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
|
||||||||||
Title of Each Class of Securities to be Registered | Registered | Price per Unit | Price(1)(2) | Amount of Registration Fee(2) | ||||||||
Common Shares, $0.175 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. |
i
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Focus on Short-Tail Lines of
Reinsurance.
Substantially all of our
$540.8 million in gross premiums written for the year ended
December 31, 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 reinsurance
in 2006
were at the highest levels recorded as measured by
rate on
line
, which is the premium paid by an insurer to a reinsurer
as a percentage of the reinsurers exposure. There can be
no assurance, however, that these favorable market conditions
will continue to exist.
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 eight underwriters have an
average of 16 years of industry experience and have
produced $540.8 million in gross premiums written for the
year ended December 31, 2006 while evaluating over 3,100
applications for coverage, or
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 five 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. However, there was a relatively low level of
catastrophic events in 2006 and as a consequence we have not
experienced a high volume of claims to date during our short
operating history.
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Timely Response to 2006 Market Dislocation and Capacity
Shortage.
We entered the global reinsurance
market in 2006 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. In the January 1, 2007
renewal period we believe we were able to capitalize on our
established relationships and to further expand our business. In
total for the January 1, 2007 renewal season, we underwrote
$362.0 million in gross premiums written, representing an
increase of $144.6 million or 66.5% over the comparable
amount for 2006.
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
$540.8 million in gross premiums written for the year ended
December 31, 2006, $234.8 million (43.4%) is property
catastrophe reinsurance. Among other property coverages, we
wrote $94.2 million (17.4%) of property
pro rata
and
$41.9 million (7.8%) of property per risk. We also
underwrote $104.6 million (19.3%) of marine reinsurance and
$65.3 million (12.1%) 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 year ended
December 31, 2006, we wrote $224.4 million of gross
premiums written in the United States (41.5% of total gross
premiums written), $99.4 million in territories outside the
United States (18.4%) and $71.4 million on a worldwide
basis including the United States (13.2%). The remaining
$145.6 million of our gross premiums written (26.9%)
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 2006,
Validus entered into collateralized quota share retrocession
treaties
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 reinsured with, or
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.
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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 $540.8 million in gross premiums written for the
year ended December 31, 2006 or over 3,100 submissions
received from inception to date. In the January 1, 2007
renewal period we believe we were able to capitalize on our
established relationships and to further expand our business. In
total for the January 1, 2007 renewal season, we underwrote
$362.0 million in gross premiums written, representing an
increase of $144.6 million or 66.5% over the comparable
amount for 2006.
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 five 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 collateralized retrocessional reinsurance
agreements with Petrel Re, 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.
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
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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 our 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. Brokers negotiate contracts of reinsurance between
a primary insurer and reinsurer, on behalf of the primary
insurer. 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. Ratings have
become an increasingly important factor in establishing the
competitive position of insurance and reinsurance companies.
Insurers and intermediaries use these ratings as one measure by
which to assess the financial strength and quality of insurers
and reinsurers. These ratings are often a key factor in the
decision by an insured or intermediary of whether to place
business with a particular insurance or reinsurance provider.
Our initial financial strength rating of A-, which was affirmed
by A.M. Best on March 7, 2007, 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.
January 2007 Gross Premiums Written.
We underwrote
$362.0 million in gross premiums written in the
January 1, 2007 renewal season, representing an increase of
$144.6 million or 66.5% over the $217.4 million in
gross premiums written we underwrote for the January 1,
2006 renewal season. In January 2007, we benefitted from being
the incumbent on much of the business we underwrote, meaning we
were a reinsurer on risk for the policy being renewed. Of the
$362.0 million in gross premiums written, we underwrote
$236.9 million (65.5%) in property reinsurance,
$89.5 million (24.7%) in marine reinsurance and
$35.6 million (9.8%) in other specialty lines.
Windstorm Kyrill.
On January 18, 2007, Windstorm
Kyrill produced hurricane-force winds across Europe. Windstorm
Kyrill was the most significant storm to affect Europe in
several
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years, causing damage predominantly in Germany as well as in
the United Kingdom, Belgium, the Netherlands, Austria, Poland
and the Czech Republic. The Companys initial estimation of
expected losses relating to its exposure to this event is
between $15.0 million and $30.0 million after
reinstatement premiums.
Florida Hurricane Catastrophe Fund Legislation.
On
January 26, 2007, the Governor of the State of Florida
signed a law that, in part, increases the amount of reinsurance
available to primary insurers from the Florida Hurricane
Catastrophe Fund. The Florida Hurricane Catastrophe Fund in
effect provides the same type of reinsurance coverage for
primary insurers as the excess of loss catastrophe reinsurance
contracts provided by private market reinsurers for the Florida
residential property market, except without the same expectation
of profit as the primary reinsurance market. Accordingly, this
law will reduce the amount of private market reinsurance
required and most likely will depress pricing on Florida excess
of loss catastrophe reinsurance contracts for residential
properties. This reduction in demand and pricing for private
market reinsurance may be significant. At January 1, 2007,
we had gross premiums written of approximately
$40.0 million in force for Florida-specific programs which
may be directly impacted by this change. It is too early to
determine what impact, if any, this law will have on the
reinsurance market in Florida, or the impact that similar laws
being considered in other coastal states may have on reinsurance
markets elsewhere.
Credit Facility.
On February 14, 2007, we entered
into a commitment letter with JPMorgan Chase Bank, National
Association, and Deutsche Bank AG, New York Branch, under which
JPMorgan Chase Bank, National Association, and Deutsche Bank AG,
New York Branch have agreed to arrange a $200 million
three-year unsecured facility with letter of credit availability
for Validus Re and revolving credit availability for Validus and
a $500 million five-year secured facility with letter of
credit availability for Validus Re. The Company believes the new
facilities will provide adequate financial flexibility for all
foreseeable short-term borrowing needs. The Company has
$80.2 million outstanding under its existing letter of
credit facility as of February 28, 2007. See
Description of Certain Indebtedness Credit
Facilities and Managements Discussion and
Analysis of Financial Condition and Results of
Operations Capital Resources.
A.M. Best Ratings Affirmation.
On March 7,
2007, A.M. Best Company affirmed the financial strength
rating of A- (Excellent) and the issuer credit rating of
a- of Validus Reinsurance, Ltd. Concurrently,
A.M. Best Company assigned an issuer credit rating of
bbb- to Validus Holdings, Ltd.
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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 the net proceeds to further
capitalize Validus Re to support the future growth of our
reinsurance operations and for general corporate purposes, which
may include acquisitions or other investments which would be
complementary to our business, and which will include a
$3.0 million payment to Aquiline in connection with the
termination of our Advisory Agreement with them.
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;
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assumes an initial public offering price of
$ per share, the midpoint of the
range set forth on the cover page of this prospectus; and
reflects the 1.75 for one reverse stock split of our outstanding
common shares which was approved by our shareholders at our
Annual General Meeting on March 1, 2007 and effective
immediately thereafter.
(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.
(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
8,455,319 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 3,523,050 voting common
shares as of December 31, 2006. Unvested restricted shares
are not considered to be outstanding in the above table but do
accumulate dividends and may be voted. See
Capitalization.
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Year ended
Period ended
December 31, 2006
December 31, 2005
(Dollars in thousands, except share and
per share amounts)
$
540,789
$
(63,696
)
477,093
(170,579
)
306,514
58,021
2,032
(1,102
)
39
2,157
365,590
2,071
91,323
36,072
46,232
2,657
8,789
77
49,122
182,493
51,779
183,097
(49,708
)
(332
)
144
1,102
(39
)
$
183,867
$
(49,603
)
58,477,130
58,423,174
58,874,567
58,423,174
$
3.13
$
(0.85
)
$
3.11
$
(0.85
)
29.8%
%
11.8%
%
15.1%
%
26.9%
%
56.7%
%
16.7%
%
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As of December 31,
As of December 31, 2006
2005
Actual
As adjusted(9)
Actual
(Dollars in thousands, except per share amounts)
$
1,376,387
$
$
610,800
63,643
398,488
1,646,423
1,014,453
178,824
178,824
77,363
77,363
150,000
150,000
1,192,523
999,806
$
20.39
$
$
17.11
19.73
16.93
(1)
General and administrative expenses for the year ended
December 31, 2006 and the period ended December 31,
2005 include $1,000,000 and $nil, respectively, related to our
Advisory Agreement with Aquiline.
(2)
Stock options which carry an average exercise price of
$17.50 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. On March 1, 2007 we effected a 1.75 for one
reverse stock split of our outstanding common shares. The stock
split does not affect our financial statements other than to the
extent it decreases the number of outstanding shares and
correspondingly increases per share information.
(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)
Return on average equity is calculated by dividing the net
income for the period by the average shareholders equity
during the period. 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).
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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.
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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;
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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.
29
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30
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31
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December 31, 2006
As
Actual
adjusted
(Dollars in thousands, except share and per share
amounts)
$
$
150,000
150,000
150,000
150,000
10,234
1,048,025
875
133,389
1,192,523
$
1,342,523
$
$
20.39
$
$
19.73
$
11.2%
%
(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.
32
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$
$
20.39
$
Average
price per
Common shares issued
Total consideration
common
Number
Percent
Amount
Percent
share
58,482,601
%
$
1,023,445,518
%
$
17.50
100%
100%
33
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Year ended
Period ended
December 31, 2006
December 31, 2005
(Dollars in thousands, except share
and per share amounts)
$
540,789
$
(63,696
)
477,093
(170,579
)
306,514
58,021
2,032
(1,102
)
39
2,157
365,590
2,071
91,323
36,072
46,232
2,657
8,789
77
49,122
182,493
51,779
183,097
(49,708
)
(332
)
144
1,102
(39
)
$
183,867
$
(49,603
)
58,477,130
58,423,174
58,874,567
58,423,174
$
3.13
$
(0.85
)
$
3.11
$
(0.85
)
29.8%
%
11.8%
%
15.1%
%
26.9%
%
56.7%
%
16.7%
%
34
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As of December 31,
As of December 31, 2006
2005
Actual
As adjusted(9)
Actual
(Dollars in thousands, except per share amounts)
$
1,376,387
$
$
610,800
63,643
398,488
1,646,423
1,014,453
178,824
178,824
77,363
77,363
150,000
150,000
1,192,523
999,806
$
20.39
$
$
17.11
19.73
16.93
(1)
General and administrative expenses for the year ended
December 31, 2006 and the period ended December 31,
2005 include $1,000,000 and $nil, respectively, related to our
Advisory Agreement with Aquiline.
(2)
Stock options which carry an average exercise price of
$17.50 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. On March 1, 2007, we effected a 1.75 for
one reverse stock split of our outstanding common shares. The
stock split does not affect our financial statements other than
to the extent it decreases the number of outstanding shares and
correspondingly increases per share information.
(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)
Return on average equity is calculated by dividing the net
income for the period by the average shareholders equity
during the period. Average shareholders equity is the
average of the beginning and ending 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).
35
Table of Contents
46
63
F-14
II-4
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
36
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37
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38
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39
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40
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41
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At December 31, 2006
Total gross
reserve
Gross case
Gross
for losses and
reserves
IBNR
loss expenses
(Dollars in thousands)
$
32,187
$
27,198
$
59,385
3,637
6,229
9,866
2,286
5,574
7,860
49
49
4
199
203
2,290
5,822
8,112
$
38,114
$
39,249
$
77,363
42
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loss emergence patterns
Reserve for losses
and loss expenses
(Dollars in millions)
$
68.6
72.5
77.4
82.7
87.9
expected loss ratios
Reserve for losses
and loss expenses
(Dollars in millions)
$
73.6
75.5
77.4
79.3
81.5
43
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Year ended
Period ended
December 31, 2006
December 31, 2005
Gross premiums
Gross premiums
written
Gross premiums
written
Gross premiums
(Dollars in thousands)
written (%)
(Dollars in thousands)
written (%)
(Dollars in thousands)
$
275,187
50.9%
%
125,652
23.2%
%
139,950
25.9%
%
$
540,789
100.0%
$
%
(1)
Allocation of treaty type to lines of business is included in
Business Line of Business by Treaty Type.
44
Table of Contents
(2)
Catastrophe excess of loss is composed of catastrophe excess of
loss, aggregate excess of loss, reinstatement premium
protection, second event and third event covers.
(3)
Per Risk excess of loss is composed of per event excess of loss
and per risk excess of loss.
(4)
Proportional is composed of quota share and surplus share.
Year ended
Period ended
December 31, 2006
December 31, 2005
(Dollars in thousands)
$
540,789
$
(63,696
)
477,093
(170,579
)
306,514
91,323
36,072
46,232
2,657
173,627
2,657
45
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Year ended
Period ended
December 31, 2006
December 31, 2005
(Dollars in thousands)
132,887
(2,657
)
58,021
2,032
(8,789
)
182,119
(625
)
77
49,122
(1,102
)
39
2,157
$
183,097
(49,708
)
(332
)
144
1,102
(39
)
$
183,867
$
(49,603
)
88.2%
%
29.8%
%
11.8%
%
15.1%
%
26.9%
%
56.7%
%
(1)
Non-GAAP Financial Measures. In presenting the
Companys results, management has included and discussed
certain schedules containing underwriting income (loss) that is
not calculated under standards or rules that comprise
U.S. GAAP. Such measures are referred to as non-GAAP.
Non-GAAP measures may be defined or calculated differently by
other companies. The Company believes these measures, which are
used to monitor the results of operations, allow for a more
complete understanding of the underlying business. These
measures should not be viewed as a substitute for those
determined in accordance with U.S. GAAP. A reconciliation
of this measure to net income, the most comparable
U.S. GAAP financial measure, is presented in the section
below entitled Underwriting Income.
Table of Contents
Year ended
December 31, 2006
Gross premiums
Gross premiums
written
written (%)
(Dollars in thousands)
$
370,958
68.6%
104,584
19.3%
40,977
7.6%
1,729
0.3%
18,525
3.4%
4,016
0.8%
65,247
12.1%
$
540,789
100.0%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
47
Table of Contents
Year ended
December 31, 2006
Net premiums
written
(Dollars in
Net premiums
thousands)
written (%)
$
338,150
70.9%
74,296
15.5%
40,377
8.5%
1,729
0.4%
18,525
3.9%
4,016
0.8%
64,647
13.6%
$
477,093
100.0%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
48
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Year ended
December 31, 2006
32.3%
18.2%
61.8%
3.3%
0.0%
7.6%
33.3%
29.8%
(1)
The Marine line of business includes our offshore energy risks.
Gross and net reserve for losses and loss expenses
Incurred related to
Incurred related to
Gross and net
Gross and net
prior years for
current year for
paid during
Gross and net
reserve at
the year ended
the year ended
the year ended
reserve at
December 31,
December 31,
December 31,
December 31,
December 31,
2005
2006
2006
2006
2006
(Dollars in thousands)
$
$
$
69,100
$
(9,715
)
$
59,385
10,352
(486
)
9,866
11,619
(3,759
)
7,860
49
49
203
203
11,871
(3,759
)
8,112
$
$
$
91,323
$
(13,960
)
$
77,363
(1)
The Marine line of business includes our offshore energy risks.
49
Table of Contents
At December 31, 2006
Total gross reserve
Gross case
for losses and loss
reserves
Gross IBNR
expenses
(Dollars in thousands)
$
32,187
$
27,198
$
59,385
3,637
6,229
9,866
2,286
5,574
7,860
49
49
4
199
203
2,290
5,822
8,112
$
38,114
$
39,249
$
77,363
(1)
The Marine line of business includes our offshore energy risks.
50
Table of Contents
Year ended
December 31, 2006
29.8%
11.8%
15.1%
26.9%
56.7%
Year ended
Period ended
December 31, 2006
December 31, 2005
(Dollars in thousands)
$
132,887
$
(2,657
)
58,021
2,032
(8,789
)
77
49,122
(1,102
)
39
2,157
$
183,097
$
(49,708
)
(1)
Underwriting (loss) in the period ended December 31, 2005
relates to expenses incurred prior to the Company writing
premiums.
51
Table of Contents
Year ended
Period ended
December 31, 2006
December 31, 2005
(Dollars in thousands)
$
57,350
$
1,266
2,583
834
59,933
2,100
(1,912
)
(68
)
$
58,021
$
2,032
52
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53
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Payment due by period
Less than
More than
Total
1 year
1-3 years
3-5 years
5 years
(Dollars in thousands)
$
77,363
$
49,836
$
17,468
$
8,083
$
1,976
211,218
13,604
27,207
20,407
150,000
3,938
829
1,658
1,451
$
292,519
$
64,269
$
46,333
$
29,941
$
151,976
(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
54
Table of Contents
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.
55
Table of Contents
interest rate risk;
foreign currency risk;
credit risk; and
effects of inflation.
56
Table of Contents
In use/
Commitment
outstanding
(Dollars in thousands)
$
150,000
$
150,000
100,000
200,000
78,323
$
450,000
$
228,323
57
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58
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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, which is
coverage that has a lengthy period between the occurrence and
final settlement of a claim,
investment results, including realized and unrealized gains and
losses on investment portfolios and annual investment yields, and
ratings and financial strength of market participants.
59
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60
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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.
61
Table of Contents
Year ended
Period ended
December 31, 2006
December 31, 2005
Gross
Gross
premiums
Gross
premiums
Gross
written
premiums
written
premiums
(Dollars in
written
(Dollars in
written
thousands)
(%)
thousands)
(%)
$
370,958
68.6%
$
%
104,584
19.3%
%
40,977
7.6 %
%
1,729
0.3 %
%
62
Table of Contents
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
Table of Contents
Year ended
Period ended
December 31, 2006
December 31, 2005
Gross
Gross
premiums
premiums
written
Gross
written
Gross
(Dollars in
premiums
(Dollars in
premiums
thousands)
written (%)
thousands)
written (%)
$
275,187
50.9%
%
125,652
23.2%
%
139,950
25.9%
%
$
540,789
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.
64
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65
Table of Contents
Year ended
Period ended
December 31,
December 31,
2006
2005
Gross
Gross
premiums
Gross
premiums
Gross
written
premiums
written
premiums
(Dollars in
written
(Dollars in
written
thousands)
(%)
thousands)
(%)
Catastrophe excess of loss(1)
$
234,850
43.4%
$
%
Per Risk excess of loss(2)
41,908
7.8%
%
Proportional(3)
94,200
17.4%
%
370,958
68.6%
%
Catastrophe excess of loss(1)
6,960
1.3%
%
Per Risk excess of loss(2)
83,144
15.3%
%
Proportional(3)
14,480
2.7%
%
104,584
19.3%
%
Catastrophe excess of loss(1)
9,606
1.8%
%
Per Risk excess of loss(2)
600
0.1%
%
Proportional(3)
30,771
5.7%
%
40,977
7.6%
%
Catastrophe excess of loss(1)
1,729
0.3%
%
Catastrophe excess of loss(1)
18,025
3.3%
%
Per Risk excess of loss(2)
%
%
Proportional(3)
500
0.1%
%
18,525
3.4%
%
Catastrophe excess of loss(1)
4,016
0.8%
%
$
540,789
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.
66
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.
67
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.
68
Table of Contents
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.
Gross
premiums
written
Gross
(Dollars in
premiums
thousands)
written (%)
$
224,423
41.5%
38,720
7.2%
36,812
6.8%
15,412
2.8%
6,326
1.2%
2,103
0.4%
99,373
18.4%
71,432
13.2%
145,561
26.9%
$
540,789
100.0%
69
Table of Contents
(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.
70
Table of Contents
Year ended December 31, 2006
Gross premiums written
Gross premiums
(Dollars in thousands)
written (%)
$
181,357
33.5%
108,435
20.1%
94,723
17.5%
67,370
12.5%
451,885
83.6%
88,904
16.4%
$
540,789
100.0%
71
Table of Contents
At December 31, 2006
Total gross
reserve for
Gross case
losses and loss
reserves
Gross IBNR
expenses(2)
(Dollars in thousands)
$
32,187
$
27,198
$
59,385
3,637
6,229
9,866
2,286
5,574
7,860
49
49
4
199
203
2,290
5,822
8,112
$
38,114
$
39,249
$
77,363
(1)
The Marine line of business includes our offshore energy risks.
(2)
The Company had no Reinsurance Recoverables at December 31,
2006.
72
Table of Contents
December 31, 2006
December 31, 2005
Fair value
Fair value
(Dollars in
(Dollars in
thousands)
Fair value (%)
thousands)
Fair value (%)
$
119,731
8.3%
$
98,187
9.7%
222,989
15.5%
53,866
5.3%
502,137
34.9%
84,695
8.4%
844,857
58.7%
236,748
23.4%
531,530
36.9%
374,052
37.1%
1,376,387
95.6%
610,800
60.5%
63,643
4.4%
398,488
39.5%
$
1,440,030
100.0%
$
1,009,288
100.0%
(1)
Short-term investments comprise investments with a remaining
maturity of less than one year at time of purchase.
December 31, 2006
December 31, 2005
Fair value
Fair value
(Dollars in
(Dollars in
thousands)
Fair value (%)
thousands)
Fair value (%)
$
67,920
8.0%
$
%
255,739
30.3%
140,601
59.4%
5,207
0.6%
8,315
3.5%
13,854
1.7%
3,137
1.3%
342,720
40.6%
152,053
64.2%
502,137
59.4%
84,695
35.8%
$
844,857
100.0%
$
236,748
100.0%
73
Table of Contents
December 31, 2006
December 31, 2005
Fair value
Fair value
(Dollars in
(Dollars in
thousands)
Fair value (%)
thousands)
Fair value (%)
$
644,106
76.2%
$
192,627
81.4%
69,087
8.2%
9,861
4.2%
58,285
6.9%
17,538
7.4%
44,136
5.2%
9,779
4.1%
22,759
2.7%
2,770
1.2%
6,484
0.8%
4,173
1.7%
$
844,857
100.0%
$
236,748
100.0%
74
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75
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
(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
76
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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).
77
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78
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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
46
Senior Vice President and General
Counsel
45
Director
55
Director
46
Director
37
Director
45
Director
57
Director
46
Director
52
Director
56
Director
79
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80
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81
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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
82
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83
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salary;
annual incentive compensation (bonus award); and
long-term incentive compensation (options and restricted shares).
84
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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 $17.50 per share, which is equal
to the price per share paid by our investors in our initial
capitalization.
85
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Change in
pension
Non-equity
value and
incentive
non-qualified
plan
deferred
All other
Stock
Option
compen-
compensation
compen-
Year
Salary(1)
Bonus(2)
awards(3)
awards(4)
sation
earnings
sation
Total
2006
$
950,000
$
1,600,000
$
1,233,062
$
1,087,565
$
411,873
(5)
$
5,282,500
Executive Officer
2006
600,000
1,300,000
616,531
543,782
472,783
(6)
3,533,096
Deputy Chairman
2006
414,516
950,000
411,023
362,523
339,832
(7)
2,477,894
President and Chief
Financial Officer
2006
500,000
1,187,500
(10)
411,023
362,523
440,072
(8)
2,901,118
President and Chief
Risk Officer
2006
500,000
1,700,000
(11)
411,023
362,523
465,927
(9)
3,439,473
President and Chief
Underwriting
Officer
(1)
The numbers presented represent earned salary for the full year
ended December 31, 2006, except for Jeff Consolino, whose
base salary of $500,000 commenced March 3, 2006.
(2)
Bonuses for 2006 compensation year are based upon underwriting
profit before target bonus and stock-based compensation. Bonus
amounts shown also include signing bonus and other discretionary
bonus payments as noted below.
(3)
The restricted stock awards vest at the end of a three year
period from the date of grant and contain certain restrictions
for said period, relating to, among other things, forfeiture in
the event of termination of employment and transferability. For
a discussion of valuation, see Notes to Consolidated
Financial Statements 2006 Note 6.
(4)
The options vest annually over five years from the date of
grant. For a discussion of valuation, see Notes to
Consolidated Financial Statements 2006
Note 6.
(5)
Includes defined contribution plan contributions and allocations
and payments in lieu thereof ($95,000), housing allowance
($174,000), housing tax gross up ($79,585) and travel allowance
($47,082).
(6)
Includes defined contribution plan contributions and allocations
and payments in lieu thereof ($60,000), housing allowance
($230,000), housing tax gross up ($109,738), relocation expenses
($25,615), travel allowance ($17,398) and education allowance
($13,660).
(7)
Includes defined contribution plan contributions and allocations
($41,452), housing allowance ($144,000), housing tax gross up
($69,897), relocation expenses ($33,202), travel allowance
($25,000) and education allowance ($11,670).
(8)
Includes defined contribution plan contributions and allocations
($50,000), housing allowance ($216,000), housing tax gross up
($102,200), relocation expenses ($16,353) and travel allowance
($37,292).
(9)
Includes defined contribution plan contributions and allocations
($50,000), housing allowance ($212,000), housing and other tax
gross up ($135,278), car allowance ($10,800), travel allowance
($24,731) and education allowance ($26,900).
(10)
Includes $250,000 for his efforts in establishing our Bermuda
operations.
(11)
Includes a signing bonus of $750,000.
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All other
Grant
All other
options
date
Estimated
Estimated
stock
awards:
Exercise
fair
future payouts
future payouts
awards:
number of
or base
value of
under non-equity
under equity
number
securities
price of
stock and
incentive plan awards
incentive plan awards
of shares
underlying
option
option
Grant
Threshold
Target
Maximum
Threshold
Target
Maximum
of stock
options
awards
awards
Date
($)
($)
($)
($)
($)
($)
or units (#)
(#)
($/Sh)
($)
$
$
$
$
$
$
March 3, 2006
70,461
1,233,067
March 3, 2006
246,614
7.35
1,812,613
87
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88
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89
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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 ($)
date
vested (#)
($)(5)
vested (#)
vested ($)
147,968
591,873
(1)
0
$
17.50
December 12, 2015
211,383
(3)
0
0
73,984
295,936
(1)
0
17.50
December 12, 2015
105,691
(3)
0
0
0
246,614
(2)
0
17.50
January 1, 2016
70,461
(4)
0
0
49,323
197,291
(1)
0
17.50
December 12, 2015
70,461
(3)
0
0
49,323
197,291
(1)
0
17.50
December 12, 2015
70,461
(3)
0
0
(1)
These options vest ratably over five years beginning
December 12, 2006.
(2)
These options vest ratably over five years beginning
January 1, 2007.
(3)
These restricted shares will vest on December 12, 2008.
(4)
These restricted shares will vest on January 1, 2009.
(5)
Valuation reflects the mid-point of the pricing range of this
offering.
Executive
Registrant
Aggregate
contributions in
contributions in
Aggregate earnings
withdrawals/
Aggregate
last FY
last FY
in last FY
distributions
balance at last FYE
($)
($)(1)
($)(2)
($)
($)
$
$
$
$
19,452
$
19,452
28,000
28,000
28,000
28,000
(1)
These amounts are also reported as compensation in the Summary
Compensation Table under the All Other Compensation
column.
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91
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92
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93
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Base salary and
Vesting in stock
Additional
benefits
and options
Bonus
Expenses
compensation
($)
($)
($)
($)
($)
1,045,000
1,425,000
304,800
990,000
900,000
294,460
825,000
750,000
263,470
825,000
750,000
251,800
825,000
750,000
281,800
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Value of vested
accelerated
Options
Value of options
restricted shares
exercisable
exercisable
$
591,873
$
295,936
246,614
197,291
197,291
Number of securities
remaining available
for future issuance
Number of securities to
Weighted-average
under equity
be issued upon exercise of
exercise price of
compensation plans
outstanding options and
outstanding options and
(excluding securities in
restricted stock
restricted stock
column (a))
3,523,050
(1)
$
17.50
(2
)
(1)
Number to equal (A) the sum, without duplication, of
(i) what has been issued prior to January 11, 2007
under the existing plan and (ii) remainder of the 5.0% of
fully diluted Common Shares not yet issued prior to
January 11, 2007 and (iii) a number equal to 10.0% of
fully diluted Common Shares (after giving effect to warrants,
restricted shares and stock options issued and authorized,
including shared reserved under the Plan) after the consummation
of the IPO less (B) what has been issued prior to
January 11, 2007 under the plan.
95
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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 exercise of
Pre-offering
Post-offering
underwriters over-allotment
Unvested
restricted
Fully-diluted
Fully-diluted
Total
shares and
Fully-diluted
Total
total
total
Shares subject
beneficial
shares subject to
total beneficial
Shares
beneficial
beneficial
Total beneficial
beneficial
Common
to exercise of
ownership
exercise of
ownership
offered
ownership
ownership
ownership
ownership
shares
warrants
(%)(2)
unvested options
%(3)
hereby
(%)(2)
%(3)
(%)(2)
%(3)
14,057,137
1,557,188
26.01
%
22.16
%
6,857,142
2,923,920
15.93
%
13.88
%
8,571,427
944,177
16.01
%
13.50
%
6,857,141
760,979
12.86
%
10.81
%
5,714,285
1,035,777
11.34
%
9.58
%
5,714,285
704,610
10.85
%
9.11
%
171,428
28,185
0.34
%
951,223
1.63
%
57,142
7,046
0.11
%
475,611
0.77
%
0.00
%
317,075
0.45
%
0.00
%
317,075
0.45
%
42,857
0.07
%
317,075
0.51
%
3,883
15.93
%
13.89
%
9,707
15.94
%
13.90
%
70,461
0.12
%
0.10
%
26.01
%
22.16
%
16.01
%
13.50
%
0.00
%
0.00
%
11.34
%
9.58
%
12.86
%
10.81
%
5,825
15.94
%
13.89
%
271,429
125,107
0.68
%
2,378,059
3.94
%
(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 December 31, 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
96
Table of Contents
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 December 31, 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. (4,798,022.9 shares and 619,634.3
warrants), GS Capital Partners V Employees Fund, L.P.
(1,550,787.4 shares and 200,320.6 warrants), GS Capital
Partners V Offshore, L.P. (3,279,530.3 shares and 423,541.1
warrants), GS Capital Partners V GmbH & Co. KG
(251,708.6 shares and 32,553. 1 warrants), GSCP V
Institutional AIV, LTD. (2,177,093.7 shares and 281,139.4
warrants), GS Private Equity Partners 1999, L.P.
(1,039,607.8 shares), GS Private Equity 1999 Offshore, L.P.
(166,143.7 shares), GS Private Equity Partners
1999 Direct Investments Funds, L.P.
(29,720.7 shares), GS Private Equity Partners 2000, L.P.
(439,293.7 shares), GS Private Equity Partners 2000
Offshore Holdings, L.P. (154,627 shares) and GS Private
Equity Partners 2000 Direct Investment Fund, L.P.
(170,607 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 14,057,137 of our common
shares and 1,557,188 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. (90,419.4 shares and
9,934.9 warrants), Vestar AIV Holdings B L.P.
(71,538.9 shares and 7,891.4 warrants), and Vestar AIV
Holdings A L.P. (8,409,470.9 shares and 926,350.9
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.
(6,262,368.7 shares and 694,886.3 warrants), Allegheny New
Mountain Partners (Cayman), L.P. (484,642.6 shares and
53,832 warrants) and New Mountain Affiliated Investors II
(Cayman), L.P.
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Table of Contents
(110,131.5 shares and 12,260 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.
(4,285,714.3 shares and 354,066.3 warrants), Merrill Lynch
Ventures L.P. 2001 (1,428,571.4 shares and 118,022.3
warrants) and GMI Investments, Inc. (563,688 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)
The natural persons who have investment or voting power for the
shares owned by Caisse de depot et Placement du Quebec are
determined pursuant to a delegation of authority to specified
individuals adopted by its board of directors.
(11)
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 (211,382.9 shares),
Mr. Reeth (105,691.4 shares), Mr. Consolino
(70,461.1 shares), Mr. Mercer (70,461.1 shares)
and Mr. Ward (70,461.1 shares).
(12)
See Management Directors for biographies
of the directors, including their relationships with certain
beneficial owners of common shares listed in this table.
(13)
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
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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.
(14)
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.
(15)
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.
(16)
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.
(17)
Excludes shares as to which beneficial ownership is disclaimed.
(18)
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.
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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 shares, 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 shares 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.
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Warrants to acquire
Percentage of fully
common shares
diluted shares
Exercise price
Expiration
2,923,920.0
4.15
%
$
17.50
December 12, 2015
1,557,188.0
2.21
%
17.50
December 12, 2015
1,035,776.8
1.47
%
17.50
December 12, 2015
944,177.1
1.34
%
17.50
December 12, 2015
760,978.9
1.08
%
17.50
December 12, 2015
704,610.3
1.00
%
17.50
December 12, 2015
70,461.1
0.10
%
17.50
December 12, 2015
28,184.6
0.04
%
17.50
December 12, 2015
7,045.7
0.01
%
17.50
December 12, 2015
3,882.9
0.01
%
17.50
December 12, 2015
9,707.4
0.01
%
17.50
December 12, 2015
5,824.6
0.01
%
17.50
December 12, 2015
403,561.6
0.57
%
17.50
December 12, 2015
8,455,319.0
12.00
%
(1)
Our director, John J. Hendrickson, is the Managing Director
of SFRi Consultants LLC.
104
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.
105
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106
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107
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108
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109
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110
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 (fair) or below (or if A.M. 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.
111
Table of Contents
112
Table of Contents
113
Table of Contents
114
Table of Contents
115
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116
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.
117
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118
Table of Contents
119
Table of Contents
120
Table of Contents
121
Table of Contents
122
Table of Contents
123
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124
Table of Contents
Number of
common shares
Incorporated
No
Full
Per share
exercise
exercise
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
125
Table of Contents
126
Table of Contents
127
Table of Contents
128
Table of Contents
129
Table of Contents
130
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STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS
131
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Page
F-2
F-3
F-4
F-5
F-6
F-7
F-28
F-29
F-32
F-1
Table of Contents
F-2
Table of Contents
CONSOLIDATED BALANCE SHEETS
As at December 31, 2006 and December 31, 2005
(Expressed in thousands of U.S. dollars, except share
amounts)
December 31,
December 31,
2006
2005
2005; $236,643)
$
844,857
$
236,748
2005; $374,052)
531,530
374,052
63,643
398,488
1,440,030
1,009,288
142,408
28,203
8,245
12,327
6,456
3,233
8,754
1,932
$
1,646,423
$
1,014,453
$
178,824
$
77,363
7,438
12,327
12,850
15,098
14,647
150,000
453,900
14,647
$
10,234
$
10,224
1,048,025
1,039,185
875
105
133,389
(49,708
)
1,192,523
999,806
$
1,646,423
$
1,014,453
F-3
Table of Contents
Year ended
Period ended
December 31,
December 31,
2006
2005
$
540,789
$
(63,696
)
477,093
(170,579
)
306,514
58,021
2,032
(1,102
)
39
2,157
365,590
2,071
91,323
36,072
46,232
2,657
8,789
77
49,122
182,493
51,779
183,097
(49,708
)
(332
)
144
1,102
(39
)
$
183,867
$
(49,603
)
58,477,130
58,423,174
58,874,567
58,423,174
$
3.13
$
(0.85
)
$
3.11
$
(0.85
)
F-4
Table of Contents
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Year Ended December 31, 2006 and the Period from
October 19, 2005 to December 31, 2005
(Expressed in thousands of U.S. dollars)
Year ended,
Period ended
December 31,
December 31,
2006
2005
$
10,224
$
10
10,224
$
10,234
$
10,224
$
1,039,185
$
885
989,773
3,690
136
77
49,122
4,188
154
$
1,048,025
$
1,039,185
$
105
$
770
105
$
875
$
105
$
(49,708
)
$
183,097
(49,708
)
$
133,389
$
(49,708
)
$
1,192,523
$
999,806
F-5
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2006 and the Period from
October 19, 2005 to December 31, 2005
(Expressed in thousands of U.S. dollars)
Year ended
Period ended
December 31,
December 31,
2006
2005
$
183,097
$
(49,708
)
7,880
290
1,102
(39
)
77
49,122
(10,911
)
(937
)
(142,408
)
(28,203
)
(8,245
)
(3,223
)
(3,233
)
(3,073
)
(1,931
)
178,824
77,363
7,438
13,487
1,611
273,205
(4,825
)
449,576
(1,045,523
)
(235,667
)
(146,212
)
(374,052
)
(12,327
)
(754,486
)
(609,719
)
146,250
(12,141
)
1,013,032
12,327
146,436
1,013,032
(334,845
)
398,488
398,488
63,643
398,488
6,802
F-6
Table of Contents
1.
Nature of
the business
2.
Basis of
preparation and consolidation
3.
Significant
accounting policies
F-7
Table of Contents
3.
Significant
accounting
policies
(Continued)
F-8
Table of Contents
3.
Significant
accounting
policies
(Continued)
F-9
Table of Contents
3.
Significant
accounting
policies
(Continued)
F-10
Table of Contents
3.
Significant
accounting
policies
(Continued)
4.
Investments
Year ended
Period ended
December 31,
December 31,
2006
2005
$
57,350
$
1,266
2,583
834
59,933
2,100
(1,912
)
(68
)
$
58,021
$
2,032
F-11
Table of Contents
4.
Investments
(Continued)
Year ended
Period ended
December 31,
December 31,
2006
2005
$
77
$
39
(1,179
)
(1,102
)
39
770
105
$
(332
)
$
144
Gross
Gross
Estimated
Amortized
unrealized
unrealized
fair
cost
gains
losses
value
$
119,579
$
304
$
(152
)
$
119,731
223,079
482
(572
)
222,989
501,324
1,688
(875
)
502,137
843,982
2,474
(1,599
)
844,857
531,530
531,530
$
1,375,512
$
2,474
$
(1,599
)
$
1,376,387
Gross
Gross
Estimated
Amortized
unrealized
unrealized
fair
cost
gains
losses
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
F-12
Table of Contents
4.
Investments
(Continued)
12 months or less
Greater than 12 months
Total
Estimated
Gross
Estimated
Gross
Estimated
Gross
fair
unrealized
fair
unrealized
fair
unrealized
value
losses
value
losses
value
losses
$
56,385
$
(123
)
$
$
$
56,385
$
(123
)
127,547
(527
)
9,111
(45
)
136,658
(572
)
225,561
(767
)
22,832
(137
)
248,393
(904
)
$
409,493
$
(1,417
)
$
31,943
$
(182
)
$
441,436
$
(1,599
)
December 31,
December 31,
2006
2005
Estimated
Estimated
fair
% of
fair
% of
value
total
value
total
$
644,106
76.2%
$
192,627
81.4%
69,087
8.2%
9,861
4.2%
58,285
6.9%
17,538
7.4%
44,136
5.2%
9,779
4.1%
22,759
2.7%
2,770
1.2%
6,484
0.8%
4,173
1.7%
$
844,857
100.0%
$
236,748
100.0%
F-13
Table of Contents
4.
Investments
(Continued)
December 31, 2006
December 31, 2005
Estimated
Estimated
Amortized
fair
Amortized
fair
cost
value
cost
value
$
67,984
$
67,920
$
$
255,808
255,739
140,508
140,601
4,966
5,207
8,301
8,315
13,900
13,854
3,134
3,137
342,658
342,720
151,943
152,053
501,324
502,137
84,700
84,695
$
843,982
$
844,857
$
236,643
$
236,748
5.
Reserves
for losses and loss expenses
Table of Contents
5.
Reserves
for losses and loss
expenses
(Continued)
Year ended
Period ended
December 31,
December 31,
2006
2005
$
$
91,323
91,323
13,960
13,960
77,363
$
77,363
$
6.
Reinsurance
Year ended
Period ended
December 31, 2006
December 31, 2005
Written
Earned
Written
Earned
$
$
$
540,789
361,965
(63,696
)
(55,451
)
$
477,093
$
306,514
$
F-15
Table of Contents
6.
Reinsurance
(Continued)
7.
Share
capital
F-16
Table of Contents
7.
Share
capital
(Continued)
8.
Retirement
plans
9.
Stock
compensation plans
F-17
Table of Contents
9.
Stock
compensation plans
(Continued)
Weighted average
Weighted average
grant date fair
grant date
Options
value
exercise price
2,217,267
$
7.35
$
17.50
351,627
7.36
17.68
2,568,894
$
7.35
$
17.52
657,637
$
7.35
$
17.50
Weighted average
Weighted average
grant date fair
grant date
Options
value
exercise price
$
$
2,217,267
7.35
17.50
2,217,267
$
7.35
$
17.50
$
$
F-18
Table of Contents
9.
Stock
compensation plans
(Continued)
Weighted average
Restricted
grant date fair
shares
value
633,503
$
17.50
100,461
17.68
733,964
$
17.52
$
Weighted
Restricted
average grant
shares
date fair value
$
633,503
17.50
633,503
$
17.50
$
10.
Taxation
F-19
Table of Contents
11.
Debt and
financing arrangements
$
13,604
13,604
13,604
13,604
156,802
$
211,218
In use /
Commitment
outstanding
$
150,000
$
150,000
100,000
200,000
78,323
$
450,000
$
228,323
F-20
Table of Contents
11.
Debt and
financing
arrangements
(Continued)
12.
Commitments
and contingencies
$
829
829
829
829
622
$
3,938
13.
Related
party transactions
F-21
Table of Contents
13.
Related
party transactions
(Continued)
14.
Earnings
per share
F-22
Table of Contents
14.
Earnings
per share
(Continued)
Year ended
Period ended
December 31,
December 31,
2006
2005
$
183,097
$
(49,708
)
58,477,130
58,423,174
244,180
153,257
58,874,567
58,423,174
$
3.13
$
(0.85
)
$
3.11
$
(0.85
)
15.
Statutory
financial data
16.
Subsequent
events
F-23
Table of Contents
17.
Share
consolidation
18.
Segment
information
Year ended
Period ended
December 31, 2006
December 31, 2005
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
$
370,958
68.6%
$
%
104,584
19.3%
%
40,977
7.6%
%
1,729
0.3%
%
18,525
3.4%
%
4,016
0.8%
%
65,247
12.1%
%
$
540,789
100.0%
$
%
F-24
Table of Contents
18.
Segment
information
(Continued)
Year ended
Period ended
December 31, 2006
December 31, 2005
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
$
224,423
41.5%
$
%
38,720
7.2%
%
36,812
6.8%
15,412
2.8%
%
6,326
1.2%
%
2,103
0.4%
%
99,373
18.4%
%
71,432
13.2%
%
145,561
26.9%
%
$
540,789
100.0%
$
%
(1)
Represents risks in two or more geographic zones.
(2)
Not classified as geographic area as marine and aerospace risks
can span multiple geographic areas and are not fixed locations
in some instances.
F-25
Table of Contents
19.
Condensed
unaudited quarterly financial data
Quarters ended
March 31,
June 30,
September 30,
December 31,
2006
2006
2006
2006
$
248,205
$
110,574
$
116,505
$
65,505
(8,238
)
(16,921
)
(38,892
)
355
239,967
93,653
77,613
65,860
(197,559
)
(27,198
)
14,885
39,293
42,408
66,455
92,498
105,153
10,912
13,185
16,272
17,652
(386
)
(354
)
(154
)
(208
)
(4
)
696
369
1,096
52,930
79,982
108,985
123,693
24,337
31,144
11,577
24,265
5,500
8,436
10,638
11,498
7,633
9,733
13,641
15,225
705
978
3,453
3,653
77
38,252
50,291
39,309
54,641
$
14,678
$
29,691
$
69,676
$
69,052
$
0.25
$
0.51
$
1.19
$
1.18
$
0.25
$
0.51
$
1.19
$
1.16
58,460,716
58,482,601
58,482,601
58,482,601
58,509,519
58,591,802
58,651,163
59,745,784
57.4%
46.9%
12.5%
23.1%
31.0%
27.3%
26.2%
25.4%
88.4%
74.2%
38.8%
48.5%
F-26
Table of Contents
19.
Condensed
unaudited quarterly financial
data
(Continued)
Period ended
December 31,
2005(1)
$
2,032
39
2,071
2,657
49,122
51,779
$
(49,708
)
$
(0.85
)
$
(0.85
)
58,423,174
58,423,174
(1)
The Company was formed on October 19, 2005, and
underwriting commenced on January 1, 2006. Accordingly, the
results for 2005 are for a shortened period and do not include
any underwriting income.
F-27
Table of Contents
(expressed in thousands of U.S. dollars)
Amount at which
Amortized
shown on the
cost
Market value
balance sheet
$
119,579
$
119,731
$
119,731
223,079
222,989
222,989
501,324
502,137
502,137
843,982
844,857
844,857
531,530
531,530
531,530
$
1,375,512
$
1,376,387
$
1,376,387
F-28
Table of Contents
F-29
Table of Contents
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2006 and the Period from
October 19, 2005 to December 31, 2005
(Expressed in thousands of U.S. dollars)
Year ended
Period ended
December 31,
December 31,
2006
2005
$
194,117
$
(552
)
25
9
194,142
(543
)
2,276
43
8,692
77
49,122
11,045
49,165
$
183,097
$
(49,708
)
F-30
Table of Contents
Year ended
Period ended
December 31,
December 31,
2006
2005
$
183,097
$
(49,708
)
77
49,122
(194,117
)
552
9
(9
)
479
(118
)
1,008
(1,008
)
9,158
522
43
233
(1,126
)
(146,212
)
(1,000,000
)
(146,212
)
(1,000,000
)
146,250
(12,141
)
1,013,032
134,109
1,013,032
(11,870
)
11,906
11,906
$
36
$
11,906
F-31
Table of Contents
Percentage
Ceded
Assumed
of amount
to other
from other
Net
assumed
Gross
companies
companies
amount
to net
$
$
63,696
$
540,789
$
477,093
113%
$
$
$
$
0%
F-32
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.
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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.
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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.
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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.
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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 the surplus
insurance liability ceded, on a share basis
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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
II-2
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
Form of Opinion of Conyers
Dill & Pearman
8
.1
Form of Opinion of Cahill
Gordon & Reindel
llp
as to certain tax matters
8
.2
Form of 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
Joseph E. (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
Nonqualified Supplemental Deferred
Compensation Plan
10
.24
Director Stock Compensation Plan
10
.25
Employment Agreement between
Validus Reinsurance, Ltd. and Jerome Dill
10
.26
Amended and Restated Restricted
Share Agreement between Validus Holdings, Ltd. and
Edward J. Noonan
10
.27
Amended and Restated Restricted
Share Agreement between Validus Holdings, Ltd. and
George P. Reeth
10
.28
Stock Option Agreement between
Validus Holdings, Ltd. and Edward J. Noonan
10
.29
Stock Option Agreement between
Validus Holdings, Ltd. and George P. Reeth
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
II-3
Table of Contents
Exhibit
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.
**
Previously filed.
Table of Contents
By:
Title:
Chief Executive Officer
Chairman of the Board of Directors
and Chief Executive Officer (Principal Executive Officer)
March 9, 2007
Deputy Chairman and President
March 9, 2007
Vice President (Principal
Financial Chief Financial Officer and Executive Vice President
(Principal Financial Officer and Principal Accounting Officer)
March 9, 2007
Director
March 9, 2007
Director
March 9, 2007
Director
March 9, 2007
Director
March 9, 2007
Director
March 9, 2007
Director
March 9, 2007
Director
March 9, 2007
II-5
Table of Contents
Director
March 9, 2007
Director
March 9, 2007
II-6
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
Form of Opinion of Conyers
Dill & Pearman
8
.1
Form of Opinion of Cahill
Gordon & Reindel
llp
as to certain tax matters
8
.2
Form of 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 Joseph E. (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
Nonqualified Supplemental Deferred
Compensation Plan
10
.24
Director Stock Compensation Plan
10
.25
Employment Agreement between
Validus Reinsurance, Ltd. and Jerome Dill
10
.26
Amended and Restated Restricted
Share Agreement between Validus Holdings, Ltd. and Edward J.
Noonan
10
.27
Amended and Restated Restricted
Share Agreement between Validus Holdings, Ltd. and George P.
Reeth
10
.28
Stock Option Agreement between
Validus Holdings, Ltd. and Edward J. Noonan
10
.29
Stock Option Agreement between
Validus Holdings, Ltd. and George P. Reeth
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.
**
Previously filed.
Exhibit 5.1
DIRECT LINE: 441 299 4965
E-MAIL: graham.collis@conyersdillandpearman.com
OUR REF: GBC/dhm/380423/203173/CorpDocs
YOUR REF:
[________] 2007
Validus Holdings, Ltd.
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs,
VALIDUS HOLDINGS, LTD. (THE "COMPANY")
We have acted as special legal counsel in Bermuda to the Company in connection
with a registration statement on form S-1 (Registration No. 333-[__]) filed with
the U.S. Securities and Exchange Commission (the "Commission") on 16th January
2007 and thereafter amended (the "Registration Statement", which term does not
include any other instrument or agreement whether or not specifically referred
to therein or attached as an exhibit or schedule thereto) relating to the
registration under the U.S. Securities Act of 1933, as amended, (the "Securities
Act") of an aggregate of [__] common shares, par value US$[0.10] each, of which
[__] common shares are being offered by the Company and [__] (the "Issued
Shares") are being offered by certain selling shareholders named in the
prospectus forming part of the Registration Statement (the "Selling
Shareholders") together with an additional [__] common shares, par value
US$[0.10] each, subject to an over-allotment option granted to the underwriters
by the Selling Shareholders (together the "Shares").
For the purposes of giving this opinion, we have examined a copy of the
Registration Statement. We have also reviewed the memorandum of association and
the bye-laws of the Company, each certified by the Secretary of the Company on
[__] 2007, minutes of meetings of the board of directors of the Company held on
[__] 2006 and [__] 2007 (together, the "Minutes") and such other documents and
made such enquiries as to questions of law as we have deemed necessary in order
to render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken, (b) the accuracy and completeness of all factual representations made in the Registration Statement and other
documents reviewed by us, (c) that there is no provision of the law of any jurisdiction, other than Bermuda, which would have any implication in relation to the opinions expressed herein, and (d) that, upon issue of any shares to be sold by the Company, the Company will receive consideration for the full issue price thereof which shall be equal to at least the par value thereof.
Under Bermuda law, in order for a share to be validly issued, it must have been issued in accordance with the Companies Act 1981 and the company's bye-laws, which, in the case of the Company, means that the share must have been issued by a resolution of the board of directors of the Company to a person who has agreed to become a member of the Company. In addition, in order for the share to be fully paid, either the Company must have received the consideration for the full issue price thereof which must be equal at least to the par value thereof or the share must have been issued as a bonus share on capitalisation of the amount standing to the credit of the Company's share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution which amount must be equal at least to the aggregate of the par values of all such bonus shares issued. Under section 65 of the Companies Act 1981 the register of members of a company must have entered therein, inter alia, the names and addresses of the members of the company, a statement of the shares held by each member and, in respect of any share that is not a fully paid share, it must specify the amount paid or agreed to be considered as paid on such share. Under section 68 of the Companies Act 1981 the register of members of a company is prima facie evidence of any matters directed or authorised by the Companies Act 1981 to be inserted therein. Accordingly, our opinion in paragraph 3 below is based solely upon a review of the register of members of the Company dated [_______] 2007, prepared by the Company.
We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than Bermuda. This opinion is to be governed by and construed in accordance with the laws of Bermuda and is limited to and is given on the basis of the current law and practice in Bermuda. This opinion is issued solely for the purposes of the filing of the Registration Statement and the offering of the Shares by the Company and is not to be relied upon in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that:
1. The Company is duly incorporated and existing under the laws of Bermuda in good standing (meaning solely that it has not failed to make any filing with any Bermuda government authority or to pay any Bermuda government fees or tax which would make it liable to be struck off the Register of Companies and thereby cease to exist under the laws of Bermuda).
2. When issued and paid for as contemplated by the Registration Statement, the Shares, other than the Issued Shares, will be validly issued, fully paid and non-assessable (which term means when used herein that no further sums are required to be paid by the holders thereof in connection with the issue of such shares).
3. The Issued Shares are validly issued, fully paid and non-assessable (which term means when used herein that no further sums are required to be paid by the holders thereof in connection with the issue of such shares).
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our firm under the captions "RISK FACTORS - We are a Bermuda company and it may be difficult for you to enforce judgements against us or against our directors and executive officers" and "Validity of Common Shares" in the prospectus forming a part of the Registration Statement. In giving this consent, we do not hereby admit that we are experts within the meaning of Section 11 of the Securities Act or that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Commission promulgated thereunder.
Yours faithfully,
CONYERS DILL & PEARMAN
Exhibit 8.1
(212) 701-3000
__________, 2007
Validus Holdings, Ltd.
19 Par-La-Ville Road
Hamilton HM 11, Bermuda
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1 (the "Registration Statement") you have requested our opinion as to certain U.S. federal income tax matters. Our opinion is set forth in the Registration Statement under the heading "Certain Tax Considerations--U.S. Taxation."
We hereby consent to the filing of this letter as Exhibit 8.1 to the Registration Statement and to the use of our name under the caption "Certain Tax Considerations--U.S. Taxation" in the Registration Statement.
Very truly yours,
Exhibit 8.2
DIRECT LINE: 441 299 4965
E-MAIL: graham.collis@conyersdillandpearman.com
OUR REF: GBC/dhm/280423/203183/CorpDocs
[__________] 2007
Validus Holdings, Ltd.
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Dear Sirs,
VALIDUS HOLDINGS, LTD. (THE "COMPANY")
We have acted as special legal counsel in Bermuda to the Company in connection with a registration statement on form S-1 (Registration No. 333-[_____]) filed with the U.S. Securities and Exchange Commission (the "Commission") on 16th January 2007 and thereafter amended (the "Registration Statement", which term does not include any other instrument or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto) relating to the registration under the U.S. Securities Act of 1933, as amended, (the "Securities Act") of an aggregate of [__________] common shares, par value US$[0.10] each, of which [__________] common shares are being offered by the Company and [__________] (the "Issued Shares") are being offered by certain selling shareholders named in the prospectus forming part of the Registration Statement (the "Selling Shareholders") together with an additional [__________] common shares, par value US$[0.10] each, subject to an over-allotment option granted to the underwriters by the Selling Shareholders (together the "Shares").
For the purposes of giving this opinion, we have examined a copy of the
Registration Statement. We have also reviewed the memorandum of association and
the bye-laws of the Company, each certified by the Secretary of the Company on
[__________] 2007, minutes of meetings of the board of directors of the Company
held on [__________] 2006 and [__________] 2007 (together, the "Minutes") and
such other documents and made such enquiries as to questions of law as we have
deemed necessary in order to render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken, (b) the accuracy and completeness of all factual representations made in the Registration Statement and other documents reviewed by us, (c) that there is no provision of the law of any jurisdiction, other than Bermuda, which would have any implication in relation to the opinions expressed herein.
We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than Bermuda. This opinion is to be governed by and construed in accordance with the laws of Bermuda and is limited to and is given on the basis of the current law and practice in Bermuda. This opinion is issued solely for the purpose of the filing of the Registration Statement and the offering of the Shares by the Company and is not to be relied upon in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that the statements under the captions "Bermuda Taxation - Taxation of Validus and its Subsidiaries" and "Taxation of Shareholders" in the prospectus forming part of the Registration Statement, to the extent that they constitute statements of Bermuda law, are accurate in all material respects and that such statements constitute our opinion.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our firm under the caption "Certain Tax Considerations" in the prospectus forming part of the Registration Statement. In giving this consent, we do not hereby admit that we are experts within the meaning of Section 11 of the Securities Act or that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Commission promulgated thereunder.
Yours faithfully,
Exhibit 10.10
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated as of December 12th, 2005 between Validus Holdings, Ltd., a Bermuda corporation (the "Company"), and Edward Noonan (the "Executive").
WHEREAS, the parties hereto wish to amend and restate the employment agreement dated as of December 12, 2005 between the Company and the Executive as set forth herein, effective as of December 12, 2005.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Subsidiaries; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Subsidiaries) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to substantially perform his duties and responsibilities hereunder 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 Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; (h) the Executive's failure to use his best efforts to obtain, maintain or renew the work permit described in Section 3.02 below in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof; or (i) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public
domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.
"Date of Termination" has the meaning set forth in Section 5.01.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) a material breach of this Agreement by the Company without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction, in the aggregate, in the Executive's Base Salary and his benefits set forth in Section 4.03 (b), (d), (e), (f) and (g) below; (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, including removal of the Executive by the Company from his position as either Chairman or Chief Executive Officer of the Company, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith, without the same being corrected within ten (10) days after being given written notice thereof; or (d) if requested in writing by the Executive at any time after the date that is eighteen (18) months after the Start Date (as defined below), the failure by the Company and the Executive to agree, within sixty (60) days after receipt by the Company of such written request, to the terms and conditions of the Executive serving solely as the Nonexecutive Chairman of the Company; provided, however, that, notwithstanding any provision of this Agreement to the contrary, the Executive must give written notice of his intention to terminate his employment for Good Reason within sixty (60) days after the act or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such act or omission.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Notice of Termination" has the meaning set forth in Section 5.04.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement 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. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, twenty (20) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a twenty (20) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated twenty (20) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01 Employment Period. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date of the Offering (as defined in the Offering Memorandum relating to Company equity dated October 13, 2005, as supplemented) (the "Start Date") and ending on the Date of Termination as defined in Section 5.01 below (the "Employment Period").
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01 Position and Duties. Effective on the later of the Start Date or the date the work permit described in Section 3.02 is issued to the Executive, the Executive shall serve as Chairman and Chief Executive Officer of the Company, render such underwriting, administrative, financial and other executive and managerial services to the Company which are consistent with Executive's position and have such responsibilities, powers and duties as may from time to time be prescribed by the Board of Directors of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without prior written consent of the Board of Directors of the Company; provided, however, the Executive may continue to serve as a director of United America Indemnity, Ltd. and Central Insurance Group.
SECTION 3.02 Work Permits. The Executive shall use his best efforts to assist the Company in obtaining, maintaining and renewing a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03 Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda or at such other place in Bermuda as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of Bermuda on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
SECTION 3.04 Relocation. The Company shall reimburse the Executive for all reasonable expenses incurred by him in relocating his household items to Bermuda, not to exceed an amount to be agreed by the parties hereto, subject to the Company's requirements with respect to reporting and documentation of such expenses.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01 Base Salary. During the Employment Period, the
Executive's base salary will be $950,000 per annum (as may be adjusted pursuant
to this paragraph, the "Base Salary"). Within ten (10) days after the Start
Date, Base Salary shall also be paid for the period from November 15, 2005 to
the Start Date. The Base Salary will be payable monthly on the last working day
of each month in arrears in twelve (12) equal installments. Annually during the
Employment Period the Company shall review with the Executive his job
performance and compensation, and if deemed appropriate by the Board of
Directors of the Company or its delegate, in its discretion, the Executive's
Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00
p.m., Monday to Friday. The Executive's salary has been computed to reflect that
his regular duties are likely, from time to time, to require more than forty
(40) hours per week and the Executive shall not be entitled to receive any
additional remuneration for any such additional hours.
SECTION 4.02 Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 150% of his Base Salary. The Board of Directors of the Company may, at any time and from time to time acting in its sole discretion, pay to the Executive an additional bonus.
SECTION 4.03 Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the public holidays referenced in the Public Holidays Act of 1947 and fifteen (15) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period;
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents;
(d) a housing allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $22,000 per month, payable in advance;
(e) an automobile allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $900 per month;
(f) direct payment or reimbursement of initiation fees (any resulting equity interest or redemption right in which shall belong to, be controlled by, and be paid to, the Company) for, and the annual dues for membership in, two (2) clubs in Bermuda;
(g) reimbursement for reasonable expenses incurred by the Executive for round-trip non-business trips by the Executive to and from Bermuda (the benefit under this Section 4.03(g) being in addition to any reimbursement of air fare described in Section 4.04, below) in accordance with the Company's policies and procedures for such family trips as in effect from time to time; and
(h) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
Upon termination of the Employment Period, to the extent permitted under terms of the applicable plan, the Executive may elect continuation of the benefits described in subclause (a) above through the plans provided by the Company at the Executive's own expense until such time as the Executive commences participation in another employer's comparable group plans. The Executive agrees to immediately notify the Company at the time he commences participation in another such plan. The amount of reimbursement provided for in Section 4.03(d) above shall be calculated and paid to the Executive on an after-tax basis to the Executive, taking into account any deduction, credit or exclusion from income allowable to the Executive in respect of such amount.
SECTION 4.04 Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Company's requirements with respect to reporting and documentation of expenses. The Company shall also reimburse the Executive for reasonable legal fees incurred by the Executive in negotiating and administering this Agreement, subject to the Company's requirements with respect to reporting and documentation of expenses.
SECTION 4.05 Stock Options and Restricted Stock. The Company shall grant to the Executive a number of shares of restricted common stock of the Company and an option to acquire a number of shares of the Company's common stock, such that the total number of shares of restricted common stock and common stock covered by such option, shall total 1.35% of the outstanding equity of the Company immediately following completion of the Offering on a fully diluted basis. Except as otherwise provided in Section 5.03 below, the terms of such restricted common stock and stock option, including terms pertaining to vesting, exercise and cancellation, shall be as set forth in the equity incentive plan to be established by the Company (the "Incentive Plan") and the applicable award agreements, the forms of which are attached hereto. The parties hereto acknowledge that the grants of shares of restricted common stock of the Company and options to acquire shares of the Company's common stock provided for in this Section 4.05 have been made to the Executive.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01 Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the "Date of Termination" shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the twelve (12) month anniversary of the Executive providing Notice of Termination specifying his resignation for Good Reason to the Company; (d) the twelve (12) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; and (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.
SECTION 5.02 Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 through the Date of Termination and, payable at the times such bonuses are payable to other employees of the Company, any unpaid bonus with respect to the year prior to the year in which the Notice of Termination is provided; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Company or stock options of the Company granted to the Executive shall vest on or following the date the Executive provides Notice of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.03 Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and the benefits set
forth in Section 4.03 through the Date of Termination and, payable at the times
such bonuses are payable to other employees of the Company, any unpaid bonus
with respect to the year prior to the year in which the Notice of Termination is
provided; (b) vest in any shares of restricted stock of the Company and any
Company stock options granted to the Executive through the Date of Termination;
(c) receive reimbursement for all Reimbursable Expenses incurred by the
Executive prior to the Date of Termination; (d) in the event the Employment
Period shall be terminated under this Section 5.03 other than by the Company
with Cause, receive a bonus for the year Notice of Termination is given,
prorated for the number of full or partial months during which the Executive
provided services to the Company, payable at the time such bonus is payable to
other employees of the Company; and (e) in the event the Employment Period shall
be terminated either by the Executive for Good Reason or by the Company without
Cause and the Company does not elect under Section 5.04 below that the Executive
perform no duties hereunder after Notice of Termination, receive an amount equal
to a full year bonus (calculated at the target level) for the year prior to the
year of termination, payable on the Date of Termination. The Executive's
entitlements under all other benefit plans and programs of the Company shall be
as determined thereunder.
SECTION 5.04 Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated. Following the provision of a Notice of Termination by the Company, the Company may direct, in its sole and exclusive discretion, that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries. Following the provision of a Notice of Termination by the Executive for Good Reason and the absence of a correction by the Company of the circumstance constituting Good Reason in accordance with Section 1.01 above, the Executive may elect that he perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01 Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01 Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01 Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Subsidiaries, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01 Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Company or its Subsidiaries, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending one (1) year after the Date of Termination (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any
business competing with the businesses of the Company or its Subsidiaries as
such businesses exist or are in process or being planned as of the Date of
Termination, within any geographical area in which the Company or its
Subsidiaries engage or plan to engage in such businesses; provided, however,
that the portion of the Noncompetition Period following the Date of Termination
shall be reduced by the period of time, if any, between the date of Notice of
Termination is given and the Date of Termination; provided, however, the
Executive may continue to serve as a director of United America Indemnity, Ltd.
and Central Insurance Group. It shall not be considered a violation of this
Section 9.01 for the Executive to be a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as the Executive has no active participation in the business of such
corporation.
SECTION 9.02 Nonsolicitation of Employees. The Executive hereby agrees that (a) during the Employment Period and for a period of one (1) year after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto.
SECTION 9.03 Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.
SECTION 9.04 Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01 Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION
SECTION 11.01 Executive Representations. The Executive hereby
represents and warrants to the Company that (a) the execution, delivery and
performance of this Agreement by the Executive does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which the Executive is a party or by
which he is bound, (b) except for agreements provided to the Company by the
Executive, the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person, and
(c) upon the execution and delivery of this Agreement by the Company, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms. Notwithstanding Section 11.02 below, in the event
that any action is brought against Executive involving any breach of any
employment agreement, noncompetition agreement or confidentiality agreement with
any other Person, the Executive shall bear his own costs incurred in defending
such action, including but not limited to, court fees, arbitration costs,
mediation costs, attorneys' fees and disbursements.
SECTION 11.02 General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02 Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company
and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the manner set forth herein. If to the Company: Validus Holdings, Ltd. Mintflower Place 8 Par-La-Ville Road, Third Floor Hamilton HMO8 Bermuda Attn: General Counsel |
Copies (which shall not constitute notice) of notices to the Company shall also be sent to:
Cahill Gordon & Reindel LLP 80 Pine Street
New York, New York 10005 Attn: Glenn J. Waldrip, Jr., Esq
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09 No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12 Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND (EXCEPT AS OTHERWISE SET FORTH IN SECTION 12.15 BELOW) THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF BERMUDA.
SECTION 12.14 Section 409A. It is intended that this Agreement will comply with Section 409A of the United States Internal Revenue Code of 1986, as amended (the "Code") and any regulations and guidelines issued thereunder, to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent. If an amendment of the Agreement is necessary in order for it to comply with Section 409A of the Code, the parties hereto will negotiate in good faith to amend the Agreement in a manner that preserves the original intent of the parties to the extent reasonably possible. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed to be a "specified
employee" within the meaning of that term under Section 409A(a)(2)(B) of the
Code, then with regard to any payment or the provisions of any benefit that is
required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, such
payment or benefit shall not be made or provided prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of his "separation
from service" (as such term is defined in Treasury Regulations issued under
Section 409A), or (ii) the date of his death (the "Delay Period"). Upon the
expiration of the Delay Period, all payments and benefits delayed pursuant to
this Section 12.14 (whether they would have otherwise been payable in a single
sum or in installments in the absence of such delay) shall be paid or reimbursed
to the Executive in a lump sum, and any remaining payments and benefits due
under this Agreement shall be paid or provided in accordance with the normal
payment dates specified for them herein. Notwithstanding the foregoing, to the
extent that the foregoing applies to the provision of any ongoing welfare
benefits to the Executive that would not be required to be delayed if the
premiums therefor were paid by the Executive, the Executive shall pay the full
costs of premiums for such welfare benefits during the Delay Period and the
Company shall pay the Executive an amount equal to the amount of such premiums
paid by the Executive during the Delay Period promptly after its conclusion.
SECTION 12.15 Arbitration. Except as otherwise set forth in Section 10.01 above, in the event that a dispute shall arise between the parities concerning this Agreement, such dispute shall be submitted to the Judicial Arbitration and Mediation Services, Inc ("JAMS") for resolution in a confidential private arbitration in accordance with the comprehensive rules and procedures of JAMS, including the internal appeal process provided for in Rule 34 of the JAMS rules with respect to any initial judgment rendered in an arbitration. Any such arbitration proceeding shall take place in Philadelphia, Pennsylvania before a single arbitrator. The arbitrator shall be acceptable to both the Company and the Executive. However, if the parties cannot agree on an acceptable arbitrator, the dispute shall be decided by a panel of three arbitrators, one appointed by each of the parties and the third appointed by the other two arbitrators or, if the arbitrators do not agree, appointed by the JAMS. Each party shall each bear their respective costs (including attorney's fees) and shall split the fee of the arbitrator; provided, however, that if the Executive prevails in the dispute, the Company shall be responsible for the reasonable attorney's fees incurred by the Executive in connection with the dispute. Judgment upon the final award rendered by such arbitrator, after giving effect to the JAMS internal appeal process, may be entered in any court having jurisdiction thereof. If JAMS is not in business or is no longer providing arbitration services, then the American Arbitration Association shall be substituted for JAMS for the purposes of the foregoing provisions. Each party agrees that it shall maintain confidentiality in respect to any arbitration between them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the ___day of February, 2007, to be effective as of the date and year first above written.
VALIDUS HOLDINGS, LTD.
EDWARD NOONAN
Exhibit 10.11
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated as of December 12, 2005 between Validus Holdings, Ltd., a Bermuda corporation (the "Company"), and George Reeth (the "Executive").
WHEREAS, the parties hereto wish to amend and restate the employment agreement dated as of December 12, 2005 between the Company and the Executive as set forth herein, effective as of December 12, 2005.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Subsidiaries; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Subsidiaries) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to adequately perform his duties and responsibilities hereunder 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 Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; (h) the Executive's failure to use his best efforts to obtain, maintain or renew the work permit described in Section 3.02 below in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof; or (i) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public
domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.
"Date of Termination" has the meaning set forth in Section 5.01.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) a material breach of this Agreement by the Company without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction, in the aggregate, in the Executive's Base Salary and his benefits set forth in Section 4.03 (b), (d), (e), (f), (g) and (h) below; or (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith, without the same being corrected within ten (10) days after being given written notice thereof; provided, however, that, notwithstanding any provision of this Agreement to the contrary, the Executive must give written notice of his intention to terminate his employment for Good Reason within sixty (60) days after the act or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such act or omission.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Notice of Termination" has the meaning set forth in Section 5.04.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement 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. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or combination thereof; or
(b) if a partnership, limited liability company, association or other business
entity, twenty (20) percent or more of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes of this definition, a Person or Persons will
be deemed to have a twenty (20) percent or more ownership interest in a
partnership, limited liability company, association or other business entity if
such Person or Persons are allocated twenty (20) percent or more of partnership,
limited liability company, association or other business entity gains or losses
or control the managing director or member or general partner of such
partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01 Employment Period. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date of the Offering (as defined in the Offering Memorandum relating to Company equity dated October 13, 2005, as supplemented) (the "Start Date") and ending on the Date of Termination as defined in Section 5.01 below (the "Employment Period").
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01 Position and Duties. Effective on the later of the Start Date or the date the work permit described in Section 3.02 is issued to the Executive, the Executive shall serve as President of the Company, render such underwriting, administrative, financial and other executive and managerial services to the Company which are consistent with Executive's position and have such responsibilities, powers and duties as may from time to time be prescribed by the Chief Executive Officer or the Board of Directors of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. The Company may direct, in its sole and exclusive discretion, that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without prior written consent of the Company.
SECTION 3.02 Work Permits. The Executive shall use his best efforts to assist the Company in obtaining, maintaining and renewing a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03 Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda or at such other place in Bermuda as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of Bermuda on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
SECTION 3.04 Relocation. The Company shall reimburse the Executive for all reasonable expenses incurred by him in relocating his household items to Bermuda, not to exceed an amount to be agreed by the parties hereto, subject to the Company's requirements with respect to reporting and documentation of such expenses.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01 Base Salary. During the Employment Period, the Executive's base salary will be $600,000 per annum (the "Base Salary"). Within ten (10) days after the Start Date, Base Salary shall also be paid for the period from November 15, 2005 to the Start Date. The Base Salary will be payable monthly on the last working day of each month in arrears in twelve (12) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than forty (40) hours per week and the Executive shall not be entitled to receive any additional remuneration for any such additional hours.
SECTION 4.02 Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 150% of his Base Salary. The Board of Directors of the Company may, at any time and from time to time acting in its sole discretion, pay to the Executive an additional bonus.
SECTION 4.03 Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the public holidays referenced in the Public Holidays Act of 1947 and fifteen (15) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period;
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions
and overall administration of such plans as set forth from time to time in the applicable plan documents;
(d) a housing allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $20,000 per month, payable monthly in advance, and reimbursement for the Executive's Bermuda housing deposit (such amount to be repaid by the Executive to the Company within thirty (30) days after the earlier of the date the deposit is returned to the Executive or the date of any termination of employment of the Executive);
(e) an automobile allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $900 per month;
(f) direct payment or reimbursement of initiation fees (any resulting equity interest or redemption right in which shall belong to, be controlled by, and be paid to, the Company) for, and the annual dues for membership in, two (2) clubs in Bermuda;
(g) reimbursement for round-trip non-business trips by the Executive and each member of his family residing with him to and from Bermuda (the benefit under this Section 4.03(g) being in addition to any reimbursement of air fare described in Section 4.04, below) in accordance with the Company's policies and procedures for such family trips as in effect from time to time, in an aggregate amount not to exceed $30,000 per annum;
(h) reimbursement for tuition expenses incurred by the Executive for his children who are attending school in Bermuda, up to $30,000 per annum; and
(i) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
Upon termination of the Employment Period, to the extent permitted under terms of the applicable plan, the Executive may elect continuation of the benefits described in subclause (a) above through the plans provided by the Company at the Executive's own expense until such time as the Executive commences participation in another employer's comparable group plans. The Executive agrees to immediately notify the Company at the time he commences participation in another such plan. The amount of reimbursement provided for in Section 4.03(d) above shall be calculated and paid to the Executive on an after-tax basis to the Executive, taking into account any deduction, credit or exclusion from income allowable to the Executive in respect of such amount.
SECTION 4.04 Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Company's requirements with respect to reporting and documentation of expenses.
SECTION 4.05 Stock Options and Restricted Stock. The Company shall grant to the Executive a number of shares of restricted common stock of the Company and an option to acquire a number of shares of the Company's common stock, such that the total number of
shares of restricted common stock and common stock covered by such option, shall total .675% of the outstanding equity of the Company immediately following completion of the Offering on a fully diluted basis. Except as otherwise provided in Section 5.03 below, the terms of such restricted common stock and stock option, including terms pertaining to vesting, exercise and cancellation, shall be as set forth in the equity incentive plan to be established by the Company (the "Incentive Plan") and the applicable award agreements. The parties hereto acknowledge that the grants of shares of restricted common stock of the Company and options to acquire shares of the Company's common stock provided for in this Section 4.05 have been made to the Executive.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01 Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the "Date of Termination" shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the twelve (12) month anniversary of the Executive providing Notice of Termination specifying his resignation for Good Reason to the Company; (d) the twelve (12) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; and (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.
SECTION 5.02 Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 through the Date of Termination; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Company or stock options of the Company granted to the Executive shall vest on or following the date the Executive provides Notice of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.03 Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 above (i) in the case of termination by the Executive for Good Reason or by the Company with or without Cause, through the Date of Termination, and (ii) in the case of termination due to the Executive's Permanent Disability or death, through the six (6) month anniversary of the Date of Termination; (b) vest in any shares of restricted stock of the Company and any Company stock options granted to the Executive through the Date of Termination; and (c) receive reimbursement for all Reimbursable Expenses incurred by the Executive prior to the
Date of Termination. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.04 Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01 Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01 Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01 Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Subsidiaries, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01 Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Company or its Subsidiaries, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending one (1) year after the Date of Termination (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Company or its Subsidiaries engage or plan to engage in such businesses; provided, however, that the portion of the Noncompetition Period following the Date of Termination shall be reduced by the period of time, if any, between the date of Notice of Termination is given and the Date of Termination. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
SECTION 9.02 Nonsolicitation of Employees. The Executive hereby agrees that (a) during the Employment Period and for a period of one (1) year after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto.
SECTION 9.03 Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured,
reinsured, reinsurer, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.
SECTION 9.04 Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01 Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION
SECTION 11.01 Executive Representations. The Executive hereby
represents and warrants to the Company that (a) the execution, delivery and
performance of this Agreement by the Executive does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which the Executive is a party or by
which he is bound, (b) except for agreements provided to the Company by the
Executive, the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person, and
(c) upon the execution and delivery of this Agreement by the Company, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms. Notwithstanding Section 11.02 below, in the event
that any action is brought against Executive involving any breach of any
employment agreement, noncompetition agreement or confidentiality agreement with
any other Person, the Executive shall bear his own costs incurred in defending
such action, including but not limited to, court fees, arbitration costs,
mediation costs, attorneys' fees and disbursements.
SECTION 11.02 General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02 Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the manner set forth herein. If to the Company: Validus Holdings, Ltd. Mintflower Place 8 Par-La-Ville Road, Third Floor Hamilton HMO8 Bermuda Attn: General Counsel |
Copies (which shall not constitute notice) of notices to the Company shall also be sent to:
Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attn: Glenn J. Waldrip, Jr., Esq
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09 No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or
foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12 Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF BERMUDA.
SECTION 12.14 Section 409A. It is intended that this Agreement will
comply with Section 409A of the United States Internal Revenue Code of 1986, as
amended (the "Code") and any regulations and guidelines issued thereunder, to
the extent the Agreement is subject thereto, and the Agreement shall be
interpreted on a basis consistent with such intent. If an amendment of the
Agreement is necessary in order for it to comply with Section 409A of the Code,
the parties hereto will negotiate in good faith to amend the Agreement in a
manner that preserves the original intent of the parties to the extent
reasonably possible. Notwithstanding any provision to the contrary in this
Agreement, if the Executive is deemed to be a "specified employee" within the
meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard
to any payment or the provisions of any benefit that is required to be delayed
pursuant to Section 409A(a)(2)(B) of the Code, such payment or benefit shall not
be made or provided prior to the earlier of (i) the expiration of the six
(6)-month period measured from the date of his "separation from service" (as
such term is defined in Treasury Regulations issued under Section 409A), or (ii)
the date of his death (the "Delay Period"). Upon the expiration of the Delay
Period, all payments and benefits delayed pursuant to this Section 12.14
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein. Notwithstanding the foregoing, to the extent that the
foregoing applies to the provision of any ongoing welfare benefits to the
Executive that would not be required to be delayed if the premiums therefor were
paid by the Executive, the Executive shall pay the full costs of premiums for
such welfare benefits during the Delay Period and the Company shall pay the
Executive an amount equal to the amount of such premiums paid by the Executive
during the Delay Period promptly after its conclusion.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the ___day of February, 2007, to be effective as of the date and year first above written.
VALIDUS HOLDINGS, LTD.
GEORGE REETH
Exhibit 10.12
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated as of March 3, 2006 between Validus Holdings, Ltd., a Bermuda corporation (the "Company"), and Joseph E. (Jeff) Consolino (the "Executive").
WHEREAS, the parties hereto wish to amend and restate the employment agreement dated as of March 3, 2006 between the Company and the Executive as set forth herein, effective as of March 3, 2006.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Subsidiaries; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Subsidiaries) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to substantially perform his duties and responsibilities hereunder (other than by reason of disability due to physical or mental illness) 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 Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; (h) the Executive's failure to use his best efforts to obtain, maintain or renew the work permit described in Section 3.02 below in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof; or (i) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain
through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.
"Date of Termination" has the meaning set forth in Section 5.01.
"Dollars" or "$" means United States dollars.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) a material breach of this Agreement by the Company without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction, in the aggregate, in the Executive's Base Salary and his benefits set forth in Section 4.03 (b), (d), (e), (f), (g) and (h) below; (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith, without the same being corrected within ten (10) days after being given written notice thereof; (d) a change such that the Executive no longer reports directly to the Company's Chief Executive Officer; or (e) Edward J. Noonan resigns for Good Reason (as defined in his employment agreement with the Company) or is terminated by the Company other than for Cause (as defined in his employment agreement with the Company); provided, however, that, notwithstanding any provision of this Agreement to the contrary, the Executive must give written notice of his intention to terminate his employment for Good Reason within sixty (60) days after the act or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such act or omission.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Notice of Termination" has the meaning set forth in Section 5.04.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement 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. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, twenty (20) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a twenty (20) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated twenty (20) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01 Employment Period. The Company shall employ the
Executive, and the Executive shall accept employment with the Company, upon the
terms and conditions set forth in this Agreement for the period beginning March
20, 2006 (the "Start Date") and ending on the Date of Termination as defined in
Section 5.01 below (the "Employment Period").
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01 Position and Duties. Effective on the later of the Start Date or the date the work permit described in Section 3.02 is issued to the Executive, the Executive shall serve as Chief Financial Officer of the Company, render such administrative, financial and other executive and managerial services to the Company which are consistent with Executive's position as the Chief Financial Officer and have such responsibilities, powers and duties as may from time to time be prescribed by the Chief Executive Officer of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without prior written consent of the Company; provided, however, the Executive may serve on the boards of directors of up to two companies unaffiliated with the Company, which shall be identified to the Company in writing by the Executive, the Board of Directors of The School of Risk Management and Actuarial Science and a reasonable number of trade associations and charitable organizations, so long as such service on boards of directors, trade associations or charitable
organizations does not interfere with the Executive's duties or responsibilities or result in a conflict with the Company or its Subsidiaries.
SECTION 3.02 Work Permits. The Executive shall use his best efforts to assist the Company in obtaining, maintaining and renewing a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03 Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda or at such other place in Bermuda as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of Bermuda on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
SECTION 3.04 Relocation. The Company shall reimburse the Executive for all reasonable expenses incurred by him in relocating his and his immediate family's household items to Bermuda, not to exceed an amount to be agreed by the parties hereto, subject to the Company's requirements with respect to reporting and documentation of such expenses.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01 Base Salary. During the Employment Period, the Executive's base salary will be $500,000 per annum (the "Base Salary"). The Base Salary will be payable monthly on the last working day of each month in arrears in twelve (12) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than forty (40) hours per week and the Executive shall not be entitled to receive any additional remuneration for any such additional hours.
SECTION 4.02 Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 150% of his Base Salary. The Board of Directors of the Company may, at any time and from time to time acting in its sole discretion, pay to the Executive an additional bonus.
SECTION 4.03 Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the public holidays referenced in the Public Holidays Act of 1947 and fifteen (15) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period;
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents;
(d) a housing allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $18,000 per month, payable monthly in advance, and reimbursement for the Executive's Bermuda housing deposit (such amount to be repaid by the Executive to the Company within thirty (30) days after the earlier of the date the deposit is returned to the Executive or the date of any termination of employment of the Executive);
(e) an automobile allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $900 per month;
(f) direct payment or reimbursement of initiation fees (any resulting equity interest or redemption right in which shall belong to, be controlled by, and be paid to, the Company) for, and the annual dues for family membership in, two (2) clubs in Bermuda;
(g) a travel allowance for round-trip non-business trips by the Executive and each member of his family residing with him to and from Bermuda (the benefit under this Section 4.03(g) being in addition to any reimbursement of air fare described in Section 4.04, below) equal to $25,000 per annum;
(h) reimbursement for tuition expenses incurred by the Executive for his children who are attending school in Bermuda; and
(i) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
Upon termination of the Employment Period, to the extent permitted under terms of the applicable plan, the Executive may elect continuation of the benefits described in subclause (a) above through the plans provided by the Company at the Executive's own expense until such time as the Executive commences participation in another employer's comparable group plans. The Executive agrees to immediately notify the Company at the time he commences participation in another such plan. The amount of reimbursement provided for in Section 4.03(d) above shall be calculated and paid to the Executive on an after-tax basis to the Executive, taking into account any deduction, credit or exclusion from income allowable to the Executive in respect of such amount.
SECTION 4.04 Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Company's requirements with respect to reporting and documentation of expenses. The Company shall also reimburse the Executive for reasonable legal fees and expenses incurred by the Executive in negotiating and administering this Agreement, subject to the Company's requirements with respect to reporting and documentation of expenses.
SECTION 4.05 Stock Options and Restricted Stock. The Company shall grant to the Executive a number of shares of restricted common stock of the Company and an option to acquire a number of shares of the Company's common stock, such that the total number of shares of restricted common stock and common stock covered by such option, shall total .45% of the outstanding equity of the Company immediately following completion of the Offering on a fully diluted basis. Of such .45% total, .10% shall be granted in the form of restricted common stock, and the remaining .35% shall be granted in the form of options to acquire common stock. Except as otherwise provided in Section 5.03 below, the terms of such restricted common stock and stock option, including terms pertaining to vesting, exercise and cancellation, shall be as set forth in the equity incentive plan established by the Company (the "Incentive Plan") and the applicable award agreements, the forms of which are attached hereto. The parties hereto acknowledge that the grants of shares of restricted common stock of the Company and options to acquire shares of the Company's common stock provided for in this Section 4.05 have been made to the Executive.
SECTION 4.06 Schools. The Company shall make reasonable efforts to assist the Executive in placing his children in schools in Bermuda which the Executive shall designate.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01 Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the "Date of Termination" shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the twelve (12) month anniversary of the Executive providing Notice of Termination specifying his resignation for Good Reason to the Company; (d) the twelve (12) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; and (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.
SECTION 5.02 Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary
and benefits set forth in Section 4.03 through the Date of Termination; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Company or stock options of the Company granted to the Executive shall vest on or following the date the Executive provides Notice of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.03 Termination for Other Reasons. If the Employment Period
shall be terminated by the Executive for Good Reason, by the Company with or
without Cause, as a result of the Executive's Permanent Disability or upon the
Executive's death, the Executive (or his estate, in the case of death) shall:
(a) continue to receive Base Salary and benefits set forth in Section 4.03 above
(i) in the case of termination by the Executive for Good Reason or by the
Company with or without Cause, through the Date of Termination, and (ii) in the
case of termination due to the Executive's Permanent Disability or death,
through the six (6) month anniversary of the Date of Termination; (b) continue
to vest in any shares of restricted stock of the Company and any Company stock
options granted to the Executive through the Date of Termination; (c) continue
to receive reimbursement for all Reimbursable Expenses incurred by the Executive
prior to the Date of Termination; (d) in the event the Employment Period shall
be terminated under this Section 5.03 other than by the Company with Cause,
receive a bonus for the year Notice of Termination is given, prorated for the
number of full or partial months during which the Executive provided services to
the Company, payable at the time such bonus is payable to other employees of the
Company; and (e) in the event the Employment Period shall be terminated under
this Section 5.03 after more than two years from the Start Date other than by
the Company with Cause, receive reimbursement for all reasonable expenses
incurred by him in relocating his and his family's household items from Bermuda
to the United States, subject to the Company's requirements with respect to
reporting and documentation of such expenses. The Executive's entitlements under
all other benefit plans and programs of the Company shall be as determined
thereunder.
SECTION 5.04 Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated. Following the provision of a Notice of Termination by the Company, the Company may direct, in its sole and exclusive discretion, that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries. Following the provision of a Notice of Termination by the Executive for Good Reason and the absence of a correction by the Company of the circumstance constituting Good Reason in accordance with Section 1.01 above, the Executive may elect, in his sole and exclusive discretion, that he perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01 Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01 Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01 Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Subsidiaries, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company,
will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.
ARTICLE 9
NONSOLICITATION
SECTION 9.01 Nonsolicitation of Employees. The Executive hereby agrees that (a) during the Employment Period and for a period of one (1) year after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto.
SECTION 9.02 Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.
SECTION 9.03 Enforcement. If, at the enforcement of Sections 9.01 or 9.02, a court holds that the duration or scope restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration or scope reasonable under such circumstances will be substituted for the stated duration or scope and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration and scope permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01 Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION
SECTION 11.01 Executive Representations. The Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement
by the Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which he is bound, (b) except for agreements provided to the Company by the Executive, the Executive is not a party to or bound by any employment agreement, noncompetition agreement or confidentiality agreement with any other Person, and (c) upon the execution and delivery of this Agreement by the parties hereto, this Agreement will be the valid and binding obligation of the Executive, enforceable in accordance with its terms. Notwithstanding Section 11.02 below, in the event that any action is brought against Executive involving any breach of any employment agreement, noncompetition agreement or confidentiality agreement with any other Person, the Executive shall bear his own costs incurred in defending such action, including but not limited to, court fees, arbitration costs, mediation costs, attorneys' fees and disbursements.
SECTION 11.02 General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02 Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not,
provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the manner set forth herein. If to the Company: Validus Holdings, Ltd. Clarendon House 2 Church Street Hamilton HM11 Bermuda Attn: General Counsel |
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09 No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12 Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND (EXCEPT AS OTHERWISE SET FORTH IN SECTION 12.15 BELOW) THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF BERMUDA.
SECTION 12.14 Section 409A. It is intended that this Agreement will
comply with Section 409A of the United States Internal Revenue Code of 1986, as
amended (the "Code") and any regulations and guidelines issued thereunder, to
the extent the Agreement is subject thereto, and the Agreement shall be
interpreted on a basis consistent with such intent. If an amendment of the
Agreement is necessary in order for it to comply with Section 409A of the Code,
the parties hereto will negotiate in good faith to amend the Agreement in a
manner that preserves the original intent of the parties to the extent
reasonably possible. Notwithstanding any provision to the contrary in this
Agreement, if the Executive is deemed to be a "specified employee" within the
meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard
to any payment or the provisions of any benefit that is required to be delayed
pursuant to Section 409A(a)(2)(B) of the Code, such payment or benefit shall not
be made or provided prior to the earlier of (i) the expiration of the six
(6)-month period measured from the date of his "separation from service" (as
such term is defined in Treasury Regulations issued under Section 409A), or (ii)
the date of his death (the "Delay Period"). Upon the expiration of the Delay
Period, all payments and benefits delayed pursuant to this Section 12.14
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein. Notwithstanding the foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare benefits to the Executive that would not be required to be delayed if the premiums therefor were paid by the Executive, the Executive shall pay the full costs of premiums for such welfare benefits during the Delay Period and the Company shall pay the Executive an amount equal to the amount of such premiums paid by the Executive during the Delay Period promptly after its conclusion.
SECTION 12.15 Arbitration. Except as otherwise set forth in Section 10.01 above, in the event that a dispute shall arise between the parities concerning this Agreement, such dispute shall be submitted to the Judicial Arbitration and Mediation Services, Inc ("JAMS") for resolution in a confidential private arbitration in accordance with the comprehensive rules and procedures of JAMS, including the internal appeal process provided for in Rule 34 of the JAMS rules with respect to any initial judgment rendered in an arbitration. Any such arbitration proceeding shall take place in New York City before a single arbitrator. The arbitrator shall be acceptable to both the Company and the Executive. However, if the parties cannot agree on an acceptable arbitrator, the dispute shall be decided by a panel of three arbitrators, one appointed by each of the parties and the third appointed by the other two arbitrators or, if the arbitrators do not agree, appointed by the JAMS. Each party shall each bear their respective costs (including attorney's fees) and shall split the fee of the arbitrator; provided, however, that if the Executive prevails in the dispute, the Company shall be responsible for the reasonable attorney's fees incurred by the Executive in connection with the dispute. Judgment upon the final award rendered by such arbitrator, after giving effect to the JAMS internal appeal process, may be entered in any court having jurisdiction thereof. If JAMS is not in business or is no longer providing arbitration services, then the American Arbitration Association shall be substituted for JAMS for the purposes of the foregoing provisions. Each party agrees that it shall maintain confidentiality in respect to any arbitration between them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the ___day of February, 2007, to be effective as of the date and year first above written.
VALIDUS HOLDINGS, LTD.
EXECUTIVE
Exhibit 10.13
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated as of December 12, 2005 between Validus Holdings, Ltd., a Bermuda corporation (the "Company"), and Stuart Mercer (the "Executive").
WHEREAS, the parties hereto wish to amend and restate the employment agreement dated as of December 12, 2005 between the Company and the Executive as set forth herein, effective as of December 12, 2005.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Subsidiaries; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Subsidiaries) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to adequately perform his duties and responsibilities hereunder 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 Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; (h) the Executive's failure to use his best efforts to obtain, maintain or renew the work permit described in Section 3.02 below in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof; or (i) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain
through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.
"Date of Termination" has the meaning set forth in Section 5.01.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) a material breach of this Agreement by the Company without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction, in the aggregate, in the Executive's Base Salary and his benefits set forth in Section 4.03 (b), (d), (e), (f) and (g) below; or (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith, without the same being corrected within ten (10) days after being given written notice thereof; provided, however, that, notwithstanding any provision of this Agreement to the contrary, the Executive must give written notice of his intention to terminate his employment for Good Reason within sixty (60) days after the act or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such act or omission.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Notice of Termination" has the meaning set forth in Section 5.04.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement 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. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or combination thereof; or
(b) if a partnership, limited liability company, association or other business
entity, twenty (20) percent or more of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes of this definition, a Person or Persons will
be deemed to have a twenty (20) percent or more ownership interest in a
partnership, limited liability company, association or other business entity if
such Person or Persons are allocated twenty (20) percent or more of partnership,
limited liability company, association or other business entity gains or losses
or control the managing director or member or general partner of such
partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01 Employment Period. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date of the Offering (as defined in the Offering Memorandum relating to Company equity dated October 13, 2005, as supplemented) (the "Start Date") and ending on the Date of Termination as defined in Section 5.01 below (the "Employment Period").
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01 Position and Duties. Effective on the later of the Start Date or the date the work permit described in Section 3.02 is issued to the Executive, the Executive shall serve as Chief Risk Officer of the Company, render such underwriting, administrative, financial and other executive and managerial services to the Company which are consistent with Executive's position and have such responsibilities, powers and duties as may from time to time be prescribed by the senior executives of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. The Company may direct, in its sole and exclusive discretion, that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without prior written consent of the Company.
SECTION 3.02 Work Permits. The Executive shall use his best efforts to assist the Company in obtaining, maintaining and renewing a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03 Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda or at such other place in Bermuda as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of Bermuda on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
SECTION 3.04 Relocation. The Company shall reimburse the Executive for all reasonable expenses incurred by him in relocating his household items to Bermuda, not to exceed an amount to be agreed by the parties hereto, subject to the Company's requirements with respect to reporting and documentation of such expenses.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01 Base Salary. During the Employment Period, the Executive's base salary will be $500,000 per annum (the "Base Salary"). Within ten (10) days after the Start Date, Base Salary shall also be paid for the period from November 15, 2005 to the Start Date. The Base Salary will be payable monthly on the last working day of each month in arrears in twelve (12) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than forty (40) hours per week and the Executive shall not be entitled to receive any additional remuneration for any such additional hours.
SECTION 4.02 Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 150% of his Base Salary. The Board of Directors of the Company may, at any time and from time to time acting in its sole discretion, pay to the Executive an additional bonus.
SECTION 4.03 Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the public holidays referenced in the Public Holidays Act of 1947 and fifteen (15) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period;
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions
and overall administration of such plans as set forth from time to time in the applicable plan documents;
(d) a housing allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $18,000 per month, payable monthly in advance, and reimbursement for the Executive's Bermuda housing deposit (such amount to be repaid by the Executive to the Company within thirty (30) days after the earlier of the date the deposit is returned to the Executive or the date of any termination of employment of the Executive);
(e) an automobile allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $900 per month;
(f) direct payment or reimbursement of initiation fees (any resulting equity interest or redemption right in which shall belong to, be controlled by, and be paid to, the Company) for, and the annual dues for membership in, two (2) clubs in Bermuda;
(g) reimbursement for reasonable expenses incurred by the Executive
for round-trip non-business trips by the Executive and each member of his
family residing with him to and from Bermuda (the benefit under this
Section 4.03(g) being in addition to any reimbursement of air fare
described in Section 4.04, below) in accordance with the Company's policies
and procedures for such family trips as in effect from time to time; and
(h) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
The amount of reimbursement provided for in Section 4.03(d) above shall be calculated and paid to the Executive on an after-tax basis to the Executive, taking into account any deduction, credit or exclusion from income allowable to the Executive in respect of such amount.
SECTION 4.04 Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Company's requirements with respect to reporting and documentation of expenses.
SECTION 4.05 Stock Options and Restricted Stock. The Company shall grant to the Executive a number of shares of restricted common stock of the Company and an option to acquire a number of shares of the Company's common stock, such that the total number of shares of restricted common stock and common stock covered by such option, shall total .45% of the outstanding equity of the Company immediately following completion of the Offering on a fully diluted basis. Except as otherwise provided in Section 5.03 below, the terms of such restricted common stock and stock option, including terms pertaining to vesting, exercise and cancellation, shall be as set forth in the equity incentive plan to be established by the Company (the "Incentive Plan") and the applicable award agreements. The parties hereto acknowledge that the grants of shares of restricted common stock of the Company and options to acquire shares of the Company's common stock provided for in this Section 4.05 have been made to the Executive.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01 Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the "Date of Termination" shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the twelve (12) month anniversary of the Executive providing Notice of Termination specifying his resignation for Good Reason to the Company; (d) the twelve (12) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; and (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.
SECTION 5.02 Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 through the Date of Termination; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Company or stock options of the Company granted to the Executive shall vest on or following the date the Executive provides Notice of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.03 Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 above (i) in the case of termination by the Executive for Good Reason or by the Company with or without Cause, through the Date of Termination, and (ii) in the case of termination due to the Executive's Permanent Disability or death, through the six (6) month anniversary of the Date of Termination; (b) vest in any shares of restricted stock of the Company and any Company stock options granted to the Executive through the Date of Termination; and (c) receive reimbursement for all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.04 Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for
Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01 Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01 Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01 Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Subsidiaries, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media,
disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01 Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Company or its Subsidiaries, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending one (1) year after the Date of Termination (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Company or its Subsidiaries engage or plan to engage in such businesses; provided, however, that the portion of the Noncompetition Period following the Date of Termination shall be reduced by the period of time, if any, between the date of Notice of Termination is given and the Date of Termination. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
SECTION 9.02 Nonsolicitation of Employees. The Executive hereby agrees that (a) during the Employment Period and for a period of one (1) year after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto.
SECTION 9.03 Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.
SECTION 9.04 Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01 Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION
SECTION 11.01 Executive Representations. The Executive hereby
represents and warrants to the Company that (a) the execution, delivery and
performance of this Agreement by the Executive does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which the Executive is a party or by
which he is bound, (b) except for agreements provided to the Company by the
Executive, the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person, and
(c) upon the execution and delivery of this Agreement by the Company, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms. Notwithstanding Section 11.02 below, in the event
that any action is brought against Executive involving any breach of any
employment agreement, noncompetition agreement or confidentiality agreement with
any other Person, the Executive shall bear his own costs incurred in defending
such action, including but not limited to, court fees, arbitration costs,
mediation costs, attorneys' fees and disbursements.
SECTION 11.02 General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers'
liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02 Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the
manner set forth herein. If to the Company: Validus Holdings, Ltd. Mintflower Place 8 Par-La-Ville Road, Third Floor Hamilton HMO8 Bermuda |
Attn: General Counsel
Copies (which shall not constitute notice) of notices to the Company shall also be sent to:
Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attn: Glenn J. Waldrip, Jr., Esq
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09 No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12 Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF BERMUDA.
SECTION 12.14 Section 409A. It is intended that this Agreement will
comply with Section 409A of the United States Internal Revenue Code of 1986, as
amended (the "Code") and any regulations and guidelines issued thereunder, to
the extent the Agreement is subject thereto, and the Agreement shall be
interpreted on a basis consistent with such intent. If an amendment of the
Agreement is necessary in order for it to comply with Section 409A of the Code,
the parties hereto will negotiate in good faith to amend the Agreement in a
manner that preserves the original intent of the parties to the extent
reasonably possible. Notwithstanding any provision to the contrary in this
Agreement, if the Executive is deemed to be a "specified employee" within the
meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard
to any payment or the provisions of any benefit that is required to be delayed
pursuant to Section 409A(a)(2)(B) of the Code, such payment or benefit shall not
be made or provided prior to the earlier of (i) the expiration of the six
(6)-month period measured from the date of his "separation from service" (as
such term is defined in Treasury Regulations issued under Section 409A), or (ii)
the date of his death (the "Delay Period"). Upon the expiration of the Delay
Period, all payments and benefits delayed pursuant to this Section 12.14
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein. Notwithstanding the foregoing, to the extent that the
foregoing applies to the provision of any ongoing welfare benefits to the
Executive that would not be required to be delayed if the premiums therefor were
paid by the Executive, the Executive shall pay the full costs of premiums for
such welfare benefits during the Delay Period and the Company shall pay the
Executive an amount equal to the amount of such premiums paid by the Executive
during the Delay Period promptly after its conclusion.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the ___day of February, 2007, to be effective as of the date and year first above written.
VALIDUS HOLDINGS, LTD.
STUART MERCER
Exhibit 10.14
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated as of December 12, 2005 between Validus Reinsurance, Ltd., a Bermuda corporation (the "Company"), and Conan Ward (the "Executive").
WHEREAS, the parties hereto wish to amend and restate the employment agreement dated as of December 12, 2005 between the Company and the Executive as set forth herein, effective as of December 12, 2005.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Affiliate" or "Affiliates" means Validus Holdings, Ltd., ("Parent"), any Subsidiary of Parent and any Subsidiary of the Company.
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Affiliates; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (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 Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to adequately perform his duties and responsibilities hereunder 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 Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; (h) the Executive's failure to use his best efforts to obtain, maintain or renew the work permit described in Section 3.02 below in a timely manner, without the same being corrected within ten (10) days after being given written notice thereof; or (i) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Affiliates in connection
with their business. It shall not include information (a) required to be
disclosed by court or administrative order, (b) lawfully obtainable from other
sources or which is in the public domain through no fault of the Executive; or
(c) the disclosure of which is consented to in writing by the Company.
"Date of Termination" has the meaning set forth in Section 5.01.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) a material breach of this Agreement by the Company without the same being corrected within ten (10) days after being given written notice thereof; (b) a material reduction, in the aggregate, in the Executive's Base Salary and his benefits set forth in Section 4.03 (b), (d), (e), (f), (g) and (h) below; or (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith, without the same being corrected within ten (10) days after being given written notice thereof; provided, however, that, notwithstanding any provision of this Agreement to the contrary, the Executive must give written notice of his intention to terminate his employment for Good Reason within sixty (60) days after the act or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such act or omission.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Notice of Termination" has the meaning set forth in Section 5.04.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement 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. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, twenty (20) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a twenty (20) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated twenty (20) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01 Employment Period. The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date of the Offering (as defined in the Offering Memorandum relating to Parent equity dated October 13, 2005, as supplemented) (the "Start Date") and ending on the Date of Termination as defined in Section 5.01 below (the "Employment Period").
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01 Position and Duties. Effective on the later of the Start Date or the date the work permit described in Section 3.02 is issued to the Executive, the Executive shall serve as Executive Vice President & Chief Underwriting Officer of the Company, render such underwriting, administrative, financial and other executive and managerial services to the Company which are consistent with Executive's position and have such responsibilities, powers and duties as may from time to time be prescribed by the senior executives of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. The Company may direct, in its sole and exclusive discretion, that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Affiliates. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Affiliates, whether for compensation or otherwise, without prior written consent of the Company.
SECTION 3.02 Work Permits. The Executive shall use his best efforts to assist the Company in obtaining, maintaining and renewing a suitable (for the purposes of the Executive's contemplated employment by the Company) work permit by the Bermuda government authorities
and any other permits required by any Bermuda government authority. The Company shall be responsible for permit fees.
SECTION 3.03 Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda or at such other place in Bermuda as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of Bermuda on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01 Base Salary. During the Employment Period, the Executive's base salary will be $500,000 per annum (the "Base Salary"). Within ten (10) days after the Start Date, Base Salary shall also be paid for the period from December 1, 2005 to the Start Date. The Base Salary will be payable monthly on the last working day of each month in arrears in twelve (12) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased. Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than forty (40) hours per week and the Executive shall not be entitled to receive any additional remuneration for any such additional hours.
SECTION 4.02 Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 150% of his Base Salary. The Board of Directors of the Company may, at any time and from time to time acting in its sole discretion, pay to the Executive an additional bonus.
SECTION 4.03 Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period:
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents;
(b) in addition to the public holidays referenced in the Public Holidays Act of 1947 and fifteen (15) paid days off for sick leave, a maximum of four (4) weeks of paid vacation annually during the term of the Employment Period;
(c) benefits under any plan or arrangement available generally for the senior executive officers of the Company, subject to and consistent with the terms and conditions and overall administration of such plans as set forth from time to time in the applicable plan documents;
(d) a housing allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $18,000 per month, payable monthly in advance, and reimbursement for the Executive's Bermuda housing deposit (such amount to be repaid by the Executive to the Company within thirty (30) days after the earlier of the date the deposit is returned to the Executive or the date of any termination of employment of the Executive);
(e) an automobile allowance for the period during which the Executive's place of work is Bermuda in an amount equal to $900 per month;
(f) direct payment or reimbursement of initiation fees (any resulting equity interest or redemption right in which shall belong to, be controlled by, and be paid to, the Company) for, and the annual dues for membership in, two (2) clubs in Bermuda;
(g) reimbursement for round-trip non-business trips by the Executive and each member of his family residing with him to and from Bermuda (the benefit under this Section 4.03(g) being in addition to any reimbursement of air fare described in Section 4.04, below) in accordance with the Company's policies and procedures for such family trips as in effect from time to time, in an aggregate amount not to exceed $25,000 per annum;
(h) reimbursement for tuition expenses incurred by the Executive for his children who are attending school in an aggregate amount not to exceed $30,000 per annum; and
(i) other fringe benefits customarily provided to similarly situated senior executives residing in Bermuda.
The amounts set forth in Section 4.03 (d), (e), (f), (g) and (h) above shall each be calculated, and paid to the Executive, on an after-tax basis to the Executive, taking into account any deduction, credit or exclusion from income allowable to the Executive in respect of such amounts.
SECTION 4.04 Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Company's requirements with respect to reporting and documentation of expenses.
SECTION 4.05 Stock Options and Restricted Stock. Parent shall grant to the Executive a number of shares of restricted common stock of Parent and an option to acquire a number of shares of Parent's common stock, such that the total number of shares of restricted common stock and common stock covered by such option, shall total .45% of the outstanding equity of Parent immediately following completion of the Offering on a fully diluted basis. Except as otherwise provided in Section 5.03 below, the terms of such restricted common stock and stock option, including terms pertaining to vesting, exercise and cancellation, shall be as set forth in the equity incentive plan to be established by Parent (the "Incentive Plan") and the applicable award agreements. The parties hereto acknowledge that the grants of shares of restricted common stock of Parent and options to acquire shares of Parent's common stock provided for in this Section 4.05 have been made to the Executive.
SECTION 4.06 Sign-up Bonus. The Company shall pay to the Executive $750,000 as a one time sign-up bonus within thirty (30) days following the Start Date; provided, however, that such amount shall be payable only if the Executive has remained continuously employed by the Company through the payment date and, except as otherwise set forth in Section 5.05 below, only if the Executive obtains the work permit described in Section 3.02 above. If the Employment Period is terminated within twelve (12) months after the Start Date (i) as a result of the Executive's resignation or leaving of his employment, other than for Good Reason and other than pursuant to Section 5.05 below, or (ii) by the Company for Cause, then in either such case the Executive shall repay the sign-up bonus to the Company no later than ten (10) business days after such termination of employment.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01 Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the "Date of Termination" shall mean the first to occur of the following: (a) the twelve (12) month anniversary of the Company providing Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) the twelve (12) month anniversary of the Executive providing Notice of Termination specifying his resignation for Good Reason to the Company; (d) the twelve (12) month anniversary of the Executive providing Notice of Termination by the Executive without Good Reason to the Company; and (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.
SECTION 5.02 Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 through the Date of Termination; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of Parent or stock options of Parent granted to the Executive shall vest on or following the date the Executive provides Notice of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.03 Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 above (i) in the case of termination by the Executive for Good Reason or by the Company with or without Cause, through the Date of Termination, and (ii) in the case of termination due to the Executive's Permanent Disability or death, through the six (6) month anniversary of the Date of Termination; (b) vest in any shares of restricted stock of Parent and any Parent
stock options granted to the Executive through the Date of Termination; and (c) receive reimbursement for all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.04 Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01 Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01 Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made for hire" under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01 Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Affiliates, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01 Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential Information concerning the Company or its Affiliates, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending one (1) year after the Date of Termination (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Affiliates as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Company or its Affiliates engage or plan to engage in such businesses; provided, however, that the portion of the Noncompetition Period following the Date of Termination shall be reduced by the period of time, if any, between the date of Notice of Termination is given and the Date of Termination. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
SECTION 9.02 Nonsolicitation of Employees. The Executive hereby agrees that (a) during the Employment Period and for a period of one (1) year after the Date of Termination (the "Nonsolicitation Period") the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Affiliates to leave the employ of the Company or its Affiliates, or in any way interfere with the relationship between the Company or its Affiliates and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Affiliates at any time during such Nonsolicitation Period or within the six-month period prior thereto.
SECTION 9.03 Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured,
reinsured, reinsurer, broker, licensee or other business relation of the Company or its Affiliates to cease doing business with the Company or its Affiliates.
SECTION 9.04 Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01 Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION
SECTION 11.01 Executive Representations. The Executive hereby
represents and warrants to the Company that (a) the execution, delivery and
performance of this Agreement by the Executive does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which the Executive is a party or by
which he is bound, (b) except for agreements provided to the Company by the
Executive, the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person, and
(c) upon the execution and delivery of this Agreement by the Company, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms. Notwithstanding Section 11.02 below, in the event
that any action is brought against Executive involving any breach of any
employment agreement, noncompetition agreement or confidentiality agreement with
any other Person, the Executive shall bear his own costs incurred in defending
such action, including but not limited to, court fees, arbitration costs,
mediation costs, attorneys' fees and disbursements.
SECTION 11.02 General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
SECTION 12.02 Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the manner set forth herein. If to the Company: Validus Reinsurance, Ltd. Clarendon House 2 Church Street Hamilton HM 11 Bermuda Attn: General Counsel |
Copies (which shall not constitute notice) of notices to the Company shall also be sent to:
Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attn: Glenn J. Waldrip, Jr., Esq
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09 No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of
strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12 Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF BERMUDA.
SECTION 12.14 Section 409A. It is intended that this Agreement will
comply with Section 409A of the United States Internal Revenue Code of 1986, as
amended (the "Code") and any regulations and guidelines issued thereunder, to
the extent the Agreement is subject thereto, and the Agreement shall be
interpreted on a basis consistent with such intent. If an amendment of the
Agreement is necessary in order for it to comply with Section 409A of the Code,
the parties hereto will negotiate in good faith to amend the Agreement in a
manner that preserves the original intent of the parties to the extent
reasonably possible. Notwithstanding any provision to the contrary in this
Agreement, if the Executive is deemed to be a "specified employee" within the
meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard
to any payment or the provisions of any benefit that is required to be delayed
pursuant to Section 409A(a)(2)(B) of the Code, such payment or benefit shall not
be made or provided prior to the earlier of (i) the expiration of the six
(6)-month period measured from the date of his "separation from service" (as
such term is defined in Treasury Regulations issued under Section 409A), or (ii)
the date of his death (the "Delay Period"). Upon the expiration of the Delay
Period, all payments and benefits delayed pursuant to this Section 12.14
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein. Notwithstanding the foregoing, to the extent that the
foregoing applies to the provision of any ongoing welfare benefits to the
Executive that would not be required to be delayed if the premiums therefor were
paid by the Executive, the Executive shall pay the full costs of premiums for
such welfare benefits during the Delay Period and the Company shall pay the
Executive an amount equal to the amount of such premiums paid by the Executive
during the Delay Period promptly after its conclusion.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the ___day of February, 2007, to be effective as of the date and year first above written.
VALIDUS REINSURANCE, LTD.
CONAN WARD
ONLY AS TO THE OBLIGATIONS SET FORTH IN
SECTION 4.05
VALIDUS HOLDINGS, LTD.
Exhibit 10.23
NONQUALIFIED
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
- PLAN DOCUMENT -
NONQUALIFIED
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
- PLAN DOCUMENT -
SECTION 1 INTRODUCTION
1.1 ADOPTION OF PLAN AND PURPOSE
This Plan is an unfunded, nonqualified deferred compensation plan. With the consent of the Employer (as defined in subsection 2.16) the plan may be adopted by executing the Adoption Agreement (as defined in subsection 2.3) in the form attached hereto. The Plan contains certain variable features which the Employer has specified in the Adoption Agreement. Only those variable features specified by the Employer in the Adoption Agreement will be applicable to the Employer.
The purpose of the Plan is to provide certain supplemental benefits under the Plan to a select group of management or highly compensated Employees of the Employers (in accordance with Sections 201, 301 and 401 of ERISA), Members of the Board(s) of the Employers, or Other Service Providers to the Employers (as defined below), and to allow such Employees, Board Members or Other Service Providers the opportunity to defer a portion of their salaries, bonuses and other compensation, subject to the terms of the Plan. Participants (and their Beneficiaries) shall have only those rights to payments as set forth in the Plan and shall be considered general, unsecured creditors of the Employers with respect to any such rights. The Plan is designed to comply with the American Jobs Creation Act of 2004 (the "Jobs Act") and Code Section 409A. It is intended that the Plan be interpreted according to a good faith interpretation of the Jobs Act and Code Section 409A, and consistent with published IRS guidance, until final IRS regulations are issued. In the event of any inconsistency between the terms of the Plan and the Jobs Act or Code Section 409A, the terms of the Jobs Act and Code Section 409A (including IRS interpretations) shall control. The Plan is intended to constitute an account balance plan (as defined in IRS Notice 2005-1, Q&A-9).
1.2 ADOPTION OF THE PLAN
The Employer may adopt the Plan by completing and signing the Adoption Agreement in the form attached hereto.
1.3 PLAN YEAR
The Plan is administered on the basis of a Plan Year, as defined in subsection 2.27.
1.4 PLAN ADMINISTRATION
The plan shall be administered by a plan administrator (the "Administrator," as that term is defined in Section 3(16)(A) of ERISA) designated by the Employer in the Adoption Agreement. The Administrator has full discretionary authority to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to
determine the rights or eligibility of employees or participants and any other persons, and the amounts of their benefits under the plan, and to remedy ambiguities, inconsistencies or omissions, and such determinations shall be binding on all parties. The Administrator from time to time may adopt such rules and regulations as may be necessary or desirable for the proper and efficient administration of the Plan and as are consistent with the terms of the Plan. The administrator may delegate all or any part of its powers, rights, and duties under the Plan to such person or persons as it may deem advisable, and may engage agents to provide certain administrative services with respect to the Plan. Any notice or document relating to the Plan which is to be filed with the Administrator may be delivered, or mailed by registered or certified mail, postage pre-paid, to the Administrator, or to any designated representative of the Administrator, in care of the Employer, at its principal office.
SECTION 2 DEFINITIONS
2.1 ACCOUNT
"Account" means all notional accounts and subaccounts maintained for a
Participant in order to reflect his interest under the Plan, as described in
Section 6.
2.2 ADMINISTRATOR
"Administrator" means the individual or individuals (if any) delegated authority by the Employer to administer the Plan, as defined in subsection 1.4.
2.3 ADOPTION AGREEMENT
"Adoption Agreement" shall mean the form executed by the Employer and attached hereto, which Agreement shall constitute a part of the Plan.
2.4 BENEFICIARY
"Beneficiary" means the person or persons to whom a deceased Participant's benefits are payable under subsection 9.5.
2.5 BOARD
"Board" means the Board of Directors of the Employer (if applicable), as from time to time constituted.
2.6 BOARD MEMBER
"Board Member" means a member of the Board.
2.7 BONUS
"Bonus" (also referred to herein as a "Non-Performance-Based Bonus) means an award of cash that is not a Performance-Based Bonus (as defined in subsection 2.25) that is payable to an Employee (or Board Member or Other Service Provider, as applicable) in a given year, with respect to the immediately preceding Bonus performance period, which may or may not be contingent upon the achievement of specified performance goals.
2.8 CODE
"Code" means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such section.
2.9 COMPENSATION
"Compensation" shall mean the amount of a Participant's remuneration from the Employer designated in the Adoption Agreement. Notwithstanding the foregoing, the Compensation of an Other Service Provider (as defined in subsection 2.22) shall mean his remuneration from the Employer pursuant to an agreement to provide services to the Employer. With respect to any Participant who is a Member of the Board (if applicable), "Compensation" means all cash remuneration which, absent a deferral election under the Plan, would have otherwise been received by the Board Member in the taxable year, payable to the Board Member for service on the Board and on Board committees, including any cash payable for attendance at Board meetings and Board committee meetings, but not including any amounts constituting reimbursements of expenses to Board Members. To the extent the Employer has designated "401(k) Refunds" in the Adoption Agreement (and to the extent elected by the Participant), an amount equal to the Participant's "401(k) Refund" shall be deferred from the Participant's Compensation otherwise payable to the Participant in the next subsequent Compensation pay period (or such later pay period as the Plan Administrator determines shall be administratively feasible), and shall be credited to the Participant's Compensation Deferral Account in accordance with subsection 4.1. For purposes of this subsection, "401(k) Refund" means any amount distributed to the applicable Participant from the Employer's qualified retirement plan intended to comply with Section 401(k) of the Code that is in excess of the maximum deferral for the prior calendar year allowable under such qualified retirement plan. To the extent the Employer has designated "401(k) Continuation Compensation" in the Adoption Agreement (and to the extent elected by the Participant), an amount equal to the Participant's "401(k) Continuation Compensation" that otherwise would have been contributed to the 401(k) Plan shall be deferred from the Participant's Compensation in the next subsequent Compensation pay period (or such later pay period as the Plan Administrator determines shall be administratively feasible), and shall be credited to the Participant's Compensation Deferral Account in accordance with subsection 4.1.
2.10 COMPENSATION DEFERRALS
"Compensation Deferrals" means the amounts credited to a Participant's Compensation Deferral Account pursuant to the Participant's election made in accordance with subsection 4.1.
2.11 DEFERRAL ELECTION
"Deferral Election" means an election by a Participant to make
Compensation Deferrals or Performance-Based Bonus Deferrals in accordance with
Section 4.
2.12 DISABILITY
"Disability" for purposes of this Plan shall mean the occurrence of an event as a result of which the Participant is considered disabled, as designated by the Employer in the Adoption Agreement.
2.13 EFFECTIVE DATE
"Effective Date" means the Effective Date of the Plan, as indicated in the Adoption Agreement.
2.14 ELIGIBLE INDIVIDUAL
"Eligible Individual" means each Board Member, Other Service Provider, or Employee of an Employer who satisfies the eligibility requirements set forth in the Adoption Agreement.
2.15 EMPLOYEE
"Employee" means a person who is employed by an Employer and is treated and/or classified by the Employer as a common law employee for purposes of wage withholding for Federal income taxes. If a person is not considered to be an Employee of the Employer in accordance with the preceding sentence, a subsequent determination by the Employer, any governmental agency, or a court that the person is a common law employee of the Employer, even if such determination is applicable to prior years, will not have a retroactive effect for purposes of eligibility to participate in the Plan.
2.16 EMPLOYER
"Employer" means the business entity designated in the Adoption Agreement, and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of the Employer, or its successors or assigns, assumes the Employer's obligations hereunder, and any affiliate or subsidiary of the Employer, as defined in Subsections 414(b) and (c) of the Code, or other corporation or business organization that has adopted the Plan on behalf of its Eligible Individuals with the consent of the Employer.
2.17 EMPLOYER CONTRIBUTIONS
"Employer Contributions" means the amounts other than Matching Contributions that are credited to a Participant's Employer Contributions Account under the Plan by the Employer in accordance with subsection 4.4.
2.18 ERISA
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific section of ERISA shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing, or superseding such section.
2.19 FISCAL YEAR COMPENSATION
"Fiscal Year Compensation" means Compensation relating to a period of service coextensive with one or more consecutive non-calendar-year fiscal years of the Employer, where no amount of such Compensation is paid or payable during the service period. For example, a
Bonus based upon a service period of two consecutive fiscal years payable after the completion of the second fiscal year would be "Fiscal Year Compensation," but periodic salary payments or Bonuses based on service periods other than the Employer's fiscal year would not be Fiscal Year Compensation.
2.20 INVESTMENT FUNDS
"Investment Funds" means the notional funds or other investment vehicles designated pursuant to subsection 5.1.
2.21 MATCHING CONTRIBUTIONS
"Matching Contributions" means the amounts credited to a Participant's Employer Contribution Account under the Plan by the Employer that are based on the amount of Participant Deferrals made by the Participant under the Plan, or that are based upon such other formula as designated by the Employer in the Adoption Agreement, in accordance with subsection 4.3.
2.22 Other Service PROVIDERS
"Other Service Providers" shall mean independent contractors, consultants, or other similar providers of services to the Employer, other than Employees and Board Members. To the extent that an Other Service Provider is unrelated to the Employer, as described in Code Section 409A and other applicable regulations, guidance, etc. thereunder, the provisions of such guidance shall not apply. To the extent that an Other Service Provider uses an accrual method of accounting for a given taxable year, amounts deferred under the Plan in such taxable year shall not be subject to Code Section 409A and other applicable guidance thereunder, notwithstanding any provision of the Plan to the contrary.
2.23 PARTICIPANT
"Participant" means an Eligible Individual who meets the requirements of Section 3 and elects to make Compensation Deferrals pursuant to Section 4, or who receives Employer Contributions or Matching Contributions pursuant to subsection 4.3 or 4.4. A Participant shall cease being a Participant in accordance with subsection 3.2 herein.
2.24 PARTICIPANT DEFERRALS
"Participant Deferrals" means all amounts deferred by a Participant under this Plan, including Participant Compensation Deferrals and Participant Performance-Based Bonus Deferrals.
2.25 PERFORMANCE-BASED BONUS
"Performance-Based Bonus" generally means Compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of previously established
organizational or individual performance criteria relating to a performance
period of at least 12 consecutive months in which the Eligible Individual
performs services, pursuant to rules described in Proposed Treasury Regulation
Section 1.409A-l(e).
2.26 PERFORMANCE-BASED BONUS DEFERRALS
"Performance-Based Bonus Deferrals" means the amounts credited to a Participant's Compensation Deferral Account from the Participant's Performance-Based Bonus/ pursuant to the Participant's election made in accordance with subsection 4.2.
2.27 PLAN YEAR
"Plan Year" means each 12-month period specified in the Adoption Agreement, on the basis of which the Plan is administered.
2.28 RETIREMENT
"Retirement" for purposes of this Plan means the Participant's Termination Date, as defined in subsection 2.30, after attaining any age and/or service minimums with respect to Retirement or Early Retirement as designated by the Employer in the Adoption Agreement.
2.29 SPOUSE
"Spouse" means the person to whom a Participant is legally married under applicable state law at the earlier of the date of the Participant's death or the date payment of the Participant's benefits commenced and who is living on the date of the Participant's death,
2.30 TERMINATION DATE
"Termination Date" means (i) with respect to an Employee Participant, the Participant's separation from service (within the meaning of Section 409A of the Code and the regulations, notices and other guidance thereunder, including death or Disability) with the Employers, and any subsidiary or affiliate of the Employers as defined in Sections 414(b) and (c) of the Code; (ii) with respect to a Board Member Participant, the Participant's resignation or removal from the Board (for any reason, including death or Disability); and (iii) with respect to any Other Service Provider, the expiration of all agreements to provide services to the Employers (for any reason, including death or Disability), as described in Proposed Treasury Regulation Section 1.409A-1(h)(2) and any successor guidance thereto.
2.31 VALUATION DATE
"Valuation Date" means the last day of each Plan Year and any other date that the Employer, in its sole discretion, designates as a Valuation Date, as of which the value of an Investment Fund is adjusted for notional deferrals, contributions, distributions, gains, losses, or expenses.
2.32 OTHER DEFINITIONS
Other defined terms used in the Plan shall have the meanings given such terms elsewhere in the Plan.
SECTION 3 ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY
Each Eligible Individual on the Effective Date of the Plan shall be eligible to become a Participant by properly making a Deferral Election on a timely basis as described in Section 4, or, if applicable and eligible as designated by the Employer in the Adoption Agreement, by receiving a Matching Contribution or other Employer Contribution under the Plan. Each other Eligible Individual may become a Participant by making a Deferral Election on a timely basis as described in Section 4 or, if applicable and eligible as designated by the Employer in the Adoption Agreement, by receiving a Matching Contribution or other Employer Contribution under the Plan. Each Eligible Individual's decision to become a Participant by making a Deferral Election shall be entirely voluntary. The Employer may require the Participant to complete any necessary forms or other information as it deems necessary or advisable prior to permitting the Eligible Individual to commence participation in the Plan.
3.2 CESSATION OF PARTICIPATION
If a Termination Date occurs with respect to a Participant, or if a
Participant otherwise ceases to be an Eligible Individual, no further
Compensation Deferrals, Performance-Based Bonus Deferrals, Matching
Contributions or other Employer Contributions shall be credited to the
Participant's Accounts after the Participant's Termination Date or date the
Participant ceases to be eligible (or as soon as administratively feasible after
the date the Participant ceases to be eligible), unless he is again determined
to be an Eligible Individual, but the balance credited to his Accounts shall
continue to be adjusted for notional investment gains and losses under the terms
of the Plan and shall be distributed to him at the time and manner set forth in
Section 9. An Employee, Board Member or Other Service Provider shall cease to be
a Participant after his Termination Date or other loss of eligibility as soon as
his entire Account balance has been distributed.
3.3 ELIGIBILITY FOR MATCHING OR EMPLOYER CONTRIBUTIONS
An Employee Participant who has satisfied the requirements necessary to become an Eligible Individual with respect to Matching Contributions as specified in the Adoption Agreement, and who has made a Compensation Deferral election pursuant to subsection 4.1 herein or who has satisfied such other criteria as specified in the Adoption Agreement, shall be eligible to receive Matching Contributions described in subsection 4.3. An Employee Participant who has satisfied the requirements necessary to become an Eligible Individual with respect to Employer Contributions other than Matching Contributions as specified in the Adoption Agreement, shall be eligible to receive Employer Contributions described in subsection 4.4.
SECTION 4 DEFERRALS AND CONTRIBUTIONS
4.1 COMPENSATION DEFERRALS OTHER THAN PERFORMANCE-BASED BONUS DEFERRALS
Each Plan Year, an Eligible Individual may elect to defer receipt of no less than the minimum and no greater than the maximum percentage or amount selected by the Employer in the Adoption Agreement with respect to each type of Compensation (other than Performance-Based Bonuses) earned with respect to pay periods beginning on and after the effective date of the election; provided, however, that Compensation earned prior to the date the Participant satisfies the eligibility requirements of Section 3 shall not be eligible for deferral under this Plan. Except as otherwise provided in this subsection, a Participant's Deferral Election for a Plan Year under this subsection must be made not later than December 31 of the preceding Plan Year (or such earlier date as determined by the Plan Administrator) with respect to Compensation (other than Performance-Based Bonuses) earned in pay periods beginning on or after the following January 1 in accordance with rules established by the Administrator.
An Employee, Board Member or Other Service Provider who first becomes an Eligible Individual during a Plan Year (by virtue of a promotion, Compensation increase, commencement of employment with the Employers, commencement of Board service, execution of an agreement to provide services to an Employer, or any other reason) shall be provided enrollment documents (including Deferral Election forms) as soon as administratively feasible following such initial eligibility. Such Eligible Individual must make his Deferral Elections within 30 days after first becoming an Eligible Individual, with respect to his Compensation (other than Performance-Based Bonuses) earned on or after the effective date of the Deferral Election (provided, however, that if such Eligible Individual is participating in any other account balance plan maintained by the Employer or any member of the Employer's "controlled group" (as defined in subsections 414(b) and (c) of the Code), such Eligible Individual must make his Compensation Deferral Election no later than December 31 of the preceding Plan Year (or such earlier date as determined by the Plan Administrator), or he may not elect to make Compensation Deferrals for that initial Plan Year). If an Eligible Individual does not elect to make Compensation Deferrals during that initial 30-day period, he may not later elect to make Compensation Deferrals for that year under this subsection. In the event that an Eligible Individual first becomes eligible during a Plan Year with respect to which Fiscal Year Compensation is payable, such Eligible Individual must make his Fiscal Year Compensation Deferral Election on or before the end of the fiscal year of the Employer immediately preceding the first fiscal year in which any services are performed for which the Fiscal Year Compensation is payable.
An election to make Compensation Deferrals under this subsection 4.1 shall remain in effect through the last pay period commencing in the calendar year to which the election applies (except as provided in subsection 4.5), shall apply with respect to the applicable type of Compensation (other than Performance-Based Bonuses) to which the Deferral Election relates earned for pay periods commencing in the applicable calendar year to which the election applies, and shall be irrevocable (provided, however, that a Participant making a Deferral Election under this subsection may change his election at any time prior to December 31 of the year preceding the year for which the Deferral Election is applicable, subject to rules established by the Plan
Administrator). If a Participant fails to make a Compensation Deferral election for a given Plan Year, such Participant's Compensation Deferral Election for that Plan Year shall be deemed to be zero; provided, however, that if the Employer has elected in the Adoption Agreement that a Participant's Compensation Deferral Election shall be "evergreen", then such Participant's Compensation Deferral Election shall be deemed to be identical to the most recent applicable Deferral Election on file with the Administrator with respect to the applicable type of Compensation; provided, however, that no In-Service Distribution shall be applicable to any amounts deferred in a year in which the Participant fails to make an affirmative election, and payment of such amounts for such year shall be made in accordance with his most recent election on file with the Administrator (if no election is on file, then such amounts shall be paid to him in a single lump sum).
With respect to "401(k) Refund" and "401(k) Continuation Compensation" deferrals, a Participant's action or inaction under the 401(k) Plan, including an adjustment to a deferral election under such qualified plan, will not be treated as either a deferral election or an acceleration of a payment under this Plan, provided that for any given calendar year, the Participant's actions or inactions under the 401(k) Plan do not result in an increase in the amounts deferred under all nonqualified deferred compensation plans in which the Participant participates in excess of the limit with respect to elective deferrals under 402(g) in effect for the calendar year in which such actions or inactions occur.
Compensation Deferrals shall be credited to the Participant's Compensation Deferral Account as soon as administratively feasible after such amounts would have been payable to the Participant.
4.2 PERFORMANCE-BASED BONUS DEFERRALS
Each Plan Year, an Eligible Individual may elect to defer receipt of no less than the minimum and no greater than the maximum percentage or amount selected by the Employer in the Adoption Agreement with respect to Performance-Based Bonuses earned with respect to the performance period for which the Performance-Based Bonus is earned; provided, however, that the Eligible Individual performed services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date upon which the Eligible Individual makes a Performance-Based Bonus Deferral Election; and further provided that in no event may an election to defer Performance-Based Bonuses be made after such Bonuses have become both substantially certain to be paid and readily ascertainable. Except as otherwise provided in this subsection, a Participant's Performance-Based Bonus Deferral Election under this subsection must be made not later than six months (or such earlier date as determined by the Plan Administrator) prior to the end of the performance period.
An Employee, Board Member or Other Service Provider who first becomes an Eligible Individual during a Plan Year (by virtue of a promotion, Compensation increase, commencement of employment with the Employers, commencement of Board service, execution of an agreement to provide services to an Employer, or any other reason) shall be provided enrollment documents (including Deferral Election forms) as soon as administratively feasible following such initial eligibility. Such Eligible Individual must make his Performance-Based Bonus Deferral Election
within 30 days after first becoming an Eligible Individual (provided, however, that if such Eligible Individual is participating in any other account balance plan maintained by the Employer or any member of the Employer's "controlled group" (as defined in subsections 414(b) and (c) of the Code), such Eligible Individual must make his Performance-Based Bonus Deferral Election no later than six months (or such earlier date as determined by the Plan Administrator) prior to the end of the performance period, or he may not elect to make Performance-Based Bonus Deferrals for such initial Plan Year. In the case of a Deferral Election in the first year of eligibility that is made after the beginning of the Performance-Based Bonus performance period, the Deferral Election will apply to the portion of the Performance-Based Bonus equal to the total amount of the Performance-Based Bonus for the performance period multiplied by the ratio of the number of days remaining in the performance period after the effective date of the Deferral Election over the total number of days in the Performance Period. If an Eligible Individual does not elect to make a Performance-Based Bonus Deferral during that initial 30-day period, he may not later elect to make a Performance-Based Bonus Deferral for that performance period under this subsection.
An election to make Performance-Based Bonus Deferrals under this subsection 4.2 shall remain in effect through the end of the performance period to which the election applies (except as provided in subsection 4.5), and shall be irrevocable (provided, however, that a Participant making a Performance-Based Bonus Deferral Election under this subsection may change his election at any time prior to the first day of the six-month period ending on the last day of the performance period for which the Performance-Based Bonus Deferral Election is applicable, subject to rules established by the Plan Administrator). If a Participant fails to make a Performance-Based Bonus Deferral Election for a given performance period, such Participant's Performance-Based Bonus Deferral Election for that performance period shall be deemed to be zero; provided, however, that if the Employer has elected in the Adoption Agreement that a Participant's Performance-Based Deferral Election shall be "evergreen", then such Participant's Performance-Based Bonus Deferral Election shall be deemed to be identical to the most recent applicable Performance-Based Bonus Deferral Election on file with the Administrator; provided, however, that no In-Service Distribution shall be applicable to any amounts deferred in a year in which the Participant fails to make an affirmative election, and payment of such amounts for such year shall be made in accordance with his most recent election on file with the Administrator (if no election is on file, then such amounts shall be paid to him in a single lump sum).
Performance-Based Bonus Deferrals shall be credited to the Participant's Compensation Deferral Account as soon as administratively feasible after such amounts would have been payable to the Participant.
4.3 MATCHING CONTRIBUTIONS
Matching Contributions shall be determined in accordance with the formula specified in the Adoption Agreement, and shall be credited to the Employer Contribution Accounts of Participants who have satisfied the eligibility requirements for Matching Contributions specified in the Adoption Agreement. Matching Contributions under this Plan shall be credited to such
Participants' Employer Contribution Accounts as soon as administratively feasible after the Applicable Period selected in the Adoption Agreement, but only with respect to Participants eligible to receive such Matching Contributions as described in the Adoption Agreement.
4.4 OTHER EMPLOYER CONTRIBUTIONS
Employer Contributions other than Matching Contributions shall be determined in accordance with the formula specified in the Adoption Agreement, and shall be credited to the Employer Contribution Accounts of Participants who have satisfied the eligibility requirements for Employer Contributions specified in the Adoption Agreement. Employer Contributions under this Plan shall be credited to such Participants' Employer Contributions Accounts as soon as administratively feasible after the Applicable Period selected in the Adoption Agreement, but only with respect to Participants eligible to receive such Employer Contributions as described in the Adoption Agreement.
4.5 NO ELECTION CHANGES DURING PLAN YEAR
A Participant shall not be permitted to change or revoke his Deferral
Elections (except as otherwise described in subsections 4.1 and 4.2), except
that, if a Participant's status changes such that he becomes ineligible for the
Plan, the Participant's Deferrals under the Plan shall cease as described in
subsection 3.2. Notwithstanding the foregoing, in the event the Employer
maintains a qualified plan designed to comply with the requirements of Code
Section 401(k) that requires the cessation of all deferrals in the event of a
hardship withdrawal under such plan, the Participant's Deferrals under this Plan
shall cease as soon as administratively feasible upon notification to the
Administrator that the participant has taken such a hardship withdrawal.
Notwithstanding the foregoing, if the Employer has elected in the Adoption
Agreement to permit Unforeseeable Emergency Withdrawals pursuant to subsection
9.8, the Participant's Deferrals under this Plan shall cease as soon as
administratively feasible upon approval by the Administrator of a Participant's
properly submitted request for an Unforeseeable Emergency Withdrawal under
subsection 9.8.
4.6 CREDITING OF DEFERRALS
The amount of deferrals pursuant to subsections 4.1 and 4.2 shall be credited to the Participant's Accounts as of a date not later than 15 business days after the date on which the amount (but for the deferral) otherwise would have been paid to the Participant, or such later date as determined to be administratively feasible by the Plan Administrator.
4.7 REDUCTION OF DEFERRALS OR CONTRIBUTIONS
Any Participant Deferrals or Employer Contributions to be credited to a Participant's Account under this Section may be reduced by an amount equal to the Federal or state income, payroll, or other taxes required to be withheld on such deferrals or contributions or to satisfy any necessary employee welfare plan contributions. A Participant shall be entitled only to the net amount of such deferral or contribution (as adjusted from time to time pursuant to the terms of the Plan). The Administrator may limit a Participant's Deferral Election if, as a result of any
election, a Participant's Compensation from the Employer would be insufficient to cover taxes, withholding, and other required deductions applicable to the Participant.
SECTION 5 NOTIONAL INVESTMENTS
5.1 INVESTMENT FUNDS
The Employer may designate, in its discretion, one or more Investment Funds for the notional investment of Participants' Accounts. The Employer, in its discretion, may from time to time establish new Investment Funds or eliminate existing Investment Funds. The Investment Funds are for recordkeeping purposes only and do not allow Participants to direct any Employer assets (including, if applicable, the assets of any trust related to the Plan). Each Participant's Accounts shall be adjusted pursuant to the Participant's notional investment elections made in accordance with this Section 5, except as otherwise determined by the Employer or Administrator in their sole discretion.
5.2 INVESTMENT FUND ELECTIONS
The Employer shall have full discretion in the direction of notional investments of Participants' Accounts under the Plan; provided, however, that if the Employer so elects in the Adoption Agreement, each Participant may elect from among the Investment Funds for the notional investment of such of his Accounts as are permitted under the Adoption Agreement from time to time in accordance with procedures established by the Employer. The Administrator, in its discretion, may adopt (and may modify from time to time) such rules and procedures as it deems necessary or appropriate to implement the notional investment of the Participant's Accounts. Such procedures may differ among Participants or classes of Participants, as determined by the Employer or the Administrator in its discretion. The Employer or Administrator may limit, delay or restrict the notional investment of certain Participants' Accounts, or restrict allocation or reallocation into specified notional investment options, in accordance with rules established in order to comply with Employer policy and applicable law, to minimize regulated filings and disclosures, or under any other circumstances in the discretion of the Employer. Any deferred amounts subject to a Participant's investment election that must be so limited, delayed or restricted under such circumstances may be notionally invested in an Investment Fund designated by the Administrator, or may be credited with earnings at a rate determined by the Administrator, which rate may be zero. A Participant's notional investment election shall remain in effect until later changed in accordance with the rules of the Administrator. If a Participant does not make a notional investment election, all deferrals by the Participant and contributions on his behalf will remain uninvested until such time as the Administrator receives proper direction, or, at the Employer's election, may be deemed to be notionally invested in the Investment Fund designated by the Employer for such purpose or may be credited with earnings at a rate determined by the Administrator or Employer, which rate may be zero.
5.3 INVESTMENT FUND TRANSFERS
A Participant may elect that all or a part of his notional interest in an Investment Fund shall be transferred to one or more of the other Investment Funds. A Participant may make such notional Investment Fund transfers in accordance with rules established from time to time by the Employer or the Administrator, and in accordance with subsection 5.2.
SECTION 6 ACCOUNTING
6.1 INDIVIDUAL ACCOUNTS
Bookkeeping Accounts shall be maintained under the Plan in the name of each Participant, as applicable, along with any subaccounts under such Accounts deemed necessary or advisable from time to time, including a subaccount for each Plan Year that a Participant's Deferral Election is in effect. Each such subaccount shall reflect (i) the amount of the Participant's Deferral during that year, any Matching Contributions or Employer Contributions credited during that year, and the notional gains, losses, expenses, appreciation and depreciation attributable thereto.
Rules and procedures may be established relating to the maintenance, adjustment, and liquidation of Participants' Accounts, the crediting of deferrals and contributions and the notional gains, losses, expenses, appreciation, and depreciation attributable thereto, as are considered necessary or advisable.
6.2 ADJUSTMENT OF ACCOUNTS
Pursuant to rules established by the Employer, Participants' Accounts will be adjusted on each Valuation Date, except as provided in Section 9, to reflect the notional value of the various Investment Funds as of such date, including adjustments to reflect any deferrals and contributions, notional transfers between Investment Funds, and notional gains, losses, expenses, appreciation, or depreciation with respect to such Accounts since the previous Valuation Date. The "value" of an Investment Fund at any Valuation Date may be based on the fair market value of the Investment Fund, as determined by the Administrator in its sole discretion.
6.3 ACCOUNTING METHODS
The accounting methods or formulae to be used under the Plan for purposes of monitoring Participants' Accounts, including the calculation and crediting of notional gains, losses, expenses, appreciation, or depreciation, shall be determined by the Administrator in its sole discretion. The accounting methods or formulae selected by the Administrator may be revised from time to time.
6.4 STATEMENT OF ACCOUNT
At such times and in such manner as determined by the Administrator, but at least annually, each Participant will be furnished with a statement reflecting the condition of his Accounts.
SECTION 7 VESTING
A Participant shall be fully vested at all times in his Compensation Deferral Account (if applicable). A Participant shall be vested in his Matching Contributions and/or Employer Contributions (if applicable), in accordance with the vesting schedule elected by the Employer under the Adoption Agreement. Vesting Years of Service shall be determined in accordance with the election made by the Employer in the Adoption Agreement. Amounts in a Participant's Accounts that are not vested upon the Participant's Termination Date ("forfeitures") shall be returned to the Employer.
If a Participant has a Termination Date with the Employer as a result of the Participant's Misconduct (as defined by the Employer in the Adoption Agreement), or if the Participant engages in Competition with the Employer (as defined by the Employer in the Adoption Agreement), and the Employer has so elected in the Adoption Agreement, the Participant shall forfeit all amounts allocated to his or her Matching Contribution Account and/or Employer Contribution Accounts (if applicable). Such forfeitures shall be returned to the Employer.
Neither the Administrator nor the Employers in any way guarantee the Participant's Account balance from loss or depreciation. Notwithstanding any provision of the Plan to the contrary, the Participant's Account balance is subject to Section 8.
SECTION 8 FUNDING
No Participant or other person shall acquire by reason of the Plan any right in or title to any assets, funds, or property of the Employers whatsoever, including, without limiting the generality of the foregoing, any specific funds, assets, or other property of the Employers. Benefits under the Plan are unfunded and unsecured. A Participant shall have only an unfunded, unsecured right to the amounts, if any, payable hereunder to that Participant. The Employers' obligations under this Plan are not secured or funded in any manner, even if the Employer elects to establish a trust with respect to the Plan. Even though benefits provided under the Plan are not funded, the Employer may establish a trust to assist in the payment of benefits. All investments under this Plan are notional and do not obligate the Employers (or their delegates) to invest the assets of the Employers or of any such trust in a similar manner.
SECTION 9 DISTRIBUTION OF ACCOUNTS
9.1 DISTRIBUTION OF ACCOUNTS
With respect to any Participant who has a Termination Date that precedes his Retirement date, an amount equal to the Participant's vested Account balances shall be distributed to the Participant (or, in the case of the Participant's death, to the Participant's Beneficiary), in the form of a single lump sum payment, or, if subsection 9.2 applies, in the form of installment payments as designated by the Employer in the Adoption Agreement. Subject to subsection 9.3 hereof, distribution of a Participant's Accounts shall be made or commence by the end of the calendar year in which occurs the Participant's Termination Date, or such earlier date as shall be administratively feasible for the Administrator to make such payment. Notwithstanding any provision of the Plan to the contrary, for purposes of this subsection, a Participant's Accounts shall be valued as of a Valuation Date as soon as administratively feasible preceding the date such distribution is made, in accordance with rules established by the Administrator.
Notwithstanding the foregoing, to the extent designated by the
Employer in the Adoption Agreement, a Participant may elect, in accordance with
this subsection, a distribution date for his Compensation Deferral Accounts that
is prior to his Termination Date (an "In-Service Distribution"). A Participant's
election of an In-Service Distribution date must: (i) be made at the time of his
Deferral Election for a Plan Year; and (ii) apply only to amounts deferred
pursuant to that election, and any earnings, gains, losses, appreciation, and
depreciation credited thereto or debited therefrom with respect to such amounts.
To the extent permitted by the Employer, a Participant may elect an In-Service
Distribution date with respect to Performance-Based Bonus Deferrals that is
separate from an In-Service Distribution date with respect to Compensation
Deferrals other than Performance-Based Bonus Deferrals for the same year,
provided that the applicable In-Service Distribution date may not be earlier
than the number of years designated by the Employer in the Adoption Agreement
following the year in which the applicable Compensation would have been paid
absent the deferral, or as further determined or limited in accordance with
rules established by the Administrator. Payments made pursuant to an In-Service
Distribution election shall be made in a lump sum as soon as administratively
feasible following January 1 of the calendar year in which the payment was
elected to be made, but in no event later than the end of the calendar year in
which the payment was elected to be made, or such later date as shall be
administratively feasible for the Administrator to make such payment. For
purposes of such payment, the value of the Participant's Accounts for the
applicable Plan Year shall be determined as of a Valuation Date preceding the
date that such distribution is made, in accordance with rules established by the
Administrator. In the event a Participant's Termination Date occurs (or, if
elected by the Employer in the Adoption Agreement, in the event of a Change in
Control of the Employer occurs) prior to the date the Participant had previously
elected to have an In-Service Distribution payment made to him, such amount
shall be paid to the Participant under the rules applicable for payment on
Termination of Employment in accordance with this subsection 9.1 and subsection
9.2. No In-Service Distribution shall be applicable to any amounts deferred in a
year in which the Participant fails to make an affirmative election, and payment
of such amounts for such year shall be made in
accordance with his most recent election on file with the Administrator (if no election is on file, then such amounts shall be paid to him in a single lump sum)
To the extent elected by the Employer in the Adoption Agreement, Participants whose Termination Date has not yet occurred may elect to defer payment of any In-Service Distribution, provided that such election is made in accordance with procedures established by the Administrator, and further provided that any such election must be made no later than 12 calendar months prior to the originally elected In-Service Distribution Date. Participants may elect any deferred payment date, but such date must be no fewer than five years from the original In-Service Distribution Date.
9.2 INSTALLMENT DISTRIBUTIONS
To the extent elected by the Employer in the Adoption Agreement, a Participant may elect to receive payments from his Accounts in the form of a single lump sum, as described in Section 9.1, or in annual installments over a period elected by the Employer in the Adoption Agreement. To the extent a Participant fails to make an election, the Participant shall be deemed to have elected to receive his distribution for that Plan Year in the form of a single lump sum. To the extent elected by the Employer in the Adoption Agreement, a Participant may make a separate election with respect to his Performance-Based Bonus Deferrals for each year (as adjusted for gains and losses thereon) that provides for a different method of distribution from the method of distribution he elects with respect to his Compensation Deferrals (as adjusted for gains and losses thereon) for that year. The Participant's Employer Contributions Account attributable to such year, if any (as adjusted for gains and losses thereon), shall be distributed in the same manner as his Compensation Deferral Account for such year.
(a) Installment Elections. A Participant will be required to make his distribution election prior to the commencement of each calendar year (or, in the event of an election with respect to Performance-Based Bonuses, prior to six months before the end of the applicable performance period), or such earlier date as determined by the Plan Administrator.
(b) Installment Payments. The first installment payment shall generally be made no later than the end of the calendar year in which occurs the Participant's Termination Date, or such later date as shall be administratively feasible for the Administrator to make such payment. Succeeding payments shall generally be made by January 1 of each succeeding calendar year, but in no event later than the end of each succeeding calendar year, or as soon as administratively feasible for the Administrator to make such payment. The amount to be distributed in each installment payment shall be determined by dividing the value of the Participant's Accounts as of a Valuation Date preceding the date of each distribution by the number of installment payments remaining to be made, in accordance with rules established by the Administrator. In the event of the death of the Participant prior to the full payment of his Accounts, payments will continue to be made to his Beneficiary in the same manner and at the same time as would have been payable
to the Participant, but substituting the Participant's date of death for the Participant's Retirement Date.
To the extent elected by the Employer in the Adoption Agreement, Participants who have elected payment in installments may make a subsequent election to elect payment of that amount in the form of a lump sum or to change the number of such installment payments so long as no acceleration of distribution payments occurs (but no fewer than the minimum number, and not to exceed the maximum number of installments elected by the Employer in the Adoption Agreement), if payment of installments with respect to that year's Deferral Elections has not yet commenced. Such election must be made in accordance with procedures established by the Administrator, and any such election must be made no later than 12 calendar months prior to the originally elected payment date of the first installment. The new payment date for any installment with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been made. Participants will be permitted to make such a change to the number of installments only once with respect to any year's Deferral Elections.
9.3 KEY EMPLOYEES
Notwithstanding anything herein to the contrary, and subject to Code
Section 409A, payment shall not be made or commence as a result of the
Participant's Termination Date to any Participant who is a key employee (defined
below) before the date that is not less than six months after the Participant's
Termination Date. For this purpose, a key employee includes a "key employee" (as
defined in Proposed Treasury Regulation Section 1.409A-1(i)) during the entire
12-month period determined by the Administrator ending with the annual date upon
which key employees are identified by the Administrator, and also including any
Employee identified by the Administrator in good faith with respect to any
distribution as belonging to the group of identified key employees, regardless
of whether such Employee is subsequently determined by the Employer, any
governmental agency, or a court not to be a key employee. In the event amounts
are payable to a key employee in installments in accordance with subsection 9.2,
the first installment shall be delayed by six months, with all other installment
payments payable as originally scheduled.
9.4 MANDATORY CASH-OUTS OF SMALL AMOUNTS
If the value of a Participant's total Accounts equals $10,000 or less at his Termination Date (or his death), or at any time thereafter, the Accounts will be paid to the Participant (or, in the event of his death, his Beneficiary) in a single lump sum, notwithstanding any election by the Participant otherwise. Payments made on account of the Participant's Termination Date shall be made on or before the earlier of (a) the last day of the Plan Year in which the Participant's Termination Date occurs, or (b) as soon as administratively feasible (except as otherwise provided in subsection 9.3).
9.5 DESIGNATION OF BENEFICIARY
Each Participant from time to time may designate any individual, trust, charity or other person or persons to whom the value of the Participant's Accounts will be paid in the event the Participant dies before receiving the value of all of his Accounts. A Beneficiary designation must be made in the manner required by the Administrator for this purpose. Primary and secondary Beneficiaries are permitted. A married participant designating a Beneficiary other than his Spouse must obtain the consent of his Spouse to such designation (in accordance with rules determined by the Administrator). Payments to the Participant's Beneficiary(ies) shall be made in accordance with subsection 9.1, 9.2 or 9.4, as applicable, after the Administrator has received proper notification of the Participant's death.
A Beneficiary designation will be effective only when the Beneficiary designation is filed with the Administrator while the Participant is alive, and a subsequent Beneficiary designation will cancel all of the Participant's Beneficiary designations previously filed with the Administrator. Any designation or revocation of a Beneficiary shall be effective as only if it is received by the Administrator. Once received, such designation shall be effective as of the date the designation was executed, but without prejudice to the Administrator on account of any payment made before the change is recorded by the Administrator. If a Beneficiary dies before payment of the Participant's Accounts have been made, the Participant's Accounts shall be distributed in accordance with the Participant's Beneficiary designation and pursuant to rules established by the Administrator. If a deceased Participant failed to designate a Beneficiary, or if the designated Beneficiary predeceases the Participant, the value of the Participant's Accounts shall be payable to the Participant's Spouse or, if there is none, to the Participant's estate, or in accordance with such other equitable procedures as determined by the Administrator.
9.6 REEMPLOYMENT
If a former Participant is rehired by an Employer, the Employer or any affiliate or subsidiary of the Employer described in Section 414(b) and (c) of the Code, regardless of whether he is rehired as an Eligible Individual (with respect to an Employee Participant), or a former Participant returns to service as a Board member, any payments being made to such Participant hereunder by virtue of his previous Termination Date shall cease. Upon such Participant's subsequent Termination Date, his payments shall again commence in the form previously elected by such Participant in accordance with this Section 9. If a former Participant is rehired by the Employer (with respect to an Employee Participant) or returns to service as a Board member, and in either case any payments to be made to the Participant by virtue of his previous Termination Date have not been made or commenced, such Participant shall no longer be entitled to such payments until his subsequent Termination Date.
9.7 SPECIAL DISTRIBUTION RULES
Except as otherwise provided herein and in Section 12, Account balances of Participants in this Plan shall not be distributed earlier than the applicable date or dates described in this Section 9. Notwithstanding the foregoing, in the case of payments: (i) the deduction for which would be limited or eliminated by the application of Section 162(m) of the Code; (ii) that would
violate securities or other applicable laws; (iii) that would violate loan covenants or other contractual terms to which an Employer is a party, where such a violation would result in material harm to an Employer, deferral of such payments may be made by the Employer at the Employer's discretion. In the case of a payment described in (i) above, the payment must be deferred either to a date in the first year in which the Employer or Administrator reasonably anticipates that a payment of such amount would not result in a limitation of a deduction with respect to the payment of such amount under Section 162(m), or the year in which the Participant's Termination Date occurs. In the case of a payment described in (ii) or (iii) above, payment will be made in the first calendar year in which the Employer or Administrator reasonably anticipates that the payment would not violate loan or other similar contractual terms, the violation would not result in material harm to an Employer, or the payment would not result in a violation of securities or other applicable laws. Payments intended to pay employment taxes or payments made as a result of income inclusion of an amount in a Participant's Accounts as a result of a failure to satisfy Section 409A of the Code shall be permitted at the Employer or Administrator's discretion at any time and to the extent provided in Proposed Treasury Regulations under Section 409A of the Code and IRS Notice 2005-1, Q&A-15, and any applicable subsequent guidance. "Employment taxes" shall include Federal Income Contributions Act (FICA) tax imposed under Sections 3101 and 3121(v)(2) of the Code on compensation deferred under the Plan (the "FICA Amount"), the income tax imposed under Section 3401 of the Code on the FICA Amount, and to pay the additional income tax under Section 3401 of the Code attributable to the pyramiding Section 3401 wages and taxes. A distribution may be accelerated as may be necessary to comply with a certificate of divestiture (as defined in Section 1043(b)(2) of the Code) with respect to certain conflict of interest rules. With respect to a subchapter S corporation, a distribution may be accelerated to avoid a nonallocation year under Code Section 409(p) with respect to a subchapter S corporation in the discretion of the Employer or Administrator, provided that the amount distributed does not exceed 125 percent of the minimum amount of distribution necessary to avoid the occurrence of a nonallocation year, in accordance with Proposed Treasury Regulation Section 1.409A-3(h)(2)(ix).
9.8 DISTRIBUTION ON ACCOUNT OF UNFORESEEABLE EMERGENCY
If elected by the Employer in the Adoption Agreement, if a Participant or Beneficiary incurs a severe financial hardship of the type described below, he may request an Unforeseeable Emergency Withdrawal, provided that the withdrawal is necessary in light of severe financial needs of the Participant or Beneficiary. To the extent elected by the Employer in the Adoption Agreement, the ability to apply for an Unforeseeable Emergency Withdrawal may be restricted to Participants whose Termination Date has not yet occurred. Such a withdrawal shall not exceed the amount required (including anticipated taxes on the withdrawal) to meet the severe financial need and not reasonably available from other resources of the Participant (including reimbursement or compensation by insurance, cessation of deferrals under this Plan, and liquidation of the Participant's assets, to the extent liquidation itself would not cause severe financial hardship). Each such withdrawal election shall be made at such time and in such manner as the Administrator shall determine, and shall be effective in accordance with such rules
as the Administrator shall establish and publish from time to time. Severe financial needs are limited to amounts necessary for:
(a) A sudden unexpected illness or accident incurred by the
Participant, his Spouse, or dependents (as defined in Code
Section 152(a)).
(b) Uninsured casualty loss pertaining to property owned by the Participant.
(c) Other similar extraordinary and unforeseeable circumstances involving an uninsured loss arising from an event outside the control of the Participant.
Withdrawals of amounts under this subsection shall be paid to the Participant in a lump sum as soon as administratively feasible following receipt of the appropriate forms and information required by and acceptable to the Administrator.
9.9 DISTRIBUTION UPON CHANGE IN CONTROL
In the event of the occurrence of a Change in Control of the Employer
or a member of the Employer's controlled group (as designated by the Employer in
the Adoption Agreement, and to the extent certified by the Plan Administrator
that a Change in Control has occurred), distributions shall be made to
Participants to the extent elected by the Employer in the Adoption Agreement, in
the form elected by the Participants as if a Termination Date had occurred with
respect to each Participant, or as otherwise specified by the Employer in the
Adoption Agreement. The Change in Control shall relate to: (i) the corporation
for whom the Participant is performing services at the time of the Change in
Control event; (ii) the corporation that is liable for the payment from the Plan
to the Participant (or all corporations so liable if more than one corporation
is liable); (iii) a corporation that is a majority shareholder of a corporation
described in (i) or (ii) above; or (iv) any corporation in a chain of
corporations in which each such corporation is a majority shareholder of another
corporation in the chain, ending in a corporation described in (i) or (ii)
above, as elected by the Employer in the Adoption Agreement. A "majority
shareholder" for these purposes is a shareholder owning more than 50% of the
total fair market value and total voting power of such corporation. Attribution
rules described in section 318(a) of the Code apply to determine stock
ownership. Stock underlying an option (whether vested or unvested) is considered
owned by the individual who holds the vested (or unvested) option.
Notwithstanding the foregoing, if a vested option is exercisable for stock that
is not substantially vested (as defined in section 1.83-3(b) and (j) of the
Code), the stock underlying the option is not treated as owned by the individual
who holds the option. If plan payments are made on account of a Change in
Control and are calculated by reference to the value of the Employer's stock,
such payments shall be completed not later than 5 years after the Change in
Control event. The Change in Control shall occur upon the date that: (v) a
person or "Group" (as defined in Proposed Treasury Regulation Sections
1.409A-3(g)(5)(v)(B) and (vi)(D)) acquires more than 50% of the total fair
market value or voting power of stock of the corporation designated in (i)
through (iv) above; (vi) a person or Group acquires ownership ("effective
control") of stock of the corporation with at least 35% of the total voting
power of the corporation designated in (i) through (iv) above and as further
limited by Proposed Treasury Regulation Section 1.409A-3(g)(5)(vi)); (vii) a
majority of the board of directors of the
corporation designated in (i) through (iv) above is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority
of the board as constituted prior to the appointment or election; or (viii) a
person or Group acquires assets from the corporation designated in (i) through
(iv) above having a total fair market value of at least 40% of the value of all
assets of the corporation immediately prior to such acquisition; as designated
by the Employer in the Adoption Agreement. For purposes of (vi) above, if any
one person, or more than one person acting as a Group, is considered to own more
than 50 percent of the total fair market value or total voting power of the
stock of a corporation, the acquisition of additional stock by the same person
or persons is not considered to cause a change in the ownership of the
corporation (or to cause a change in the effective control of the corporation
under (vi) above). An increase in the percentage of stock owned by any one
person, or persons acting as a Group, as a result of a transaction in which the
corporation acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this subsection. For purposes of (v)
through (viii) above, a Change in Control shall be further limited in accordance
with Proposed Treasury Regulation Sections 1.409A-3(g)(5)(v), (vi) and (vii).
Distributions under this subsection shall be made as soon as administratively
feasible following such Change in Control.
9.10 401(K) POUROVER TRANSFERS TO EMPLOYER'S 401(K) PLAN
If the Employer has elected in the Adoption Agreement to include a "401(k) Pourover" feature in the Plan, then, as soon as practicable for each plan year of the Employer's qualified profit sharing plan containing a qualified cash-or-deferred arrangement as described in Code Section 401(k) (the "401(k) plan"), and not later than March 15 of the next calendar year, the Employer shall perform a preliminary actual deferral percentage and actual contribution percentage test to determine the maximum amount of elective deferrals that could be made to the 401(k) plan for the applicable plan year, consistent with Code Sections 402(g) and 401(k)(3), on behalf of the Participant in the 401(k) plan. The lesser of such amount or the Participant's Compensation Deferrals hereunder for the Plan Year will be paid to the Participant from this Plan as soon as practicable, but in no event later than March 15 of the Plan Year following the Plan Year for which such determination is made, unless the Participant previously elected to have such amount contributed to the 401(k) plan as an elective deferral to such plan. The Participant's election to have such amount contributed to the 401(k) plan must be made at the same time as the Participant's Deferrals under this Plan, which must in no event be later than December 31 of the Plan Year in which the compensation to which the deferral relates is earned (or such earlier date as determined by the Plan Administrator) and, once made, the election shall be irrevocable.
SECTION 10 GENERAL PROVISIONS
10.1 INTERESTS NOT TRANSFERABLE
The interests of persons entitled to benefits under the Plan are not
subject to their debts or other obligations and, except as may be required by
the tax withholding provisions of the Code or any state's income tax act, may
not be voluntarily or involuntarily sold, transferred, alienated, assigned, or
encumbered; provided, however, that a Participant's interest in the Plan may be
transferable pursuant to a qualified domestic relations order, as defined in
Section 414(p) of the Code to the extent designated by the Employer in the
Adoption Agreement.
10.2 EMPLOYMENT RIGHTS
The Plan does not constitute a contract of employment, and participation in the Plan shall not give any Employee the right to be retained in the employ of an Employer, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. The Employers expressly reserve the right to discharge any Employee at any time.
10.3 LITIGATION BY PARTICIPANTS OR OTHER PERSONS
If a legal action begun against the Administrator (or any member or former member thereof), an Employer, or any person or persons to whom an Employer or the Administrator has delegated all or part of its duties hereunder, by or on behalf of any person results adversely to that person, or if a legal action arises because of conflicting claims to a Participant's or other person's benefits, the cost to the Administrator (or any member or former member thereof), the Employers or any person or persons to whom the Employer or the Administrator has delegated all or part of its duties hereunder of defending the action shall be charged to the extent permitted by law to the sums, if any, which were involved in the action or were payable to the Participant or other person concerned.
10.4 INDEMNIFICATION
To the extent permitted by law, the Employer shall indemnify each member of the Administrator committee, and any other employee or member of the Board with duties under the Plan, against losses and expenses (including any amount paid in settlement) reasonably incurred by such person in connection with any claims against such person by reason of such person's conduct in the performance of duties under the Plan, except in relation to matters as to which such person has acted fraudulently or in bad faith in the performance of duties. Notwithstanding the foregoing, the Employer shall not indemnify any person for any expense incurred through any settlement or compromise of any action unless the Employer consents in writing to the settlement or compromise.
10.5 EVIDENCE
Evidence required of anyone under the Plan may be by certificate, affidavit, document, or other information which the person acting on it considers pertinent and reliable, and signed, made, or presented by the proper party or parties.
10.6 WAIVER OF NOTICE
Any notice required under the Plan may be waived by the person entitled to such notice.
10.7 CONTROLLING LAW
Except to the extent superseded by laws of the United States, the laws of the state indicated by the Employer in the Adoption Agreement shall be controlling in all matters relating to the Plan.
10.8 STATUTORY REFERENCES
Any reference in the Plan to a Code section or a section of ERISA, or to a section of any other Federal law, shall include any comparable section or sections of any future legislation that amends, supplements, or supersedes that section.
10.9 SEVERABILITY
In case any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provision had never been set forth in the Plan.
10.10 ACTION BY THE EMPLOYER, THE EMPLOYERS OR THE ADMINISTRATOR
Any action required or permitted to be taken by the Employer or any of the Employers under the Plan shall be by resolution of its Board of Directors (which term shall include any similar governing body for any Employer that is not a corporation), by resolution or other action of a duly authorized committee of its Board of Directors, or by action of a person or persons authorized by resolution of its Board of Directors or such committee. Any action required or permitted to be taken by the Administrator under the Plan shall be by resolution or other action of the Administrator or by a person or persons duly authorized by the Administrator.
10.11 HEADINGS AND CAPTIONS
The headings and captions contained in this Plan are inserted only as a matter of convenience and for reference, and in no way define, limit, enlarge, or describe the scope or intent of the Plan, nor in any way shall affect the construction of any provision of the Plan.
10.12 GENDER AND NUMBER
Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular.
10.13 EXAMINATION OF DOCUMENTS
Copies of the Plan and any amendments thereto are on file at the office of the Employer where they may be examined by any Participant or other person entitled to benefits under the Plan during normal business hours.
10.14 ELECTIONS
Each election or request required or permitted to be made by a Participant (or a Participant's Spouse or Beneficiary) shall be made in accordance with the rules and procedures established by the Employer or Administrator and shall be effective as determined by the Administrator. The Administrator's rules and procedures may address, among other things, the method and timing of any elections or requests required or permitted to be made by a Participant (or a Participant's Spouse or Beneficiary).
10.15 MANNER OF DELIVERY
Each notice or statement provided to a Participant shall be delivered in any manner established by the Administrator and in accordance with applicable law, including, but not limited to, electronic delivery.
10.16 FACILITY OF PAYMENT
When a person entitled to benefits under the Plan is a minor, under legal disability, or is in any way incapacitated so as to be unable to manage his financial affairs, the Administrator may cause the benefits to be paid to such person's guardian or legal representative. If no guardian or legal representative has been appointed, or if the Administrator so determines in its sole discretion, payment may be made to any person as custodian for such individual under any applicable state law, or to the legal representative of such person for such person's benefit, or the Administrator may direct the application of such benefits for the benefit of such person. Any payment made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment under the Plan.
10.17 MISSING PERSONS
The Employers and the Administrator shall not be required to search for or locate a Participant, Spouse, or Beneficiary. Each Participant, Spouse, and Beneficiary must file with the Administrator, from time to time, in writing the Participant's, Spouse's, or Beneficiary's post office address and each change of post office address. Any communication, statement, or notice addressed to a Participant, Spouse, or Beneficiary at the last post office address filed with the Administrator, or if no address is filed with the Administrator, then in the case of a Participant, at
the Participant's last post office address as shown on the Employer's records, shall be considered a notification for purposes of the Plan and shall be binding on the Participant and the Participant's Spouse and Beneficiary for all purposes of the Plan.
If the Administrator is unable to locate the Participant, Spouse, or Beneficiary to whom a Participant's Accounts are payable, the Participant's Accounts shall be frozen as of the date on which distribution would have been completed under the terms of the Plan, and no further notional investment returns shall be credited thereto.
If a Participant whose Accounts were frozen (or his Beneficiary) files a claim for distribution of the Accounts within 7 years after the date the Accounts are frozen, and if the Administrator or Employer determines that such claim is valid, then the frozen balance shall be paid by the Employer to the Participant or Beneficiary in a lump sum cash payment as soon as practicable thereafter. If the Administrator notifies a Participant, Spouse, or Beneficiary of the provisions of this Subsection, and the Participant, Spouse, or Beneficiary fails to claim the Participant's, Spouse's, or Beneficiary's benefits or make such person's whereabouts known to the Administrator within 7 years after the date the Accounts are frozen, the benefits of the Participant, Spouse, or Beneficiary may be disposed of, to the extent permitted by applicable law, by one or more of the following methods:
(a) By retaining such benefits in the Plan.
(b) By paying such benefits to a court of competent jurisdiction for judicial determination of the right thereto.
(c) By forfeiting such benefits in accordance with procedures established by the Administrator. If a Participant, Spouse, or Beneficiary is subsequently located, such benefits shall be restored (without adjustment) to the Participant, Spouse, or Beneficiary under the Plan.
(d) By any equitable manner permitted by law under rules adopted by the Administrator.
10.18 RECOVERY OF BENEFITS
In the event a Participant, Spouse, or Beneficiary receives a benefit payment from the Plan that is in excess of the benefit payment that should have been made to such Participant, Spouse, or Beneficiary, or in the event a person other than a Participant, Spouse, or Beneficiary receives an erroneous payment from the Plan, the Administrator or Employer shall have the right, on behalf of the Plan, to recover the amount of the excess or erroneous payment from the recipient. To the extent permitted under applicable law, the Administrator or Employer may, at its option, deduct the amount of such excess or erroneous payment from any future benefits payable to the applicable Participant, Spouse, or Beneficiary.
10.19 EFFECT ON OTHER BENEFITS
Except as otherwise specifically provided under the terms of any other employee benefit plan of the Employer, a Participant's participation in this Plan shall not affect the benefits provided under such other employee benefit plan.
10.20 TAX AND LEGAL EFFECTS
The Employers, the Administrator, and their representatives and delegates do not in any way guarantee the tax treatment of benefits for any Participant, Spouse, or Beneficiary, and the Employers, the Administrator, and their representatives and delegates do not in any way guarantee or assume any responsibility or liability for the legal, tax, or other implications or effects of the Plan. In the event of any legal, tax, or other change that may affect the Plan, the Employer may, in its sole discretion, take any actions it deems necessary or desirable as a result of such change.
SECTION 11 THE ADMINISTRATOR
11.1 INFORMATION REQUIRED BY ADMINISTRATOR
Each person entitled to benefits under the Plan must file with the Administrator from time to time in writing such person's mailing address and each change of mailing address. Any communication, statement, or notice addressed to any person at the last address filed with the Administrator will be binding upon such person for all purposes of the Plan. Each person entitled to benefits under the Plan also shall furnish the Administrator with such documents, evidence, data, or information as the Administrator considers necessary or desirable for the purposes of administering the Plan. The Employers shall furnish the Administrator with such data and information as the Administrator may deem necessary or desirable in order to administer the Plan. The records of the Employers as to an Employee's or Participant's period of employment or membership on the Board, termination of employment or membership and the reason therefor, leave of absence, reemployment, and Compensation will be conclusive on all persons unless determined to the Administrator's or Employer's satisfaction to be incorrect.
11.2 UNIFORM APPLICATION OF RULES
The Administrator shall administer the Plan on a reasonable basis. Any rules, procedures, or regulations established by the Administrator shall be applied uniformly to all persons similarly situated.
11.3 REVIEW OF BENEFIT DETERMINATIONS
Benefits will be paid to Participants and their beneficiaries without the necessity of formal claims. Participants or their beneficiaries, however, may make a written request to the Plan Administrator for any Plan benefits to which they may be entitled. Participants' written request for Plan benefits will be considered a claim for Plan benefits, and will be subject to a full and fair review. If the claim is wholly or partially denied, the Plan Administrator will furnish the claimant with a written notice of this denial. This written notice will be provided to the claimant within 90 days after the receipt of the claim by the Plan Administrator. If notice of the denial of a claim is not furnished to the claimant in accordance with the above within 90 days, the claim will be deemed denied. The claimant will then be permitted to proceed to the review stage described in the following paragraphs.
Upon the denial of the claim for benefits, the claimant may file a claim for review, in writing, with the Plan Administrator. The claim for review must be filed no later than 60 days after the claimant has received written notification of the denial of the claim for benefits or, if no written denial of the claim was provided, no later than 60 days after the deemed denial of the claim. The claimant may review all pertinent documents relating to the denial of the claim and submit any issues and comments, in writing, to the Plan Administrator. If the claim is denied, the Plan Administrator must provide the claimant with written notice of this denial within 60 days after the Plan Administrator's receipt of the claimant's written claim for review. The Plan Administrator's decision on the claim for review will be communicated to the claimant in writing and will include specific references to the pertinent Plan provisions on which the decision was
based. If the Plan Administrator's decision on review is not furnished to the claimant within the time limitations described above, the claim will be deemed denied on review. If the claim for Plan benefits is finally denied by the Plan Administrator (or deemed denied), then the claimant may bring suit in federal court. The claimant may not commence a suit in a court of law or equity for benefits under the Plan until the Plan's claim process and appeal rights have been exhausted and the Plan benefits requested in that appeal have been denied in whole or in part. However, the claimant may only bring a suit in court if it is filed within 90 days after the date of the final denial of the claim by the Plan Administrator.
11.4 ADMINISTRATOR'S DECISION FINAL
Benefits under the Plan will be paid only if the Administrator decides in its sole discretion that a Participant or Beneficiary (or other claimant) is entitled to them. Subject to applicable law, any interpretation of the provisions of the Plan and any decisions on any matter within the discretion of the Administrator made by the Administrator or its delegate in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the Administrator shall make such adjustment on account thereof as it considers equitable and practicable.
SECTION 12 AMENDMENT AND TERMINATION
While the Employer expects and intends to continue the Plan, the Employer and the Administrator reserve the right to amend the Plan at any time and for any reason, including the right to amend this Section 12 and the Plan termination rules herein; provided, however, that each Participant will be entitled to the amount credited to his Accounts immediately prior to such amendment. The Employer's power to amend the Plan includes (without limitation) the power to change the Plan provisions regarding eligibility, contributions, notional investments, vesting, and distribution forms, and timing of payments, including changes applicable to benefits accrued prior to the effective date of any such amendment; provided, however, that amendments to the Plan (other than amendments relating to Plan termination) shall not cause the Plan to provide for acceleration of distributions in violation of Section 409A of the Code and applicable regulations thereunder.
The Employer reserves the right to terminate the Plan at any time and for any reason; provided, however, that each Participant will be entitled to the amount credited to his Accounts immediately prior to such termination (but such Accounts shall not be adjusted for future notional income, losses, expenses, appreciation and depreciation).
In the event that the Plan is terminated pursuant to this Section 12, the balances in affected Participants' Accounts shall be distributed at the time and in the manner set forth in Section 9. Notwithstanding the foregoing, the Employer and the Administrator reserve the right to make all such distributions within the second twelve-month period commencing with the date of termination of the Plan; provided, however, that no such distribution will be made during the first twelve-month period following such date of Plan termination other than those that would otherwise be payable under Section 9 absent the termination of the Plan. In the event of a Plan termination due to a Change in Control of the Employer, distributions shall be made within 12 months of the date of the Change in Control.
Exhibit 10.24
VALIDUS HOLDINGS LTD.
DIRECTORS STOCK COMPENSATION PLAN
1. PURPOSES.
The purposes of this Validus Holdings Ltd. Directors Stock Compensation Plan are to advance the interests of Validus Holdings Ltd. and its shareholders by providing a means to attract, retain and motivate members of the Board of Directors of Validus Holdings Ltd. upon whose judgment, initiative and efforts the continued success, growth and development of Validus Holdings Ltd. is dependent.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder.
(c) "Company" means Validus Holdings Ltd., a corporation organized under the laws of Bermuda, or any successor corporation.
(d) "Director" means a non-employee member of the Board.
(e) "Fair Market Value" means, with respect to Shares on any day, the following:
(i) If the Shares are at the time listed or admitted to trading on any stock exchange, then the Fair Market Value shall be the closing selling price per share of Shares on the date in question on the stock exchange which is the primary market for the Shares, as such price is officially quoted on such exchange. If there is no reported sale of Shares on such exchange on such date, then the Fair Market Value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists; and
(ii) If the Shares are not at the time listed or admitted to trading on any stock exchange but are traded in the over-the-counter market, the Fair Market Value shall be the closing selling price per share of Shares on the date in question, as such
price is reported by the National Association of Securities Dealers through the NASDAQ National Market System or any successor system. If there is no reported closing selling price for Shares on such date, then the closing selling price on the last preceding date for which such quotation exists shall be determinative of Fair Market Value.
(f) "Participant" means a Director who has elected to receive Shares or defer compensation under the Plan.
(g) "Plan" means this Validus Holdings Ltd. Directors Stock Compensation Plan, as amended from time to time.
(h) "Plan Year" means the calendar year.
(i) "Shares" means common shares, $0.10 par value per share, of the
Company, [and such other securities as may be substituted for Shares pursuant to
Section 4(b) hereof].
3. ADMINISTRATION.
The Plan shall be administered by the Board. Subject to the express provisions of the Plan, the Board shall have full and exclusive authority to interpret the Plan, to make all determinations with respect to the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable in the implementation and administration of the Plan. The Board's interpretation and construction of the Plan shall be conclusive and binding on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in Section 6(g), the total number of Shares reserved for issuance under the Plan shall be 100,000.
(b) Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares or treasury Shares, including Shares acquired by purchase in the open market or in private transactions.
5. SHARE ELECTION.
(a) Each Director may make an election in writing on or prior to each December 31 to receive the Director's annual retainer fees payable in the following Plan Year in the form of Shares instead of cash. Unless the Director makes a deferral election pursuant to Section 6 below, any Shares elected shall be distributed at the time cash retainer fees are otherwise payable. The number of Shares distributed shall be equal to the amount of the
annual retainer fee otherwise payable on such payment date divided by 100% the Fair Market Value of a Share on such payment date. Notwithstanding the foregoing, a Director who is first elected or appointed to the Board may make an election under this Section 5 within 30 days after such election or appointment to the Board in respect of annual retainer fees for services to be performed by the Director subsequent to the election. Any election made under this Section 5 shall remain in effect for all future Plan Years until changed in writing, which change shall apply prospectively to the Plan Year beginning after the date of the written change of election. Elections shall be made hereunder when delivered in writing to the person designated from time to time by the Company to receive the elections.
6. DEFERRAL ELECTION.
(a) A Director who has elected to receive Shares pursuant to Section 5 above may make an irrevocable election on or before the December 31 immediately preceding the beginning of a Plan Year of the Company, by written notice to the Company, to defer delivery of all or a designated percentage of the Shares otherwise payable as his or her annual retainer for service as a Director for the Plan Year. Notwithstanding the foregoing, a Director who is first elected or appointed to the Board may make a deferral election under this Section 6(a) within 30 days after such election or appointment to the Board in respect of annual retainer fees for services to be performed by the Director subsequent to the election.
(b) Deferrals of Shares hereunder shall continue until the Director notifies the Company in writing, on or prior to the December 31 immediately preceding the commencement of any Plan Year, that he wishes to change his election hereunder for such Plan Year and subsequent Plan Years.
(c) All Shares which a Director elects to defer pursuant to this
Section 6 shall be credited in the form of Share units to a bookkeeping account
maintained by the Company in the name of the Director. Each such Share unit
shall represent the right to receive one Share at the time determined pursuant
to the terms of the Plan.
(d) As of each date on which a cash dividend is paid on Shares, there shall be credited to each account that number of Share units (including fractional Share units) determined by: (i) multiplying the amount of such dividend per Share by the number of Share units in such account; and (ii) dividing the total so determined by the Fair Market Value of a Share on the date of payment of such cash dividend. The additions to a Director's account pursuant to this Section 6(d) shall continue until the Director's account is fully paid.
(e) The account of a Director shall be distributed (in the form of one Share for each Share unit) in a lump sum at the time of termination of the Director's service on the Board.
(f) The right of a Director to amounts described under this Section 6 shall not be subject to assignment or other disposition by him or her other than by will or the laws of descent and distribution. In the event that, notwithstanding this provision, a Director makes a prohibited disposition, the Company may disregard the same and discharge its obligation hereunder by making payment or delivery as though no such disposition had been made.
(g) Adjustments. In the event that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or Share exchange, or other such change, affects the Shares such that they are increased or decreased or changed into or exchanged for a different number or kind of Shares, other securities of the Company or of another corporation or other consideration, then in order to maintain the proportionate interest of the Directors and preserve the value of the Directors' Share units, (i) there shall automatically be substituted for each Share unit a new unit representing the number and kind of Shares, other securities or other consideration into which each outstanding Share shall be changed, and (ii) the number and kind of shares available for issuance under the Plan shall be equitably adjusted in order to take into account such transaction or other change. The substituted units shall be subject to the same terms and conditions as the original Share units.
7. GENERAL PROVISIONS.
(a) Compliance with Legal and Trading Requirements. The Plan shall be subject to all applicable laws, rules and regulations, including, but not limited to, federal and state laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Company, in its discretion, may postpone the issuance or delivery of Shares under the Plan until completion of such stock exchange or market system listing or registration or qualification of such Shares or other required action under any federal or state law, rule or regulation or under laws, rules or regulations of other jurisdictions as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules and regulations. No provisions of the Plan shall be interpreted or construed to obligate the Company to register any Shares under federal or state law or under the laws of other jurisdictions.
(b) No Right to Continued Service. Neither the Plan nor any action taken thereunder shall be construed as giving any Director the right to be retained in the service of the Company or any of its subsidiaries or affiliates, nor shall it interfere in any way with the right of the Company or any of its subsidiaries or affiliates to terminate any Director's service at any time.
(c) Taxes. The Company is authorized to withhold from any Shares delivered under this Plan any amounts of withholding and other taxes due in connection therewith, and to take such other action as the Company may deem advisable to enable the Company and a Participant to satisfy obligations for the payment of any withholding taxes and other tax obligations relating thereto. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations; provided, however, that the amount of tax withholding to be satisfied by withholding Shares shall be limited to the minimum amount of taxes required to be withheld under applicable law.
(d) Amendment. The Board may amend, alter, suspend, discontinue, or terminate the Plan without the consent of shareholders of the Company or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the Company's shareholders if such shareholder approval is required by any federal law or regulation or the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted; provided, however, that, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation or termination of the Plan may impair the rights or, in any other manner, adversely affect the rights of such Participant under any award theretofore granted to him or her or compensation previously deferred by him or her hereunder.
(e) Unfunded Status of Awards. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to a deferral election, nothing contained in the Plan shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company; provided, however, that the Company may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan to deliver cash, Shares, or other property pursuant to any award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Company otherwise determines with the consent of each affected Participant.
(f) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other compensation arrangements as it may deem desirable, and such arrangements may be either applicable generally or only in specific cases.
(g) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan. Cash shall be paid in lieu of such fractional Shares.
(h) Governing Law. The validity, construction, and effect of the Plan shall be determined in accordance with the laws of the State of New York, without giving effect to principles of conflict of laws thereof.
(i) Effective Date; Plan Termination. The Plan shall become effective as of January 1, 2007 (the "Effective Date"), subject to approval by the Shareholders of the Company. The Plan shall terminate as to future awards, at such time as no Shares remain available for issuance pursuant to Section 4, and the Company has no further obligations with respect to any compensation deferred under the Plan.
(j) Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only. In the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
Exhibit 10.25
(VALIDUS RE LOGO)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of January 30th, 2007 between Validus Holdings, Ltd., a Bermuda corporation (the "Company"), and Jerome Dill (the "Executive").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:
"Base Salary" has the meaning set forth in Section 4.01.
"Cause" means (a) theft or embezzlement by the Executive with respect to the Company or its Subsidiaries; (b) malfeasance or gross negligence in the performance of the Executive's duties; (c) the commission by the Executive of any felony or any crime involving moral turpitude; (d) willful or prolonged absence from work by the Executive (other than by reason of disability due to physical or mental illness or at the direction of the Company or its Subsidiaries) or failure, neglect or refusal by the Executive to perform his duties and responsibilities without the same being corrected within ten (10) days after being given written notice thereof; (e) failure by the Executive to adequately perform his duties and responsibilities hereunder 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 Executive to an extent which materially impairs the Executive's performance of his duties without the same being corrected within ten (10) days after being given written notice thereof; (g) the Executive's use of illegal drugs without the same being corrected within ten (10) days after being given written notice thereof; or (h) the material breach by the Executive of any of the covenants contained in this Agreement without, in the case of any breach capable of being corrected, the same being corrected within ten (10) days after being given written notice thereof.
"Confidential Information" means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business. It shall not include information (a) required to be disclosed by court or administrative order, (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company,
"Date of Termination" has the meaning set forth in Section 5.01.
"Employment Period" has the meaning set forth in Section 2.01.
"Good Reason" means, without the Executive's written consent, (a) a material breach of this Agreement by the Company without the same being corrected within ten (10) days
(VALIDUS RE LOGO)
after being given written notice thereof; (b) a material reduction, in the aggregate, in the Executive's Base Salary and his benefit set forth in Section 4.03(b) below; or (c) a material and adverse change by the Company in the Executive's duties and responsibilities set forth in Section 3.01 hereof, other than due to the Executive's failure to adequately perform such duties and responsibilities as determined by the Board in good faith, without the same being corrected within ten (10) days after being given written notice thereof; provided, however, that, notwithstanding any provision of this Agreement to the contrary, the Executive must give written notice of his intention to terminate his employment for Good Reason within sixty (60) days after the act or omission which constitutes Good Reason, and any failure to give such written notice within such period will result in a waiver by the Executive of his right to terminate for Good Reason as a result of such act or omission.
"Intellectual Property" has the meaning set forth in Section 7.01.
"Noncompetition Period" has the meaning set forth in Section 9.01.
"Notice of Termination" has the meaning set forth in Section 5.04.
"Permanent Disability" means those circumstances where the Executive is unable to continue to perform the usual customary duties of his assigned job or as otherwise assigned in accordance with the provisions of this Agreement 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. Any questions as to the existence of a Permanent Disability shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (which approval shall not be unreasonably withheld). The determination of any such physician shall be final and conclusive for all purposes of this Agreement.
"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"Reimbursable Expenses" has the meaning set forth in Section 4.04.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, twenty (20) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, twenty (20) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a twenty (20) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated twenty (20) percent or more of partnership, limited liability company, association or other business entity gains or losses or control
(VALIDUS RE LOGO)
the managing director or member or general partner of such partnership, limited liability company, association or other business entity.
ARTICLE 2
EMPLOYMENT
SECTION 2.01 Employment Period. The Company shall employ the
Executive, and the Executive shall accept employment with the Company, upon the
terms and conditions set forth in this Agreement for the period beginning April
1, 2007 (the "Start Date") and ending on the Date of Termination as defined
Section 5.01 below (the "Employment Period"').
ARTICLE 3
POSITION AND DUTIES
SECTION 3.01 Position and Duties. Effective on the Start Date, the Executive shall serve as General Counsel of the Company, render such legal, administrative and other executive and managerial services to the Company which are consistent with Executive's position and have such responsibilities, powers and duties as may from time to time be prescribed by the senior executives of the Company; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required by the conduct of the business of the Company. The Company may direct, in its sole and exclusive discretion, that the Executive perform no duties and exercise no powers or resign from any office held in connection with his employment with the Company or its Subsidiaries. During the Employment Period the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without prior written consent of the Company.
SECTION 3.02 Work Location. While employed by the Company hereunder, the Executive shall perform his duties (when not traveling or engaged elsewhere outside the United States in the performance of his duties) at the offices of the Company in Bermuda or at such other place in Bermuda as the Company may in its discretion from time to time direct. The Executive shall travel to such places outside of Bermuda on the business of the Company in such manner and on such occasions as the Company may from time to time reasonably require.
ARTICLE 4
BASE SALARY AND BENEFITS
SECTION 4.01 Base Salary. During the Employment Period, the Executive's base salary will be $425,000 per annum (the "Base Salary"). The Base Salary will be payable monthly on the last working day of each month in arrears in twelve (12) equal installments. Annually during the Employment Period the Company shall review with the Executive his job performance and compensation, and if deemed appropriate by the Board of Directors of the Company or its delegate, in its discretion, the Executive's Base Salary may be increased. Normal
(VALIDUS RE LOGO)
hours of employment are 8:30 a.m. to 5:00 p.m., Monday to Friday. The Executive's salary has been computed to reflect that his regular duties are likely, from time to time, to require more than forty (40) hours per week and the Executive shall not be entitled to receive any additional remuneration for any such additional hours.
SECTION 4.02 Bonuses. In addition to the Base Salary, the Executive shall be eligible to participate in an annual bonus plan on terms set forth from time to time by the Board of Directors of the Company; provided, however, that the Executive's target annual bonus will be 115% of his Base Salary.
SECTION 4.03 Benefits. In addition to the Base Salary, and any bonuses payable to the Executive pursuant to this Agreement, the Executive shall be entitled to the following benefits during the Employment Period;
(a) such major medical, life insurance and disability insurance coverage as is, or may during the Employment Period, be provided generally for other senior executive officers of the Company as set forth from time to time in the applicable plan documents; and
(b) in addition to the public holidays referenced in the Public Holidays Act of 1947 and up to ten (10) paid days off for sick leave, a maximum of five (5) weeks of paid vacation annually during the term of the Employment Period.
SECTION 4.04 Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses ("Reimbursable Expenses"), subject to the Company's requirements with respect to reporting and documentation of expenses. Other business expenses shall include reimbursement of Executive's International Bar Association Membership and Practicing Certificate fees.
SECTION 4.05 Stock Options and Restricted Stock. The Company shall grant to the Executive 57,500 shares of restricted common stock of the Company and an option to acquire 130,000 shares of the Company's common stock. Except as otherwise provided in Section 5.03 below, the terms of such restricted common stock and stock option, including terms pertaining to vesting, exercise and cancellation, shall be as set forth in the equity incentive plan to be established by the Company (the "Incentive Plan") and the applicable award agreements.
ARTICLE 5
TERM AND TERMINATION
SECTION 5.01 Date of Termination. The Employment Period shall end on the Date of Termination. For purposes of this Agreement, the "Date of Termination" shall mean the first to occur of the following: (a) the six (6) months from the date the Company provides Notice of Termination (as defined below) without Cause to the Executive; (b) immediately upon the Company providing Notice of Termination for Cause to the Executive; (c) six (6) months from the date the Executive provides Notice of Termination specifying his resignation for Good Reason
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to the Company; (d) six (6) months from the date the Executive provides Notice of Termination by the Executive without Good Reason to the Company; and (e) the fifth (5th) day following the Company providing Notice of Termination to the Executive as a result of the Executive's Permanent Disability; or (f) the date of Executive's death. In the event that there are circumstances which would give rise to a termination by the Company for Cause, the Company may, in its sole and exclusive discretion, treat such termination as a termination without Cause.
SECTION 5.02 Resignation by the Executive Without Good Reason. If the Employment Period shall be terminated as a result of the Executive's resignation or leaving of his employment, other than for Good Reason, Executive shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 through the Date of Termination; and (b) receive reimbursement of all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. Notwithstanding any provision of this Agreement or any applicable plan or other agreement to the contrary, no shares of restricted stock of the Company or stock options of the Company granted to the Executive shall vest on or following the date the Executive provides Notice of Termination without Good Reason to the Company. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.03 Termination for Other Reasons. If the Employment Period shall be terminated by the Executive for Good Reason, by the Company with or without Cause, as a result of the Executive's Permanent Disability or upon the Executive's death, the Executive (or his estate, in the case of death) shall continue to: (a) receive Base Salary and benefits set forth in Section 4.03 above (i) in the case of termination by the Executive for Good Reason or by the Company with or without Cause, through the Date of Termination, and (ii) in the case of termination due to the Executive's Permanent Disability or death, through the six (6) month anniversary of the Date of Termination; (b) vest in any shares of restricted stock of the Company and any Company stock options granted to the Executive through the Date of Termination; and (c) receive reimbursement for all Reimbursable Expenses incurred by the Executive prior to the Date of Termination. The Executive's entitlements under all other benefit plans and programs of the Company shall be as determined thereunder.
SECTION 5.04 Notice of Termination. Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive for Good Reason or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, with respect to termination by the Company for Permanent Disability or Cause or resignation by the Executive for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.
ARTICLE 6
CONFIDENTIAL INFORMATION
SECTION 6.01 Nondisclosure and Nonuse of Confidential Information. The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and
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required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.
ARTICLE 7
INTELLECTUAL PROPERTY
SECTION 7.01 Ownership of Intellectual Property. In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, "Intellectual Property"), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed "a work made in the course of employment" as defined by the Copyright Act of 1958, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company's interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive's employment hereunder).
ARTICLE 8
DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT
SECTION 8.01 Delivery of Materials upon Termination of Employment. As requested by the Company, from time to time and upon the termination of the Executive's employment with the Company for any reason, the Executive will promptly deliver to the Company all property of the Company or its Subsidiaries, including, without limitation, all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive's possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that, to the best of his knowledge, all such materials have been delivered to the Company.
ARTICLE 9
NONCOMPETITION AND NONSOLICITATION
SECTION 9.01 Noncompetition. The Executive acknowledges that during his employment with the Company, he will become familiar with trade secrets and other Confidential
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Information concerning the Company or its Subsidiaries, and that his services will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period ending six(6) months after the Date of Termination (the "Noncompetition Period"), he will not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process or being planned as of the Date of Termination, within any geographical area in which the Company or its Subsidiaries engage or plan to engage in such businesses; provided, however, that the portion of the Noncompetition Period following the Date of Termination shall be reduced by the period of time, if any, between the date of Notice of Termination is given and the Date of Termination. It shall not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
SECTION 9.02 Nonsolicitation of Employees. The Executive hereby agrees that (a) during the Employment Period and for a period of one (1) year after the Date of Termination (the "Nonsolicitation Period" the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of any individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period or within the six-month period prior thereto.
SECTION 9.03 Nonsolicitation of Customers. During the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, insured, reinsured, reinsurer, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.
SECTION 9.04 Enforcement. If, at the enforcement of Sections 9.01, 9.02 or 9.03, a court holds that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration, scope and area permitted by law.
ARTICLE 10
EQUITABLE RELIEF
SECTION 10.01 Equitable Relief. The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive's services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03 could cause irreparable harm to the Company for which they would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01, 9.02 or 9.03, the Company shall have the absolute right to apply to any court of competent
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jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.
ARTICLE 11
EXECUTIVE REPRESENTATIONS AND INDEMNIFICATION
SECTION 11.01 Executive Representations. The Executive hereby
represents and warrants to the Company that (a) the execution, delivery and
performance of this Agreement by the Executive does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which the Executive is a party or by
which he is bound, (b) except for agreements provided to the Company by the
Executive, the Executive is not a party to or bound by any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person, and
(c) upon the execution and delivery of this Agreement by the Company, this
Agreement will be the valid and binding obligation of the Executive, enforceable
in accordance with its terms. Notwithstanding Section 11.02 below, in the event
that any action is brought against Executive involving any breach of any
employment agreement, noncompetition agreement or confidentiality agreement with
any other Person, the Executive shall bear his own costs incurred in defending
such action, including but not limited to, court fees, arbitration costs,
mediation costs, attorneys' fees and disbursements.
SECTION 11.02 General Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "Proceeding"'), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and its organizational documents, against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company agrees to maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 Rights and Remedies. The Company will be entitled to enforce its rights and remedies under this Agreement specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. There are currently no disciplinary or grievance procedures in place, there is no collective agreement in place, and there is no probationary period.
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SECTION 12.02 Consent to Amendments. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.
SECTION 12.03 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company.
SECTION 12.04 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
SECTION 12.05 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.
SECTION 12.06 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
SECTION 12.07 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two(2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four(4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below.
If to the Executive: To the last address delivered to the Company by the Executive in the manner set forth herein. If to the Company: Validus Holdings, Ltd. Clarendon House 2 Church Street Hamilton HM 11 Bermuda |
Attn: President
Copies (which shall not constitute notice) of notices to the Company shall also be sent to:
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Cahill Gordon & Reindel LLP 80 Pine Street New York, New York 10005 Attn: Glenn J. Waldrip, Jr., Esq
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
SECTION 12.08 Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
SECTION 12.09 No Third Party Beneficiary. This Agreement will not confer any rights or remedies (or any obligations) upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.
SECTION 12.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement shall serve as a written statement of employment for purposes of Section 6 of the Bermuda Employment Act 2000.
SECTION 12.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation.
SECTION 12.12 Survival. Sections 6.01, 7.01, 8.01 and Articles 9 and 12 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.
SECTION 12.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS, AND THE PARTIES HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF BERMUDA.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
VALIDUS HOLDINGS, LTD.
By: /s/ Edward J. Noonan ------------------------------------ Printed Name: EDWARD J. NOONAN Title: CEO /s/ JEROME DILL ---------------------------------------- JEROME DIll |
Exhibit 10.26
VALIDUS HOLDINGS, LTD.
AMENDED AND RESTATED
RESTRICTED SHARE AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, dated as of February 4, 2006, between Validus Holdings, Ltd. (the "Company"), a Bermuda corporation, and Edward Noonan (the "Employee").
WHEREAS, the Employee has entered into a written employment agreement with the Company (the "Employment Agreement") providing for this grant of Restricted Shares;
WHEREAS, the Employee has been granted 369,920 Restricted Shares under the Company's 2005 Long Term Incentive Plan (the "Plan") evidenced by an agreement between the parties hereto dated as of February 4,2006, and the parties hereto wish to amend and restate the terms of such agreement in its entirety as set forth herein;
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 369,920 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. Vesting of Award. Subject to the provisions of Sections 3 and
4 below and the other terms and conditions of this Agreement, this Award shall
become vested 100% on December 12, 2008, provided, except as set forth in
Section 3 or 4 below, the Employee remains actively employed by the Company or a
Subsidiary through such vesting date. 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.
3. Termination of Employment. Except as otherwise set forth in
Section 4 below, the following provisions apply in the event of termination of
employment of the Employee.
(a) 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); provided, however, that in such event no less than 25% of the Restricted Shares subject to the Award will vest on the Date of Termination. For the avoidance of doubt, except as otherwise set forth in the immediately preceding sentence, Restricted Shares granted hereunder 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.
(b) 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.
(c) 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.
(d) 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.
4. Continuation as Director. Notwithstanding any provision of
this Agreement to the contrary, if the Employee's employment by the Company
terminates but he continues to serve on the Board, (i) a prorata portion (based
on the number of days from December 12, 2005 to the date of termination of
employment as a percentage of the number of days from December 12, 2005 to
December 12, 2008) of the Award shall continue to vest in accordance with
Section 2 (a) above for so long as the Employee continues to serve on the Board,
(ii) 50% of the remainder of the Award, if any, shall continue to vest in
accordance with Section 2 (a) above for so long as the Employee continues to
serve on the Board, (iii) the remaining 50% of the remainder of the Award, if
any, shall be immediately forfeited to the Company upon such termination of
employment, and (iv) any portion of the Award which is unvested at the time of
the Employee's termination of service on the Board shall be immediately
forfeited to the Company; provided, however, that if, after becoming a
nonemployee member of the Board, the Employee is involuntarily removed from the
Board, or after having agreed to stand for reelection is not reelected to the
Board, in either case not due to circumstances that would constitute Cause under
the Employment Agreement, then any unvested portion of the
Award that was not previously forfeited shall become vested at the time the Employee ceases to be member of the Board.
5. 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 hereto and the satisfaction of any withholding tax liability
pursuant to Section 10 hereof, the certificates evidencing such vested Shares,
not bearing the Restrictive Legend (but still bearing the legend set forth in
Section 12(d) below), shall be delivered to the Employee or other evidence of
vested Shares shall be provided to the Employee.
6. 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 hereof) at the time paid on such Restricted Shares.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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").
12. 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 12 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 final, 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.
13. 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.
14. 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.
15. 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.
16. 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 HM08 Bermuda
Attention: 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.
17. 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.
18. 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 on February 12, 2007, to be effective as of the date first above written.
VALIDUS HOLDINGS, LTD.
By: /s/ George Reeth ------------------------------------ Name: George Reeth Title: President /s/ EDWARD NOONAN ---------------------------------------- EDWARD NOONAN |
Exhibit 10.27
VALIDUS HOLDINGS, LTD.
AMENDED AND RESTATED
RESTRICTED SHARE AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, dated as of February 4, 2006, between Validus Holdings, Ltd. (the "Company"), a Bermuda corporation, and George Reeth (the "Employee").
WHEREAS, the Employee has entered into a written employment agreement with the Company (the "Employment Agreement") providing for this grant of Restricted Shares;
WHEREAS, the Employee has been granted 184,690 Restricted Shares under the Company's 2005 Long Term Incentive Plan (the "Plan") evidenced by an agreement between the parties hereto dated as of February 4, 2006, and the parties hereto wish to amend and restate the terms of such agreement in its entirety as set forth herein;
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 184,690 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. Vesting of Award. Subject to the provisions of Section 3 below and the other terms and conditions of this Agreement, this Award shall become vested 100% on December 12, 2008, provided, except as set forth in Section 3 below, the Employee remains actively employed by the Company or a Subsidiary through such vesting date. 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.
3. Termination of Employment.
(a) 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); provided, however, that in such event no less than 25% of the Restricted Shares subject to the Award will vest on the
Date of Termination. For the avoidance of doubt, except as otherwise set forth in the immediately preceding sentence, Restricted Shares granted hereunder 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.
(b) 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.
(c) 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.
(d) 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.
4. 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 hereto and the satisfaction of any withholding tax liability
pursuant to Section 9 hereof, the certificates evidencing such vested Shares,
not bearing the Restrictive Legend (but still bearing the legend set forth in
Section 11(d) below), shall be delivered to the Employee or other evidence of
vested Shares shall be provided to the Employee.
5. 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 hereof) at the time paid on such Restricted Shares.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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").
11. 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 11 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 final, 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.
12. 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 Employees or Grantor, and all profits, proceeds, gains, or other consideration received through the sale or other transfer of the or Shares shall be promptly returned and repaid to the Company.
13. 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.
14. 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.
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Attention: 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.
15. 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.
16. 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 on February 12, 2007, to be effective as of the date first above written.
VALIDUS HOLDINGS, LTD.
By: /s/ Joseph E. (Jeff) Consolino ------------------------------------ Name: Joseph E. (Jeff) Consolino Title: EVP & CFO /s/ GEORGE REETH ---------------------------------------- GEORGE REETH |
Exhibit 10.28
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 Edward Noonan (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 1,294,721 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 paragraphs (f) or
(h) 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. Except as otherwise set forth in paragraph (f) below, the following provisions apply in the event of Termination of Service of the Option Holder.
(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) Continuation as Director. Notwithstanding any provision of this Agreement to the contrary, if the Option Holder's employment by the Company terminates but he continues to serve on the Board, (i) 50% of the unvested Option, if any, shall continue to vest and become exercisable in accordance with the schedule set forth in paragraph (d) above for so long as the Option Holder continues to serve on the Board, (ii) the remaining 50% of the unvested Option, if any, shall be immediately forfeited to the Company upon such termination of employment, (iii) the Option, to the extent it is or becomes vested, will continue to be exercisable until ninety (90) days after the Option Holder ceases to be a member of the Board (but not beyond the Option Period), and (iv) any portion of the Option which is unexercisable at the time of the Option Holder's termination of service on the Board shall be immediately forfeited to the Company; provided, however, that if, after becoming a nonemployee member of the Board, the Employee is involuntarily removed from the Board, or after having agreed to stand for reelection is not reelected to the Board, in either case not due to circumstances that would constitute Cause under the Employment Agreement, then any unvested Options that were not previously forfeited shall become vested at the time the Employee ceases to be member of the Board.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
(m) 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").
(n) 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 (n) 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.
(o) 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.
(p) 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.
(q) 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.
(r) 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.
(s) 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.
(t) 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 10.29
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 George Reeth (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 647,360 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 me 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 HM08 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.
By: /s/ Edward Noonan ------------------------------------ Name: Edward Noonan Title: Chief Executive Officer and Chairman /s/ GEORGE REETH ---------------------------------------- GEORGE REETH |
EXHIBIT 23.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1/A of our report dated March 9, 2007 relating to the financial statements and financial statement schedules of Validus Holdings, Ltd., which appears in this Registration Statement. We also consent to the reference to us under the heading "Experts" which appears in such Registration Statement.
/s/ PricewaterhouseCoopers Hamilton, Bermuda March 9, 2007 |