the Company
not later than forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Company and not later than ninety
(90) days after the end of each fiscal year of the Company. Each Recipient shall
maintain the confidentiality of such information except that such information
may be disclosed (i) on a no-name basis to any investor in a collateralized debt
obligor Holder (a "CDO Investor"), (ii) on a named-basis, to any CDO Investor or
Prospective Purchaser who has agreed with such furnishing Recipient or with the
Company to hold the information confidential in accordance with the terms
hereof, (iii) to its officers, directors, employees and agents, including
accountants, legal counsel and other advisors (it being understood that such
Persons shall be informed of and subject to the confidentiality requirements
hereof), (iv) to the extent requested by any regulatory authority, (v) to the
extent required by applicable laws or regulations or by any subpoena or similar
legal process, or (vi) to the extent such information becomes publicly available
other than as a result of the action of such Recipient.
(c) If the Company intends to file its annual and quarterly information with the Securities and Exchange Commission (the "Commission") in electronic form pursuant to Regulation S-T of the Commission using the Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Company shall notify the Trustee in the manner prescribed herein of each such annual and quarterly filing. The Trustee is hereby authorized to access the EDGAR system for purposes of retrieving the financial information so filed. Compliance with the foregoing shall constitute delivery by the Company of its financial statements to the Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable. The Trustee shall have no duty to search for or obtain any electronic or other filings that the Company makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Trustee pursuant to this Section 7.3(c) shall be solely for purposes of compliance with this Section 7.3(c) and, if applicable, with Section 314(a) of the Trust Indenture Act. The Trustee's receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Company's compliance with any of its covenants hereunder, as to which the Trustee is entitled to rely upon Officers' Certificates.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not, while any of the Securities remain outstanding, consolidate or amalgamate with or merge into any other Person or sell, convey, transfer or lease all or substantially all of its properties and assets as an entirety to any Person unless:
(a) if the Company shall consolidate or amalgamate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the entity formed by such consolidation or amalgamation or into which the Company is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Company substantially as an entirety shall be an entity organized and existing under the laws of the United States of America or any State or Territory thereof, the District of Columbia, Bermuda, the Cayman Islands or any other country or state which is a member of the Organization for Economic Cooperation and Development, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would constitute an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, any such supplemental indenture comply with this Article VIII and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1.
SECTION 8.2. Successor Company Substituted.
(a) Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1 and the execution and delivery to the Trustee of the supplemental indenture described in Section 8.1(a), the successor entity formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance or transfer, following the execution and delivery of such supplemental indenture, the Company shall be discharged from all obligations and covenants under the Indenture and the Securities.
(b) Such successor Person may cause to be executed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture.
(c) In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate to reflect such occurrence.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities; or
(b) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the other provisions of this Indenture, provided, that such action pursuant to this clause (b) shall not adversely affect in any material respect the interests of any Holders; or
(c) to add to the covenants, restrictions or obligations of the Company or to add to the Events of Default, provided, that such action pursuant to this clause (c) shall not adversely affect in any material respect the interests of any Holders; or
(d) to modify, eliminate or add to any provisions of the Indenture or the Securities to such extent as shall be necessary to ensure that the Securities are treated as indebtedness of the Company for United States Federal income tax purposes, provided, that such action pursuant to this clause (d) shall not adversely affect in any material respect the interests of any Holders; or
(e) provide for any replacement Trustee or Administrative Agent in accordance with Article VI.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
(a) With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security,
(i) change the Stated Maturity of the principal or any premium of any Security or change the date of payment of any installment of interest (including any Additional Interest) on any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or restrict or impair the right to institute suit for the enforcement of any such payment on or after such date, or
(ii) reduce the percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with any provision of this Indenture or of defaults hereunder and their consequences provided for in this Indenture, or
(iii) modify any of the provisions of this Section 9.2, Section 5.13 or Section 10.7, except to increase any percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any reason, or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security.
(b) It shall not be necessary for any Act of Holders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in conclusively relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to such action have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, indemnities or immunities under this Indenture or otherwise. Copies of the final form of each supplemental indenture shall be delivered by the Trustee at the expense of the Company to each Holder promptly after the execution thereof.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.5. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders of the Securities that it will duly and punctually pay the principal of and any premium and interest (including any Additional Interest) on the Securities in accordance with the terms of the Securities and this Indenture. As of the date of this Indenture, the Company represents that it has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Securities.
SECTION 10.2. Money for Security Payments to be Held in Trust.
(a) If the Company shall at any time act as its own Paying Agent with respect to the Securities, it will, on or before each due date of the principal of and any premium or interest (including any Additional Interest) on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium or interest (including Additional Interest) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee in writing of its failure so to act.
(b) Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m., New York City time, on each due date of the principal of or any premium or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided in the Trust Indenture Act and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act.
(c) The Company will cause each Paying Agent for the Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 10.2, that such Paying Agent will (i) comply with the provisions of this
Indenture and the Trust Indenture Act applicable to it as a
Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities.
(d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
(e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of and any premium or interest (including any Additional Interest) on any Security and remaining unclaimed for two years after such principal and any premium or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 10.3. Statement as to Compliance.
The Company shall deliver to the Trustee, within ninety (90) days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 10.4. Calculation Agent.
(a) The Company hereby agrees that for so long as any of the Securities remain Outstanding, there will at all times be an agent appointed to calculate LIBOR in respect of each Interest Payment Date in accordance with the terms of Schedule A (the "Calculation Agent"). The Company has initially appointed the Trustee as Calculation Agent for purposes of determining LIBOR for each Interest Payment Date. The Calculation Agent may be removed by
the Company at any time. If the Calculation Agent is unable or unwilling to act as such or is removed by the Company, the Company will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed.
(b) The Calculation Agent shall be required to agree that, as soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date (as defined in Schedule A), but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate (the Interest Payment shall be rounded to the nearest cent, with half a cent being rounded upwards) for the related Interest Payment Date, and will communicate such rate and amount to the Company, the Trustee, each Paying Agent and the Depositary. The Calculation Agent will also specify to the Company the quotations upon which the foregoing rates and amounts are based and, in any event, the Calculation Agent shall notify the Company before 5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has determined or is in the process of determining the foregoing rates and amounts or (ii) it has not determined and is not in the process of determining the foregoing rates and amounts, together with its reasons therefor. The Calculation Agent's determination of the foregoing rates and amounts for any Interest Payment Date will (in the absence of manifest error) be final and binding upon all parties. For the sole purpose of calculating the interest rate for the Securities, "Business Day" shall be defined as any day on which dealings in deposits in Dollars are transacted in the London interbank market.
SECTION 10.5. Additional Amounts.
All payments of principal of and premium, if any, interest (including any Additional Interest) and any other amounts on, or in respect of, the Securities of any series shall be made without withholding or deduction at source for, or on account of, any present or future taxes, fees, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Bermuda or any other jurisdiction in which the Company is organized (each, a "taxing jurisdiction") or any political subdivision or taxing authority thereof or therein, unless such taxes, fees, duties, assessments or governmental charges are required to be withheld or deducted by (i) the laws (or any regulations or ruling promulgated thereunder) of a taxing jurisdiction or any political subdivision or taxing authority thereof or therein or (ii) an official position regarding the application, administration, interpretation or enforcement of any such laws, regulations or rulings (including, without limitation, a holding by a court of competent jurisdiction or by a taxing authority in a taxing jurisdiction or any political subdivision thereof).
If a withholding or deduction at source is required, the Company shall, subject to certain limitations and exceptions set forth below, pay to the Holder of any such Security such additional amounts ("Additional Amounts") as may be necessary so that every net payment of principal, premium, if any, interest (including any Additional Interest) or any other amount made to such Holder, after such withholding or deduction, shall not be less than the amount provided for in such Security and this Indenture to be then due and payable; provided, however, that the Company shall not be required to make payment of such Additional Amounts for or on account of:
(a) any tax, fee, duty, assessment or governmental charge of whatever nature which would not have been imposed but for the fact that such Holder: (A) was a resident, domiciliary or national of, or engaged in business or maintained a permanent establishment or was physically present in, the relevant taxing jurisdiction or any political subdivision thereof or otherwise had some connection with the relevant taxing jurisdiction other than by reason of the mere ownership of, or receipt of payment under, such Security; (B) presented such Security, where presentation is required, for payment in the relevant taxing jurisdiction or any political subdivision thereof, unless such Security could not have been presented for payment elsewhere; or (C) presented such Security, where presentation is required, more than thirty (30) days after the date on which the payment in respect of such Security first became due and payable or provided for, whichever is later, except to the extent that the Holder would have been entitled to such Additional Amounts if it had presented such Security for payment on any day within such period of thirty (30) days;
(b) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure by the Holder or the beneficial owner of such Security to comply with any reasonable request by the Company addressed to the Holder within ninety (90) days of such request (A) to provide information concerning the nationality, residence or identity of the Holder or such beneficial owner or (B) to make any declaration or other similar claim or satisfy any information or reporting requirement, which, in the case of (A) or (B), is required or imposed by statute, treaty, regulation or administrative practice of the relevant taxing jurisdiction or any political subdivision thereof as a precondition to exemption from all or part of such tax, assessment or other governmental charge;
(d) any withholding or deduction required to be made pursuant to any EU Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meetings of 26-27 November 2000, 3 June 2003 or any law implementing or complying with, or introduced in order to confirm to, such EU Directive; or
(e) any combination of items (a), (b), (c) and (d);
nor shall Additional Amounts be paid with respect to any payment of the principal of, or premium, if any, interest or any other amounts on, any such Security to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such Security to the extent such payment would be required by the laws of the relevant taxing jurisdiction (or any political subdivision or relevant taxing authority thereof or therein) to be included in the income for tax purposes of a beneficiary or partner or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such Additional Amounts had it been the Holder of the Security.
Whenever in this Indenture there is mentioned, in any context, the payment of the principal of or any premium, interest (including Additional Interest) or any other amounts on, or in respect of, any Security of any series or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established hereby or pursuant hereto to the extent that, in such context, Additional Amounts are, were or would be payable in respect
thereof pursuant to such terms, and express mention of the payment of Additional Amounts (if applicable) in any provision hereof shall not be construed as excluding the payment of Additional Amounts in those provisions hereof where such express mention is not made.
SECTION 10.6. Additional Covenants.
The Company covenants and agrees with each Holder of Securities that if (i) an Event of Default shall have occurred and be continuing, (ii) any Significant Subsidiaries (as defined in Section 1-02(w) of Regulation S-X of the Securities Act (the "Significant Subsidiaries") of the Company which is rated by A.M. Best Company, Inc. and which (A) is rated B or below by A.M. Best Company, Inc. or (B) A.M. Best Company, Inc. withdraws its rating or (iii) the Company shall have given notice of its election to begin an Extension Period with respect to the Securities, then, from the date on which the Company shall have given notice of its election to begin an Extension Period through the end of any such Extension Period (including any extension thereof), then the Company shall not, and shall not permit any subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's or such subsidiary's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing, (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Securities (other than, with respect to clauses (ii) and (iii) above, (A) repurchases, redemptions or other acquisitions of shares of capital stock of the Company or any subsidiary of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company or of such subsidiary (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (B) as a result of an exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock (or in the case of a subsidiary of the Company, any class or series of such subsidiary's capital stock) or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock (or in the case of indebtedness of a subsidiary of the Company, of any class or series of such subsidiary's indebtedness for any class or series of such subsidiary's capital stock), (C) the purchase of fractional interests in shares of the Company's capital stock (or the capital stock of a subsidiary of the Company) pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (D) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan or the redemption or repurchase of rights pursuant thereto, or (E) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith or (F) any repurchases, redemptions or other acquisitions of shares of capital stock of the Company or any subsidiary of the Company made by the Company or such subsidiary, which the Company's Board of Directors determine in good faith are necessary or advisable in order to avoid, ameliorate or limit any material adverse tax or regulatory consequences for the Company or its shareholders), or (iii) enter into any new (as
opposed to existing) contracts with shareholders on less than an arm's-length negotiation basis holding more than 10% of the outstanding shares of Common Shares of the Company.
SECTION 10.7. Waiver of Covenants.
The Company may omit in any particular instance to comply with any covenant or condition contained in Section 10.6 if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect.
SECTION 10.8. Treatment of Securities.
The Company will treat the Securities as indebtedness, and the amounts, other than payments of principal, payable in respect of the principal amount of such Securities as interest, for all U.S. federal income tax purposes. All payments in respect of the Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S. status for U.S. federal income tax purposes, or any other applicable form establishing a complete exemption from U.S. withholding tax.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Optional Redemption.
The Company may, at its option, on any Interest Payment Date, on or after June 15, 2011, redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof (or of the redeemed portion thereof, as applicable), together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Optional Redemption Price").
SECTION 11.2. Special Event Redemption.
Prior to June 15, 2011, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, redeem the Securities, in whole but not in part, at a Redemption Price equal to
TIME PERIOD PERCENTAGE ----------- ---------- June 15, 2006 - June 14, 2007 105% June 15, 2007 - June 14, 2008 103.75% |
June 15, 2008 - June 14, 2009 102.5% June 15, 2009 - June 14, 2010 101.25% June 15, 2010 and thereafter 100% |
of the principal amount thereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Special Redemption Price"). Unless the Company defaults in the payment of the Special Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Securities called for redemption.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities, in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, not less than forty-five (45) days and not more than seventy-five (75) days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such date and of the principal amount of the Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.5. In the case of any redemption of Securities, in whole or in part, (a) prior to the expiration of any restriction on such redemption provided in this Indenture or the Securities or (b) pursuant to an election of the Company which is subject to a condition specified in this Indenture or the Securities, the Company shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction or condition.
SECTION 11.4. Selection of Securities to be Redeemed.
(a) If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected and redeemed on a pro rata basis not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, provided, that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security.
(b) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed.
(c) The provisions of paragraphs (a) and (b) of this Section 11.4 shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security.
SECTION 11.5. Notice of Redemption.
(a) Notice of redemption shall be given not later than the thirtieth (30th) day, and not earlier than the sixtieth (60th) day, prior to the Redemption Date to each Holder of Securities to be redeemed, in whole or in part.
(b) With respect to Securities to be redeemed, in whole or in part, each notice of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price, as calculated by the Company, together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the fifth Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated);
(iii) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed;
(iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that any interest (including any Additional Interest) on such Security or such portion, as the case may be, shall cease to accrue on and after said date; and
(v) the place or places where such Securities are to be surrendered for payment of the Redemption Price.
(c) Notice of redemption of Securities to be redeemed, in whole or in part, at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security.
SECTION 11.6. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.5, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.2) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date.
SECTION 11.7. Payment of Securities Called for Redemption.
(a) If any notice of redemption has been given as provided in Section 11.5, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment specified in such notice, the Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date.
(b) Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms.
(c) If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and any premium on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
ARTICLE XII
SUBORDINATION OF SECURITIES
SECTION 12.1. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XII, the payment of the principal of and any premium and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed).
SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc.
(a) In the event and during the continuation of any default by the Company in the payment of any principal of or any premium or interest on any Senior Debt (following any grace period, if applicable) when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Company by the holders of such Senior Debt or any trustee therefor, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of or any premium or interest (including any Additional Interest) on any of the Securities, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities.
(b) In the event of a bankruptcy, insolvency or other proceeding described in clause (d) or (e) of the definition of Event of Default (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Debt (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities shall be paid or delivered directly to the holders of Senior Debt in accordance with the priorities then existing among such holders until all Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full.
(c) In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Debt, the Holders of the Securities, together with the holders of any obligations of the Company ranking on a parity with the Securities, shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of and any premium and interest (including any Additional Interest) on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Company ranking junior to the Securities and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Debt shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt at the time outstanding in accordance with the priorities then existing among such holders as calculated and certified by the Company for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay all such Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Debt is hereby irrevocably authorized to endorse or assign the same.
(d) The Trustee and the Holders, at the expense of the Company, shall take such reasonable action (including the delivery of this Indenture to an agent for any holders of Senior Debt or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Debt at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions.
(e) The provisions of this Section 12.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Company in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture.
(f) The securing of any obligations of the Company, otherwise ranking on a parity with the Securities or ranking junior to the Securities, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities.
SECTION 12.3. Payment Permitted If No Default.
Nothing contained in this Article XII or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time, except during the pendency of the conditions described in paragraph (a) of Section 12.2 or of any Proceeding referred to in Section 12.2, from making payments at any time of principal of and any premium or interest (including any Additional Interest) on the Securities or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of and any premium or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 12.8) that such payment would have been prohibited by the provisions of this Article XII, except as provided in Section 12.8.
SECTION 12.4. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article XII (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Debt of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of and any premium and interest (including any Additional Interest) on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XII, and no payments made pursuant to the provisions of this Article XII to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt.
SECTION 12.5. Provisions Solely to Define Relative Rights.
The provisions of this Article XII are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article XII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of and any premium and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms, (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than their rights in relation to the holders of Senior Debt or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, including filing and voting claims in any Proceeding, subject to the rights, if any, under this Article XII of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 12.6. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XII and appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 12.7. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of this
Section 12.7, the holders of Senior Debt may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to such Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of such Holders of the Securities to the
holders of Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt
or any instrument evidencing the same or any agreement under which Senior Debt
is outstanding, (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt, (iii) release any Person
liable in any manner for the payment of Senior Debt and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 12.8. Notice to Trustee.
(a) The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article XII or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until a Responsible Officer of the Trustee
shall have received written notice thereof from the Company or a holder of
Senior Debt or from any trustee, agent or representative therefor; provided,
that if the Trustee shall not have received the notice provided for in this
Section 12.8 at least two Business Days prior to the date upon which by the
terms hereof any monies may become payable for any purpose (including, the
payment of the principal of and any premium on or interest (including any
Additional Interest) on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
(b) The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XII, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in this Article XII, the Trustee and the Holders of the Securities shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII.
SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article XII or otherwise.
SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.
SECTION 12.12. Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article XII shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XII in addition to or in place of the Trustee; provided, that Sections 12.8 and 12.11 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent.
* * * *
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
VALIDUS HOLDINGS, LTD.
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION as Trustee
DETERMINATION OF LIBOR
With respect to the Securities, the London interbank offered rate ("LIBOR") shall be determined by the Calculation Agent in accordance with the following provisions (in each case rounded to the nearest .000001%):
(1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for three-month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date.
(2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date.
(3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London.
[Exhibit 10.9]
FIRST SUPPLEMENTAL INDENTURE, dated as of September 15, 2006 (this "Supplemental Indenture"), between VALIDUS HOLDINGS, LTD., a company with limited liability organized under the laws of Bermuda (the "Company"), and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee (in such capacity, the "Trustee").
WITNESSETH
REFERENCE is made to the Indenture, dated as of June 15, 2006 (the "Original Indenture" and as amended and modified by this Supplemental Indenture, the "Indenture"), between the Company and the Trustee, pursuant to which the Company issued its Junior Subordinated Deferrable Interest Debentures due 2036. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Indenture.
WHEREAS, the Company has requested that the Trustee enter into this Supplemental Indenture to amend certain provisions of the Original Indenture;
WHEREAS, Section 9.2 of the Original Indenture provides that with the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture supplemental thereto for the purpose of (subject to certain limited exceptions) adding any provisions to or changing in any manner or eliminating any of the provisions of the Original Indenture or of modifying in any manner the rights of the Holders of Securities;
WHEREAS, all necessary actions for the execution and delivery of this Supplemental Indenture have been taken pursuant to Article IX of the Indenture and the Trustee has received an Officers' Certificate and Opinion of Counsel, stating, among other things, that the execution of this Supplemental Indenture is authorized or permitted by the Original Indenture and that all conditions precedent therein have been complied with, each as contemplated by Section 9.3 of the Indenture in connection with the execution and delivery of this Supplemental Indenture;
WHEREAS, the Trustee has provided a copy of this Supplemental Indenture to the Holders and the Company has obtained the Consent of not less than a majority of aggregate principal amount of the Outstanding Securities to such Supplemental Indenture; and
WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements hereinafter contained and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the undersigned parties hereto agree, for the equal and proportionate benefit of the Holders, as follows:
ARTICLE I
AMENDMENTS
SECTION 1.1 Section 1.1 of the Indenture is hereby amended by inserting the following defined terms in such Section in alphabetical order:
"Closing Date" shall mean June 15, 2006.
"Fixed Rate Period" shall mean the period beginning on the Closing Date through but excluding June 15, 2011.
SECTION 1.2 The form of Security set forth in Section 2.1 of the Indenture is hereby amended by deleting the first sentence of the second paragraph thereof and replacing said sentence with the following:
"The amount of interest payable for any interest period shall be computed and paid (i) during the Fixed Rate Period on the basis of a 360-day year of twelve 30-day months and (ii) thereafter on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period."
SECTION 1.3 Section 3.1(d) of the Indenture is hereby amended by deleting such Section in its entirety and replacing such Section with the following:
"(d) Payments of interest on the Securities shall include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for the Securities shall be computed and paid (i) during the Fixed Rate Period on the basis of a 360-day year of twelve 30-day months and (ii) thereafter on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period."
ARTICLE II
MISCELLANEOUS
SECTION 2.1 Successors and Assigns.
This Supplemental Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law.
SECTION 2.2 Separability Clause.
If any provision in this Supplemental Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.
SECTION 2.3 Governing Law.
THIS SUPPLEMENTAL INDENTURE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE COMPANY AND THE TRUSTEE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
* * * *
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.
VALIDUS HOLDINGS, LTD.
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, as Trustee
[Exhibit 10.15]
INVESTMENT MANAGER AGREEMENT
THIS AGREEMENT, made as of the 8th day of December, 2005, by and between VALIDUS REINSURANCE, LTD. (hereinafter called the "Company") and BLACKROCK (through its subsidiary BlackRock Financial Management, Inc., hereinafter called the "Manager").
WITNESSETH:
WHEREAS, the Company has all requisite authority to appoint one or more investment managers to supervise and direct the investment and reinvestment of a portion of all of the assets of the Company and of certain subsidiaries of the Company;
THEREFORE, for and in consideration of the premises and of the mutual covenants herein contained, the parties hereby agree as follows:
1. Appointment and Status as Investment Manager. The Company hereby appoints the Manager as an "Investment Manager." The Manager does hereby accept said appointment and by its execution of this Agreement the Manager represents and warrants that it is registered as an investment adviser under the U.S. Investment Advisers Act of 1940 (the "Advisers Act"). The Manager does also acknowledge that it is a fiduciary with respect to the assets under management and assumes the duties, responsibilities and obligations of a fiduciary with respect to the services described in Sections 3 through 5 below.
2. Representations by Company. The Company represents and warrants that (a) it has all requisite authority to appoint the Manager hereunder, (b) the terms of the Agreement do not conflict with any obligation by which the Company is bound, whether arising by contract, operation of law or otherwise and (c) this Agreement has been duly authorized by appropriate corporate action.
3. Management Services. The Manager shall be responsible for the investment and reinvestment of those assets designated by the Company as subject to the Manager's management (which assets, together with all additions, substitutions and alterations thereto are hereinafter called the "Account"). The Account may include all securities and instruments described in Exhibit A or appropriate to effect the strategies described therein. The Company does hereby delegate to the Manager all of its powers, duties and responsibilities with regard to such investment and reinvestment and hereby appoints the Manager as its agent in fact with full authority to buy, sell or otherwise effect investment transactions involving the assets in its name and for the Account, including without limitation, the power to enter into swap, futures, options and other agreements with counterparties on the Company's behalf as the Manager deems appropriate from time to time in order to carry out the Manager's responsibilities hereunder. Said powers, duties and responsibilities shall be exercised exclusively by the Manager pursuant to and in accordance with its fiduciary responsibilities and the provisions of this Agreement. In deciding on a proper investment of the Account, the Manager shall consider the following factors as communicated in writing to the Manager by the Company from time to time: a) the investment purposes of the Company, b) the Company's financial needs such as liquidity, c) applicable laws, d) the Company's investment policies and guidelines, and e) the
Account's Investment Guidelines attached as Exhibit A. In addition, in accordance with the Manager's guidelines in effect from time to time, the Manager or its agent is authorized, but shall not be required, to vote, tender or convert any securities in the Account; to execute waivers, consents and other instruments with respect to such securities; to endorse, transfer or deliver such securities or to consent to any class action, plan of reorganization, merger, combination, consolidation, liquidation or similar plan with reference to such securities; and the Manager shall not incur any liability to the Company by reason of any exercise of, or failure to exercise, any such discretion in the absence of gross negligence or bad faith.
4. Accounting and Reports. At such intervals as shall be mutually agreed upon between the parties, the Manager shall furnish the Company with appraisals of the Account, performance tabulations, a summary of purchases and sales and such other reports as shall be agreed upon from time to time. The Manager shall also reconcile accounting, transaction and asset-summary data with custodian reports at times that are mutually agreeable to the Manager and the Company. In addition, the Manager shall communicate and resolve any significant discrepancies with the custodian.
5. Other Services. The Manager shall, on invitation, attend meetings with representatives of the Company to discuss the position of the Account and the immediate investment outlook, or shall submit its views in writing as the Company shall suggest from time to time.
6. Additional Investment Services; Considerations and Acknowledgments. As
agreed between the parties from time to time, the Manager may provide certain
operating, analytical, and reporting support ("Additional Investment Services")
for those portfolios of the Company managed by the Manager and by other parties.
The Additional Investment Services may include, but are not limited to the
following: (i) establishing appropriate investment mandates and strategies, (ii)
drafting investment policies and guidelines, (iii) supporting the Company's
operations, including custodial assistance, (iv) creating a consolidated risk
reporting platform for the Company, (v) providing asset-liability reporting,
(vi) providing income projections, and (vii) broad and general consulting on
accounting, operational, regulatory, and other strategic issues.
The Company understands and acknowledges that (a) all Additional Investment Services require the Manager to exercise good-faith judgments that may ultimately prove to be erroneous, (b) in connection with providing the Additional Investment Services, the Manager will make certain assumptions about the movements of interest rates, volatility of interest rates, movements of spreads, and the relationship of mortgage prepayments to interest rates, (c) the Manager's assumptions will not necessarily capture all the characteristics and risks inherent in the Company's portfolios, and (d) the Manager's assumptions are based upon information provided to the Manager by the Company or certain of its third-party vendors that is assumed to be reliable and accurate, but the Manager does not represent or warrant that it is accurate or complete, and will not be responsible for verifying the accuracy of any such information.
7. Compensation. For its investment management services rendered hereunder, the Manager shall be compensated in accordance with Exhibit B, attached hereto. If the management of the Account commences or ends at any time other than the beginning or end of a calendar quarter, the quarterly fee shall be prorated based on the portion of such calendar quarter during which this Agreement was in force.
8. Custodian. The securities in the Account shall be held by a custodian duly appointed by the Company and the Manager is authorized to give instructions to the custodian with respect to all investment decisions regarding the Account. Nothing contained herein shall be deemed to authorize the Manager to take or receive physical possession of any of the assets for the Account, it being intended that sole responsibility for safekeeping thereof (in such investments as the Manager may direct) and the consummation of all purchases, sales, deliveries and investments made pursuant to the Manager's direction shall rest upon the custodian.
9. Brokerage. The Company hereby delegates to the Manager sole and exclusive authority to designate the brokers or dealers through whom all purchases and sales on behalf of the Account will be made. The Manager will determine the rate or rates, if any, to be paid for brokerage services provided to the Account. The Manager agrees that securities are to be purchased through such brokers as, in the Manager's best judgment, shall offer the best combination of price and execution. The Manager, in seeking to obtain best execution of portfolio transactions for the Account may consider the quality and reliability of brokerage services, as well as research and investment information and other services provided by brokers or dealers. Accordingly, the Manager's selection of a broker or dealer for transactions for the Account may take into account such relevant factors as (i) price, (ii) the broker's or dealer's facilities, reliability and financial responsibility, (iii) when relevant, the ability of the broker to effect securities transactions, particularly with regard to such aspects as timing, order size and execution of the order, (iv) the broker's or dealer's recordkeeping capabilities and (v) the research and other services provided by such broker or dealer to the Manager which are expected to enhance its general portfolio management capabilities (collectively, "Research"), notwithstanding that the Account may not be the exclusive beneficiary of such Research.
10. Confidential Information. All information regarding operations and investments of the Company shall be regarded as confidential by the Manager. The terms of this Agreement, including the Exhibits hereto, also shall be regarded as confidential by the Company and the Manager and shall not be disclosed to any third party except with the consent of both parties or if a party becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to do so, and then only to the extent of such legal compulsion; provided, further, that in the event of legal compulsion to disclose the terms hereof, the party subject to such legal process shall (a) first notify the other party of such legal process, unless such notice is prohibited by statute, rule or court order, (b) attempt to obtain the other party's consent to such disclosure, and (c) in the event consent is not given, agree to permit a motion to quash, or other similar procedural step, to frustrate the production or publication of information. In making any disclosure under such legal process, a disclosing party agrees to use all reasonable efforts to preserve the confidential nature of such information.
11. Directions to the Manager. All directions by or on behalf of the Company to the Manager shall be in writing signed by:
Name Title ---- ----- Ed Noonan Chairman George Reeth Deputy Chairman |
The Manager shall be fully protected in relying upon any direction in accordance with the previous paragraph with respect to any instruction, direction or approval of the Company, and shall be so protected also in relying upon a certification duly executed on behalf of the Company as to the names of persons authorized to act for it and in continuing to rely upon such certification until notified by the Company to the contrary.
The Manager shall be fully protected in acting upon any instrument, certificate or paper believed by it to be genuine and to be signed or presented by the proper persons or to any statement contained in any such writing and may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained.
12. Liabilities of the Manager and the Company. The Company acting in good faith shall not be liable for any act or omission of the Manager in connection with the Manager's discharge of its duties; provided, however, this limitation shall not act to relieve the Company from any responsibility or liability for any fiduciary responsibility, obligation or duty. The Manager, its officers, directors and employees, acting in good faith shall not be liable and shall be indemnified by the Company against any and all losses, damages, costs, expenses (including reasonable attorneys' fees), liabilities, claims and demands (collectively, "Losses"), for any action, omission, information or recommendation in connection with this Agreement, except in the case of the Manager's or such officer's, director's or employee's actual misconduct, gross negligence, willful violation of any applicable statute or reckless disregard for its duties and except as further limited in the paragraph immediately below; provided, however, this limitation shall not act to relieve the Manager, its officers, directors and employees from any responsibility or liability for any responsibility, obligation or duty which the Manager or such officer, director or employee may have under any federal securities act; and provided, further, however, that to the extent any limitations or restrictions contained in the Investment Guidelines are not adhered to as a result of changes in market value, additions to or withdrawals from the Account, portfolio rebalancing or other nonvolitional acts of the Manager, the Manager shall not be liable to the Company.
The Company understands that in connection with the Additional Investment Services provided by the Manager that (i) the Manager is not serving in an investment advisory capacity, or making any recommendations or soliciting any action based upon its analyses with respect to those portfolios of the Company not managed by the Manager and (ii) the Company will be solely responsible for any judgments as to valuation and the purchase and sale of its portfolio securities (other than in the case of the Account). Accordingly, the Manager will not be responsible, and have no liability, for any conclusions drawn by the Company with respect to its portfolio securities, notwithstanding that such conclusions may, in part, be based upon information provided by the Manager in connection with the Additional Investment Services.
13. Non-Exclusive Management. The Company understands that the Manager will continue to furnish investment management and advisory services to others, and that the Manager shall be at all times free, in its discretion, to make recommendations to others which may be the same as, or may be different from those made to the Account. The Company further understands that the Manager, its affiliates, and any officer, director, stockholder, employee or any member of their families may or may not have an interest in the securities whose purchase and sale the Manager may recommend. Actions with respect to securities of the same kind may be the same as or different from
the action which the Manager, or any of its affiliates, or any officer, director, stockholder, employee or any member of their families, or other investors may take with respect thereto.
14. Aggregation and Allocation of Orders. The Company acknowledges that circumstances may arise under which the Manager determines that, while it would be both desirable and suitable that a particular security or other investment be purchased or sold for the account of more than one of the Manager's clients' accounts, there is a limited supply or demand for the security or other investment. Under such circumstances, the Company acknowledges that, while the Manager will seek to allocate the opportunity to purchase or sell that security or other investment among those accounts on an equitable basis, the Manager shall not be required to assure equality of treatment among all of its clients (including that the opportunity to purchase or sell that security or other investment will be proportionally allocated among those clients according to any particular or predetermined standards or criteria). Where, because of prevailing market conditions, it is not possible to obtain the same price or time of execution for all of the securities or other investments purchased or sold for the Account, the Manager may average the various prices and charge or credit the Account with the average price.
15. Conflict of Interest. The Company agrees that the Manager may refrain from rendering any advice or services concerning securities of companies of which any of the Manager's, or affiliates of the Manager's officers, directors, or employees are directors or officers, or companies as to which the Manager or any of the Manager's affiliates or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information, unless the Manager either determines in good faith that it may appropriately do so without disclosing such conflict to the Company or discloses such conflict to the Company prior to rendering such advice or services with respect to the Account.
From time to time, when determined by the Manager in its capacity of a fiduciary to be in the best interest of the Company, the Account may purchase securities from or sell securities to another account managed by the Manager at prevailing market levels in accordance with the procedures under Rule 17a-7(b) of the U.S. Investment Company Act of 1940 and other applicable law.
16. Effective Period of Agreement and Amendments. This Agreement shall become effective on the date hereof. Any amendment to this Agreement shall be written and signed by both parties to the Agreement. No such amendment shall be effective to permit the use of the Account or any part thereof for any purpose not authorized by the Company's charter.
17. Resignation or Removal of the Manager. The Manager may be removed by the Company or may resign upon 30 days' notice in writing. On the effective date of the removal or resignation of the Manager or as close to such date as is reasonably possible, the Manager shall provide the Company with a final report containing the same information as paragraph 4 above.
18. Assignment. No assignment (as that term is defined in the Advisers Act) of this Agreement by the Manager may be made without the consent of the Company, and any such assignment made without such consent shall be null and void for all purposes. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors and permitted assigns.
19. Severable. Any term or provision of this Agreement which is invalid or unenforceable in any applicable jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable remaining terms or provisions of the Agreement in any jurisdiction.
20. Applicable Law. To the extent not inconsistent with applicable U.S. federal law, this Agreement shall be construed pursuant to, and shall be governed by, the laws of the state of New York.
21. Investment Manager Brochure. The Company hereby acknowledges that it has received from the Manager a copy of the Manager's Form ADV, Part II, at least forty-eight hours prior to entering into this Agreement.
22. Web-site. The Manager, at the Company's request, will provide access to its account information electronically, via the world wide web, based upon the Company's use of a BlackRock issued user id and password. The Company acknowledges and agrees the world wide web is a continually growing medium and the Manager does not make any warranty regarding the security related to the world wide web. The Company must be aware there is no absolute guaranteed system or technique to fully secure information made available over the web. The Company agrees that it will not share its user id, password and access to information provided electronically with any third party.
23. Notices. All notices required or permitted to be sent under this Agreement shall be sent, if to the Manager:
c/o BlackRock, Inc. 40 East 52nd Street New York, NY 10022 Attention: Robert Connolly, General Counsel or by facsimile to (212) 810-3744
if to the Company: Validus Reinsurance, Ltd.
Suite 1790
48 Par-la-Ville Road
Hamilton, HM 11 Bermuda
Attention: Ed Noonan
or by facsimile to: 441-278-9090
or such other name or address as may be given in writing to the other party. All notices hereunder shall be sufficient if delivered by facsimile or overnight mail. Any notices shall be deemed given only upon actual receipt.
24. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original but all of which together shall constitute one agreement.
25. Use of Futures. Pursuant to an exemption from the U.S. Commodity Futures Trading Commission (the "Commission") in connection with accounts of qualified eligible persons, this Agreement is not required to be, and has not been, filed with the Commission. The Commission does not pass upon the merits of participating in a trading program or upon the adequacy or accuracy of commodity trading advisor disclosure. Consequently, the Commission has not reviewed or approved this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
VALIDUS REINSURANCE, LTD.
BLACKROCK
(through its subsidiary BlackRock Financial Management, Inc.)
[EXHIBIT 10.16]
RISK REPORTING & INVESTMENT ACCOUNTING SERVICES AGREEMENT
This RISK REPORTING AND INVESTMENT ACCOUNTING SERVICES AGREEMENT (the "Agreement") is made as of the 8th day of December, 2005 ("Effective Date") between BlackRock Financial Management, Inc. ("BlackRock") and Validus Reinsurance, Ltd. ("Client"). WHEREAS, Client wishes to engage BlackRock to provide certain risk measurement reporting services for Client as well as to engage and appoint BlackRock as its agent to provide certain investment accounting services for Client, all as set forth below; NOW, THEREFORE, the parties agree as follows:
1. Services. (a) (i) Risk Services: BlackRock will provide Client with certain risk measurement reports as set forth on Schedule A (each, a "Report"; together, the "Reports Package"). Reports will be made available to Client on a website (the "Client Site") that will be created and maintained by BlackRock for password-protected access via the internet by certain Client personnel ("Client Users," as defined in Schedule A). The Reports Package will be produced by BlackRock using the same quality control procedures used for its other clients of similar services. Client acknowledges that the creation of these Reports will be dependent on portfolio and securities data that Client and/or its agents (such as Client's custodian) shall provide in a format specified by BlackRock ("Client Data," as defined in Schedule A), and/or data obtained from BlackRock's Accounting Services (as defined below), which are derived from the Client Data. The "Risk Services" shall consist of provision of the Reports Package.
(ii) Accounting Services: BlackRock will perform investment accounting services for Client as set forth in Schedule B (the "Accounting Services"), and such additional accounting and other services as the parties may agree upon in writing from time to time. BlackRock is hereby authorized to communicate with Client's custodian regarding Client's account and portfolio and regarding reports and information provided by or pertaining to Client, Client's custodian, or BlackRock.
The "Services" shall consist of the Risk Services together with the Accounting Services. The following provisions apply to the Risk Services or Accounting Services as specifically noted.
With respect to the Risk Services:
(b) BlackRock will provide Client with improvements in the Services as and when it makes such improvements generally available to its clients. Client also may request new or additional Reports from BlackRock for an additional fee, as the parties may agree.
(c) "Third Party Data" means any data provided by BlackRock that are not proprietary to BlackRock and are listed in Schedule D. Certain Third Party Data are required to use the Risk Services. Use of Third Party Data is subject to certain additional contract and fee terms with the provider of such data, as outlined in Schedule D.
(d) Client will provide the hardware, software, and internet connectivity necessary for Client Users to access and use the Reports. Current requirements are set forth in Schedule E. All use of the Risk Services will be subject to the limitations set forth in this Agreement (and Schedule A), including limitations on the number and identity of Client Users and limitations applicable to Third Party Data (see Schedule D).
(e) Use of the Risk Services shall be for Client's internal business purposes only. Only Client Users, as specified in Schedule A, shall be permitted to access the Risk Services. Client shall not (i) provide Reports to any third party, except as expressly permitted in this Agreement; or (ii) reverse engineer or otherwise use the Risk Services in any way to develop, test, enhance, or calibrate, on behalf of itself or for any other party, any system or services that are similar to any component(s) of the Risk Services. Notwithstanding the foregoing, in the ordinary course of its business, Client shall be permitted to provide excerpts from Reports to its customers and prospective customers, so long as the provision of such materials is not for a fee and is only an incidental component of the service provided by Client to such customers or prospective customers, and to its auditors and regulators as required by law, rule, or practice. At BlackRock's request, Client shall provide BlackRock indicative copies of its materials that include Report excerpts and are provided to its customers.
(f) Client acknowledges that not all securities in its portfolios may lend themselves to explicit analytically derived risk measures and that BlackRock may not have procedures, methods, or models appropriate for
risk analysis of certain types of securities. BlackRock will consult with Client's designated representative in such cases to determine the appropriate methodology for analysis of these securities for the Reports Package. In the absence of input from Client in such instances, BlackRock will use its reasonable judgment to analyze the security.
(g) BlackRock will provide the Reports Package to Client on the schedule set forth in Schedule A. The timely production of each Report will depend on the timely receipt of complete Client Data.
With respect to the Accounting Services.
(h) On the Effective Date, BlackRock shall commence work on the implementation process and other tasks (together, the "Conversion") necessary to provide the Accounting Services beginning after the Conversion is accepted by Client. BlackRock will use commercially reasonable efforts to complete the Conversion promptly subject to the timely receipt of necessary information from Client.
(i) Client shall be responsible for: (1) coordinating communications among
BlackRock and Client's custodian and advisors; (2) filing any claims in
connection with Client's invested assets (though BlackRock will facilitate
handling of certain claims, such as late-payment claims); (3) representing its
interest in any litigation relating to or involving the invested assets of
Client; (4) coordinating and controlling any movement of assets not relating to
trades and resolving any discrepancies related to the movement of such assets;
(5) notifying BlackRock of all such asset movement activity; (6) ensuring that
all necessary information from Client is timely received by BlackRock (see
Schedule B); and (7) advising BlackRock of, and ensuring all compliance with,
laws, procedures, instructions, and regulations applicable to Client due to the
specific nature of Client's business, including performing all acts required
with regard to any registration or qualification requirements imposed by any
governmental or self-regulatory authority, such as registration with SEC or
filings with the NAIC-SVO (notwithstanding the foregoing, BlackRock may assist
Client in its compliance efforts, as described in Schedule B). BlackRock shall
be entitled to rely on, for all purposes under this Agreement, any and all
instructions provided by Client. BlackRock may require, at its discretion, that
any such instructions be certified to in writing by an officer of Client.
For the avoidance of doubt, unless otherwise provided in a separate written agreement with BlackRock, BlackRock's sole responsibility is to provide the Accounting Services to assist Client in its financial reporting, and Client shall be solely responsible for (i) monitoring its investments for compliance with its investment guidelines and (ii) any judgments as to valuation of, or purchase or sale of, securities in its portfolio; and in any case, (iii) BlackRock shall have no responsibility for compliance with or the content of Client's investment guidelines or for any actions of or conclusions drawn by Client with respect to its portfolios or securities, whether or not such conclusions are based on BlackRock's Accounting Services.
(j) Client takes sole responsibility for the acts or omissions of its custodian and will have by the Accounting Services Commencement Date instructed its custodian, and will instruct any future custodian of Client (such instructions to remain in force during the term of this Agreement), to provide BlackRock (at Client's request, on custodian's initiative, or at BlackRock's request) with custodian's reports and other information of Client that BlackRock requires to perform its duties hereunder.
(k) BlackRock will provide reports to Client as provided for in Schedule B. The timely production of reports will depend on the timely receipt of complete Client data.
(l) Third Party Data for the Accounting Services shall be governed by the provisions set forth in Section 1(b) above as well as Schedule D.
2. Representations by Client. Client represents and warrants that (a) execution, delivery, and performance of this Agreement have been duly authorized and shall not conflict with any obligation of Client, whether arising by contract, operation of law, or otherwise, (b) this Agreement constitutes a valid and binding obligation, (c) Client has all rights necessary to provide the Client Data to BlackRock for the uses set forth herein, and (d) Client has all rights and power necessary to appoint BlackRock as its accounting agent.
3. Representations by BlackRock. BlackRock represents and warrants that (a) execution, delivery, and performance of this Agreement have been duly authorized and shall not conflict with any obligation of BlackRock, whether arising by contract, operation of law, or otherwise, (b) this Agreement constitutes a valid and binding obligation, and (c) BlackRock has
all rights and power necessary to provide the Services contemplated herein. No other warranties are provided, express or implied.
4. Risk Considerations. Client understands that risk measurement analyses rely on certain assumptions and judgments, such as with respect to movement in and volatility of interest rates and spreads, and relative risks and the relationship between risk factors (such as the relationship of mortgage prepayments to interest rates). These analyses, models, and methodologies are generally based on observations of past market behavior that may not hold true in the future. Such assumptions may not cover all aspects of, or risks inherent in, Client's portfolios. Client understands that the risk analyses are also dependent on the integrity of the security master data, and the validity of the pricing data, provided by Client (as part of the Client Data), as well as economic data used in the analyses. BlackRock will use its best judgment and practices to model the portfolios using the Client Data, Third Party Data, and other available sources. For portfolios for which Client provides the securities indicative data (see Section 1(a), above), BlackRock will depend solely on Client Data for its analyses. BlackRock's analyses performed to create the Reports are based on information BlackRock deems to be reliable, but BlackRock in no case guarantees their accuracy or completeness. Client acknowledges that significant professional disagreement exists regarding the accuracy and validity of these types of analyses and methodologies, and that there is no assurance that the analyses and methodologies used by BlackRock or provided by BlackRock are or will be appropriate for Client or its portfolios.
Client acknowledges and agrees that (i) BlackRock's sole responsibility in connection with this Agreement is to provide the Services to aid Client's analysis of its portfolios, (ii) BlackRock is not serving as an investment advisor, or making any recommendations or soliciting any action based on its risk measurement analyses or provision of analytic tools, and (iii) Client will be solely responsible for any judgments as to valuation of or purchase or sale of its portfolio securities. Accordingly, BlackRock will not be responsible or have any liability for any actions of or conclusions drawn by Client with respect to any matter, whether or not such conclusions are based to any extent on BlackRock's Services.
5. Fees. (a) Client shall pay BlackRock fees for the Services to be calculated and payable as set forth in Schedule C (the "Risk Fees" and the "Accounting Fees"). If the composition of Client's portfolios substantially changes after the Effective Date, the parties agree to jointly determine in good faith whether an increase in the amount of the Fees, and/or any changes to the Services, is required.
(b) Client agrees to reimburse BlackRock for all fees paid by BlackRock to the National Association of Insurance Commissioners' Security Valuation Office ("NAIC-SVO") to file or register Client's securities with the NAIC-SVO.
6. Confidential Information. (a) All information regarding this Agreement, the parties' business and their subsidiaries and affiliates, any documents exchanged between the parties in connection with the Services, as well as all technology, know-how, financial models, model documentation, processes, trade secrets, contracts, proprietary information, historical or projected financial information, organizational or operating data, strategic or management plans, and customer information or lists, whether received before or after the date hereof ("Confidential Information"), shall be kept in confidence by each of the parties hereto and not disclosed to any third party, other than disclosures to third parties in the ordinary course of business (e.g., contractors and data vendors), subject to the requirement that such third parties be bound by confidentiality obligations substantially equivalent to the terms of this Agreement. Notwithstanding the foregoing and use of industry standard security measures, neither party can guarantee to the other the security or integrity of information accessible through the Internet against improper or unauthorized access.
(b) The parties' obligations concerning Confidential Information shall survive
termination or expiration of this Agreement. These confidentiality obligations
shall not apply to information (i) lawfully in the public domain, (ii) lawfully
possessed by the recipient before disclosure by the other parry, (iii) lawfully
disclosed to a party by a third party without obligation of confidentiality, or
(iv) independently developed by a party without reference to the other party's
Confidential Information. (v) If any disclosure is compelled by a court or other
competent authority, the compelled party shall make reasonable efforts to allow
the disclosing party to oppose and/or limit such disclosure. Disclosures
described in (v) shall not be deemed a violation of this Section 6.
(c) Client may provide to BlackRock suggestions, comments, or other feedback ("Feedback") with
respect to Confidential Information and/or the Services. Client agrees that all Feedback is and shall be given entirely voluntarily. Except pursuant to a subsequent written agreement between the parties, BlackRock shall be free to use, disclose, reproduce, license, or otherwise distribute and exploit Feedback provided to it, without obligation or restriction of any kind on account of intellectual property rights or otherwise.
(d) BlackRock shall be permitted to include Client on its list of clients and BlackRock may describe the general nature of its work for Client under this Agreement.
7. Limitations on Liability; Indemnity. (a) BlackRock shall not be liable for any incidental, consequential, special, exemplary, or indirect damages. Except with respect to indemnified claims (as set forth below in subsection (b)(i)), in no case shall BlackRock's liability, in the aggregate, exceed the fees payable by Client to BlackRock during the six-month period immediately preceding the event giving rise to the liability.
(b) (i) BlackRock shall defend and indemnify Client against all losses, damages, expenses (including reasonable attorney's fees), and claims ("Losses") arising out of BlackRock's breach of its obligations under Sections 3(c) and 6; and (ii) Client shall defend and indemnify BlackRock against all Losses arising out of Client's breach of its obligations under Sections 1(e), 2(c), and 6, and Client further agrees to reimburse BlackRock for all out-of-pocket expenses (as noted above) incurred by BlackRock in connection with investigating, preparing for or defending any action or claim, whether in connection with pending or threatened litigation to which BlackRock is a party, in each case, as such expenses are incurred or paid. Client, however, will not be responsible for any Losses that are finally judicially determined by a court of competent jurisdiction to have resulted from the gross negligence, fraud, or illegal acts of BlackRock.
8. Term. (a) The initial term of this Agreement will begin on the Effective Date and will expire on the 36-month anniversary of the availability to Client of the first Reports Package. Thereafter, this Agreement will renew for 12-month terms unless either party provides written notice to the other party of its desire to avoid automatic renewal at least 90 days in advance.
(b) Either party shall have the right to terminate this Agreement before its expiration date if the other party commits a material breach of its obligations that remains uncured more than 30 days after a written notice specifying in detail the nature of such breach. In the event that any third parties upon whom BlackRock relies in the provision of the Accounting Services are no longer able or willing to provide the requisite services to BlackRock or will only provide such services on commercially unreasonable terms, then BlackRock will use commercially reasonable efforts to provide alternatives to such services. If BlackRock is unable to provide alternatives to any such terminated services, then it may terminate the Accounting Services without penalty upon notice to Client.
9. Applicable Law. (a) This Agreement shall be governed by the laws of the state of New York without regard to its conflicts of laws principles. The parties agree that all disputes arising under this Agreement shall be resolved in the state or federal courts in New York County, New York. Each party consents to jurisdiction and venue in such courts. The prevailing party in any dispute arising under this Agreement shall be entitled to payment of its reasonable attorney's fees by the other party.
(b) Each party acknowledges that certain breaches by it of its obligations hereunder (such as under Sections 1(e) and 6) may cause irreparable harm to the other party, and that the aggrieved party shall be entitled in any such case to seek injunctive or similar relief without the posting of any bond or security.
10. Assignment. Client may not assign this Agreement without BlackRock's written consent, which shall not be unreasonably withheld. Subject to the foregoing, this Agreement shall be for the benefit of and binding upon the parties, their successors and permitted assigns.
11. Auditinq. Client shall have the reasonable right to audit all BlackRock's books and records directly pertaining to the performance of the Accounting Services, and to obtain such copies of such books and records as its auditors may reasonably request in connection with such audit, provided that Client gives reasonable notice of the audit, and reviews the books and records during BlackRock's normal business hours, and promptly reimburses BlackRock for any costs of photocopying such books and records. BlackRock also shall provide to Client on request a copy of its annual "SAS 70" report pertaining to the provision of the Accounting Services.
12. Notices. Any notice given hereunder shall be in writing and delivered by hand, facsimile, or by first class mail, addressed as follows:
IF TO CLIENT:
Ed Noonan Chairman Validus Insurance, Ltd. 48 Par-La-Ville Road, Suite 1790 Hamilton, HM 11 Bermuda Phone: 441-278-9000 Fax: 441-278-9090 IF TO BLACKROCK: WITH A COPY TO: Charles S. Hallac Robert P. Connolly Managing Director Managing Director & General Counsel BlackRock Financial Management, Inc. 40 East 52nd Street New York, NY 10022 Phone: (212) 810-5502 (212) 810-3743 Fax: (212) 180-3330. (212) 810-3744 |
Notices will be deemed given only upon actual receipt.
13. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. No understanding or modification relating hereto shall be valid unless in writing and signed by both parties.
14. Waiver. Waiver by a party of any provision or any breach of any provision of this Agreement shall not be deemed to be a waiver of such provision in any other instance, or of any other breach of any provision hereof.
15. Non-Exclusive Arrangement. Client agrees that BlackRock shall not be restricted from furnishing services similar to the Services, or any other investment management, risk measurement, or advisory services, to others. Client acknowledges that BlackRock, its affiliates, and any officer, director, stockholder, employee, or any member of their families, may have an interest in securities with respect to which Services are performed under this Agreement. If conflicts of interest arise with respect to BlackRock's duties under this Agreement, BlackRock agrees to perform its duties to Client in good faith and shall deal fairly with Client.
16. Severable. Any term or provision of this Agreement that is or may become Invalid or unenforceable in any applicable jurisdiction shall be, as to such jurisdiction, deemed modified so as to allow enforceability of the parties' original intent, as well as of the remaining terms and provisions of the Agreement.
17. Schedules. References to this Agreement shall be deemed to include any schedules, addenda, and exhibits hereto, taken as a whole with the Agreement.
18. Taxes. Client shall pay or reimburse (and be liable to) BlackRock for taxes arising out of this Agreement, including sales, use, or other taxes (except taxes based on BlackRock's net income or corporate status).
19. Construction. Any conflict between the body of this Agreement and the Schedules or attachments hereto that are expressly referenced herein shall be resolved in favor of such Schedules or attachments.
20. Survival. Sections 6, 7, 9, and any other provision that by its terms survives termination, shall survive the expiration or earlier termination of this Agreement.
21. Cooperation. The parties recognize that successful delivery of the Services will require mutual cooperation, communication, feedback, and interaction, including action required hereunder or reasonably requested by the other party to enable it to accomplish its obligations and responsibilities hereunder. Both parties agree to perform the foregoing responsibilities in good faith and in a professional manner that reflects the sophisticated nature of the Services to be provided.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one agreement.
23. Independent Contractor. BlackRock is an independent contractor and is not an agent or employee of Client. BlackRock has no authority to bind Client by contract or otherwise without Client's prior written authorization. The manner of BlackRock's performance of the Services shall be in its sole discretion, subject to the requirement that BlackRock shall at all times comply with applicable law and its obligations hereunder. Client has no right or authority to control the manner or means by which the Services are rendered.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
VALIDUS REINSURANCE LTD. BLACKROCK FINANCIAL MANAGEMENT, INC. By: By: --------------------------------- ------------------------------------ Name: Name: ------------------------------- ---------------------------------- Title: Title: ------------------------------ --------------------------------- |
[Exhibit 10.17]
DISCRETIONARY ADVISORY AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 8th day of December, 2005 between GOLDMAN SACHS ASSET MANAGEMENT, L.P., a limited partnership organized under the laws of Delaware (the "Adviser") and Validus Reinsurance, Ltd (the "Client").
WHEREAS, the Adviser and Goldman Sachs Asset Management
International, Goldman Sachs Asset Management Japan Limited, Goldman Sachs
(Asia) L.L.C., Goldman Sachs (Singapore) Pte., and other advisory affiliates
(collectively, "Affiliate Advisers") of Goldman, Sachs & Co. ("Goldman Sachs")
may, subject to applicable law and contract, provide investment advice to
clients;
WHEREAS, the Client desires to appoint the Adviser as the investment adviser of the portion of the assets of the Client constituting the Account (as defined in Section 4), and the Adviser wishes to accept such appointment;
NOW THEREFORE, in consideration of the mutual agreements herein contained, it is covenanted and agreed as follows;
1. Appointment of Investment Adviser; Acceptance of Appointment. The Adviser is hereby appointed as investment adviser to the Account for the purpose of selecting and executing transactions which are in compliance with the Account's Investment Guidelines (as defined in Section 2) and the Adviser hereby accepts such appointment. In performing its obligations under this Agreement the Adviser may, at its own discretion, delegate any or all of its discretionary investment. advisory and other rights, powers and functions hereunder to any Affiliate Advisers, without further written consent of the Client, provided that the Adviser shall always remain liable to the Client for its obligations hereunder. References herein to the Adviser shall include, except in Section 20 hereof, any of the Affiliate Advisers to which the Adviser delegates responsibilities hereunder.
2. Discretion; Management of Account and Powers of Adviser. (a) The Adviser is hereby authorized to supervise and direct the investment and reinvestment of assets in the Account, with full authority and at its discretion (without reference to the Client), on the Clients behalf and at the Client's risk, subject to the written investment restrictions and guidelines (the "Investment Guidelines") in respect of one or more sub-accounts and attached hereto as Appendix A. An investment's compliance with the Investment Guidelines shall be determined on the date of purchase only, based upon the price and characteristics of the investment on the date of purchase compared to the value of the Account as of the most recent valuation date; the Investment Guidelines shall not be deemed breached as a result of changes in value or status of an investment following purchase. The Adviser's authority and discretion hereunder shall include, without limitation, the power to buy, sell, retain and exchange investments and affect transactions; and other powers as the Adviser deems appropriate in relation to investing and executing transactions for the Account. The Client hereby authorizes the
Adviser to open accounts and execute documents, indemnities and representation letters in the name of, binding against and on behalf of the Client for all purposes necessary or desirable in the Adviser's view to effectuate the Adviser's activities under this Agreement.
(b) The Client may from time to time amend the Investment Guidelines. The Adviser will not be bound to follow any amendment to the Investment Guidelines, however, until it has received actual written notice of the amendment from the Client and has agreed to accept such amendment. All transactions effected for the Account will be deemed to be in compliance with the Investment Guidelines unless written notice to the contrary is received by the Adviser from the Client within 30 days following the first issue of the periodic report containing such transactions.
(c) The Adviser may in its sole discretion invest the Account in any investment company, unit trust or other collective investment fund, registered or non-registered, for which the Adviser or any of its affiliates serves as investment adviser ("Affiliated Fund"); provided, however, that the purposes of such investment are limited management of short-term cash balances in the Account. The Adviser will make such investments only if in its reasonable view the Affiliated Fund is, based on yield, safety, charges, nature of investment program, liquidity and other relevant factors, an equivalent investment to competing investments. In connection with investments in Affiliated Fund(s), the Client will pay its share of all fees, expenses and 12b-1 fees (if any) associated with investing in such Affiliated Fund(s); provided, that the Adviser agrees to waive the advisory fee payable by the Client hereunder for those Account assets invested from time to time in Affiliated Funds. The Client may revoke its consent to investment in Affiliated Funds at any time by written notice to the Adviser.
3. Portfolio Transactions. (a) The Adviser will place orders for the execution of transactions for the Account in accordance with Part II of the Adviser's Form ADV as may be amended from time to time. Best price, giving effect to commissions and commission equivalents, if any, and other transaction costs, is normally an important factor in this decision, but the selection also takes into account the quality of brokerage services, including such factors as execution capability, willingness to commit capital, creditworthiness and financial stability, and clearance and settlement capability, and the provisions of research and other services. Accordingly, transactions will not always be executed at the lowest available price or commission. The Adviser may select a broker-dealer that furnishes the Adviser directly or through correspondent relationships with third party research or other services which provide in the Adviser's view appropriate assistance to the Adviser in the investment decision-making process (including with respect to futures, fixed-price offerings and over-the-counter transactions, if such instruments are permitted by the Investment Guidelines). Such research or other services may include research reports on companies, industries, and securities; economic and financial data; financial publications; computer data bases; quotation equipment and services; and research-oriented computer hardware, software and other services. These selections, and the total amount of commissions given a particular broker-dealer, may be made pursuant to an agreement that would bind the Adviser to compensate the selected broker-dealer for the services provided. Research and other services obtained in this manner may be used in servicing any or all of the Adviser's clients and may be used in connection with accounts other than those that pay commissions to the broker-dealer relating to the research or
other service arrangements. The Adviser may endeavor to direct sufficient commissions to broker-dealers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services the Adviser believes is useful in its investment decision-making process.
(b) The Client authorizes the Adviser, at the Adviser's discretion, to bunch or aggregate orders for the Account with orders of other Clients and to allocate the aggregate amount of the investment among accounts (including accounts in which the Adviser, its affiliates and/or their personnel have beneficial interests) in the manner in which the Adviser shall determine appropriate and may, in accordance with applicable laws or rules of any exchange or regulatory or self-regulatory organization, when placing orders with Goldman Sachs or with unaffiliated brokers, give permission for Goldman Sachs or such other brokers to trade along with or ahead of the Client order. When portfolio decisions are made on an aggregated basis, the Adviser may in its discretion, place a large order to purchase or sell a particular security for the Account and the accounts of several other clients. Because of the prevailing trading activity, it is frequently not possible to receive the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged and the Account will be charged or credited with the average price; and the effect of the aggregation may operate on some occasions to the Clients disadvantage. Although in such an instance the Client will be charged the average price, the Adviser will make the information regarding the actual transactions available to the Client upon the Client's request. Neither the Adviser nor its affiliates, however, are required to bunch or aggregate orders.
(c) Subject to the Adviser's execution obligations described in
Section 3(a), the Adviser is hereby authorized to execute so much or all of the
transactions for the Account with or through Goldman Sachs or any of Goldman
Sachs' affiliates, as agent or as principal, as the Adviser in its sole
discretion shall determine, and may execute transactions in which the Adviser,
its affiliates and/or their personnel have interests as described in Section 15
hereof. In all such dealings, Goldman Sachs and any of its affiliates shall be
authorized and entitled to retain any commissions, remuneration or profits which
may be made in such transactions and shall not be liable to account for the same
to the Client, and the Adviser's fees as set forth in Section 14 shall not be
abated thereby. The Adviser shall, with respect to transactions subject to
Section 11(a) of the U.S. Securities Exchange Act of 1934, as amended, and Rule
11a2-2(T) thereunder (or any similar rule which may be adopted in the future),
use its best efforts to provide the Client with information annually disclosing
commissions, if any, retained by the Adviser's affiliates in connection with
exchange transactions for the Account. The Adviser and its affiliates are also
authorized to execute agency and other cross transactions (collectively "Cross
transactions") for the Account. Cross transactions are inter-account
transactions which may be effected by the Adviser or its affiliates acting for
both the Account and the counterparty to the transaction. Cross transactions
enable the Adviser to purchase or sell a block of securities for the Account at
a set price and possibly avoid an unfavorable price movement that may be created
through entrance into the market with such purchase or sell order. The Adviser
believes that such transactions can provide meaningful benefits for its clients.
However, the Client should note that the Adviser has a potentially conflicting
division of loyalties and responsibilities regarding both parties to Cross
transactions and that Goldman Sachs, or any of its affiliates, if acting as
broker may receive commissions from both parties to such transactions. The
Client understands that its authority to the Adviser to execute Cross
transactions for the Account is terminable at will without
penalty, effective upon receipt by the Adviser of written notice from the Client, and that the failure to terminate such authorization will result in its continuation.
(d) The Adviser may cause the Client to enter into short-term borrowings to facilitate execution and settlement of transactions in the Account.
4. Account. The "Account" shall initially consist of the cash and other assets of the Client listed in the schedule of assets separately furnished in writing to the Adviser by the Client or otherwise delivered by the Client to its Custodian (as hereinafter defined) and notified to the Adviser for management hereunder, plus all investments, reinvestments and proceeds of the sale thereof, including, without limitation, all interest, dividends and appreciation on investments, less depreciation thereof and withdrawals therefrom, and at the Client's direction may be comprised of one or more sub-accounts (each a "Sub-Account") subject to different Investment Guidelines attached hereto as Exhibit A and which may be subject to different fees as set forth in Appendix B. To the extent that the Account is comprised of two or more Sub-Accounts, the Client acknowledges that the amount of Client assets to be included and managed in each Sub-Account and the Investment Guidelines applicable thereto, have been prescribed by the Client. The Adviser has no responsibility, unless otherwise expressly provided in the Investment Guidelines, to allocate assets from one Sub-Account to another or advise the Client regarding any such allocation from time to time. Cash and other assets may, at the Adviser's discretion, be deemed part of the Account and the Client shall be responsible for all transactions effected on the basis of such assumption, beginning before immediately available funds (in the case of cash) and Client ownership (in the case of securities) are received by the Custodian (as defined below) in its account for the Client. The Client consents and acknowledges that securities issued by The Goldman Sachs Group, Inc. or any of its affiliates ("GS Securities") received as original or additional assets of the account will be sold as soon as practical, unless Client directs the Adviser to retain the GS Securities by executing the Retention Letter, attached hereto, prior to funding date. Furthermore, Client acknowledges that it is the policy of the Adviser not to give advice with respect to the purchase, sale, retention or voting of GS Securities. The Client shall give reasonable written notice to the Adviser of additions to, or withdrawals from, the Account.
5. Custody. The cash and assets of the Account shall be held by a custodian (the "Custodian") appointed by the Client pursuant to a separate custody agreement or by the Client itself. The Adviser and its affiliates shall at no time have custody or physical control of the assets and cash in the Account. The Adviser shall not be liable for any act or omission of the Custodian. The Client shall instruct the Custodian to act, within the limits of the Adviser's authority hereunder, in accordance with instructions from the Adviser and shall deposit security within the limits provided hereunder as directed by the Adviser. The Client shall instruct the Custodian to provide the Adviser with such periodic reports concerning the status of the Account as the Adviser may reasonably request from time to time. The Client will not change the Custodian without giving the Adviser reasonable prior written notice of its intention to do so together with the name and other relevant information with respect to the new Custodian. The Client authorizes and directs the Custodian to debit its custodial account maintained for Client for all remuneration and expenses payable hereunder. In such a case, the Adviser will send a statement to the Custodian indicating the amount of the fee to be paid to the Adviser hereunder. The Client agrees that if the Custodian does not determine whether the Adviser's fee is properly calculated, it will be the Client's responsibility to undertake such verification. The Client will arrange for
the Custodian to send to the Client, no less than quarterly, a statement showing all amounts disbursed from the Client's Custodian account to the Adviser.
6. Representations and Warranties of the Adviser. The Adviser hereby represents and warrants to, and agrees with, the Client that this Agreement has been duly authorized, executed and delivered by the Adviser and constitutes its legal, valid and binding obligation and that the Adviser is registered under the U.S. investment Advisers Act of 1940 as an "investment adviser."
7. Representations and Warranties; Certain Agreements of the Client.
(a) The Client hereby represents and warrants to, and agrees with, the Adviser
that (i) the Client is the sole beneficial owner of all assets in the Account
and that no restrictions exist on the transfer, sale or other disposition of any
of those assets and no option, lien, charge, security or encumbrance exists or
will, due to any act or omission of the Client, exist over any of the said
assets; (ii) this Agreement has been duly authorized, executed and delivered by
the Client and constitutes the Client's legal, valid and binding obligation and,
without limitation, all transactions in securities, futures, options, forwards
and other instruments and obligations of any kind relating thereto authorized by
the Client in the Investment Guidelines (collectively, "Obligations") are within
the Client's power, are duly authorized by the Client and, when duly entered
into with a counterparty, will be the legal, valid and binding Obligations of
the Client; (iii) the Client is not an officer, director or controlling person
of any corporation whose securities fall within the Investment Guidelines except
as may be set forth in writing by the Client to the Adviser as an addendum
hereto; (iv) without limitation, the transactions and agreements which the
Adviser enters on behalf of the Client with a counterparty pursuant to this
Agreement will not violate the constituent documents of, or any law, rule,
regulation, order, decree or judgment binding on the Client, or any contractual
restriction binding on or affecting the Client or its properties and no
governmental or other notice or consent b required in connection with the
execution, delivery or performance of this Agreement by the Client or of any
agreements governing or relating to Obligations; (v) the Client shall have full
responsibility for payment of all taxes due on capital or income halt or
collected for the Account; (vi) the Client will not deal or authorize anyone
other than the Adviser to deal with the Account; (vii) the Client is not
required to be registered as an Investment company under the Investment Company
Act of 1940; (viii) the Client has independently examined and understands the
tax, legal and accounting consequences related to the Account and the
transactions permitted under the Investment Guidelines; (ix) the Client is an
"accredited investor" as defined in Regulation D and a "Qualified Institutional
Buyer" as defined in Rule 144A under the U.S. Securities Act of 1933; (x) the
Client is not a commodity pool and the Client and any person with trading
authority over the Client's accounts is not required to be registered as a
Commodity Pool Operator under the Commodity Exchange Act (the "Act") or has
reviewed the registration requirements of the Commodity Exchange Act, as
amended, and the National Futures Association pertinent to commodity pool
operators and has determined that the Client is in compliance with such
requirements; and (xi) the Client is a "Qualified Eligible Person" as defined
under Commodity Futures Trading Commission ("CFTC") Regulation 4.7, it consents
to its account being an "exempt account" for purposes of such Regulation and it
acknowledges that it has not been furnished with a disclosure document prepared
in accordance with CFTC Regulation 4.31 because no such document is required
pursuant to CFTC Regulation 4.7. In addition, the Client acknowledges receipt of
Part II of GSAM's Form ADV at least 48
hours prior to entering into this Agreement and, to the extent that options are approved Investments for the Account, the Client also acknowledges receipt of the Characteristics and Risks of Standardized Options booklet. Furthermore, the Client agrees to inform the Adviser promptly in writing if any representation, warranty or agreement made by the Client in this Agreement is no longer true, correct or complete or requires exception and/or modification to remain true.
8. Limitation of Liability; Indemnification. (a) To the extent permitted by law, the Adviser shall not be liable for any expenses, losses, damages, liabilities, demands, charges and claims of any kind or nature whatsoever (including without limitation any legal expenses and boats and expenses relating to investigating or defending any demands, charges and claims) (collectively "Losses") by or with respect to the Account, except to the extent that such Losses are actual losses of the Client proven with reasonable certainly, are not speculative, are proven to have been fairly within the contemplation of the parties as of the date hereof, and are the direct result of an act or omission taken or omitted by the Adviser during the term of this Agreement which constitutes gross negligence or willful misconduct under the Agreement, and without limiting the generality of the foregoing, the Adviser will not be liable for any indirect, special, incidental or consequential damages or other losses (regardless of whether such damages or other losses were reasonably foreseeable). Without limitation, the Adviser shall not be liable for Losses resulting from or in any way arising out of (i) any action of the Client or its previous advisers or its Custodian or other agents, following any direction of the Client or the Adviser's failure to follow any unlawful or unreasonable direction of the Client, (ii) force majeure or other events beyond the control of the Adviser, including without limitation any failure, default or delay in performance resulting from computer or other electronic or mechanical equipment failure, unauthorized access, strikes, failure of common carrier or utility systems, severe weather or breakdown in communications not reasonably within the control of the Adviser or other causes commonly known as "acts of god", whether or not any such cause was reasonably foreseeable, or (iii) general market conditions unrelated to any violation of this Agreement by the Adviser. The Adviser gives no warranty as to the performance or profitability of the Account or any part thereof, nor any guarantee that the investment objectives, expectations or targets described in this Agreement and/or in the Investment Guidelines or any Client Policy Statements will be achieved, including without limitation any risk control, risk management or return objectives, expectations or targets. The Account may suffer lose of principal, and income, if any, may fluctuate. The value of Account investments may be affected by a variety of factors, including, but not limited to, economic and political developments, interest rates and issuer-specific evens, market conditions, sector positioning, and other factors. The Adviser shall not be responsible for the performance by any person not affiliated with the Adviser of such person's commercial obligations in executing, completing or satisfying such person's obligations. The Adviser shall not be responsible for any Losses incurred after termination of the Account. The Adviser shall have no responsibility whatsoever for the management of any other assets of the Client and shall incur no liability for any Losses which may result from the management of such other assets. U.S. federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith; nothing herein shall constitute a waiver or limitation of any rights which the Client may have, if any, under any applicable U.S. federal and state securities laws. The rights of the Client under this clause (a) shall be the exclusive remedy of the Client for any breach of the Adviser under this Agreement.
(b) The Client shall reimburse, indemnify and hold harmless the Adviser, its affiliates and their partners, directors, officers and employees and any person controlled by or controlling the Adviser ("indemnities") for, from and against any and all Losses (i) relating to this Agreement or the Account arising out of any misrepresentation or act or omission or alleged act or omission on the part of the Client or previous advisers or the Custodian or any of their agents; or (ii) arising out of or relating to any demand, charge or claim in respect of an indemnitee's acts, omissions, transactions, duties, obligations or responsibilities arising pursuant to this Agreement, unless (y) a court with appropriate jurisdiction shall have determined by a final judgment which is not subject to appeal that such indemnitee is liable in respect of the demands, charges and claims referred to in this subparagraph or (z) such indemnitee shall have settled such demands, charges and claims without the Client's consent.
9. Directions to the Adviser. All directions by or on behalf of the Client to the Adviser shall be in writing signed either by the Client or by an authorized agent of the Client or, if by telephone, confirmed in writing. For this purpose, the term in writing, shall include directions given by facsimile. A list of persons authorized to give instructions to the Adviser hereunder with specimen signatures, is set out in Appendix C to this Agreement. The Client may revise the list of authorized persons from time to time by sending the Adviser a revised list which has been certified either by the Client or by a duty authorized agent of the Client. The Adviser shall incur no liability whatsoever in relying upon any direction from, or document signed by, any person reasonably believed by it to be authorized to give or sign the same, whether or not the authority of such person is then effective. The Adviser shall be under no duty to make any investigation or inquiry as to any statement contained in any writing and may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. Directions given by the Client to the Adviser hereunder shall be effective only upon actual receipt by the Adviser and shall be acknowledged by the Adviser through its actions hereunder only, unless the Client is advised by the Adviser otherwise.
10. Reports. The Adviser shall provide the Client with reports containing the valuations and status of the Account on a quarterly basis, or otherwise as the Client and the Adviser may from time to time agree. Performance reporting shall begin as of the business day one full month following the date on which cash or securities are deemed part of the Account or Sub-Account as provided in Section 4, or on such earlier date in the Adviser's reasonable discretion. Valuation levels for the assets listed in the Account statements will reflect the Adviser's good faith effort to ascertain fair market levels (including accrued income, if any) for the securities and other assets in the Account based on pricing and valuation information believed by the Adviser to be reliable for round lot sizes. These valuation levels may not be realized by the Account upon liquidation. Market conditions and transaction size will affect liquidity and price received upon liquidation. Then current exchange rates will be applied in valuing holdings in foreign currency. The Client agrees that the Adviser is not obligated to send to the Client copies of any trade confirmations it receives.
11. Exercise of Membership Rights; Proxies; Tender Offers: Class Actions. Subject to any other written instructions of the Client or as otherwise stated herein, the Adviser is hereby appointed the Client's agent and attorney-in-fact to exercise in its discretion all rights and perform all duties which may be exercisable in relation to any assets held or that were held in the Account with respect to the right to vote (or in its discretion, refrain from voting), tender,
exchange, endorse, transfer. or deliver any securities in the Account, to participate in or consent to any distribution, plan of reorganization, creditors committee, merger, combination, consolidation, liquidation, underwriting, or similar plan with reference to such securities; and to execute and bind the Client and Account in waivers, consents, covenants and indemnification related thereto. Notwithstanding the above, the Client or its Custodian, and not the Adviser, shall make any and all filings in connection with any securities litigation or class action lawsuits involving securities held or that were held in the Account. Except as may be explicitly provided by applicable law, the Adviser shall not incur any liability to the Client by reason of any exercise of, or failure to exercise, any such discretion and shall not incur any liability for any failure arising from an act or omission of a person other than the Adviser. The Client understands that the Adviser establishes from time to time guidelines for the voting of proxies and may employ the services of a proxy voting service to exercise proxies in accordance with the Adviser's guidelines. The Adviser is authorized to hire at the Client's expense any agents (including attorneys) the Adviser deems appropriate in connection with and in order to provide services related to matters set forth in this paragraph and the Client agrees to pay for such agents in addition to the fees set forth in this Agreement.
12. Non-Assignability. No assignment (as such term is defined under the U.S. Investment Advisers Act of 1940) of this Agreement may be made by either party to the Agreement except with the written consent of the other party. The Client will be notified by the Adviser of a change in general partners of the Adviser within a reasonable time thereafter.
13. Confidential Information. (a) The Adviser and the Client each
agree not to disclose each other's name to the public or to use each others name
without the prior written approval of the other party except that the Client
hereby consents to the disclosure by the Adviser of the Client's name to (i)
brokers and dealers (including any futures brokers and futures commission
merchants if futures are permitted by the Investment Guidelines) whether
executing or clearing to effectuate the Adviser's trading activities on behalf
of the Client, (ii) consultants in connection with the completion of
questionnaires and informational surveys, and (iii) prospective clients of the
Adviser as part of a representative client list. The Client agrees and
acknowledges that confidential information and advice furnished by the Adviser
to the Client (including without limitation information evidencing the Adviser's
expertise, investment strategies or trading activities) has been developed by
the Adviser through the application of methods and standards of judgment and
through the expenditure of considerable work, time and money and is the
exclusive and proprietary intellectual property of the Adviser which (i) shall
be treated as confidential by the Client, (ii) shall not be used by the Client
as the basis for effecting transactions in any accounts other than the Account,
(iii) shall not be used for any purpose other than Client's, or Client's
consultant's, analysis of the performance of the Adviser, and (iv) shall not be
disclosed, directly or indirectly, to third parties by the Client except (in the
case of (i) through (iv)) with the prior written consent of the Adviser or as
required by law. Notwithstanding the above, confidential information may be
disclosed if (i) requested by or through, or related to a judicial,
administrative, governmental or self-regulatory organization process,
investigation, inquiry or proceeding, or is otherwise legally required, (ii)
required in order for each party to carry out its responsibilities hereunder, or
(iii) permitted upon the prior written consent of the other party.
(b) Notwithstanding anything herein to the contrary, the Client (and each of the Client's employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of any transaction or potential transaction in the Client's Account and all materials of any kind (including opinions or other tax analyses) that are provided to the Client relating to such tax treatment and tax structure. However, any information relating to the tax treatment or tax structure shall remain subject to the confidentiality provisions hereof (and the foregoing sentence shall not apply) to the extent reasonably necessary to enable the parties hereto, their respective affiliates, and their respective affiliates' directors and employees to comply with applicable securities laws. For this purpose, "tax structure" means any facts relevant to the federal income tax treatment of any such transaction or potential transaction but does not include information relating to the identity of the issuer of any securities bought, sold or transferred in any such transaction, or to be bought, sold or transferred in any such potential transaction, the issuer of any assets underlying any such securities, or any of their respective affiliates that are offering any such securities.
14. Remuneration; Expenses. For its discretionary advisory services
hereunder, the Adviser shall be entitled to the fees and terms of payment as set
forth in Appendix B to this Agreement. The Adviser may, at its discretion, make
payments out of such fees to any affiliate from which the Adviser obtains
assistance. Furthermore, the Client acknowledges and agrees that, if Client has
been referred to the Adviser by an employee of the Adviser or any of its
affiliates, the Adviser may, at its discretion, make payments out of such fees
directly or indirectly to said employee, and that such persons may also receive
commissions or commission equivalents related to brokerage transactions effected
by Goldman, Sachs & Co. and its affiliates as compensation for such referral or
for services provided to the Client in relation to the Account. Custodial fees,
if any, are charged separately by the Custodian for the Account and are not
included in Appendix B unless specifically set forth therein. The Client shall
be responsible for payment of brokerage commissions, transfer fees, registration
costs, taxes and other similar costs and transaction-related expenses and fees
arising out of transactions in the Account as well as any expenses described in
Section 11, and the Client hereby authorizes the Adviser to incur such expenses
for the Account.
15. Services to Other Clients; Certain Affiliated Activities. (a) The relationship between the Adviser and the Client is as described in this Agreement and permits, expressly as set forth herein, the Adviser and its affiliates to act in multiple capacities (i.e., act as principal or agent in addition to acting on behalf of Client), and, subject only to the Adviser's execution obligations set forth in Section 3 hereof, to effect transactions with or for the Account in instances in which the Adviser and its affiliates may have multiple interests. In this regard the Client understands that the Adviser is part of a worldwide, full-service investment banking, broker-dealer, asset management organization, and as such, the Adviser and its affiliates (the "Firm") and their managing directors, directors, officers and employees ("Personnel") may have multiple advisory, transactional and financial and other interests in securities, instruments and companies that may be purchased, sold or held by the Adviser for the Account. The Firm may act as adviser to clients in investment banking, financial advisory, asset management and other capacities in advisory or other assignments of all types including those related to instruments that may be purchased, sold or held in the Account and the Firm may issue, or be engaged as underwriter for the issuer of, instruments that the Account may purchase,
sell or hold. At times, these activities may cause departments of the Firm to give advice to clients that may cause these clients to take actions adverse to the interests of the Client. The Firm and Personnel may act in a proprietary capacity with long or short positions, in instruments of all types, including those that the Account may purchase, sell, or hold. Such activities could affect the prices and availability of the securities and instruments that the Adviser seeks to buy or sell for the Account, which could adversely impact the performance of the Account. Personnel may serve as directors of companies the securities of which the Account may purchase, sell, or hold. The Firm and Personnel may give advice, and take action, with respect to any of the Firm's clients or proprietary accounts that may differ from the advice given, or may involve a different timing or nature of action taken, than with respect to any one or all of the Adviser's advisory accounts, and effect transactions for such clients or proprietary accounts at prices or rates that may be more or less favorable than for the Account. The Firm and Personnel may obtain and keep any profits, commissions and fees accruing to them in connection with their activities as agent or principal in transactions for the Account and other activities for themselves and other clients and their own accounts and the Adviser's fees as set forth in this Agreement shall not be abated thereby.
(b) The Client understands that the ability of the Adviser and its affiliates to effect and/or recommend transactions may be restricted by applicable regulatory requirements in the United States, United Kingdom or elsewhere and/or their internal policies designed to comply with such requirements. As a result, there may be periods when the Adviser will not initiate or recommend certain types of transactions in certain investments when the Adviser or its affiliates are performing investment banking or other services or when aggregated position limits have been reached and the Client will not be advised of that fact. Without limitation, when Goldman Sachs or an affiliate is engaged in an underwriting or other distribution of securities of a company, the Adviser may in certain circumstances be prohibited from purchasing or recommending the purchase of certain securities of that company for its clients. Without limitation, the Adviser and its affiliates may also be prohibited from effecting transactions for the Account with or through its affiliates, from acting as agent for another customer as well as the Client in respect of a particular transaction, or from acting as the counterparty on a transaction with the Client. If not prohibited, the Adviser is nonetheless not required to effect transactions for the Account with or through its affiliates and other clients or in instances in which the Adviser or its affiliates have multiple interests.
(c) The Client should be aware that from time to time at the Adviser's discretion, advisory Personnel may consult with Personnel in proprietary trading or other areas of the Firm or form investment policy committees comprised of such Firm Personnel, and the performance of Firm Personnel obligations related to their consultation with the Adviser could conflict with their areas of primary responsibility within the Firm. In connection with their activities with the Adviser, such Firm Personnel may receive information regarding the Adviser's proposed investment activities which is not generally available to the public. However, there will be no obligation on the part of such Firm Personnel to make available for use by advisory accounts any information or strategies known to them or developed in connection with their client, proprietary or other activities. In addition, the Firm will be under no obligation to make available any research or analysis prior to its public dissemination. Furthermore, the Firm shall have no obligation to recommend for purchase or sale by advisory accounts any security that the Firm or Personnel may purchase for themselves or for any other clients. The Firm shall have no obligation
to seek to obtain any material non-public ("inside") information about any issuer of securities, and will not effect transactions for advisory accounts on the basis of any inside information as may come into its possession.
16. Duration and Termination. This Agreement shall continue in full force and effect until terminated in writing as set forth below. The Adviser or the Client may terminate the Agreement at any time upon 30 days' written notice without penalty or other additional payment except that the Client will pay the fees of the Adviser referred to in Section 11 and Section 14 of the Agreement prorated to the date upon which all trades have settled and all positions have been liquidated or otherwise transferred upon order of the Client. Termination of the Adviser's discretionary authority hereunder to supervise and direct the investment and reinvestment of assets in the Account shall be effective immediately upon one party's receipt of written notice of termination from the other party provided that the Client shall honor any trades entered but not settled before the date of any such termination and that, upon such termination, except as the Client may otherwise direct, the Account will be liquidated by the Adviser in an orderly manner. Sections 6, 7, 8,13,14,15,16,17, 18 and 20 shall survive the termination of this Agreement.
17. Notices. (a) Except as otherwise specifically provided herein, all notices shall be deemed duly given when sent in writing to the appropriate party at the addresses appearing at the end of this Agreement for each signatory hereto, or to such other address as shall be notified in writing by that party to the other party from time to time or, if sent by facsimile transmission, upon transmission.
(b) The Client agrees that it will be notified only of trading errors by the Adviser that in the Adviser's reasonable view, result in a loss as a result of a direct violation of the Investment Guidelines or fiduciary responsibility but that no other notice of errors is required.
18. Entire Agreement; Amendment, Etc. This Agreement, including the Appendices attached hereto, states the entire agreement of the parties with respect to management of the Account and may not be amended except by a writing signed by the parties. If any provision or any part of a provision of this Agreement shall be found to be void or unenforceable, it shall not affect the remaining part which shall remain in full force and effect. All terms used but not defined in the Appendices shall have the meaning ascribed to herein.
19. Effective Date. (a) This Agreement shall become effective on the day and year first written above.
(b) The Adviser shall commence its discretionary investment management activities, as contemplated under the Agreement, on the later of the date of (i) execution of this Agreement by each of the parties; (ii) either the receipt by the Adviser of confirmation in writing from the Custodian that cleared funds are available to the Adviser for investment on behalf of the Client or that assets initially comprising the Account have been delivered to the Custodian and are available for disposition by the Adviser; or (iii) such other date agreed in writing between the Adviser and the Client.
20. Governing Law. This Agreement shall be governed by, and construed in accordance with the law of New York. The Client acknowledges and agrees however that, to the extent that the Adviser delegates power and authority hereunder to an Affiliate Adviser, the laws and regulations applicable to such Affiliate Adviser's activities will apply to the Affiliate Adviser's activities for the Account. Nothing herein shall constitute a waiver or limitation of any rights which the Client may have, if any, under any applicable U.S. federal and state securities laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly appointed agents so as to be effective on the day, month and year first above written.
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Notice Address: Goldman Sachs Asset Management, L.P. 32 Old Slip New York New York 10005 Attention: Chief Executive Officer Fax: 212-346-3213 |
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE CFTC. THE CFTC DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE CFTC HAS NOT REVIEWED OR APPROVED THE TRADING PROGRAM ADOPTED HEREUNDER OR ANY BROCHURE OR ACCOUNT DOCUMENT.
[CLIENT]
Mailing Address:
Suite 1790
48 Par-la-Ville Road
Hamilton, HM 11, Bermuda
[Exhibit 10.19]
[Form for Employees Without Garden Leave Forms of Employment Agreement]
VALIDUS HOLDINGS, LTD.
RESTRICTED SHARE AGREEMENT
THIS AGREEMENT, dated as of ___________, 2006, between Validus Holdings, Ltd. (the "Company"), a Bermuda corporation, and _______________ (the "Employee").
WHEREAS, the Employee has been granted the following award under the Company's 2005 Long Term Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.
1. Award of Shares. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded ______________ Restricted Shares (the "Award"), subject to the terms and conditions of the Plan and those herein set forth. The Award is granted as of _____________, 2006. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.
2. Terms and Conditions. It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:
(a) Vesting of Award. Subject to the provisions of this Section 2
below and the other terms and conditions of this Agreement, this Award shall
become vested 100% on _____________. All dividends and other amounts receivable
in connection with any adjustments to the Shares under Section 4(b) of the Plan
shall be subject to the vesting schedule herein and shall be paid to the
Employee upon any vesting of the Restricted Shares hereunder in respect of which
such dividends or other amounts are payable. Except as otherwise provided in
Section 2 (b) below, any portion of the Award that is not vested on the date of
Termination of Service of the Employee for any reason shall be forfeited by the
Employee and become the property of the Company.
(b) Change in Control. Notwithstanding any provision of this Agreement to the contrary, if, within two years following a Change in Control, the Employee's employment is terminated by the Company not for Cause, the Award shall become immediately vested in full upon such termination of employment. For purposes of this Agreement, "Change in Control" shall have the meaning set forth in the Plan. For purposes of this Agreement, "Cause" means (a) theft or embezzlement by the Employee with respect to the Company or its Affiliates; (b) malfeasance or gross negligence in the performance of the Employee's duties; (c) the commission by the Employee of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Employee (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Affiliates) or failure,
neglect or refusal by the Employee to perform his or her duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Employee to adequately perform his or her duties and responsibilities without the same being corrected within thirty (30) days after being given written notice thereof, as determined by the Company in good faith; (f) continued and habitual use of alcohol by the Employee to an extent which materially impairs the Employee's performance of his or her duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Employee's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; or (h) the Employee's failure to use his or her best efforts to obtain, maintain or renew any required work permit in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof.
(c) Certificates. Each certificate or other evidence of ownership issued in respect of Restricted Shares awarded hereunder shall be deposited with the Company, or its designee, together with, if requested by the Company, a stock power executed in blank by the Employee, and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the "Restrictive Legend"). Upon the vesting of Restricted Shares pursuant to Section 2 hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing such vested Shares, not bearing the Restrictive Legend (but still bearing the legend set forth in Section 7(d) below), shall be delivered to the Employee or other evidence of vested Shares shall be provided to the Employee.
(d) Rights of a Stockholder. Prior to the time a Restricted Share is fully vested hereunder, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share. During such period, the Employee shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.
(e) No Right to Continued Employment. This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee's employment at any time.
3. Transfer of Shares. Any vested Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, the provisions of this Agreement, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.
4. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of Shares.
5. Withholding. No later than the date of vesting of (or the date of an election by the Employee under Section 83(b) of the Code with respect to) the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time.
6. Market Stand Off Period. The Employee covenants and agrees that he or she shall not, without the prior written consent of the Company, sell or otherwise dispose of any shares of stock of the Company during such period (a "Market Stand Off Period") as the Company or its underwriters shall establish in connection with the filing of a registration statement in connection with an initial public offering of the stock of the Company (an "Initial Public Offering").
7. Purchase Option. The Employee's Shares are subject to repurchase as provided below in subsections (a) through (g) below:
(a) If the Employee's active service with the Company or a Subsidiary is terminated by the Employee or by the Company for Cause, the Company and/or its designee(s) shall have the option (the "Purchase Option") to purchase, and if the Purchase Option is exercised, the Grantor (as defined below) shall sell to the Company and/or its assignee(s), all or any portion (at the Company's option) of the Shares held by the Grantor (such Shares collectively being referred to as the "Purchasable Shares").
(b) The Company shall give notice in writing to the Grantor of the exercise of the Purchase Option within one (1) year after the date of Termination of Service of the Employee. Such notice shall state the number of Purchasable Shares to be purchased by the Company and the determination of the purchase price of such Purchasable Shares. If no notice is given within the time limit specified above, the Purchase Option shall be deemed to have terminated.
(c) The purchase price to be paid for the Purchasable Shares purchased pursuant to the Purchase Option shall be the Book Value (as defined below) per share as of the date of the notice of exercise of the Purchase Option times the number of Shares being purchased. The purchase price for the Purchasable Shares shall be paid in cash or by wire transfer of immediately available funds. The closing of such purchase shall take place at the Company's principal executive offices within ten (10) days after the purchase price has been determined. At such closing, the Grantor shall deliver to the purchaser(s) the certificates or instruments evidencing the Purchasable Shares being purchased, duly endorsed (or accompanied by duly executed stock powers) and otherwise in good form for delivery, against payment of the purchase price by check of the purchaser(s). In the event that, notwithstanding the foregoing, the Grantor shall have failed to obtain the release of any pledge or other encumbrance on any Purchasable Shares by the scheduled closing date, at the option of the purchaser(s) the closing
shall nevertheless occur on such scheduled closing date, with the cash purchase price being reduced to the extent of, and paid to the holder of, all unpaid indebtedness for which such Purchasable Shares are then pledged or encumbered.
(d) To ensure the enforceability of the Company's rights hereunder, each certificate or instrument representing Shares shall bear a conspicuous legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 2005 LONG TERM INCENTIVE PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH LONG TERM INCENTIVE PLAN AND STOCK OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."
(e) The Company's rights under this Section 7 shall terminate upon the consummation of an Initial Public Offering.
(f) "Book Value" shall mean the book value of a Share at the end of the fiscal quarter in which the termination of active service occurs, as determined on a fully diluted basis by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
(g) "Grantor" shall mean, collectively, the Employee, the Employee's assignee, the executor or the administrator of the Employee's estate in the event of the Employee's death, and the Employee's legal representative in the event of the Employee's incapacity.
8. Forfeiture Upon Breach of Certain Other Agreements. The Employee's breach of any noncompete, nondisclosure, nonsolicitation, assignment of inventions, or other intellectual property agreement that he may be a party to with the Company or a Subsidiary, in addition to whatever other equitable relief or monetary damages that the Company or a Subsidiary may be entitled to, shall result in automatic rescission, forfeiture, cancellation, and return of any Shares (whether or not otherwise vested) held by the Employee or Grantor, and all profits, proceeds, gains, or other consideration received through the sale or other transfer of the Shares shall be promptly returned and repaid to the Company.
9. Shareholders' Agreement. If any Restricted Shares are scheduled to vest hereunder at a time when the Company is not a publicly-traded entity and the Employee is not a party to the Shareholders' Agreement by and among the Company and its shareholders, as the same may be amended from time to time (the "Shareholders' Agreement"), the Employee shall, as a condition to the Employee's right to have such Restricted Shares vest, become a party to the
Shareholders' Agreement by execution of a joinder agreement in form and substance satisfactory to the Company.
10. References. References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
11. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HMO8 Bermuda
Attn.: Chief Financial Officer
If to the Employee:
At the Employee's most recent address shown on the Company's corporate records, or at any other address which the Employee may specify in a notice delivered to the Company in the manner set forth herein.
12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
13. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
VALIDUS HOLDINGS, LTD.
[Exhibit 10.20]
VALIDUS HOLDINGS, LTD.
RESTRICTED SHARE AGREEMENT
THIS AGREEMENT, dated as of February 4, 2006, between Validus Holdings, Ltd. (the "Company"), a Bermuda corporation, and _______________ (the "Employee").
WHEREAS, the Employee has entered into a written employment agreement with the Company or one of its Subsidiaries (the "Employment Agreement");
WHEREAS, the Employee has been granted the following award under the Company's 2005 Long Term Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.
1. Award of Shares. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded ______________ Restricted Shares (the "Award"), subject to the terms and conditions of the Plan and those herein set forth. The Award is granted as of February 4, 2006. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.
2. Terms and Conditions. It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:
(a) Vesting of Award. Subject to the provisions of this Section 2 below and the other terms and conditions of this Agreement, this Award shall become vested 100% December 12, 2008. All dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(b) of the Plan shall be subject to the vesting schedule herein and shall be paid to the Employee upon any vesting of the Restricted Shares hereunder in respect of which such dividends or other amounts are payable.
(b) Termination Not For Cause or For Good Reason. If the Employment Period (as defined in the Employment Agreement) shall be terminated by the Employee for Good Reason (as defined in the Employment Agreement) or by the Company without Cause (as defined in the Employment Agreement), the Award shall continue to vest through the Date of Termination (as defined in the Employment Agreement). For the avoidance of doubt, Restricted Shares will vest only to the extent a vesting date, as set forth above, occurs on or prior to the Date of Termination. Any portion of the Award that is not vested on the Date of Termination shall be forfeited by the Employee and become the property of the Company.
(c) Resignation Without Good Reason. If the Employment Period shall be terminated as a result of the Employee's resignation or leaving of his employment, other
than for Good Reason, no portion of the Award shall vest on or following the date the Employee provides Notice of Termination (as defined in the Employment Agreement) without Good Reason to the Company (the "Notice Date"). Any portion of the Award that has not vested on the Notice Date shall be forfeited by the Employee and become the property of the Company.
(d) Change in Control. Notwithstanding any provision of this Agreement to the contrary, if, within two years following a Change in Control, the Employee's employment is terminated by the Company not for Cause or by the Employee for Good Reason, the Award shall become immediately vested in full upon such termination of employment. For purposes of this Agreement, "Change in Control" shall have the meaning set forth in the Plan.
(e) Termination of Service; Forfeiture of Unvested Shares. In the event of Termination of Service of the Employee other than as set forth above prior to the date the Award otherwise becomes vested, the unvested portion of the Award shall immediately be forfeited by the Employee and become the property of the Company.
(f) Certificates. Each certificate or other evidence of ownership issued in respect of Restricted Shares awarded hereunder shall be deposited with the Company, or its designee, together with, if requested by the Company, a stock power executed in blank by the Employee, and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the "Restrictive Legend"). Upon the vesting of Restricted Shares pursuant to Section 2 hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing such vested Shares, not bearing the Restrictive Legend (but still bearing the legend set forth in Section 7(d) below), shall be delivered to the Employee or other evidence of vested Shares shall be provided to the Employee.
(g) Rights of a Stockholder. Prior to the time a Restricted Share is fully vested hereunder, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share. During such period, the Employee shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.
(h) No Right to Continued Employment. This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee's employment at any time.
3. Transfer of Shares. Any vested Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, the provisions of this Agreement, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.
4. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of Shares.
5. Withholding. No later than the date of vesting of (or the date of an election by the Employee under Section 83(b) of the Code with respect to) the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time.
6. Market Stand Off Period. The Employee covenants and agrees that he or she shall not, without the prior written consent of the Company, sell or otherwise dispose of any shares of stock of the Company during such period (a "Market Stand Off Period") as the Company or its underwriters shall establish in connection with the filing of a registration statement in connection with an initial public offering of the stock of the Company (an "Initial Public Offering").
7. Purchase Option. The Employee's Shares are subject to repurchase as provided below in subsections (a) through (g) below:
(a) If the Employee's active service with the Company or a Subsidiary is terminated by the Employee other than for Good Reason (such termination of active service shall be treated as occurring on the Notice Date) or by the Company for Cause, the Company and/or its designee(s) shall have the option (the "Purchase Option") to purchase, and if the Purchase Option is exercised, the Grantor (as defined below) shall sell to the Company and/or its assignee(s), all or any portion (at the Company's option) of the Shares held by the Grantor (such Shares collectively being referred to as the "Purchasable Shares").
(b) The Company shall give notice in writing to the Grantor of the exercise of the Purchase Option within one (1) year after the Date of the Termination (as defined in the Employment Agreement) of the Employee's service. Such notice shall state the number of Purchasable Shares to be purchased by the Company and the determination of the purchase price of such Purchasable Shares. If no notice is given within the time limit specified above, the Purchase Option shall be deemed to have terminated.
(c) The purchase price to be paid for the Purchasable Shares purchased pursuant to the Purchase Option shall be the Book Value (as defined below) per share as of the date of the notice of exercise of the Purchase Option times the number of Shares being purchased. The purchase price for the Purchasable Shares shall be paid in cash or by wire transfer of immediately available funds. The closing of such purchase shall take place at the
Company's principal executive offices within ten (10) days after the purchase price has been determined. At such closing, the Grantor shall deliver to the purchaser(s) the certificates or instruments evidencing the Purchasable Shares being purchased, duly endorsed (or accompanied by duly executed stock powers) and otherwise in good form for delivery, against payment of the purchase price by check of the purchaser(s). In the event that, notwithstanding the foregoing, the Grantor shall have failed to obtain the release of any pledge or other encumbrance on any Purchasable Shares by the scheduled closing date, at the option of the purchaser(s) the closing shall nevertheless occur on such scheduled closing date, with the cash purchase price being reduced to the extent of, and paid to the holder of, all unpaid indebtedness for which such Purchasable Shares are then pledged or encumbered.
(d) To ensure the enforceability of the Company's rights hereunder, each certificate or instrument representing Shares shall bear a conspicuous legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 2005 LONG TERM INCENTIVE PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH LONG TERM INCENTIVE PLAN AND STOCK OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."
(e) The Company's rights under this Section 7 shall terminate upon the consummation of an Initial Public Offering.
(f) "Book Value" shall mean the book value of a Share at the end of the fiscal quarter in which the termination of active service occurs (which, in the case of termination by the Employee other than for Good Reason, shall be treated as the Notice Date), as determined on a fully diluted basis by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
(g) "Grantor" shall mean, collectively, the Employee, the Employee's assignee, the executor or the administrator of the Employee's estate in the event of the Employee's death, and the Employee's legal representative in the event of the Employee's incapacity.
8. Forfeiture Upon Breach of Certain Other Agreements. The Employee's breach of any noncompete, nondisclosure, nonsolicitation, assignment of inventions, or other intellectual property agreement that he may be a party to with the Company or a Subsidiary, in addition to whatever other equitable relief or monetary damages that the Company or a Subsidiary may be entitled to, shall result in automatic rescission, forfeiture, cancellation, and return of any Shares (whether or not otherwise vested) held by the Employee or Grantor, and all
profits, proceeds, gains, or other consideration received through the sale or other transfer of the Shares shall be promptly returned and repaid to the Company.
9. Shareholders' Agreement. If any Restricted Shares are scheduled to vest hereunder at a time when the Company is not a publicly-traded entity and the Employee is not a party to the Shareholders' Agreement by and among the Company and its shareholders, as the same may be amended from time to time (the "Shareholders' Agreement"), the Employee shall, as a condition to the Employee's right to have such Restricted Shares vest, become a party to the Shareholders' Agreement by execution of a joinder agreement in form and substance satisfactory to the Company.
10. References. References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
11. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:
If to the Company:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HMO8 Bermuda
Attn.: Chief Financial Officer
If to the Employee:
At the Employee's most recent address shown on the Company's corporate records, or at any other address which the Employee may specify in a notice delivered to the Company in the manner set forth herein.
12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
13. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
VALIDUS HOLDINGS, LTD.
[Exhibit 10.21]
[Form for Employees Without Garden Leave Forms of Employment Agreement]
VALIDUS HOLDINGS, LTD.
STOCK OPTION AGREEMENT
AGREEMENT, made and entered into this ___ day of _________, 2006 by and between Validus Holdings, Ltd. (the "Company"), a Bermuda corporation, and _____________ (the "Option Holder").
WHEREAS, the Option Holder has been designated to participate in the Validus Holdings, Ltd. 2005 Long Term Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the Company and the Option Holder agree as follows:
(a) Grant. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Company hereby grants to the Option Holder the right and option (the "Option") to purchase ___________ Shares. The Option is granted as of _________, 2006, and such grant is subject to the terms and conditions herein and the terms and conditions of the Plan. Such Option is not intended to be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). In the event there is any conflict between the terms of the Plan and this Agreement, the terms of the Plan shall control. Capitalized terms used herein but not defined shall have the meanings given to them in the Plan.
(b) Purchase Price. The purchase price of the Shares subject to the Option shall be equal to $____ per Share.
(c) Term of Option. The Option may be exercised only during the period commencing on the date it vests and becomes exercisable under paragraph (d) below and continuing until the close of business on ________________ (the "Option Period"). The Option Holder's exercise rights during the Option Period shall be subject to limitations as hereinafter provided and shall be subject to sooner termination as provided in paragraph (e) below. At the end of the Option Period or, if earlier, the termination of the period of exercisability as provided in paragraph (e), below, the Option shall terminate.
(d) Exercisability. Except as otherwise provided in paragraph (g) below, the Option shall vest and become exercisable in five equal annual installments, beginning on _________ and continuing on each of the following four anniversaries thereof.
(e) Termination.
(i) (A) Death in Service. In the event of Termination of Service of the Option Holder by reason of the Option Holder's death, the Option Holder's estate or other legal representative shall be entitled to exercise the portion of the Option exercisable at the time of death, if any, determined in accordance with paragraph (d) above, and such portion of the Option shall continue to be exercisable by the estate or other legal representative of the Option Holder during the period ending one (1) year following the date of death (but not beyond the Option Period).
(B) Death After Service. In the event the Option Holder dies after his or her Termination of Service at a time when all or a portion of the Option remains exercisable, the estate or other legal representative of the Option Holder shall be entitled to exercise the portion of the Option that remains exercisable during the period the Option Holder would have been eligible to exercise the Option had the Option Holder not died.
(ii) Termination Due to Disability. In the event of Termination of Service of the Option Holder by reason of the Option Holder's Disability, the Option Holder shall be entitled to exercise the portion of the Option exercisable at the time of such Termination of Service, if any, determined in accordance with paragraph (d) above, and such portion of the Option shall continue to be exercisable by the Option Holder during the period ending one (1) year following the date of Termination of Service (but not beyond the Option Period). "Disability" means those circumstances where the Option Holder is unable to continue to perform the usual customary duties of his or her assigned job for a period of six (6) months in any twelve (12) month period because of physical, mental or emotional incapacity resulting from injury, sickness or disease.
(iii) Termination for Cause. In the event of Termination of
Service of the Option Holder by the Company or its Subsidiaries for Cause, all
rights of the Option Holder to exercise the Option granted to the Option Holder
shall be forfeited immediately and the Option shall terminate. For purposes of
this Agreement, "Cause" means (a) theft or embezzlement by the Option Holder
with respect to the Company or its Affiliates; (b) malfeasance or gross
negligence in the performance of the Option Holder's duties; (c) the commission
by the Option Holder of any felony or any crime involving moral turpitude; (d)
willful or prolonged absence from work by the Option Holder (other than by
reason of disability due to physical or mental illness or at the direction of
the Company or its Affiliates) or failure, neglect or refusal by the Option
Holder to perform his or her duties and responsibilities without the same being
corrected within ten (10) days after being given written notice thereof; (e)
failure by the Option Holder to adequately perform his or her duties and
responsibilities without the same being corrected within thirty (30) days after
being given written notice thereof, as determined by the Company in good faith;
(f) continued and habitual use of alcohol by the Option Holder to an extent
which materially impairs the Option Holder's performance of his or her duties
without the same being corrected within ten (10) days after being given written
notice thereof; (g) the Option Holder's use of illegal drugs without the same
being corrected within ten (10) days after being given written notice thereof;
or (h) the Option Holder's failure to use his or her best efforts to obtain,
maintain or renew any required work permit in a timely manner, without the same
being corrected within ten (10) days after being given written notice thereof.
(iv) Other Termination of Service. In the event of Termination of
Service of the Option Holder for any reason other than as set forth in clauses
(i), (ii) or (iii) above, except as otherwise provided in paragraph (g) below,
no portion of the Option shall vest on or following the date of the Option
Holder's Termination of Service, the Option Holder shall be entitled to exercise
only the portion of the Option exercisable on the date of Termination of
Service, if any, determined in accordance with paragraph (d) above, and such
portion of the Option shall continue to be exercisable by the Option Holder for
ninety (90) days following such Termination of Service (but not beyond the
Option Period).
(v) Forfeiture. That portion of the Option which is unexercisable immediately following the Option Holder's Termination of Service shall be immediately forfeited to the Company.
(f) Exercise of Option. In order to exercise the Option, the Option Holder shall submit to the Company an instrument in writing specifying the number of Shares in respect of which the Option is being exercised, accompanied by payment, in a manner acceptable to the Committee, of the Option Price of the Shares in respect of which the Option is being exercised. Shares shall then be issued by the Company; provided, however, that the Company shall not be obligated to issue any Shares hereunder if the issuance of such Shares would violate the provisions of any applicable law.
(g) Change in Control. Notwithstanding any provision of this Agreement to the contrary, if, within two years following a Change in Control, the Option Holder's employment is terminated by the Company not for Cause, the Option shall become immediately vested and exercisable in full upon such termination of employment. For purposes of this Agreement, "Change in Control" shall have the meaning set forth in the Plan.
(h) No Rights of Shareholder; No Rights of Continued Employment. The Option Holder shall not, by virtue of the Option, be entitled to any rights of a shareholder of the Company until Shares are issued to the Option Holder. The grant of the Option shall not confer on the Option Holder any right with respect to continuance of the Option Holder's service with the Company nor shall such grant interfere in any way with the right of the Company to terminate the Option Holder's service at any time.
(i) Nonassignability. The Option may be assigned or otherwise transferred only in the following circumstances: (i) by will or the laws of descent and distribution; (ii) by valid beneficiary designation taking effect at death made in accordance with procedures established by the Committee; or (iii) by the Option Holder to members of the Option Holder's "immediate family," to a trust established for the exclusive benefit of solely one or more members of the Option Holder's "immediate family" and/or the Option Holder, or to a partnership, limited liability company or other entity under which the only partners, members or equity holders are one or more members of the Option Holder's "immediate family" and/or the Option Holder. Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Option Holder's children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), nieces, nephews, in-laws, and relationships arising because of legal adoption.
(j) Shareholders' Agreement. If this Option is exercised when the Company is not a publicly-traded entity, simultaneous with the exercise of this Option, the Option Holder shall, as a condition to the Option Holder's right to exercise this Option, become a party to the Shareholders' Agreement by and among the Company and its shareholders, as the same may be amended from time to time, by execution of a joinder agreement in form and substance satisfactory to the Company.
(k) Restrictions on Transfer of Shares. Neither the Shares nor any interest in them may be sold, assigned, pledged, hypothecated, encumbered or in any other manner transferred or disposed of, in whole or in part, except in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or other applicable laws or regulations and the terms and conditions hereof.
(l) Market Stand Off Period. The Option Holder covenants and agrees that he or she shall not, without the prior written consent of the Company, sell or otherwise dispose of any shares of stock of the Company during such period (a "Market Stand Off Period") as the Company or its underwriters shall establish in connection with the filing of a registration statement in connection with the initial public offering of the stock of the Company (an "Initial Public Offering").
(m) Purchase Option. The Option Holder's Shares and Options are subject to repurchase as provided below in subsections (i) through (vii) below:
(i) If the Option Holder's active service with the Company or a Subsidiary is terminated by the Option Holder or by the Company for Cause, the Company and/or its designee(s) shall have the option (the "Purchase Option") to purchase, and if the Purchase Option is exercised, the Grantor (as defined below) shall sell to the Company and/or its assignee(s), all or any portion (at the Company's option) of the Shares and/or Options held by the Grantor (such Shares and Options collectively being referred to as the "Purchasable Shares").
(ii) The Company shall give notice in writing to the Grantor of the exercise of the Purchase Option within one (1) year after the date of the Option Holder's Termination of Service. Such notice shall state the number of Purchasable Shares to be purchased by the Company and the determination of the purchase price of such Purchasable Shares. If no notice is given within the time limit specified above, the Purchase Option shall be deemed to have terminated.
(iii) The purchase price to be paid for the Purchasable Shares purchased pursuant to the Purchase Option shall be, in the case of any Shares, the Book Value (as defined below) per share as of the date of the notice of exercise of the Purchase Option times the number of Shares being purchased, and in the case of any Option, the Book Value per share (less the applicable per share Option exercise price) times the number of vested Shares (including by acceleration if applicable) subject to such Option which are being purchased by the Company. The purchase price for the Purchasable Shares shall be paid in cash or by wire transfer of immediately available funds. The closing of such purchase shall take place at the Company's principal executive offices within ten (10) days after the purchase price has been determined. At such closing, the Grantor shall deliver to the purchaser(s) the certificates or instruments evidencing the Purchasable Shares being purchased, duly endorsed (or accompanied by duly executed stock powers) and otherwise in good form for delivery, against payment of the purchase price by check of the purchaser(s). In the event that, notwithstanding the foregoing, the Grantor shall have failed to obtain the release of any pledge or other encumbrance on any Purchasable Shares by the scheduled closing date, at the option of the purchaser(s) the closing shall nevertheless occur on such scheduled closing date, with the cash purchase price being reduced to the extent of, and paid to the holder of, all unpaid indebtedness for which such Purchasable Shares are then pledged or encumbered.
(iv) To ensure the enforceability of the Company's rights hereunder, each certificate or instrument representing Shares or Options shall bear a conspicuous legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE [ISSUABLE PURSUANT TO THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 2005 LONG TERM INCENTIVE PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH LONG TERM INCENTIVE PLAN AND STOCK OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."
(v) The Company's rights under this paragraph (m) shall terminate upon the consummation of an Initial Public Offering.
(vi) "Book Value" shall mean the book value of a Share at the end of the fiscal quarter in which the termination of active service occurs, as determined on a fully diluted basis by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
(vii) "Grantor" shall mean, collectively, the Option Holder, the Option Holder's assignee, the executor or the administrator of the Option Holder's estate in the event of the Option Holder's death, and the Option Holder's legal representative in the event of the Option Holder's incapacity.
(n) Forfeiture Upon Breach of Certain Other Agreements. The Option Holder's breach of any noncompete, nondisclosure, nonsolicitation, assignment of inventions, or other intellectual property agreement that he may be a party to with the Company or a Subsidiary, in addition to whatever other equitable relief or monetary damages that the Company or a Subsidiary may be entitled to, shall result in automatic rescission, forfeiture, cancellation, and return of any Options and Shares (whether or not otherwise vested) held by Optionee or Grantor, and all profits, proceeds, gains, or other consideration received through the sale or other transfer of the Options or Shares shall be promptly returned and repaid to the Company.
(o) Withholding. The Option Holder agrees to make appropriate arrangements with the Company for satisfaction of any applicable tax withholding requirements, or similar requirements, arising out of this Agreement.
(p) References. References herein to rights and obligations of the Option Holder shall apply where appropriate, to the Option Holder's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
(q) Notice. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process given notice of:
If to the Company:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HMO8 Bermuda
Attention: Chief Financial Officer
If to the Option Holder:
At the Option Holder's most recent address shown on the Company's corporate records, or at any other address which the Option Holder may specify in a notice to the Company delivered in the manner set forth herein.
(r) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
(s) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be regarded for all purposes as an original constituting but one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
VALIDUS HOLDINGS, LTD.
[Exhibit 10.22]
VALIDUS HOLDINGS, LTD.
STOCK OPTION AGREEMENT
AGREEMENT, made and entered into this 4th day of February, 2006 by and between Validus Holdings, Ltd. (the "Company"), a Bermuda corporation, and _____________ (the "Option Holder").
WHEREAS, the Option Holder has been designated to participate in the Validus Holdings, Ltd. 2005 Long Term Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the Company and the Option Holder agree as follows:
(a) Grant. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Company hereby grants to the Option Holder the right and option (the "Option") to purchase ___________ Shares. The Option is granted as of February 4, 2006, and such grant is subject to the terms and conditions herein and the terms and conditions of the Plan. Such Option is not intended to be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). In the event there is any conflict between the terms of the Plan and this Agreement, the terms of the Plan shall control. Capitalized terms used herein but not defined shall have the meanings given to them in the Plan.
(b) Purchase Price. The purchase price of the Shares subject to the Option shall be equal to $10.00 per Share.
(c) Term of Option. The Option may be exercised only during the period commencing on the date it vests and becomes exercisable under paragraph (d) below and continuing until the close of business on December 12, 2015 (the "Option Period"). The Option Holder's exercise rights during the Option Period shall be subject to limitations as hereinafter provided and shall be subject to sooner termination as provided in paragraph (e) below. At the end of the Option Period or, if earlier, the termination of the period of exercisability as provided in paragraph (e), below, the Option shall terminate.
(d) Exercisability. Except as otherwise provided in paragraph (g) below, the Option shall vest and become exercisable in five equal annual installments, beginning on December 12, 2006 and continuing on each of the following four anniversaries of December 12, 2006.
(e) Termination.
(i) (A) Death in Service. In the event of Termination of Service of the Option Holder by reason of the Option Holder's death, the Option Holder's estate or other legal representative shall be entitled to exercise the portion of the Option exercisable at the time of death, if any, determined in accordance with paragraph (d) above, and such portion of the Option shall continue to be exercisable by the estate or other legal representative of the Option Holder during the period ending one (1) year following the date of death (but not beyond the Option Period).
(B) Death After Service. In the event the Option Holder dies after his or her Termination of Service at a time when all or a portion of the Option remains exercisable, the estate or other legal representative of the Option Holder shall be entitled to exercise the portion of the Option that remains exercisable during the period the Option Holder would have been eligible to exercise the Option had the Option Holder not died.
(ii) Termination Due to Disability. In the event of Termination of Service of the Option Holder by reason of the Option Holder's Disability (as defined in the Employment Agreement (as defined below)), the Option Holder shall be entitled to exercise the portion of the Option exercisable at the time of such Termination of Service, if any, determined in accordance with paragraph (d) above, and such portion of the Option shall continue to be exercisable by the Option Holder during the period ending one (1) year following the date of Termination of Service (but not beyond the Option Period).
(iii) Termination for Cause. In the event of Termination of Service of the Option Holder by the Company or its Subsidiaries for Cause, all rights of the Option Holder to exercise the Option granted to the Option Holder shall be forfeited immediately and the Option shall terminate. For purposes of this Agreement, "Cause" shall have the meaning set forth in the Option Holder's employment agreement with the Company or a Subsidiary (the "Employment Agreement").
(iv) Termination Not For Cause or For Good Reason. If the Employment Period (as defined in the Employment Agreement) shall be terminated by the Option Holder for Good Reason (as defined in the Employment Agreement) or by the Company without Cause, the Option shall continue to vest through the Date of Termination (as defined in the Employment Agreement) and the exercisable portion of the Option shall continue to be exercisable by the Option Holder during the period ending ninety (90) days following the Date of Termination (but not beyond the Option Period). For the avoidance of doubt, the Option will continue to vest under this clause (iv) only if and to the extent a vesting date, as set forth in (d) above, occurs on or prior to the Date of Termination.
(v) Resignation Without Good Reason. If the Employment Period shall be terminated as a result of the Option Holder's resignation or leaving of his employment, other than for Good Reason, no portion of the Option shall vest on or following the date the Option Holder provides Notice of Termination (as defined in the Employment Agreement) without Good Reason to the Company (the "Notice Date"), the Option Holder shall be entitled to exercise only the portion of the Option exercisable on such Notice Date, if any, determined in accordance with paragraph (d) above, and such portion of the Option shall continue to be exercisable by the Option Holder for ninety (90) days following the Notice Date (but not beyond the Option Period).
(vi) Forfeiture. That portion of the Option which is unexercisable immediately following the Option Holder's Termination of Service (in the case of clauses (i), (ii) or (iii) above), following the Date of Termination (in the case of clause (iv) above), or following the Notice Date (in the case of clause (v) above) shall be immediately forfeited to the Company.
(f) Exercise of Option. In order to exercise the Option, the Option Holder shall submit to the Company an instrument in writing specifying the number of Shares in respect of which
the Option is being exercised, accompanied by payment, in a manner acceptable to the Committee, of the Option Price of the Shares in respect of which the Option is being exercised. Shares shall then be issued by the Company; provided, however, that the Company shall not be obligated to issue any Shares hereunder if the issuance of such Shares would violate the provisions of any applicable law.
(g) Change in Control. Notwithstanding any provision of this Agreement to the contrary, if, within two years following a Change in Control, the Option Holder's employment is terminated by the Company not for Cause or by the Option Holder for Good Reason, the Option shall become immediately vested and exercisable in full upon such termination of employment. For purposes of this Agreement, "Change in Control" shall have the meaning set forth in the Plan.
(h) No Rights of Shareholder; No Rights of Continued Employment. The Option Holder shall not, by virtue of the Option, be entitled to any rights of a shareholder of the Company until Shares are issued to the Option Holder. The grant of the Option shall not confer on the Option Holder any right with respect to continuance of the Option Holder's service with the Company nor shall such grant interfere in any way with the right of the Company to terminate the Option Holder's service at any time.
(i) Nonassignability. The Option may be assigned or otherwise transferred only in the following circumstances: (i) by will or the laws of descent and distribution; (ii) by valid beneficiary designation taking effect at death made in accordance with procedures established by the Committee; or (iii) by the Option Holder to members of the Option Holder's "immediate family," to a trust established for the exclusive benefit of solely one or more members of the Option Holder's "immediate family" and/or the Option Holder, or to a partnership, limited liability company or other entity under which the only partners, members or equity holders are one or more members of the Option Holder's "immediate family" and/or the Option Holder. Any Option held by the transferee will continue to be subject to the same terms and conditions that were applicable to the Option immediately prior to the transfer, except that the Option will be transferable by the transferee only by will or the laws of descent and distribution. For purposes hereof, "immediate family" means the Option Holder's children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), nieces, nephews, in-laws, and relationships arising because of legal adoption.
(j) Shareholders' Agreement. If this Option is exercised when the Company is not a publicly-traded entity, simultaneous with the exercise of this Option, the Option Holder shall, as a condition to the Option Holder's right to exercise this Option, become a party to the Shareholders' Agreement by and among the Company and its shareholders, as the same may be amended from time to time, by execution of a joinder agreement in form and substance satisfactory to the Company.
(k) Restrictions on Transfer of Shares. Neither the Shares nor any interest in them may be sold, assigned, pledged, hypothecated, encumbered or in any other manner transferred or disposed of, in whole or in part, except in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable United States federal and state securities laws or other applicable laws or regulations and the terms and conditions hereof.
(l) Market Stand Off Period. The Option Holder covenants and agrees that he or she shall not, without the prior written consent of the Company, sell or otherwise dispose of any shares of stock of the Company during such period (a "Market Stand Off Period") as the Company or its underwriters shall establish in connection with the filing of a registration statement in connection with the initial public offering of the stock of the Company (an "Initial Public Offering").
(m) Purchase Option. The Option Holder's Shares and Options are subject to repurchase as provided below in subsections (i) through (vii) below:
(i) If the Option Holder's active service with the Company or a Subsidiary is terminated by the Option Holder other than for Good Reason (such termination of active service shall be treated as occurring on the Notice Date) or by the Company for Cause, the Company and/or its designee(s) shall have the option (the "Purchase Option") to purchase, and if the Purchase Option is exercised, the Grantor (as defined below) shall sell to the Company and/or its assignee(s), all or any portion (at the Company's option) of the Shares and/or Options held by the Grantor (such Shares and Options collectively being referred to as the "Purchasable Shares").
(ii) The Company shall give notice in writing to the Grantor of the exercise of the Purchase Option within one (1) year after the Date of Termination (as defined in the Employment Agreement) of the Option Holder's service. Such notice shall state the number of Purchasable Shares to be purchased by the Company and the determination of the purchase price of such Purchasable Shares. If no notice is given within the time limit specified above, the Purchase Option shall be deemed to have terminated.
(iii) The purchase price to be paid for the Purchasable Shares purchased pursuant to the Purchase Option shall be, in the case of any Shares, the Book Value (as defined below) per share as of the date of the notice of exercise of the Purchase Option times the number of Shares being purchased, and in the case of any Option, the Book Value per share (less the applicable per share Option exercise price) times the number of vested Shares (including by acceleration if applicable) subject to such Option which are being purchased by the Company. The purchase price for the Purchasable Shares shall be paid in cash or by wire transfer of immediately available funds. The closing of such purchase shall take place at the Company's principal executive offices within ten (10) days after the purchase price has been determined. At such closing, the Grantor shall deliver to the purchaser(s) the certificates or instruments evidencing the Purchasable Shares being purchased, duly endorsed (or accompanied by duly executed stock powers) and otherwise in good form for delivery, against payment of the purchase price by check of the purchaser(s). In the event that, notwithstanding the foregoing, the Grantor shall have failed to obtain the release of any pledge or other encumbrance on any Purchasable Shares by the scheduled closing date, at the option of the purchaser(s) the closing shall nevertheless occur on such scheduled closing date, with the cash purchase price being reduced to the extent of, and paid to the holder of, all unpaid indebtedness for which such Purchasable Shares are then pledged or encumbered.
(iv) To ensure the enforceability of the Company's rights hereunder, each certificate or instrument representing Shares or Options shall bear a conspicuous legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE [ISSUABLE PURSUANT TO THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 2005 LONG TERM INCENTIVE PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH LONG TERM INCENTIVE PLAN AND STOCK OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."
(v) The Company's rights under this paragraph (m) shall terminate upon the consummation of an Initial Public Offering.
(vi) "Book Value" shall mean the book value of a Share at the end of the fiscal quarter in which the termination of active service occurs (which, in the case of termination by the Option Holder other than for Good Reason, shall be treated as the Notice Date), as determined on a fully diluted basis by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
(vii) "Grantor" shall mean, collectively, the Option Holder, the Option Holder's assignee, the executor or the administrator of the Option Holder's estate in the event of the Option Holder's death, and the Option Holder's legal representative in the event of the Option Holder's incapacity.
(n) Forfeiture Upon Breach of Certain Other Agreements. The Option Holder's breach of any noncompete, nondisclosure, nonsolicitation, assignment of inventions, or other intellectual property agreement that he may be a party to with the Company or a Subsidiary, in addition to whatever other equitable relief or monetary damages that the Company or a Subsidiary may be entitled to, shall result in automatic rescission, forfeiture, cancellation, and return of any Options and Shares (whether or not otherwise vested) held by Optionee or Grantor, and all profits, proceeds, gains, or other consideration received through the sale or other transfer of the Options or Shares shall be promptly returned and repaid to the Company.
(o) Withholding. The Option Holder agrees to make appropriate arrangements with the Company for satisfaction of any applicable tax withholding requirements, or similar requirements, arising out of this Agreement.
(p) References. References herein to rights and obligations of the Option Holder shall apply where appropriate, to the Option Holder's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.
(q) Notice. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the
party concerned at the address indicated below or to such changed address as such party may subsequently by similar process given notice of:
If to the Company:
Validus Holdings, Ltd.
Mintflower Place
8 Par-La-Ville Road, Third Floor
Hamilton HMO8 Bermuda
Attention: Chief Financial Officer
If to the Option Holder:
At the Option Holder's most recent address shown on the Company's corporate records, or at any other address which the Option Holder may specify in a notice to the Company delivered in the manner set forth herein.
(r) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to principles of conflict of laws.
(s) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be regarded for all purposes as an original constituting but one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
VALIDUS HOLDINGS, LTD.
[Exhibit 21.1]
LIST OF VALIDUS HOLDINGS, LTD. SUBSIDIARIES*
Validus Reinsurance, Ltd., a Bermuda Company Validus Research Inc., an Ontario Company Validus Specialty, Inc., a Delaware Company
* All subsidiaries are, directly or indirectly, wholly-owned subsidiaries.
Exhibit 23.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of our report dated March 22, 2006, relating to the financial statements of Validus Holdings, Ltd. for the year ended December 31, 2005. We also consent to the reference to us under the heading "Experts" which appears in such Registration Statement.
/s/ PricewaterhouseCoopers Hamilton, Bermuda January 16, 2007 |