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)(3) | ||||||||
Common Shares, $0.175 par
value per common share
|
18,010,107 | $26.00 | $468,262,782 | $29,636 | ||||||||
(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. |
(3) | Of the $29,636 registration fee, $26,005 was previously paid. |
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. |
Deutsche Bank Securities | JPMorgan | UBS Investment Bank | Wachovia Securities |
Cochran Caronia Waller | Dowling & Partners Securities, LLC | Keefe, Bruyette & Woods |
ABN AMRO Rothschild LLC | Scotia Capital | Calyon Securities (USA) Inc. | Comerica Securities | HSBC | ING Financial Markets |
i
Table of Contents
1
Table of Contents
2
Table of Contents
Focus on Short-Tail Lines of
Reinsurance.
Substantially all of our
$670.7 million in gross premiums written for the
twelve-month period ended March 31, 2007 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 $670.7 million in gross premiums written for the
twelve-month period ended March 31, 2007 while evaluating
over 3,250 applications for coverage, or
submissions
, and
declining approximately 57% of the risks presented to them. Our
risk analytics staff is comprised of 17 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 has been a relatively low
level of catastrophic events in 2006 and to date in
3
Table of Contents
2007 and as a consequence we have not experienced a high volume
of claims so far during our short operating history.
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
period 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
$670.7 million in gross premiums written for the
twelve-month period ended March 31, 2007,
$283.5 million (42.3%) is property catastrophe reinsurance.
Among other property coverages, we wrote $135.8 million
(20.2%) of property
pro rata
and $45.4 million
(6.8%) of property per risk. We also underwrote
$138.8 million (20.7%) of marine reinsurance and
$67.2 million (10.0%) 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 twelve-month
period ended March 31, 2007, we wrote $295.7 million
of gross premiums written in the United States (44.1% of total
gross premiums written), $102.9 million in territories
outside the United States (15.3%) and $94.6 million on a
worldwide basis including the United States (14.1%). The
remaining $177.5 million of our gross premiums written
(26.5%) 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,
we 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 we have 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.
4
Table of Contents
Enhanced Business Mix and Underwriting Abilities as a Result
of the Talbot Acquisition.
The acquisition of
Talbot is expected to provide us significant benefits in terms
of product line and geographic diversification as well as offer
us broader access to underwriting expertise. Similar to Validus,
Talbot writes primarily short-tail lines of business but, as a
complement to Validus, focuses mostly on insurance, as opposed
to reinsurance, risks and on specialty lines where Validus
currently has limited or no presence (e.g. political violence,
political risk, hull, cargo). In addition, Talbot provides
Validus access to the Lloyds marketplace where we
currently do not operate. As a London-based insurer, Talbot also
writes the majority of its premiums on risks outside the United
States, which risks generally do not aggregate with
Validus. Finally, Validus will benefit from Talbots
highly experienced team of underwriters who, in many cases, have
spent most of their careers writing niche, short-tail business
and who will bring their expertise to bear on expanding
Validus short-tail business franchise.
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 $670.7 million in gross premiums written for the
twelve-month period ended March 31, 2007 or over
3,250 submissions received for the same period. 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 three months ended
March 31, 2007, we underwrote $378.1 million in gross
premiums written, representing an increase of
$129.9 million or 52.3% over the comparable prior year
period.
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 16, 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 (the 2006 Junior Subordinated Deferrable
Debentures) and an additional $200.0 million of the
2007 Junior Subordinated Deferrable Debentures (together with
the 2006 Junior Subordinated Deferrable Debentures, the
Junior Subordinated Deferrable Debentures). See
Description of Certain Indebtedness Junior
Subordinated Deferrable Debentures. In addition to the
prudent use of financial leverage, we intend to actively manage
our capital by evaluating the returns available in the
5
Table of Contents
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 March 31, 2007,
we have not experienced any catastrophe events such as those
experienced by the industry in 2004 and 2005 and the events of
September 11, 2001, and as a result we cannot provide
assurances as to how our business model or risk controls would
respond to such events. There is limited historical financial
and operating information available to help you evaluate our
past performance or make a decision about an investment in our
common shares. As a recently formed company, we face substantial
business and financial risks and may suffer significant losses.
As a result of these risks, it is possible that we may not be
successful in the continued implementation of our business
strategy or completing the development of the infrastructure
necessary to run our business. In addition, particularly as a
recently-formed company, our business strategy may change and
may be affected by acquisition, joint venture or other business,
investment and/or growth opportunities that may, in the future,
become available to us or that we may pursue.
Claims arising from unpredictable and severe catastrophic
events could adversely affect our financial condition or results
of operations.
Our reinsurance operations expose
us to
claims
arising out of unpredictable natural and
other catastrophic events, such as hurricanes, windstorms,
tsunamis, severe winter weather, earthquakes, floods, fires,
explosions, acts of terrorism and other natural and man-made
disasters. One or more catastrophic or other events could result
in claims that substantially exceed our expectations.
We depend on 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.
6
Table of Contents
the transaction, our integration plan and our risk-adjusted
capital position upon completion of the acquisition and
completion of this Offering.
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.
7
Table of Contents
Issuer
Validus Holdings, Ltd.
Common shares offered by us
13,415,501 common shares.
Common shares offered by the selling shareholders
2,245,462 common shares.
Common shares to be outstanding immediately after this Offering
71,916,517 common shares(1).
Use of proceeds
We estimate that the net proceeds to us from this Offering will
be approximately $311.3 million ($346.6 million if the
underwriters exercise in full their option to purchase
additional common shares), based upon an assumed initial public
offering price of $25.00 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 this Offering. We will use
$188.9 million of the net proceeds to repay borrowings and
to pay accrued interest under our unsecured credit facility,
which we incurred on July 2, 2007 to fund a portion of the
cash purchase price for our acquisition of Talbot and associated
expenses (see Description of Certain
Indebtedness Credit Facilities,
Acquisition of Talbot, Selected Financial
Information of Talbot Holdings Ltd. and Unaudited
Condensed Consolidated Pro Forma Financial Information).
The interest rate set on our credit facility borrowings on
July 2, 2007 was 6.0% per annum. We intend to use the
remainder of the net proceeds to further capitalize Validus Re
to support the future growth of our reinsurance operations and
for general corporate purposes, 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 $0.125 per common share payable in the
first full fiscal quarter ending 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.
8
Table of Contents
assumes no exercise of the underwriters over-allotment
option;
assumes an initial public offering price of $25.00 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)
Of these shares, 52,145,095 are voting common shares and
19,771,422 are non-voting common shares. All of the common
shares offered hereby are voting common shares.
The shares to be outstanding after the Offering do not include:
Unvested restricted shares are not considered to be outstanding
in the above table but do accumulate dividends and may be voted.
See Capitalization and note 7(b) to our Consolidated
Financial Statements (unaudited).
9
Table of Contents
Three months ended March 31,
Year ended
Period ended
2007
2006
December 31, 2006
December 31, 2005
(Unaudited)
(Unaudited)
(Dollars in thousands, except share and per share amounts)
$
378,070
$
248,205
$
540,789
$
(30,958
)
(8,238
)
(63,696
)
347,112
239,967
477,093
(235,620
)
(197,559
)
(170,579
)
111,492
42,408
306,514
18,497
10,912
58,021
2,032
46
(386
)
(1,102
)
39
1,643
1,389
(4
)
2,157
133,067
52,930
365,590
2,071
46,487
24,337
91,323
12,219
5,500
36,072
13,172
7,633
46,232
2,657
4,441
705
8,789
77
77
49,122
76,319
38,252
182,493
51,779
56,748
14,678
183,097
(49,708
)
(3,880
)
(332
)
144
386
1,102
(39
)
$
56,748
$
11,184
$
183,867
$
(49,603
)
58,482,601
58,460,716
58,477,130
58,423,174
60,215,392
58,509,519
58,874,567
58,423,174
$
0.97
$
0.25
$
3.13
$
(0.85
)
$
0.94
$
0.25
$
3.11
$
(0.85
)
41.7%
57.4%
29.8%
%
11.0%
13.0%
11.8%
%
11.8%
18.0%
15.1%
%
22.8%
31.0%
26.9%
%
64.5%
88.4%
56.7%
%
18.6%
5.8%
17.0%
NM
NM
Not meaningful.
10
Table of Contents
As of March 31, 2007
As of December 31,
As
2006
2005
Actual
adjusted(10)
Actual
Actual
(Dollars in thousands, except per share amounts)
$
1,439,303
$
1,957,471
$
1,376,387
$
610,800
88,317
582,467
63,643
398,488
2,012,485
3,759,500
1,646,423
1,014,453
433,263
745,454
178,824
111,555
842,058
77,363
150,000
350,000
150,000
1,251,216
1,559,894
1,192,523
999,806
$
21.39
$
21.69
$
20.39
$
17.11
20.56
20.49
19.73
16.93
(1)
The Company has early adopted FAS 157 and FAS 159 as
of January 1, 2007 and elected the fair value option on all
securities previously accounted for as
available-for-sale.
Unrealized gains and losses on
available-for-sale
investments at December 31, 2006 of $875,000, previously
included in accumulated other comprehensive income, were treated
as a cumulative-effect adjustment as of January 1, 2007.
The cumulative-effect adjustment will transfer the balance of
unrealized gains and losses from accumulated other comprehensive
income to retained earnings and will have no impact on the
results of operations for the annual or interim periods
beginning January 1, 2007. The Companys investments
were accounted for as trading for the annual or interim periods
beginning January 1, 2007 and as such all unrealized gains
and losses are included in net income.
(2)
General and administrative expenses for the three months ended
March 31, 2007 and 2006, the year ended December 31,
2006 and the period ended December 31, 2005 include
$250,000, $250,000, $1,000,000 and $0, respectively, related to
our Advisory Agreement with Aquiline. Our Advisory Agreement
with Aquiline will terminate upon completion of this Offering,
in connection with which we will record general and
administrative expense of $3.0 million in the third quarter
of the current year.
(3)
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 for all periods
presented.
(4)
Calculated by dividing
losses and loss expenses
by
net
premiums earned.
(5)
Calculated by dividing policy
acquisition costs
by net
premiums earned.
(6)
Calculated by dividing general and administrative expenses by
net premiums earned.
(7)
Calculated by combining the policy acquisition cost ratio and
the general and administrative
expense ratio.
(8)
Calculated by combining the
loss ratio
, the policy
acquisition cost ratio and the general and administrative
expense ratio.
(9)
Return on average equity is calculated by dividing the net
income for the period by the average shareholders equity
during the period. Quarterly average shareholders equity
is the annualized average of the beginning and ending
shareholders equity balances. Annual average
shareholders equity is the average of the beginning,
ending and intervening quarter end shareholders equity
balances.
11
Table of Contents
(10)
The As Adjusted column reflects unaudited pro forma
consolidated financial data giving effect to the Talbot
acquisition and the Offering as if they occurred at
March 31, 2007. See Unaudited Condensed Consolidated
Pro Forma Financial Information. 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, currently
estimated at $24.1 million. The As Adjusted
column gives effect to this Offering of our common shares at an
assumed public offering price of $25.00 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.
(11)
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.
(12)
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).
(13)
The following table presents book value per common share and
diluted book value per common share and share equivalent at
prices consistent with the price range set forth on the cover
page of this prospectus, in $0.50 increments.
Price per
Book value per
Diluted book value
$
24.00
$
21.52
$
20.34
24.50
21.60
20.41
25.00
21.69
20.49
25.50
21.78
20.56
26.00
21.86
20.63
12
Table of Contents
Talbot
Historical
Historical
Holdings Ltd.
Pro Forma
Pro Forma
Validus
Talbot
accounting
Purchase
Finance
Pro Forma
Holdings, Ltd.
Holdings Ltd.
adjustments
adjustments
adjustments
Consolidated
(Dollars in thousands, except share and per share amounts)
$
540,789
$
648,652
$
$
(8,675
)
$
$
1,180,766
(63,696
)
(140,490
)
8,675
(195,511
)
477,093
508,162
985,255
(170,579
)
(37,588
)
(208,167
)
306,514
470,574
777,088
58,021
32,746
90,767
(1,102
)
(6,279
)
(7,381
)
4,583
4,583
2,157
511
2,668
365,590
502,135
867,725
91,323
183,050
(2,920
)
271,453
36,072
115,518
151,590
46,232
79,383
3,363
19,846
148,824
8,789
986
17,360
27,135
77
77
(182,493
)
(378,937
)
(443
)
(19,846
)
(17,360
)
(599,079
)
183,097
123,198
(443
)
(19,846
)
(17,360
)
268,646
566
1,354
1,920
$
183,097
$
123,764
$
(443
)
$
(18,492
)
$
(17,360
)
$
270,566
$
3.13
$
3.76
$
3.11
$
3.74
58,477,130
13,433,916
71,911,046
58,874,567
128,363
13,433,916
72,436,846
13
Table of Contents
Talbot
Historical
Historical
Holdings Ltd.
Pro Forma
Pro Forma
Validus
Talbot
accounting
Purchase
Finance
Pro Forma
Holdings, Ltd.
Holdings Ltd.
adjustments
adjustments
adjustments
Consolidated
$
378,070
$
198,805
$
$
(12,363
)
$
$
564,512
(30,958
)
(91,067
)
12,363
(109,662
)
347,112
107,738
454,850
(235,620
)
23,037
(212,583
)
111,492
130,775
242,267
18,497
9,703
28,200
46
(1,322
)
(1,276
)
1,643
1,643
943
943
1,389
(168
)
1,221
133,067
139,931
272,998
46,487
68,585
(858
)
114,214
12,219
30,047
42,266
13,172
21,191
1,837
3,426
39,626
4,441
165
4,340
8,946
(76,319
)
(119,988
)
(979
)
(3,426
)
(4,340
)
(205,052
)
56,748
19,943
(979
)
(3,426
)
(4,340
)
67,946
(1,005
)
338
(667
)
$
56,748
$
18,938
$
(979
)
$
(3,088
)
$
(4,340
)
$
67,279
$
0.97
$
0.94
$
0.94
$
0.91
58,482,601
13,433,916
71,916,517
60,215,392
500,847
13,433,916
74,150,155
14
Table of Contents
Talbot
Historical
Historical
Holdings Ltd.
Pro Forma
Pro Forma
Validus
Talbot
accounting
Purchase
Finance
Pro Forma
Holdings, Ltd.
Holdings Ltd.
adjustments
adjustments
adjustments
Consolidated
$
1,089,167
$
197,485
$
$
$
$
1,286,652
350,136
317,628
2,003
669,767
88,317
371,825
(2,003
)
(382,350
)
506,678
582,467
1,527,620
886,938
(382,350
)
506,678
2,538,886
77,735
(77,735
)
143,406
(143,406
)
356,294
221,141
(8,316
)
569,119
66,694
61,516
(3,264
)
124,946
27,064
71,717
(9,314
)
89,467
16,258
16,258
450
204,675
205,125
7,683
6,188
13,871
276
6,541
6,817
176,949
176,949
10,422
7,314
2,000
19,736
$
2,012,485
$
1,459,765
$
(3,264
)
$
(216,490
)
$
508,678
$
3,761,174
$
433,263
$
321,505
$
$
(9,314
)
$
$
745,454
111,555
730,503
842,058
25,708
113,363
(8,316
)
130,755
1,610
1,610
15,052
2,466
17,518
16,258
16,258
17,209
17,209
7,276
70,731
2,411
80,418
150,000
200,000
350,000
761,269
1,252,764
(12,753
)
200,000
2,201,280
81,376
(81,376
)
10,234
100
(100
)
2,351
12,585
(613
)
613
1,049,970
5,214
(5,214
)
309,327
1,359,297
(16
)
16
191,012
120,940
(3,264
)
(117,676
)
(3,000
)
188,012
1,251,216
125,625
(3,264
)
(122,361
)
308,678
1,559,894
$
2,012,485
$
1,459,765
$
(3,264
)
$
(216,490
)
$
508,678
$
3,761,174
$
21.39
$
21.69
$
20.56
$
20.49
58,482,601
13,433,916
71,916,517
70,328,761
2,118,324
13,433,916
85,881,001
15
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16
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17
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18
Table of Contents
19
Table of Contents
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
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24
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25
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26
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27
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28
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29
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30
Table of Contents
the perceived prospects for the insurance industry in general;
differences between our actual financial and operating results
and those expected by investors;
changes in the share price of public companies with which we
compete;
news about our industry and our competitors;
31
Table of Contents
changes in general economic or market conditions;
broad market fluctuations; and
regulatory actions.
32
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33
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34
Table of Contents
unpredictability and severity of catastrophic events;
our ability to obtain and maintain ratings, which may be
affected by our ability to raise additional equity or debt
financings, as well as other factors described herein;
adequacy of our risk management and loss limitation methods;
cyclicality of demand and pricing in the reinsurance market;
our limited operating history;
our ability to successfully implement our business strategy
during soft as well as hard markets;
adequacy of our loss reserves;
continued availability of capital and financing;
our ability to identify, hire and retain, on a timely and
unimpeded basis and on anticipated economic and other terms,
experienced and capable senior management, as well as
underwriters, claims professionals and support staff;
acceptance of our business strategy, security and financial
condition by rating agencies and regulators, as well as by
brokers and reinsureds;
competition, including increased competition, on the basis of
pricing, capacity, coverage terms or other factors;
potential loss of business from one or more major reinsurance
brokers;
our ability to implement, successfully and on a timely basis,
complex infrastructure, distribution capabilities, systems,
procedures and internal controls, and to develop accurate
actuarial data to support the business and regulatory and
reporting requirements;
general economic and market conditions (including inflation,
interest rates and foreign currency exchange rates) and
conditions specific to the reinsurance markets in which we
expect to operate;
the integration of Talbot, or other 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;
35
Table of Contents
availability to us of retrocessions to manage our gross and net
exposures and the cost of such retrocessions;
the failure of retrocessionaires, producers or others to meet
their obligations to us;
the timing of loss payments being faster or the receipt of
reinsurance recoverables being slower than anticipated by us;
changes in domestic or foreign laws or regulations, or their
interpretations;
changes in accounting principles or the application of such
principles by regulators; and
statutory or regulatory or rating agency developments, including
as to tax policy and matters and reinsurance and other
regulatory matters such as the adoption of proposed legislation
that would affect Bermuda-headquartered companies
and/or
Bermuda-based insurers or reinsurers.
36
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37
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38
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March 31, 2007
As
Actual
adjusted(5)
(Dollars in thousands, except share and per share amounts)
$
$
150,000
350,000
150,000
350,000
10,234
12,585
1,049,970
1,359,297
191,012
188,012
1,251,216
1,559,894
$
1,401,216
$
1,909,894
$
21.39
$
21.69
$
20.56
$
20.49
10.7%
18.3%
(1)
For a description of our credit facilities, see
Description of Certain Indebtedness Credit
Facilities. On July 2, 2007, we made a draw upon our
unsecured credit facility in the amount of $188.0 million
to fund a portion of the cash purchase price of our acquisition
of Talbot and associated expenses. We will use
$188.9 million of the net proceeds of this Offering to
repay that borrowing and to pay accrued interest thereon. See
Use of Proceeds.
(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.
(5)
The above table does not give effect to the IPO Grant which
would affect diluted book value per common share, but not book
value per share.
39
Table of Contents
$
25.00
$
21.39
0.30
21.69
$
3.31
Average
price per
Common shares issued
Total consideration
common
Number
Percent
Amount
Percent
share
58,482,601
81.3
%
$
1,023,445,518
75.3
%
$
17.50
13,415,501
18.7
%
335,387,525
24.7
%
$
25.00
71,898,102
100.0
%
$
1,358,833,043
100.0
%
$
18.90
40
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Three months ended March 31,
Year ended
Period ended
2007
2006
December 31, 2006
December 31, 2005
(Unaudited)
(Unaudited)
(Dollars in thousands, except share and per share amounts)
$
378,070
$
248,205
$
540,789
$
(30,958
)
(8,238
)
(63,696
)
347,112
239,967
477,093
(235,620
)
(197,559
)
(170,579
)
111,492
42,408
306,514
18,497
10,912
58,021
2,032
46
(386
)
(1,102
)
39
1,643
1,389
(4
)
2,157
133,067
52,930
365,590
2,071
46,487
24,337
91,323
12,219
5,500
36,072
13,172
7,633
46,232
2,657
4,441
705
8,789
77
77
49,122
76,319
38,252
182,493
51,779
56,748
14,678
183,097
(49,708
)
(3,880
)
(332
)
144
386
1,102
(39
)
$
56,748
$
11,184
$
183,867
$
(49,603
)
58,482,601
58,460,716
58,477,130
58,423,174
60,215,392
58,509,519
58,874,567
58,423,174
$
0.97
$
0.25
$
3.13
$
(0.85
)
$
0.94
$
0.25
$
3.11
$
(0.85
)
41.7%
57.4%
29.8%
%
11.0%
13.0%
11.8%
%
11.8%
18.0%
15.1%
%
22.8%
31.0%
26.9%
%
64.5%
88.4%
56.7%
%
18.6%
5.8%
17.0%
NM
41
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As of March 31, 2007
As of December 31,
As
2006
2005
Actual
adjusted(10)
Actual
Actual
(Dollars in thousands, except per share amounts)
$
1,439,303
$
1,957,471
$
1,376,387
$
610,800
88,317
582,467
63,643
398,488
2,012,485
3,759,500
1,646,423
1,014,453
433,263
745,454
178,824
111,555
842,058
77,363
150,000
350,000
150,000
1,251,216
1,559,894
1,192,523
999,806
$
21.39
$
21.69
$
20.39
$
17.11
20.56
20.49
19.73
16.93
(1)
The Company has early adopted FAS 157 and FAS 159 as
of January 1, 2007 and elected the fair value option on all
securities previously accounted for as
available-for-sale.
Unrealized gains and losses on
available-for-sale
investments at December 31, 2006 of $875,000, previously
included in accumulated other comprehensive income, were treated
as a cumulative-effect adjustment as of January 1, 2007.
The cumulative-effect adjustment will transfer the balance of
unrealized gains and losses from accumulated other comprehensive
income to retained earnings and will have no impact on the
results of operations for the annual or interim periods
beginning January 1, 2007. The Companys investments
were accounted for as trading for the annual or interim periods
beginning January 1, 2007 and as such all unrealized gains
and losses are included in net income.
(2)
General and administrative expenses for the three months ended
March 31, 2007 and 2006, the year ended December 31,
2006 and the period ended December 31, 2005 include
$250,000, $250,000, $1,000,000 and $0, respectively, related to
our Advisory Agreement with Aquiline. Our Advisory Agreement
with Aquiline will terminate upon completion of this Offering,
in connection with which we will record general and
administrative expense of $3.0 million in the third quarter
of the current year.
(3)
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 for all periods
presented.
(4)
Calculated by dividing
losses and loss expenses
by
net
premiums earned.
(5)
Calculated by dividing policy
acquisition costs
by net
premiums earned.
(6)
Calculated by dividing general and administrative expenses by
net premiums earned.
(7)
Calculated by combining the policy acquisition cost ratio and
the general and administrative
expense ratio.
(8)
Calculated by combining the
loss ratio
, the policy
acquisition cost ratio and the general and administrative
expense ratio.
(9)
Return on average equity is calculated by dividing the net
income for the period by the average shareholders equity
during the period. Quarterly average shareholders equity
is the annualized average of the beginning and ending
shareholders equity balances. Annual average
shareholders equity is the average of the beginning,
ending and intervening quarter end shareholders equity
balances.
42
Table of Contents
(10)
The As Adjusted column reflects unaudited pro forma
consolidated financial data giving effect to the Talbot
acquisition and the Offering as if they occurred at
March 31, 2007. See Unaudited Condensed Consolidated
Pro Forma Financial Information. 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, currently
estimated at $24.1 million. The As Adjusted
column gives effect to this Offering of our common shares at an
assumed public offering price of $25.00 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.
(11)
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.
(12)
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).
(13)
The following table presents book value per common share and
diluted book value per common share and share equivalent at
prices consistent with the price range set forth on the cover
page of this prospectus, in $0.50 increments.
Price per
Book value per
Diluted book value
$
24.00
$
21.52
$
20.34
24.50
21.60
20.41
25.00
21.69
20.49
25.50
21.78
20.56
26.00
21.86
20.63
43
Table of Contents
F-42
F-64
II-4
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
44
Table of Contents
45
Table of Contents
46
Table of Contents
47
Table of Contents
48
Table of Contents
49
Table of Contents
At March 31, 2007
Total gross
reserve
Gross case
Gross
for losses and
reserves
IBNR
loss expenses
(Dollars in thousands)
$
32,528
$
46,399
$
78,927
3,810
13,858
17,668
6,299
8,233
14,532
1
46
47
9
372
381
6,309
8,651
14,960
$
42,647
$
68,908
$
111,555
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
50
Table of Contents
loss emergence patterns
Reserve for losses
and loss expenses
(Dollars in millions)
$
103.3
106.8
111.6
116.6
121.6
51
Table of Contents
expected loss ratios
Reserve for losses
and loss expenses
(Dollars in millions)
$
102.9
107.2
111.6
115.9
120.3
52
Table of Contents
Three months ended
Three months ended
March 31, 2007
March 31, 2006
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
(Dollars in
(Dollars in
thousands)
thousands)
$
162,545
43.0%
$
110,115
44.4%
93,482
24.7%
66,148
26.6%
122,043
32.3%
71,942
29.0%
$
378,070
100.0%
$
248,205
100.0%
(1)
Allocation of treaty type to lines of business is included in
Business Line of Business by Treaty Type.
(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.
53
Table of Contents
Three months ended
Year ended
Year ended
March 31,
December 31,
December 31,
2007
2006
% change(1)
2006
2005
(Dollars in thousands)
(Dollars in thousands)
$
378,070
$
248,205
52.3%
$
540,789
$
(30,958
)
(8,238
)
275.8%
(63,696
)
347,112
239,967
44.6%
477,093
(235,620
)
(197,559
)
19.3%
(170,579
)
111,492
42,408
162.9%
306,514
46,487
24,337
91.0%
91,323
12,219
5,500
122.2%
36,072
13,172
7,633
72.6%
46,232
2,657
71,878
37,470
91.8%
173,627
2,657
39,614
4,938
702.2%
132,887
(2,657
)
18,497
10,912
69.5%
58,021
2,032
(4,441
)
(705
)
529.9%
(8,789
)
53,670
15,145
254.4%
182,119
(625
)
(77
)
NM
(77
)
49,122
46
(386
)
NM
(1,102
)
39
1,643
NM
1,389
(4
)
NM
2,157
$
56,748
14,678
286.6%
$
183,097
(49,708
)
period(3)
(3,880
)
NM
(332
)
144
386
NM
1,102
(39
)
$
56,748
$
11,184
407.4%
$
183,867
$
(49,603
)
91.8%
96.7%
(4.9
)
88.2%
%
41.7%
57.4%
(15.7
)
29.8%
%
11.0%
13.0%
(2.0
)
11.8%
%
11.8%
18.0%
(6.2
)
15.1%
%
22.8%
31.0%
(8.2
)
26.9%
%
64.5%
88.4%
(23.9
)
56.7%
%
NM
Not meaningful
(1)
% change for ratios represent the change in percentage points.
(2)
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
54
Table of Contents
may be defined or calculated differently by other companies.
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.
(3)
The Company has early adopted FAS 157 and FAS 159 as
of January 1, 2007 and elected the fair value option on all
securities previously accounted for as
available-for-sale.
Unrealized gains and losses on
available-for-sale
investments at December 31, 2006 of $875,000 previously
included in the accumulated other comprehensive income, were
treated as a cumulative-effect adjustment as of January 1,
2007. The cumulative-effect adjustment will transfer the balance
of unrealized gains and losses from accumulated other
comprehensive income to retained earnings and will have no
impact on the results of operations for the annual or interim
periods beginning January 1, 2007. The Companys
investments will be accounted for as trading for the annual or
interim periods beginning January 1, 2007 and, as such, all
unrealized gains and losses will be included in net income.
An increase in gross premiums written of $129.9 million or
52.3%;
The benefit of earning premiums in the three months ended
March 31, 2007 that were written throughout 2006;
The relatively low level of catastrophic events in the three
months ended March 31, 2007; and
An increase in net investment income of $7.6 million or
69.5% as a result of growth in the investment portfolio.
An increase in premiums ceded of $22.7 million or 275.8%
due to the Petrel agreement;
Increased losses and loss expenses and policy acquisition costs
corresponding to the higher level of premiums written and earned;
An increase in general and administrative expenses of
$5.5 million or 72.6% primarily resulting from an increase
in staff from 19 to 44; and
Increased finance expenses resulting from $3.6 million
interest and debt issuance costs on the Junior Subordinated
Deferrable Debentures.
55
Table of Contents
Three months ended
Three months ended
March 31, 2007
March 31, 2006
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
% Change
(Dollars in
(Dollars in
thousands)
thousands)
$
238,789
63.2%
$
145,082
58.5%
64.6%
101,150
26.7%
66,884
26.9%
51.2%
19,573
5.2%
21,919
8.8%
(10.7%
)
345
0.1%
1,109
0.5%
(68.9%
)
15,453
4.1%
11,718
4.7%
31.9%
2,760
0.7%
1,493
0.6%
84.9%
38,131
10.1%
36,239
14.6%
5.2%
$
378,070
100.0%
$
248,205
100.0%
52.3%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
56
Table of Contents
Three months ended
Three months ended
March 31, 2007
March 31, 2006
Net
Net
Net
Net
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
% Change
(Dollars in
(Dollars in
thousands)
thousands)
$
238,789
68.8%
$
143,582
59.8%
66.3%
71,617
20.6%
60,146
25.1%
19.1%
18,148
5.2%
21,919
9.1%
(17.2%
)
345
0.1%
1,109
0.5%
(68.9%
)
15,453
4.5%
11,718
4.9%
31.9%
2,760
0.8%
1,493
0.6%
84.9%
36,706
10.6%
36,239
15.1%
1.3%
$
347,112
100.0%
$
239,967
100.0%
44.6%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
57
Table of Contents
Three months
Percentage
ended March 31,
point
2007
2006
change
35.2
%
44.2%
(9.0
)
51.7
%
64.0%
(12.3
)
185.1
%
251.0%
(65.9
)
(0.8
%)
48.5%
(49.3
)
0.0
%
30.3%
(30.3
)
13.7
%
14.1%
(0.4
)
77.8
%
112.2%
(34.4
)
41.7
%
57.4%
(15.7
)
(1)
The Marine line of business includes our offshore energy risks.
Incurred related
Incurred related
to prior years
to current year
Gross paid
Gross reserve at
for the three
for the three
during the three
Gross
December 31,
months ended
months ended
months ended
reserve at
2006
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
(Dollars in thousands)
$
59,385
$
(3,326
)
$
33,712
$
(10,844
)
$
78,927
9,866
25
7,791
(14
)
17,668
7,860
21
8,539
(1,888
)
14,532
49
(27
)
25
47
203
3
175
381
8,112
(3
)
8,739
(1,888
)
14,960
$
77,363
$
(3,304
)
$
50,242
$
(12,746
)
$
111,555
(1)
The Marine line of business includes our offshore energy risks.
58
Table of Contents
Incurred related to
Incurred related to
current year for
Net paid
Net reserve at
prior years for the
the three months
during the three
Net
December 31,
three months ended
ended
months ended
reserve at
2006
March 31, 2007
March 31, 2007
March 31, 2007
March 31, 2007
(Dollars in thousands)
$
59,385
$
(3,326
)
$
33,262
$
(10,844
)
$
78,477
9,866
25
7,791
(14
)
17,668
7,860
21
8,539
(1,888
)
14,532
49
(27
)
25
47
203
3
175
381
8,112
(3
)
8,739
(1,888
)
14,960
$
77,363
$
(3,304
)
$
49,792
$
(12,746
)
$
111,105
(1)
The Marine line of business includes our offshore energy risks.
59
Table of Contents
At March 31, 2007
Total gross
reserve
Gross case
Gross
for losses and
reserves
IBNR
loss expenses
(Dollars in thousands)
$
32,528
$
46,399
$
78,927
3,810
13,858
17,668
6,299
8,233
14,532
1
46
47
9
372
381
6,309
8,651
14,960
$
42,647
$
68,908
$
111,555
(1)
The Marine line of business includes our offshore energy risks.
60
Table of Contents
Three months ended March 31,
Percentage
point change
41.7
%
57.4
%
(15.7
)
11.0
%
13.0
%
(2.0
)
11.8
%
18.0
%
(6.2
)
22.8
%
31.0
%
(8.2
)
64.5
%
88.4
%
(23.9
)
Three months ended March 31,
(Dollars in thousands)
$
39,614
$
4,938
18,497
10,912
(4,441
)
(705
)
(77
)
46
(386
)
1,643
1,389
(4
)
$
56,748
$
14,678
61
Table of Contents
Three months ended March 31,
% Change
(Dollars in thousands)
$
18,076
$
8,052
124.5%
931
3,182
(70.7%
)
19,007
11,234
69.2%
(510
)
(322
)
58.3%
$
18,497
$
10,912
69.5%
62
Table of Contents
63
Table of Contents
Year ended
Period ended
December 31,
December 31,
2006
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
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
%
%
64
Table of Contents
(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. 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.
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.
65
Table of Contents
Year ended
December 31, 2006
Net premiums
Net premiums
written
written (%)
(Dollars in
thousands)
$
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.
66
Table of Contents
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.
67
Table of Contents
At December 31, 2006
Total gross reserve
Gross case
Gross
for losses and loss
reserves
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.
68
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.
69
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
70
Table of Contents
71
Table of Contents
72
Table of Contents
Payment due by period
Less than
More than
Total
1 year
1-3 years
3-5 years
5 years
(Dollars in thousands)
$
111,555
$
61,339
$
36,212
$
10,462
$
3,542
207,817
13,604
27,208
17,005
150,000
3,731
829
1,658
1,244
$
323,103
$
75,772
$
65,078
$
28,711
$
153,542
(1)
The reserve for losses and loss expenses represents an estimate,
including actuarial and statistical projections at a given point
in time of an insurers or reinsurers expectations of
the ultimate settlement and administration costs of claims
incurred. As a result, it is likely that the ultimate liability
will differ from such estimates, perhaps significantly. Such
estimates are not precise in that, among other things, they are
based on predictions of future developments and estimates of
future trends in loss severity and frequency and other variable
factors such as inflation, litigation and tort reform. This
uncertainty is heightened by the short time in which the Company
has operated, thereby providing limited claims loss emergence
patterns specifically for the Company. The lack of historical
information for the Company has necessitated the use of industry
loss emergence patterns in deriving IBNR. Further, expected
losses and loss ratios are typically developed using vendor and
proprietary computer models and these expected loss ratios are a
material component in the calculation deriving IBNR. Actual loss
ratios will deviate from expected loss ratios and ultimate loss
ratios will be greater or less than expected loss ratios. During
the loss settlement period, it often becomes necessary to refine
and adjust the estimates of liability on a claim either upward
or downward. Even after such adjustments, ultimate liability
will exceed or be less than the revised estimates. The actual
payment of the reserve for losses and loss expenses will differ
from estimated payouts.
(2)
The 2006 Junior Subordinated Deferrable Debentures mature on
June 15, 2036.
73
Table of Contents
interest rate risk;
foreign currency risk;
credit risk; and
effects of inflation.
74
Table of Contents
In use/
Commitment
outstanding
(Dollars in thousands)
$
150,000
$
150,000
200,000
500,000
82,991
$
850,000
$
232,991
75
Table of Contents
76
Table of Contents
77
Table of Contents
loss experience for the industry in general, and for specific
lines of business or risks in particular,
natural and man-made disasters, such as hurricanes, windstorms,
earthquakes, floods, fires and acts of terrorism,
trends in the amounts of settlements and jury awards in cases
involving professionals and corporate directors and officers
covered by professional liability and directors and officers
liability insurance,
a growing trend of plaintiffs targeting property and casualty
insurers in class action litigation related to claims handling,
insurance sales practices and other practices related to the
insurance business,
development of reserves for mass tort liability, professional
liability and other
long-tail
lines of business, 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.
78
Table of Contents
79
Table of Contents
a well-developed hub for insurance and reinsurance services,
excellent professional and other business services,
a well-developed brokerage market offering worldwide risks to
Bermuda-based insurance and reinsurance companies,
political and economic stability, and
ease of access to global insurance markets.
80
Table of Contents
Three months ended
Three months ended
Year ended
Period ended
March 31, 2007
March 31, 2006
December 31, 2006
December 31, 2005
Gross
Gross
Gross
Gross
Gross
premiums
Gross
premiums
Gross
premiums
Gross
premiums
premiums
written
premiums
written
premiums
written
premiums
written
written
(%)
written
(%)
written
(%)
written
(%)
(Dollars in
(Dollars in
(Dollars in
(Dollars in
thousands)
thousands)
thousands)
thousands)
$
238,789
63.2%
$
145,082
58.5%
$
370,958
68.6%
$
%
101,150
26.7%
66,884
26.9%
104,584
19.3%
%
19,573
5.2%
21,919
8.8%
40,977
7.6%
%
345
0.1%
1,109
0.5%
1,729
0.3%
%
15,453
4.1%
11,718
4.7%
18,525
3.4%
%
2,760
0.7%
1,493
0.6%
4,016
0.8%
%
38,131
10.1%
36,239
14.6%
65,247
12.1%
%
$
378,070
100.0%
$
248,205
100.0%
$
540,789
100%
%
(1)
The Marine line of business includes our offshore energy risks.
(2)
Written on an excess of loss basis.
81
Table of Contents
82
Table of Contents
Three months ended March 31,
Year ended
Period ended
2007
2006
December 31, 2006
December 31, 2005
Gross
Gross
Gross
Gross
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
written
written (%)
written
written (%)
(Dollars in
(Dollars in
(Dollars in
(Dollars in
thousands)
thousands)
thousands)
thousands)
$
162,545
43.0%
110,115
44.4%
$
275,187
50.9%
%
93,482
24.7%
66,148
26.6%
125,652
23.2%
%
122,043
32.3%
71,942
29.0%
139,950
25.9%
%
$
378,070
100.0%
$
248,205
100.0%
$
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.
83
Table of Contents
Three Months ended
Three Months ended
Year ended
Period ended
March 31,
March 31,
December 31,
December 31,
2007
2006
2006
2005
Gross
Gross
Gross
Gross
Gross
premiums
Gross
premiums
Gross
premiums
Gross
premiums
premiums
written
premiums
written
premiums
written
premiums
written
written
(%)
written
(%)
written
(%)
written
(%)
(Dollars in
(Dollars in
(Dollars in
(Dollars in
thousands)
thousands)
thousands)
thousands)
Catastrophe excess of
loss(1)
$
140,917
37.3
%
$
92,275
37.2
%
$
234,850
43.4
%
$
%
Per Risk excess of
loss(2)
12,737
3.4
%
9,229
3.7
%
41,908
7.8
%
%
Proportional(3)
85,135
22.5
%
43,578
17.6
%
94,200
17.4
%
%
238,789
63.2
%
145,082
58.5
%
370,958
68.6
%
%
Catastrophe excess of loss(1)
(955
)
(0.3
)%
1,783
0.7
%
6,960
1.3
%
%
Per Risk excess of
loss(2)
80,045
21.2
%
52,745
21.3
%
83,144
15.3
%
%
Proportional(3)
22,060
5.8
%
12,356
4.9
%
14,480
2.7
%
%
101,150
26.7
%
66,884
26.9
%
104,584
19.3
%
%
Catastrophe excess of loss(1)
4,025
1.1
%
1,737
0.7
%
9,606
1.8
%
%
Per Risk excess of
loss(2)
700
0.2
%
4,174
1.7
%
600
0.1
%
%
Proportional(3)
14,848
3.9
%
16,008
6.4
%
30,771
5.7
%
%
19,573
5.2
%
21,919
8.8
%
40,977
7.6
%
%
Catastrophe excess of loss(1)
345
0.1
%
1,109
0.5
%
1,729
0.3
%
%
Catastrophe excess of loss(1)
15,453
4.1
%
11,718
4.7
%
18,025
3.3
%
%
Proportional(3)
0.0
%
0.0
%
500
0.1
%
%
15,453
4.1
%
11,718
4.7
%
18,525
3.4
%
%
Compensation
Catastrophe excess of loss(1)
2,760
0.7
%
1,493
0.6
%
4,016
0.8
%
%
$
378,070
100.0
%
$
248,205
100.0
%
$
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.
84
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.
85
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.
86
Table of Contents
Prior to making overall adjustments for changes in climate
variables, we adjust other variables (for example, demand surge,
storm surge, and secondary uncertainty).
When pricing individual contracts, we frequently apply further
adjustments to the three vendor models. Examples include bias in
damage curves for commercial structures and occupancies and
frequency of specific perils.
VCAPS takes into account annual limits, event/franchise/annual
aggregate deductibles, and reinstatement premiums. This allows
us to more accurately evaluate treaties with a broad range of
features, including both common (reinstatement premium and
annual limits) and complex features (second or third event
coverage, aggregate excess of loss, attritional loss components
covers with varying attachment across different geographical
zones or lines of businesses and covers with complicated
structures).
VCAPS use of
100,000-year
simulation enables robust pricing of catastrophe-exposed
business. This is possible in real-time operation because we
have designed our computing hardware platform and software
environment to accommodate our significant computing needs.
87
Table of Contents
Three months ended
Year ended
March 31, 2007
December 31, 2006
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
(Dollars in
(Dollars in
thousands)
thousands)
$
139,048
36.8%
$
224,423
41.5%
22,935
6.0%
38,720
7.2%
32,402
8.6%
36,812
6.8%
2,861
0.8%
15,412
2.8%
(7
)
0.0%
6,326
1.2%
0.0%
2,103
0.4%
58,191
15.4%
99,373
18.4%
60,108
15.9%
71,432
13.2%
120,723
31.9%
145,561
26.9%
$
378,070
100.0
$
540,789
100.0%
(1)
Represents risks in two or more geographic zones.
(2)
Not classified by geographic area as marine and aerospace risks
can span multiple geographic areas and are not fixed locations
in some instances.
(3)
Negative amount for the three months ended March 31, 2007
represents a downward revision of estimated premium.
88
Table of Contents
Three months ended March 31, 2007
Year ended December 31, 2006
Gross premiums
Gross premiums
Gross premiums written
written (%)
Gross premiums written
written (%)
(Dollars in thousands)
(Dollars in thousands)
$
140,338
37.1%
$
181,357
33.5%
64,679
17.1%
108,435
20.1%
57,005
15.1%
94,723
17.5%
69,549
18.4%
67,370
12.5%
331,571
87.7%
451,885
83.6%
46,499
12.3%
88,904
16.4%
$
378,070
100.0%
$
540,789
100.0%
89
Table of Contents
At March 31, 2007
At December 31, 2006
Total gross
Total gross
reserve for
reserve for
Gross case
Gross
losses and loss
Gross case
Gross
losses and loss
reserves
IBNR
expenses(2)
reserves
IBNR
expenses(2)
(Dollars in thousands)
$
32,528
$
46,399
$
78,927
$
32,187
$
27,198
$
59,385
3,810
13,858
17,668
3,637
6,229
9,866
6,299
8,233
14,532
2,286
5,574
7,860
1
46
47
49
49
9
372
381
4
199
203
6,309
8,651
14,960
2,290
5,822
8,112
$
42,647
$
68,908
$
111,555
$
38,114
$
39,249
$
77,363
(1)
The Marine line of business includes our offshore energy risks.
(2)
The Company had Reinsurance Recoverables of $450 at
March 31, 2007.
90
Table of Contents
March 31, 2007
December 31, 2006
December 31, 2005
Fair
Fair
Fair
Fair value
value (%)
Fair value
value (%)
Fair value
value (%)
(Dollars in
(Dollars in
(Dollars in
thousands)
thousands)
thousands)
$
217,697
14.3%
$
119,731
8.3%
$
98,187
9.7%
295,494
19.3%
222,989
15.5%
53,866
5.3%
575,976
37.7%
502,137
34.9%
84,695
8.4%
1,089,167
71.3%
844,857
58.7%
236,748
23.4%
350,136
22.9%
531,530
36.9%
374,052
37.1%
1,439,303
94.2%
1,376,387
95.6%
610,800
60.5%
88,317
5.8%
63,643
4.4%
398,488
39.5%
$
1,527,620
100.0%
$
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.
March 31, 2007
December 31, 2006
December 31, 2005
Fair
Fair
Fair
Fair value
value (%)
Fair value
value (%)
Fair value
value (%)
(Dollars in
(Dollars in
(Dollars in
thousands)
thousands)
thousands)
$
85,776
7.9%
$
67,920
8.0%
$
%
404,074
37.1%
255,739
30.3%
140,601
59.4%
7,857
0.7%
5,207
0.6%
8,315
3.5%
15,484
1.4%
13,854
1.7%
3,137
1.3%
513,191
47.1%
342,720
40.6%
152,053
64.2%
575,976
52.9%
502,137
59.4%
84,695
35.8%
$
1,089,167
100.0%
$
844,857
100.0%
$
236,748
100.0%
91
Table of Contents
March 31, 2007
December 31, 2006
December 31, 2005
Fair
Fair
Fair
Fair value
value (%)
Fair value
value (%)
Fair value
value (%)
(Dollars in
(Dollars in
(Dollars in
thousands)
thousands)
thousands)
$
824,242
75.7%
$
644,106
76.2%
$
192,627
81.4%
104,003
9.5%
69,087
8.2%
9,861
4.2%
62,265
5.7%
58,285
6.9%
17,538
7.4%
67,622
6.2%
44,136
5.2%
9,779
4.1%
24,553
2.3%
22,759
2.7%
2,770
1.2%
6,482
0.6%
6,484
0.8%
4,173
1.7%
$
1,089,167
100.0%
$
844,857
100.0%
$
236,748
100.0%
92
Table of Contents
93
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);
94
Table of Contents
3.
Validus Re is prohibited from declaring or paying in any
financial year dividends of more than 25% of its total statutory
capital and surplus (as shown on its previous statutory balance
sheet) unless it files with the BMA an affidavit stating that it
will continue to meet the required margins;
4.
Validus Re is prohibited, without the approval of the BMA, from
reducing by 15% or more its total statutory capital, as set out
in its previous years financial statements and any
application for such approval must include an affidavit stating
that it will continue to meet the required margins; and
5.
Validus Re is required, at any time it fails to meet its
solvency margin, within 30 days (45 days where total
statutory capital and surplus falls to $75 million or less)
after becoming aware of that failure or having reason to believe
that such failure has occurred, to file with the BMA a written
report containing certain information.
Relevant assets include cash and time deposits, quoted
investments, unquoted bonds and debentures, first liens on real
estate, investment income due and accrued, accounts and premiums
receivable and reinsurance balances receivable. There are
certain categories of assets which, unless specifically
permitted by the BMA, do not automatically qualify as relevant
assets, such as unquoted equity securities, investments in and
advances to affiliates and real estate and collateral loans.
The relevant liabilities are total general business insurance
reserves and total other liabilities less deferred income tax
and sundry liabilities (by interpretation, those not
specifically defined).
95
Table of Contents
96
Table of Contents
97
Table of Contents
to maintain a balanced and well-spread portfolio;
to maintain a balance of gross premiums by size of class of
business written;
to write a predominantly short-tail account so that claims and
reserve development are known within a relatively short time;
to reinsure Syndicate 1183 with a comprehensive reinsurance
program;
to have the capability to lead in all classes of business
written, but also to follow well-respected leads; and
to have strong focus on underwriting controls over other areas
of the business.
98
Table of Contents
a highly developed infrastructure;
the quality of underwriting expertise, particularly in specialty
risks;
specialized service providers such as actuaries, claims
adjusters and consultants;
an established history as a world financial center, which allows
for greater speed and efficiency in major placements; and
an ability to handle more complex business than other newer
insurance centers.
99
Table of Contents
Year Ended
December 31,
2006
2005
2004
(Dollars in thousands)
$
648,652
$
592,154
$
539,114
(140,490
)
(145,887
)
(117,666
)
508,162
446,267
421,448
(37,588
)
(20,922
)
(63,963
)
470,574
425,345
357,485
32,746
20,350
10,194
4,583
4,907
6,204
507,903
450,602
373,883
183,050
303,998
178,771
115,518
105,201
81,523
79,383
67,317
78,943
6,279
3,522
2,115
(511
)
1
315
986
682
306
384,705
480,721
341,973
123,198
(30,119
)
31,910
566
(6,895
)
(6,773
)
$
123,764
$
(37,014
)
$
25,137
517
(536
)
(1,329
)
(688
)
1,267
257
(171
)
731
(1,072
)
(241
)
51
313
(412
)
782
(759
)
$
123,352
$
(36,232
)
$
24,378
100
Table of Contents
101
Table of Contents
102
Table of Contents
2006
2005
Gross
Net
Gross
Net
(Dollars in millions)
$
230.7
$
94.6
$
224.8
$
95.7
82.8
11.0
71.7
11.0
22.5
5.0
22.4
6.2
$
336.0
$
110.6
$
318.9
$
112.9
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
Talbot
Historical
Historical
Holdings Ltd.
Pro Forma
Pro Forma
Validus
Talbot
accounting
Purchase
Finance
Pro Forma
Holdings, Ltd.
Holdings Ltd.
adjustments
adjustments
adjustments
Notes
Consolidated
(Dollars in thousands, except share and per share amounts)
$
540,789
$
648,652
$
$
(8,675
)
$
3(f)
$
1,180,766
(63,696
)
(140,490
)
8,675
3(f)
(195,511
)
477,093
508,162
985,255
(170,579
)
(37,588
)
(208,167
)
306,514
470,574
777,088
58,021
32,746
4(b)
90,767
(1,102
)
(6,279
)
(7,381
)
4,583
4,583
2,157
511
2,668
365,590
502,135
867,725
91,323
183,050
(2,920
)
2(d)
271,453
36,072
115,518
151,590
46,232
79,383
3,363
19,846
2(c), 2(d),
3(b), 3(g),
3(h) 3(i)
148,824
8,789
986
17,360
4(d)
27,135
77
77
(182,493
)
(378,937
)
(443
)
(19,846
)
(17,360
)
(599,079
)
183,097
123,198
(443
)
(19,846
)
(17,360
)
268,646
566
1,354
3(g)
1,920
$
183,097
$
123,764
$
(443
)
$
(18,492
)
$
(17,360
)
$
270,566
$
3.13
$
3.76
$
3.11
$
3.74
58,477,130
13,433,916
4(a), 4(c)
71,911,046
58,874,567
128,363
13,433,916
3(g), 3(j)
4(a), 4(c)
72,436,846
107
Table of Contents
Talbot
Historical
Historical
Holdings Ltd.
Pro Forma
Pro Forma
Validus
Talbot
accounting
Purchase
Finance
Pro Forma
Holdings, Ltd.
Holdings Ltd.
adjustments
adjustments
adjustments
Notes
Consolidated
$
378,070
$
198,805
$
$
(12,363
)
$
3(f)
$
564,512
(30,958
)
(91,067
)
12,363
3(f)
(109,662
)
347,112
107,738
454,850
(235,620
)
23,037
(212,583
)
111,492
130,775
242,267
18,497
9,703
4(b)
28,200
46
(1,322
)
(1,276
)
1,643
1,643
943
943
1,389
(168
)
1,221
133,067
139,931
272,998
46,487
68,585
(858
)
2(d)
114,214
12,219
30,047
42,266
13,172
21,191
1,837
3,426
2(c), 2(d), 3(b),
3(g), 3(h), 3(i)
39,626
4,441
165
4,340
4(d)
8,946
(76,319
)
(119,988
)
(979
)
(3,426
)
(4,340
)
(205,052
)
56,748
19,943
(979
)
(3,426
)
(4,340
)
67,946
(1,005
)
338
3(g)
(667
)
$
56,748
$
18,938
$
(979
)
$
(3,088
)
$
(4,340
)
$
67,279
$
0.97
$
0.94
$
0.94
$
0.91
58,482,601
13,433,916
4(a), 4(c)
71,916,517
60,215,392
500,847
13,433,916
3(g), 3(j)
4(a), 4(c)
74,150,155
108
Table of Contents
Talbot
Historical
Historical
Holdings Ltd.
Pro Forma
Pro Forma
Validus
Talbot
accounting
Purchase
Finance
Pro Forma
Holdings, Ltd.
Holdings Ltd.
adjustments
adjustments
adjustments
Notes
Consolidated
$
1,089,167
$
197,485
$
$
$
$
1,286,652
350,136
317,628
2,003
2(a)
669,767
88,317
371,825
(2,003
)
(382,350
)
506,678
2(a), 3(a), 3(c),
4(a), 4(c), 4(d)
582,467
1,527,620
886,938
(382,350
)
506,678
2,538,886
77,735
(77,735
)
2(b)
143,406
(143,406
)
2(b)
356,294
221,141
(8,316
)
2(b), 3(f)
569,119
66,694
61,516
(3,264
)
2(c)
124,946
27,064
71,717
(9,314
)
3(f)
89,467
16,258
16,258
450
204,675
205,125
7,683
6,188
13,871
276
6,541
3(a), 3(c)
6,817
176,949
3(b)
176,949
10,422
7,314
2,000
4(d)
19,736
$
2,012,485
$
1,459,765
$
(3,264
)
$
(216,490
)
$
508,678
$
3,761,174
$
433,263
$
321,505
$
$
(9,314
)
$
3(f)
$
745,454
111,555
730,503
3(d)
842,058
25,708
113,363
(8,316
)
3(f)
130,755
1,610
1,610
15,052
2,466
3(a)
17,518
16,258
16,258
17,209
17,209
7,276
70,731
2,411
3(a)
80,418
150,000
200,000
4(d)
350,000
761,269
1,252,764
(12,753
)
200,000
2,201,280
81,376
(81,376
)
3(e)
10,234
100
(100
)
2,351
3(a), 3(e),
4(a), 4(c)
12,585
(613
)
613
3(e)
1,049,970
5,214
(5,214
)
309,327
3(a), 3(e), 4(a),
3(e), 3(g), 4(c)
1,359,297
(16
)
16
3(e)
191,012
120,940
(3,264
)
(117,676
)
(3,000
)
3(a), 3(c),
3(e), 3(g)
188,012
1,251,216
125,625
(3,264
)
(122,361
)
308,678
1,559,894
$
2,012,485
$
1,459,765
$
(3,264
)
$
(216,490
)
$
508,678
$
3,761,174
$
21.39
$
21.69
$
20.56
$
20.49
58,482,601
13,433,916
4(a), 4(c)
71,916,517
70,328,761
2,118,324
13,433,916
3(g), 3(j)
4(a), 4(c)
85,881,001
109
Table of Contents
1.
Basis of
Presentation
110
Table of Contents
2.
Accounting
and Reclassification Adjustments
3.
Purchase
adjustments
111
Table of Contents
$
382,176
Total Purchase Price (A)
$
389,134
6,958
Talbot Shareholders equity
$
125,625
Talbot Redeemable preferred shares
81,376
$
389,134
Talbot employee option exercise
8,673
Other closing adjustments
(225
)
Accounting Adjustments
(3,264
)
Estimated Fair Value of Tangible
Net Assets Acquired (B)
212,185
Excess of total purchase price
above estimated fair value of Tangible Net Assets acquired
(A − B)
$
176,949
$
92,139
31,155
13,104
136,398
40,551
$
176,949
112
Table of Contents
113
Table of Contents
497,419 shares
237,441 shares
237,441 shares
237,440 shares
1,209,741 shares
173,913 shares
173,913 shares
152,174 shares
152,174 shares
652,174 shares
Employee Seller
Award
Shares
Shares
Total
$
11,440
$
4,000
$
15,440
5,461
4,000
9,461
5,461
3,500
8,961
5,462
3,500
8,962
$
27,824
$
15,000
$
42,824
114
Table of Contents
Distribution network
Trademarks/Brands
Total
$
3,116
$
1,310
$
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,116
1,310
4,426
3,111
1,314
4,425
$
31,155
$
13,104
$
44,259
4.
Financing
adjustments
115
Table of Contents
$
335,388
424
200,000
$
535,812
$
382,176
117,544
24,134
6,958
3,000
2,000
$
535,812
116
Table of Contents
5.
Earnings
per Common Share
117
Table of Contents
Historical
Validus
Pro Forma
Holdings, Ltd.
Consolidated
$
56,748
$
67,279
58,482,601
71,916,517
1,370,158
1,396,820
362,633
836,818
60,215,392
74,150,155
$
0.97
$
0.94
$
0.94
$
0.91
Historical
Validus
Pro Forma
Holdings, Ltd.
Consolidated
$
183,097
$
270,566
58,477,130
71,911,046
244,180
248,940
153,257
276,860
58,874,567
72,436,846
$
3.13
$
3.76
$
3.11
$
3.74
118
Table of Contents
6.
Book
Value per Share
Historical
Validus
Pro Forma
Holdings, Ltd.
Consolidated
$
1,251,216
$
1,559,894
58,482,601
71,916,517
$
21.39
$
21.69
$
1,251,216
$
1,559,894
$
147,968
$
153,144
$
46,444
$
46,444
$
1,445,628
$
1,759,482
58,482,601
71,916,517
8,455,320
8,711,729
2,637,344
2,637,344
753,496
2,615,411
70,328,761
85,881,001
$
20.56
$
20.49
Price per
Book value per
Diluted book value per
$24
.00
$21
.52
$20
.34
24
.50
21
.60
20
.41
25
.00
21
.69
20
.49
25
.50
21
.78
20
.56
26
.00
21
.86
20
.63
119
Table of Contents
49
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
General Counsel
47
Executive Vice President and Chief
Risk Officer
39
Executive Vice President and Chief
Underwriting Officer
45
Director
55
Director
47
Director
38
Director
45
Director
57
Director
47
Director
53
Director
56
Director
120
Table of Contents
121
Table of Contents
122
Table of Contents
Audit
Compensation
Executive
Finance
Governance
Underwriting
ü
ü
ü
ü
ü
Chair
Chair
ü
ü
Chair
ü
ü
ü
ü
ü
ü
ü
ü
ü
Chair
ü
ü
ü
ü
ü
Chair
ü
ü
Chair
123
Table of Contents
124
Table of Contents
salary;
annual incentive compensation (bonus award); and
long-term incentive compensation (options and restricted shares).
125
Table of Contents
The restricted shares vest on a three-year cliff
basis.
Stock option grants vest equally over five years (20% each
year). The stock option grants to our named executive officers
have an exercise price of $17.50 per share, which is equal
to the price per share paid by our investors in our initial
capitalization.
126
Table of Contents
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).
127
Table of Contents
(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 $750,000.
All other
Grant
All other
options
date
Estimated
Estimated
stock
awards:
Exercise
fair
future payouts
future payouts
awards:
number of
or base
value of
under non-equity
under equity
number
securities
price of
stock and
incentive plan awards
incentive plan awards
of shares
underlying
option
option
Grant
Threshold
Target
Maximum
Threshold
Target
Maximum
of stock
options
awards
awards
Date
($)
($)
($)
($)
($)
($)
or units (#)
(#)
($/Sh)
($)
$
$
$
$
$
$
March 3, 2006
70,461
1,233,067
March 3, 2006
246,614
7.35
1,812,613
128
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129
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130
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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.
131
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132
Table of Contents
133
Table of Contents
134
Table of Contents
Base salary and
Vesting in stock
Additional
benefits
and options
Bonus
Expenses
compensation
($)
($)
($)
($)
($)
$
1,045,000
$
1,109,760
$
1,425,000
$
304,800
990,000
554,880
900,000
294,460
825,000
739,845
750,000
263,470
825,000
369,923
750,000
251,800
825,000
369,923
750,000
281,800
135
Table of Contents
Value of vested
accelerated
Options
Value of options
restricted shares
exercisable
exercisable
$
5,284,575
591,873
$
4,439,048
2,642,275
295,936
2,219,520
1,761,525
246,614
1,849,605
1,761,525
197,291
1,479,683
1,761,525
197,291
1,479,683
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
$
17.50
(1)
(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 such shares reserved under the Plan) after the
consummation of the IPO less (B) what has been issued prior
to January 11, 2007 under the plan.
136
Table of Contents
each person known by us to beneficially own more than 5% of our
outstanding common shares,
each of our directors,
each of our named executive officers,
all of our directors and executive officers as a group, and
selling shareholders not otherwise included in the categories
above
137
Table of Contents
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
Shares
Total beneficial
beneficial
Common
to exercise of
ownership
exercise of
ownership
offered
ownership
ownership
offered
ownership
ownership
shares
warrants
(%)(2)
options
%(3)
hereby
(%)(2)
%(3)
hereby
(%)(2)
%(3)
Inc.(4),(5)
14,057,137
1,604,410
26.06%
21.61%
21.30%
18.24%
20.87%
17.92%
company and affiliated companies(6)
6,857,142
3,435,572
16.62%
14.20%
13.66%
11.98%
13.39%
11.78%
Partners(7)
8,571,427
972,810
16.05%
13.17%
13.09%
11.11%
12.83%
10.92%
LLC(8)
6,857,141
784,056
12.89%
10.54%
10.51%
8.90%
500,000
9.62%
8.17%
Lynch or managed by Merrill Lynch affiliates(4),(9)
5,714,285
1,067,187
11.38%
9.36%
9.29%
7.90%
9.10%
7.76%
5,714,285
752,977
10.87%
8.89%
496,894
8.18%
6.92%
571,428
7.91%
6.72%
171,428
29,039
0.34%
951,223
1.59%
0.28%
1.34%
0.27%
1.32%
57,142
7,260
0.11%
475,611
0.75%
0.09%
0.63%
0.09%
0.62%
0.00%
317,075
0.44%
0.00%
0.37%
0.00%
0.36%
0.00%
317,075
0.44%
0.00%
0.37%
0.00%
0.36%
42,857
0.07%
317,075
0.50%
0.06%
0.42%
0.06%
0.41%
5,953
16.63%
14.21%
13.67%
11.99%
13.40%
11.78%
10,019
16.63%
14.22%
13.67%
12.00%
13.40%
11.79%
72,598
0.12%
0.10%
0.10%
0.08%
0.10%
0.08%
26.06%
21.61%
21.30%
18.24%
20.87%
17.92%
16.05%
13.17%
13.09%
11.11%
12.83%
10.92%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
11.38%
9.36%
9.29%
7.90%
9.10%
7.76%
12.89%
10.54%
10.51%
8.90%
10.30%
8.74%
6,026
16.63%
14.21%
13.67%
11.99%
13.40%
11.78%
271,427
130,895
0.69%
2,378,059
3.84%
0.56%
3.24%
0.55%
3.18%
and Executive officers as a group)
18,415
0.03%
1,861,915
2.59%
2.61%
2.19%
0.03%
2.15%
1,314,282
2.25%
1.81%
1,043,476
0.38%
0.32%
1,199,997
0.16%
0.13%
857,140
1.47%
1.18%
521,739
0.47%
0.39%
600,000
0.35%
0.29%
285,714
0.49%
0.39%
122,360
0.23%
0.19%
140,714
0.20%
0.17%
57,142
0.10%
0.08%
49,689
0.01%
0.01%
57,142
0.00%
0.00%
51,771
0.09%
0.07%
11,304
0.06%
0.05%
13,000
0.05%
0.04%
138
Table of Contents
(1)
All holdings in this beneficial ownership table have been
rounded to the nearest whole share.
(2)
The percentage of beneficial ownership for all holders has been
rounded to the nearest 1/10th of a percentage. Total
beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and includes common
shares issuable within 60 days of July 2, 2007 upon
the exercise of all options and warrants and other rights
beneficially owned by the indicated person on that date. Under
our Bye-laws, if, and for so long as, the common shares of a
shareholder, including any votes conferred by controlled
shares, would otherwise represent more than 9.09% of the
aggregate voting power of all common shares entitled to vote on
a matter, including an election of directors, the votes
conferred by such shares will be reduced by whatever amount is
necessary such that, after giving effect to any such reduction
(and any other reductions in voting power required by our
Bye-laws), the votes conferred by such shares represent 9.09% of
the aggregate voting power of all common shares entitled to vote
on such matter.
(3)
The percentage of beneficial ownership for all holders has been
rounded to the nearest 1/10th of a percentage.
Fully-diluted total beneficial ownership is based upon all
common shares and all common shares subject to exercise of
options and warrants outstanding at July 2, 2007. 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 and entities affiliated with Merrill Lynch or managed by
Merrill Lynch affiliates are non-voting.
(5)
Funds affiliated with or managed by Goldman Sachs are GSCP V
AIV, L.P. (4,798,022 shares and 638.459.4 warrants), GS
Capital Partners V Employees Fund, L.P. (1,550,787 shares
and 206,358.9 warrants), GS Capital Partners V Offshore, L.P.
(3,279,530 shares and 436,397.9 warrants), GS Capital
Partners V GmbH & Co. KG (251,708 shares and
33,494.2 warrants), GSCP V Institutional AIV, Ltd.
(2,177,093 shares and 289,699.7 warrants), GS Private
Equity Partners 1999, L.P. (1,039,607 shares),
GS Private Equity Partners 1999 Offshore, L.P.
(166,143 shares), GS Private Equity Partners
1999 Direct Investments Funds, L.P.
(29,720 shares), GS Private Equity Partners 2000, L.P.
(439,293 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, 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 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. Amounts
of shares subject to exercise of warrants attributed to Aquiline
Financial Services Fund L.P. and its management company
139
Table of Contents
and affiliated companies include amounts held by
Messrs Grayson, Greenberg and Watson, as otherwise
described in the table, as well as certain other Aquiline
partners and professionals.
(7)
Funds affiliated with or managed by Vestar Capital Partners are
Vestar AIV Employees Validus Ltd. (90,419 shares and
10,236.3 warrants), Vestar AIV Holdings B L.P.
(71,538 shares and 8,130.9 warrants), and Vestar AIV
Holdings A L.P. (8,409,470 shares and 954,442.5 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 shares
and 716,031.5 warrants), Allegheny New Mountain Partners
(Cayman), L.P. (484,642 shares and 55,392.1 warrants) and
New Mountain Affiliated Investors II (Cayman), L.P.
(110,131 shares and 12,632.0 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 shares and 364,803.6 warrants), Merrill Lynch
Ventures L.P. 2001 (1,428,571 shares and 121,601.2
warrants) and GMI Investments, Inc. (580,782 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.
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, 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, 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.
140
Table of Contents
(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 shares),
Mr. Reeth (105,691 shares), Mr. Consolino
(70,461 shares), Mr. Mercer (70,461 shares) and
Mr. Ward (70,461 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 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 address of each other beneficial owner
listed, except the Selling Shareholders indicated by
note 19, is c/o Validus Holdings, Ltd.,
19 Par-La-Ville Road, Hamilton HM11 Bermuda.
(19)
Selling Shareholder not otherwise included in the categories
above.
141
Table of Contents
Sponsors.
Our shareholders agreement
defines Aquiline, Goldman Sachs Capital Partners, Vestar Capital
Partners, New Mountain Capital and Merrill Lynch Global Private
Equity as Sponsors. So long as a Sponsor continues
to beneficially hold at least 1/3 of its original shares of
common 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.
142
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143
Table of Contents
144
Table of Contents
145
Table of Contents
146
Table of Contents
Total Warrants
Existing Warrants
Warrants issued Pursuant to Anti-Dilution Provision(2)
Weighted
Percentage
Shares
Shares
Shares
average
of Fully
subject to
Exercise
subject to
Exercise
subject to
exercise
diluted
Exercise
Price
Exercise
Price(3)
Exercise
price
shares
Expiration
2,921,806.2
$
17.50
88,604.3
$
25.00
3,010,410.5
$
17.72
4.15
%
December 12, 2015
1,557,188.1
17.50
47,222.0
17.50
1,604,410.1
17.50
2.21
%
December 12, 2015
1,035,776.7
17.50
31,410.1
17.50
1,067,186.8
17.50
1.47
%
December 12, 2015
944,177.4
17.50
28,632.3
17.50
972,809.7
17.50
1.34
%
December 12, 2015
760,978.8
17.50
23,076.8
17.50
784,055.6
17.50
1.08
%
December 12, 2015
704,610.0
17.50
21,367.4
17.50
725,977.4
17.50
1.00
%
December 12, 2015
70,461.0
17.50
2,136.7
25.00
72,597.7
17.72
0.10
%
December 12, 2015
28,184.4
17.50
854.7
25.00
29,039.1
17.72
0.04
%
December 12, 2015
7,046.1
17.50
213.7
25.00
7,259.8
17.72
0.01
%
December 12, 2015
5,777.8
17.50
175.2
17.50
5,953.0
17.50
0.01
%
December 12, 2015
9,723.6
17.50
294.9
17.50
10,018.5
17.50
0.01
%
December 12, 2015
5,848.3
17.50
177.3
17.50
6,025.6
17.50
0.01
%
December 12, 2015
403,741.4
17.50
12,243.6
17.50
415,985.0
17.50
0.57
%
December 12, 2015
8,455,319.8
$
17.50
256,409.0
$
20.19
8,711,728.8
$
17.58
12.00
%
(1)
Amounts of warrants to acquire common shares attributed to
Aquiline Financial Services Fund L.P. and its management company
and affiliated companies include amounts held by certain
Aquiline professionals.
(2)
Warrants to purchase an additional 256,409 shares, which
were issued in respect of the Talbot acquisition as a result of
a particular anti-dilution provision in the existing warrants,
which provision terminates upon consummation of this Offering.
(3)
Each of Aquiline, John J. Hendrickson, Edward J.
Noonan and George P. Reeth hold compensatory warrants,
under which terms the warrants issued pursuant to the
anti-dilution provision are issued with
147
Table of Contents
exercise value equal to fair market value. For purposes of this
table, fair market value is assumed to be $25.00, representing
the mid-point of the offering range set forth on the cover of
this prospectus.
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.
148
Table of Contents
149
Table of Contents
150
Table of Contents
151
Table of Contents
152
Table of Contents
153
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,
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.
154
Table of Contents
155
Table of Contents
Restricted shares, and stock options to acquire common shares,
aggregating 3,390,840 voting common shares, held by certain of
our employees.
1,861,915 common shares issued to certain Talbot employees in
the Talbot acquisition, which are subject to forfeiture if the
recipients employment terminates under certain
circumstances.
8,711,729 common shares that may be issued as a result of
the exercise of the warrants described under Description
of Share Capital Warrants, which include 256,409
additional warrants which were issued in respect of the Talbot
acquisition as a result of a particular anti-dilution provision
in the existing warrants, which provision terminates upon
consummation of this Offering.
The IPO Grant.
156
Table of Contents
157
Table of Contents
158
Table of Contents
159
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.
160
Table of Contents
161
Table of Contents
162
Table of Contents
163
Table of Contents
164
Table of Contents
165
Table of Contents
166
Table of Contents
167
Table of Contents
Number of
common shares
Incorporated
15,660,963
168
Table of Contents
No
Full
Per share
exercise
exercise
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
169
Table of Contents
170
Table of Contents
171
Table of Contents
172
Table of Contents
173
Table of Contents
174
Table of Contents
STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS
175
Table of Contents
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-28
F-29
F-32
F-33
F-34
F-35
F-36
F-37
F-50
F-51
F-52
F-53
F-55
F-56
F-1
Table of Contents
VALIDUS HOLDINGS, LTD.
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
F-14
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
16.
Subsequent
events
(Continued)
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
Net
Net
Net
Net
premiums
premiums
premiums
premiums
earned
earned (%)
earned
earned (%)
$
214,083
69.8%
$
%
56,755
18.5%
%
18,799
6.1%
%
1,473
0.5%
%
12,721
4.2%
%
2,683
0.9%
%
35,676
11.7%
%
$
306,514
100.0%
$
%
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
CONSOLIDATED BALANCE SHEETS
As at March 31, 2007 (unaudited) and December 31,
2006
(Expressed in thousands of U.S. dollars, except share
amounts)
March 31,
December 31,
2007
2006
(Unaudited)
$
1,089,167
$
844,857
350,136
531,530
88,317
63,643
1,527,620
1,440,030
356,294
142,408
66,694
28,203
27,064
8,245
16,258
12,327
450
7,683
6,456
10,422
8,754
$
2,012,485
$
1,646,423
$
433,263
$
178,824
111,555
77,363
25,708
7,438
16,258
12,327
17,209
12,850
7,276
15,098
150,000
150,000
761,269
453,900
10,234
10,234
1,049,970
1,048,025
875
191,012
133,389
1,251,216
1,192,523
$
2,012,485
$
1,646,423
F-33
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2007 and 2006
(Expressed in thousands of U.S. dollars, except share
amounts)
Three months ended
Three months ended
March 31,
March 31,
2007
2006
(Unaudited)
(Unaudited)
$
378,070
$
248,205
(30,958
)
(8,238
)
347,112
239,967
(235,620
)
(197,559
)
111,492
42,408
18,497
10,912
46
(386
)
1,643
1,389
(4
)
133,067
52,930
46,487
24,337
12,219
5,500
13,172
7,633
4,441
705
77
76,319
38,252
56,748
14,678
(3,880
)
386
$
56,748
$
11,184
58,482,601
58,460,716
60,215,392
58,509,519
$
0.97
$
0.25
$
0.94
$
0.25
F-34
Table of Contents
Three months ended
Three months ended
March 31, 2007
March 31, 2006
(Unaudited)
(Unaudited)
$
10,234
$
10,224
10
$
10,234
$
10,234
$
1,048,025
$
1,039,185
1,030
915
848
77
1,030
961
$
1,049,970
$
1,042,101
$
875
$
105
(3,494
)
(875
)
$
$
(3,389
)
$
133,389
$
(49,708
)
875
56,748
14,678
$
191,012
$
(35,030
)
$
1,251,216
$
1,013,916
F-35
Table of Contents
Three months ended
Three months ended
March 31, 2007
March 31, 2006
(Unaudited)
(Unaudited)
$
56,748
$
14,678
1,945
1,809
(46
)
386
(1,643
)
77
(2,627
)
(2,596
)
(213,886
)
(168,031
)
(38,491
)
(29,261
)
(18,819
)
(7,085
)
(450
)
(1,227
)
(2,375
)
(1,668
)
(1,659
)
254,439
204,644
34,192
24,337
18,270
5,550
(7,822
)
925
78,915
41,399
163,758
138,798
(401,955
)
(566,190
)
183,956
216,426
(3,932
)
(58,173
)
(210,966
)
3,932
(11,996
)
3,932
(11,996
)
24,674
(181,563
)
63,643
398,488
$
88,317
$
216,925
$
3,401
$
F-36
Table of Contents
1.
Nature of
the business
2.
Basis of
preparation and consolidation
3.
Significant
accounting policies
F-37
Table of Contents
3.
Significant
accounting
policies
(Continued)
4.
Recent
accounting pronouncements
F-38
Table of Contents
4.
Recent
accounting
pronouncements
(Continued)
5.
Investments
Three months ended
Three months ended
March 31, 2007
March 31, 2006
$
18,076
$
8,052
931
3,182
19,007
11,234
(510
)
(322
)
$
18,497
$
10,912
F-39
Table of Contents
5.
Investments
(Continued)
Three months ended
Three months ended
March 31, 2007
March 31, 2006
$
89
$
29
(43
)
(415
)
46
(386
)
1,643
(3,494
)
$
1,689
$
(3,880
)
Gross
Gross
Estimated
Amortized
unrealized
unrealized
fair
cost
gains
losses
value
$
217,466
$
363
$
(132
)
$
217,697
294,974
793
(273
)
295,494
574,208
2,251
(483
)
575,976
1,086,648
3,407
(888
)
1,089,167
350,136
350,136
$
1,436,784
$
3,407
$
(888
)
$
1,439,303
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
F-40
Table of Contents
5.
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
)
March 31,
December 31,
2007
2006
Estimated
Estimated
fair
% of
fair
% of
value
total
value
total
$
824,242
75.7%
$
644,106
76.2%
104,003
9.5%
69,087
8.2%
62,265
5.7%
58,285
6.9%
67,622
6.2%
44,136
5.2%
24,553
2.3%
22,759
2.7%
6,482
0.6%
6,484
0.8%
$
1,089,167
100.0%
$
844,857
100.0%
F-41
Table of Contents
5.
Investments
(Continued)
March 31, 2007
December 31, 2006
Estimated
Estimated
Amortized
fair
Amortized
fair
cost
value
cost
value
$
85,832
$
85,776
$
67,984
$
67,920
403,480
404,074
255,808
255,739
7,625
7,857
4,966
5,207
15,503
15,484
13,900
13,854
512,440
513,191
342,658
342,720
574,208
575,976
501,324
502,137
$
1,086,648
$
1,089,167
$
843,982
$
844,857
6.
Reinsurance
Three months ended March 31, 2007
Three months ended March 31, 2006
Written
Earned
Written
Earned
$
$
$
$
378,070
123,631
248,205
43,561
(30,958
)
(12,139
)
(8,238
)
(1,153
)
$
347,112
$
111,492
$
239,967
$
42,408
Table of Contents
6.
Reinsurance
(Continued)
7.
Share
capital
F-43
Table of Contents
7.
Share
capital
(Continued)
8.
Debt and
financing arrangements
F-44
Table of Contents
8.
Debt and
financing
arrangements
(Continued)
$
10,203
13,604
13,604
13,604
156,802
$
207,817
F-45
Table of Contents
8.
Debt and
financing
arrangements
(Continued)
In use /
Commitment
outstanding
$
150,000
$
150,000
200,000
500,000
82,991
$
850,000
$
232,991
9.
Related
party transactions
F-46
Table of Contents
9.
Related
party transactions
(Continued)
10.
Earnings
per share
F-47
Table of Contents
10.
Earnings
per share
(Continued)
Three months ended
Three months ended
March 31, 2007
March 31, 2006
$
56,748
$
14,678
58,482,601
58,460,716
1,370,158
362,633
48,803
60,215,392
58,509,519
$
0.97
$
0.25
$
0.94
$
0.25
11.
Share
consolidation
12.
Segment
information
Three months ended
Three months ended
March 31, 2007
March 31, 2006
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
$
238,789
63.2%
$
145,082
58.5%
101,150
26.7%
66,884
26.9%
19,573
5.2%
21,919
8.8%
345
0.1%
1,109
0.5%
15,453
4.1%
11,718
4.7%
2,760
0.7%
1,493
0.6%
38,131
10.1%
36,239
14.6%
$
378,070
100.0%
$
248,205
100.0%
F-48
Table of Contents
12.
Segment
information
(Continued)
Three months ended
Three months ended
March 31, 2007
March 31, 2006
Net
Net
Net
Net
premiums
premiums
premiums
premiums
earned
earned (%)
earned
earned (%)
$
85,152
76.4
%
$
26,666
62.9
%
15,111
13.6
%
10,634
25.1
%
4,624
4.1
%
1,901
4.5
%
238
0.2
%
274
0.6
%
5,064
4.5
%
2,565
6.0
%
1,303
1.2
%
368
0.9
%
11,229
10.0
%
5,108
12.0
%
$
111,492
100.0
%
$
42,408
100.0
%
Three months ended
Three months ended
March 31, 2007
March 31, 2006
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
written
written (%)
written
written (%)
$
139,048
36.8%
$
67,800
27.3%
22,935
6.0%
23,185
9.3%
32,402
8.6%
19,233
7.7%
2,861
0.8%
11,107
4.5%
(7
)
0.0%
665
0.3%
0.0%
436
0.2%
58,191
15.4%
54,626
22.0%
60,108
15.9%
36,976
14.9%
120,723
31.9%
88,803
35.8%
$
378,070
100.0%
$
248,205
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-49
Table of Contents
F-50
Table of Contents
2006
2005
$000
$000
524,483
527,614
28,446
47,900
278,231
119,386
831,160
694,900
46,065
42,745
140,440
113,978
228,124
296,883
9,178
9,726
55,841
46,047
7,717
5,061
13,509
7,867
275
1,332,309
1,217,207
711,014
732,935
281,928
235,648
59,127
99,210
1,735
2,717
14,704
13,587
76,552
58,522
6,543
1,145,060
1,149,162
79,128
72,954
100
100
5,065
6,078
104,250
(10,248
)
(681
)
(269
)
(613
)
(570
)
108,121
(4,909
)
1,332,309
1,217,207
F-51
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
AND COMPREHENSIVE INCOME/(LOSS)
Years ended 31st December 2006, 2005 and 2004
2006
2005
2004
$000
$000
$000
648,652
592,154
539,114
(140,490
)
(145,887
)
(117,666
)
508,162
446,267
421,448
(37,588
)
(20,922
)
(63,963
)
470,574
425,345
357,485
32,746
20,350
10,194
4,583
4,907
6,204
507,903
450,602
373,883
183,050
303,998
178,771
115,518
105,201
81,523
79,383
67,317
78,943
6,279
3,522
2,115
(511
)
1
315
986
682
306
384,705
480,721
341,973
123,198
(30,119
)
31,910
566
(6,895
)
(6,773
)
123,764
(37,014
)
25,137
517
(536
)
(1,329
)
(688
)
1,267
257
(171
)
731
(1,072
)
(241
)
51
313
(412
)
782
(759
)
123,352
(36,232
)
24,378
F-52
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON
SHAREHOLDERS EQUITY/(DEFICIT)
Years ended 31st December 2006, 2005 and 2004
Accumulated
Additional
other
Common
paid-in
Retained
comprehensive
Treasury
shares
capital
earnings
income/(loss)
shares
Total
$000
$000
$000
$000
$000
$000
100
2,100
19,817
(292
)
21,725
25,137
25,137
(1,072
)
(1,072
)
313
313
25,137
(759
)
24,378
(9,115
)
(9,115
)
100
2,100
35,839
(1,051
)
36,988
F-53
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON
SHAREHOLDERS EQUITY (DEFICIT)
(Continued)
Years ended 31st December 2006, 2005 and 2004
Accumulated
Additional
other
Common
paid-in
Retained
comprehensive
Treasury
shares
capital
earnings
income/(loss)
shares
Total
$000
$000
$000
$000
$000
$000
100
2,100
35,839
(1,051
)
36,988
(37,014
)
(37,014
)
731
731
51
51
(37,014
)
782
(36,232
)
3,978
3,978
(570
)
(570
)
(8,763
)
(8,763
)
(494
)
(494
)
184
184
100
6,078
(10,248
)
(269
)
(570
)
(4,909
)
123,764
123,764
(171
)
(171
)
(241
)
(241
)
123,764
(412
)
123,352
(1,195
)
(1,195
)
(43
)
(43
)
182
182
(4,292
)
(4,292
)
(4,974
)
(4,974
)
100
5,065
104,250
(681
)
(613
)
108,121
F-54
Table of Contents
Years ended 31st December 2006, 2005 and 2004
2006
2005
2004
$000
$000
$000
123,764
(37,014
)
25,137
953
858
1,865
182
4,755
3,522
2,430
(511
)
1
(313
)
(1,239
)
(8,863
)
(9,394
)
(22,246
)
(18,593
)
3,893
71,712
(192,287
)
30,138
943
8,684
36,731
(7,602
)
699
(15,931
)
(277
)
(7,334
)
(5,321
)
301
(42,933
)
374,947
167,944
36,710
12,238
(56,146
)
(41,401
)
(11,070
)
14,402
(1,492
)
3,021
118
(542
)
2,264
5,112
3,384
(15,737
)
21,721
116,826
117,349
228,008
1,472,517
535,078
190,655
58,299
234,315
(1,437,382
)
(874,713
)
(612,342
)
(623
)
(850
)
(1,812
)
34,512
(282,186
)
(189,184
)
2,544
9
(7,000
)
11,180
(4,292
)
(8,763
)
5
2,778
(43
)
(570
)
184
(150
)
(3,827
)
9
7,657
(13,684
)
3,841
158,845
(182,348
)
42,674
119,386
301,734
259,060
278,231
119,386
301,734
(727
)
(751
)
(101
)
(7,485
)
6,201
F-55
Table of Contents
1
General
2
Basis of
preparation
F-56
Table of Contents
2
Basis of
preparation
(Continued)
3
Significant
accounting policies
F-57
Table of Contents
3
Significant
accounting
policies
(Continued)
5 years
3 years
licence term
F-58
Table of Contents
3
Significant
accounting
policies
(Continued)
F-59
Table of Contents
3
Significant
accounting
policies
(Continued)
Gross
Gross
Estimated
Amortised
unrealised
unrealised
fair
cost
gains
losses
value
$000
$000
$000
$000
216,683
156
(671
)
216,168
200,051
158
(948
)
199,261
110,724
(1,670
)
109,054
527,458
314
(3,289
)
524,483
28,446
28,446
555,904
314
(3,289
)
552,929
F-60
Table of Contents
4
Investment
securities
(Continued)
Gross
Gross
Estimated
Amortised
unrealised
unrealised
fair
cost
gains
losses
value
$000
$000
$000
$000
458,601
498
(1,581
)
457,518
68,426
17
(663
)
67,780
2,363
(47
)
2,316
529,390
515
(2,291
)
527,614
47,900
47,900
577,290
515
(2,291
)
575,514
2006
2005
2006
Estimated
2005
Estimated
Amortised
fair
Amortised
fair
cost
value
cost
value
$000
$000
$000
$000
148,843
148,622
194,653
194,116
325,528
323,271
381,737
380,498
81,533
81,036
900
900
555,904
552,929
577,290
575,514
F-61
Table of Contents
4
Investment
securities
(Continued)
2006
2005
2004
$000
$000
$000
20,119
11,578
4,848
13,239
9,226
5,628
33,358
20,804
10,476
(612
)
(454
)
(282
)
32,746
20,350
10,194
2006
2005
2004
$000
$000
$000
1,987
2,051
150
(8,266
)
(5,778
)
(2,265
)
205
(6,279
)
(3,522
)
(2,115
)
(171
)
731
(1,072
)
(171
)
731
(1,072
)
2006
2005
$000
$000
46,094
43,134
(29
)
(389
)
46,065
42,745
F-62
Table of Contents
2006
2005
2004
$000
$000
$000
direct
359,373
325,950
308,952
assumed
289,279
266,204
230,162
at syndicate level
(118,941
)
(128,810
)
(102,120
)
(21,549
)
(17,077
)
(15,546
)
508,162
446,267
421,448
direct
339,256
316,165
294,705
assumed
272,686
263,751
218,334
at syndicate level
(119,819
)
(136,721
)
(140,124
)
(21,549
)
(17,850
)
(15,430
)
470,574
425,345
357,485
F-63
Table of Contents
2006
2005
2004
Gross
Gross
Gross
Gross
Gross
Gross
premiums
premiums
premiums
premiums
premiums
premiums
written
written
written
written
written
written
$000
%
$000
%
$000
%
244,535
37.7
221,910
37.5
191,822
35.6
129,965
20.0
114,500
19.3
116,449
21.6
121,358
18.7
118,030
19.9
114,634
21.3
17,873
2.8
16,094
2.7
16,778
3.1
44,666
6.9
44,214
7.5
44,848
8.3
90,255
13.9
77,406
13.1
54,583
10.1
648,652
100.0
592,154
100.0
539,114
100.0
2006
2005
2004
$000
$000
$000
46,047
48,453
30,499
122,935
107,763
99,094
6,329
5,899
12,247
(115,518
)
(105,201
)
(81,523
)
(6,144
)
(9,160
)
(13,115
)
2,192
(1,707
)
1,251
55,841
46,047
48,453
2006
2005
$000
$000
6,440
5,069
(4,612
)
(3,157
)
1,828
1,912
Table of Contents
2006
2005
2004
$000
$000
$000
436,052
264,889
145,974
247,325
335,270
207,213
(64,275
)
(31,272
)
(28,442
)
183,050
303,998
178,771
31,232
83,380
29,476
121,420
41,806
37,362
152,652
125,186
66,838
18,058
(11,497
)
6,415
(1,618
)
3,848
567
482,890
436,052
264,889
228,124
296,883
107,240
711,014
732,935
372,129
2006
2005
2004
$000
$000
$000
214,321
557,396
247,198
(31,271
)
(253,398
)
(68,427
)
183,050
303,998
178,771
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11
Other
liabilities
2006
2005
$000
$000
22,601
34,421
16,769
14,924
21,086
4,998
11,178
4,918
4,179
76,552
58,522
12
Commitments
and contingencies
2004 YOA
2005 YOA
2006 YOA
$m
$m
$m
184.0
184.0
184.0
20.4
20.4
0.2
0.2
47.4
47.4
10.0
37.0
204.6
261.8
268.6
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12
Commitments
and contingencies
(Continued)
2004YOA
2005YOA
2006YOA
$m
$m
$m
111.6
130.8
140.0
93.0
131.0
128.6
204.6
261.8
268.6
2006
2005
$000
$000
729
1,587
1,350
682
1,530
1,215
5,994
6,970
9,603
10,454
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12
Commitments
and contingencies
(Continued)
13
Redeemable
preference shares
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13
Redeemable
preference shares
(Continued)
2006
2005
$000
$000
71,270
65,574
7,858
7,380
79,128
72,954
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13
Redeemable
preference shares
(Continued)
Redemption amount
Redemption amount
Class A shares
Class B shares
$000
$000
75,562
8,336
79,854
8,814
84,145
9,292
88,437
9,770
92,729
10,248
*
For redemptions after November 2010 (seven years after issue),
the redemption value is the higher of market value or the
amounts disclosed in the table above.
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14
Shareholders
equity/(deficit) and share options
F-71
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14
Shareholders
equity/(deficit) and share
options
(Continued)
Non-Performance
Non-Performance
Performance
Options granted
Options granted
related options
before November
in November
granted in 2006
2006
2006
4
3
3
$
0.34
$
0.90
$
1.60
26.8
%
26.8
%
26.8
%
0
%
0
%
0
%
4
%
5
%
5
%
F-72
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14
Shareholders
equity/(deficit) and share
options
(Continued)
Number
Number
Number
outstanding
outstanding
exercisable
Number
at 1st
Granted
Forfeited
Exercised
at 31st
at 31st
originally
January
during
during
during
December
December
granted
2006
year
year
year
2006
2006
3,000,000
2,500,000
(500,000
)
2,000,000
2,000,000
2,000,000
1,750,000
1,750,000
900,000
900,000
(125,000
)
775,000
2,062,500
2,062,500
2,062,500
700,000
700,000
700,000
5,150,000
2,762,500
(625,000
)
7,287,500
2,000,000
Number
Number
Number
outstanding
outstanding
exercisable
Number
at 1st
Granted
Forfeited
Exercised
at 31st
at 31st
originally
January
during
during
during
December
December
granted
2005
year
year
year
2005
2005
2,750,000
2,000,000
(2,000,000
)
3,000,000
2,500,000
2,500,000
2,000,000
2,000,000
(250,000
)
1,750,000
900,000
900,000
900,000
6,500,000
900,000
(2,250,000
)
5,150,000
Number
Number
Number
outstanding
outstanding
exercisable
Number
at 1st
Granted
Forfeited
Exercised
at 31st
at 31st
originally
January
during
during
during
December
December
granted
2004
year
year
year
2004
2004
2,750,000
2,125,000
(125,000
)
2,000,000
3,000,000
3,000,000
(500,000
)
2,500,000
2,000,000
2,000,000
2,000,000
5,125,000
2,000,000
(625,000
)
6,500,000
*
Of the options issued in 2006, 500,000 contained specific
provisions related to a change of control; this condition also
applies to 1,250,000 of the ordinary options issued in 2004.
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14
Shareholders
equity/(deficit) and share
options
(Continued)
2006
2005
2004
Weighted
Weighted
Weighted
average
average
average
ex price
ex price
ex price
Number
$
Number
$
Number
$
5,150,000
0.742
6,500,000
0.497
5,125,000
0.309
2,762,500
1.079
900,000
0.946
2,000,000
0.946
(625,000
)
0.714
(2,250,000
)
0.116
(625,000
)
0.396
7,287,500
0.872
5,150,000
0.742
6,500,000
0.497
2006
2005
2004
Weighted
Weighted
Weighted
average
average
average
Number of
ex price
Number of
ex price
Number of
ex price
shares
$
shares
$
shares
$
5,150,000
0.742
6,500,000
0.497
5,125,000
0.309
2,762,500
1.079
900,000
0.946
2,000,000
0.946
(2,000,000
)
0.492
(625,000
)
0.714
(2,250,000
)
0.116
(625,000
)
0.396
5,287,500
1.016
5,150,000
0.742
6,500,000
0.497
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15
Retirement
plans
16
Income
taxes
2006
2005
2004
$000
$000
$000
115,124
(52,550
)
12,058
8,074
22,431
19,852
123,198
(30,119
)
31,910
(25
)
4,737
1,568
(541
)
2,158
5,205
(566
)
6,895
6,773
2006
2005
2004
$000
$000
$000
(816
)
7,821
4,824
76
57
1,426
174
(983
)
523
(566
)
6,895
6,773
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16
Income
taxes
(Continued)
2006
2005
$000
$000
34,438
16,119
(22,273
)
(24,718
)
7,054
22,002
1,236
922
20,455
14,325
(3,285
)
(738
)
(2,466
)
(5,751
)
(738
)
14,704
13,587
17
Other
comprehensive income
Tax expense
Before tax
(benefit)
Net of tax
$000
$000
$000
(171
)
(171
)
(241
)
(241
)
(412
)
(412
)
Tax expense
Before tax
(benefit)
Net of tax
$000
$000
$000
731
731
51
51
782
782
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17
Other
comprehensive
income
(Continued)
Tax expense
Before tax
(benefit)
Net of tax
$000
$000
$000
(1,072
)
(1,072
)
313
313
(759
)
(759
)
18
Statutory
financial data
2006
2005
$000
$000
121,743
23,851
121,743
23,851
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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.
Binder
An agreement executed by an agent or insurer (usually the
latter) putting insurance into force before the contract has
been written.
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,
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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.
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
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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
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.
Lineslip
An agreement for insurance or reinsurance made between
underwriters and a broker whereby an
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Underwriter delegates underwriting authority to the leading
underwriter of the lineslip.
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.
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
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(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.
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
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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.
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
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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.
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
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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 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.
War, political risk and political violence
War and political violence insurance generally covers physical
loss to property or goods caused by war, terrorism or civil
unrest. Political risk insurance generally covers such risks as
expropriation of assets in emerging market countries, contract
frustration, kidnap and ransom risks to companies or families,
and malicious or accidental product tampering.
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Goldman,
Sachs & Co.
Merrill
Lynch & Co.
Deutsche
Bank Securities
JPMorgan
UBS
Investment Bank
Wachovia
Securities
Cochran
Caronia Waller
Dowling
& Partners Securities, LLC
Keefe,
Bruyette & Woods
ABN AMRO
Rothschild LLC
Scotia
Capital
Calyon
Securities (USA) Inc.
Comerica
Securities
HSBC
ING
Financial Markets
Table of Contents
$
28,835
150,000
15,000
5,000
600,000
950,000
550,000
15,000
20,000
$
2,333,835
II-1
Table of Contents
II-2
Table of Contents
Exhibit
1
.1
Form of Purchase Agreement
3
.1
Memorandum of Association dated
October 10, 2005**
3
.2
Amended and Restated Bye-laws
4
.1
Specimen Common Share Certificate*
4
.2
Certificate of Deposit of
Memorandum of Increase of Share Capital dated October 28,
2005**
5
.1
Opinion of Conyers
Dill & Pearman*
8
.1
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
Five-Year Secured Letter of Credit
Facility Agreement**
10
.6
Three-Year Unsecured Letter of
Credit Facility Agreement**
10
.7
[Reserved]
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**
10
.30
Share Sale Agreement between
Validus Holdings, Ltd. and the Shareholders of Talbot
Holdings Ltd.
10
.31
Agreement to Provide Information
between Validus Holdings, Ltd. and Talbot Holdings Ltd.**
10
.32
8.480% Junior Subordinated
Deferrable Debentures Indenture as of June 29, 2007
II-3
Table of Contents
Exhibit
10
.33
Form of Backstop Subscription
Agreement between Validus Holdings, Ltd. and our Major Investors
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
23
.4
Consent of KPMG Audit Plc
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)
July 5, 2007
Deputy Chairman and President
July 5, 2007
Chief Financial Officer and
Executive Vice President (Principal Financial Officer and
Principal Accounting Officer)
July 5, 2007
Director
July 5, 2007
Director
July 5, 2007
Director
July 5, 2007
Director
July 5, 2007
Director
July 5, 2007
Director
July 5, 2007
Director
July 5, 2007
II-5
Table of Contents
Director
July 5, 2007
Director
July 5, 2007
II-6
Table of Contents
Exhibit
1
.1
Form of Purchase Agreement
3
.1
Memorandum of Association dated
October 10, 2005**
3
.2
Amended and Restated Bye-laws
4
.1
Specimen Common Share Certificate*
4
.2
Certificate of Deposit of
Memorandum of Increase of Share Capital dated October 28,
2005**
5
.1
Opinion of Conyers
Dill & Pearman*
8
.1
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
Five-Year Secured Letter of Credit
Facility Agreement**
10
.6
Three-Year Unsecured Letter of
Credit Facility Agreement**
10
.7
[Reserved]
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**
10
.30
Share Sale Agreement between
Validus Holdings, Ltd. and the Shareholders of Talbot
Holdings Ltd.
10
.31
Agreement to Provide Information
between Validus Holdings, Ltd. and Talbot Holdings Ltd.**
Table of Contents
Exhibit
10
.32
8.480% Junior Subordinated
Deferrable Debentures Indenture as of June 29, 2007.
10
.33
Form of Backstop Subscription
Agreement between Validus Holdings, Ltd. and our Major Investors
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
23
.4
Consent of KPMG Audit Plc
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 1.1
VALIDUS HOLDINGS, LTD.
15,660,963 Common Shares
PURCHASE AGREEMENT
Dated: July , 2007
TABLE OF CONTENTS
PAGE SECTION 1. Representations and Warranties ..................................................................... 2 (a) Representations and Warranties by the Company ...................................................... 2 (b) Representations, Warranties and Covenants by the Selling Shareholders .............................. 10 SECTION 2. Sale and Delivery to Underwriters; Closing ......................................................... 13 SECTION 3. Covenants of the Company ........................................................................... 15 SECTION 4. Free Writing Prospectus ............................................................................ 19 SECTION 5. Payment of Expenses ................................................................................ 20 (a) Expenses ........................................................................................... 20 (b) Expenses of Selling Shareholders ................................................................... 20 (c) Allocation of Expenses ............................................................................. 21 SECTION 6. Conditions of Underwriters' Obligations ............................................................ 21 SECTION 7. Indemnification and Contribution ................................................................... 24 (a) Indemnification of Underwriters .................................................................... 24 (b) Indemnification of Company, Directors and Officers and Selling Shareholders ........................ 26 (c) Actions against Parties; Notification .............................................................. 26 (e) Control Persons .................................................................................... 28 |
SECTION 8. Representations, Warranties and Agreements to Survive Delivery ..................................... 28 SECTION 9. Termination of Agreement ........................................................................... 28 SECTION 10. Default by One or More of the Underwriters ......................................................... 29 SECTION 11. Default by Selling Shareholders .................................................................... 29 SECTION 12. Notices ............................................................................................ 30 SECTION 13. Parties ............................................................................................ 30 SECTION 14. GOVERNING LAW; TIME APPOINTMENT OF AGENT FOR SERVICE ............................................... 30 SECTION 15. Waiver of Immunity ................................................................................. 31 SECTION 16. Judgment Currency .................................................................................. 31 SECTION 17. Miscellaneous ...................................................................................... 31 SECTION 18. Effect of Headings ................................................................................. 32 SCHEDULES Schedule I -- List of Underwriters ........................................................................... Sch I-1 Schedule II -- List of Selling Shareholders .................................................................. Sch II-1 Schedule III -- Issuer Free Writing Prospectuses ............................................................. Sch III-1 Schedule IV -- List of Subsidiaries of the Company ........................................................... Sch IV-1 Schedule V -- List of Persons Subject to Lock-up ............................................................. Sch V-1 EXHIBITS Exhibit A -- Form of Lock-up Agreement ....................................................................... A-1 Exhibit B -- Form of Opinion of Company's Outside Counsel .................................................... B-1 Exhibit C -- Form of Opinion of Company's Bermuda Counsel .................................................... C-1 Exhibit D -- Form of Opinion of Counsel to Selling Shareholders .............................................. D-1 Exhibit E -- Form of Secretary's Certificate ................................................................. E-1 |
VALIDUS HOLDINGS, LTD.
(a Bermuda holding company)
15,660,963 Common Shares
(Par Value $0.175 Per Share)
PURCHASE AGREEMENT
July , 2007
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
as Representatives of the several Underwriters
named in Schedule I hereto
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
and
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Validus Holdings, Ltd., an exempted company incorporated in Bermuda as a holding company (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the underwriters named in Schedule I hereto (collectively, the "Underwriters," which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith ("Merrill Lynch") are acting as lead representatives (the "Lead Representatives"), 13,415,501 common shares, par value $0.175 per share, of the Company ("Common Shares"), and certain shareholders of the Company named in Schedule II hereto (collectively, the "Selling Shareholders," and each, a "Selling Shareholder") propose, subject to the terms and conditions stated herein, to sell to the Underwriters the number of Common Shares set forth in said Schedule II; furthermore, at the election of the Underwriters, the Company proposes to issue and sell to the Underwriters all or any part of 1,512,325 additional Common Shares (the "Company Optional Securities) and the Selling Shareholders propose to sell to the Underwriters all or any part of 836,819 additional Common Shares (the "Selling Shareholders' Optional Securities" and together with the Company Optional Securities, the "Optional Securities"), in each case to cover over-allotments, if any, pursuant to Section 2(b) hereof. The aforesaid 13,415,501 Common Shares to be issued and sold by the Company and purchased by the Underwriters (the "Company Firm Securities"), the aforesaid 2,245,462 Common Shares set forth in Schedule II to be sold by the Selling Shareholders and purchased by the Underwriters (the "Selling Shareholder Firm
Securities," and together with the Company Firm Securities, the "Firm Securities") and all or any part of the aforesaid aggregate 2,349,144 Optional Securities are hereinafter called, collectively, the "Securities."
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof and as of each Time of Delivery referred to in Section 2(d) hereof, and agrees with each Underwriter, as follows:
(i) Compliance with Registration Requirements. (A) A registration statement on Form S-1 (File No. 333-139989) (the "Initial Registration Statement") in respect of the Securities has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to the Lead Representatives, and, excluding exhibits thereto, to the Lead Representatives for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "1933 Act"), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the 1933 Act is hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the 1933 Act in accordance with Section 3(a) hereof and deemed by virtue of Rule 430A under the 1933 Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the "Registration Statement"; the Preliminary Prospectus relating to the Securities that was included in the Registration Statement immediately prior to the Applicable Time (as defined below) is hereinafter called the "Pricing Prospectus"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the 1933 Act, is hereinafter called the "Prospectus"; and any "issuer free writing prospectus" as defined in Rule 433 under the 1933 Act relating to the Securities is hereinafter called an "Issuer Free Writing Prospectus");
(B) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the 1933 Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Lead Representatives expressly for use therein;
(C) For the purposes of this Agreement, the "Applicable Time" is ___:___ __P.M. (New York City time) on the date of this Agreement. The Pricing Prospectus, when considered together with the price to the public and the number of Securities sold, each as set forth on the cover page of the Prospectus, as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus listed on Schedule III hereto does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements or omissions made in an Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Lead Representatives expressly for use therein; and
(D) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the 1933 Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Lead Representatives expressly for use therein;
(ii) Independent Accountants of the Company. PricewaterhouseCoopers, who have certified the consolidated financial statements and supporting schedules of the Company that are included in the Registration Statement, Pricing Prospectus and the Prospectus, is an independent registered public accounting firm as required by the 1933 Act and the rules and regulations of the Commission thereunder.
(iii) Independent Accountants of Talbot. KPMG LLP, who have certified the consolidated financial statements and supporting schedules of Talbot Holdings Ltd., a wholly
owned subsidiary of the Company, organized under the laws of Bermuda ("Talbot" and together with its subsidiaries, the "Talbot Group"), that are included in the Registration Statement, Pricing Prospectus and the Prospectus, is, to the best knowledge of the Company after due inquiry, an independent registered public accounting firm as required by the 1933 Act and the rules and regulations of the Commission thereunder.
(iv) Financial Statements. (a) The consolidated financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus, together with the related schedules and notes, present fairly, in all material respects, the financial position of the Company and its subsidiaries (provided, that this representation and warranty in respect of the Talbot Group extends only to the best knowledge of the Company after due inquiry) at the dates indicated and the statement of operations, shareholders' equity and cash flows of the Company and its subsidiaries for the periods specified; said financial statements have been prepared in conformity with United States generally accepted accounting principles ("U.S. GAAP") applied on a consistent basis throughout the periods involved. The financial statement schedules, if any, included in the Registration Statement, the Pricing Prospectus and the Prospectus present fairly, in all material respects, in accordance with U.S. GAAP, the information required to be stated therein. The selected financial data and the summary financial information included in the Registration Statement, the Pricing Prospectus and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent in all material respects with that of the audited financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus, as applicable.
(b) The pro forma financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus, together with the related notes, present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions referred to therein.
(v) Good Standing of the Company. The Company has been duly incorporated and is validly existing as an exempted company in good standing under the laws of Bermuda and has the necessary corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Pricing Prospectus and the Prospectus and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect" is defined as a material adverse change or any development or event that could reasonably be expected to result in a prospective material adverse change in the financial condition, results of operations or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business.
(vi) Good Standing of Subsidiaries. Each of the subsidiaries of the Company listed on Schedule IV hereto has been duly incorporated or organized and is validly existing as a company or corporation in good standing under the laws of the jurisdiction of its incorporation or
organization and has the necessary corporate power to own, lease and operate its properties and to conduct its business as described in the Pricing Prospectus and the Prospectus and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Registration Statement, the Pricing Prospectus or the Prospectus, all of the issued and outstanding share capital or capital stock of each such subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity interest; none of the outstanding shares of share capital or capital stock of any subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary.
(vii) Capitalization. The Company has an authorized capitalization as set forth in the Pricing Prospectus and Prospectus and all of the issued shares of capital stock of the Company (A) have been duly authorized and validly issued, (B) are fully paid and non-assessable, (C) were not issued in violation of the preemptive or similar rights of any securityholder of the Company or any subsidiary and (D) conform to the description thereof contained in the Pricing Prospectus and the Prospectus.
(viii) Authorization and Description of Securities. The unissued Securities to be issued and sold by the Company hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Securities contained in the Pricing Prospectus and the Prospectus; the shareholders of the Company have no preemptive or similar rights with respect to the unissued Securities to be issued and sold by the Company hereunder and no shareholder consents are required in connection with the Company's issuance and sale of such Securities.
(ix) Authorization and Execution of Agreement. This Agreement has been duly authorized, executed and delivered by the Company.
(x) Certain Information. The statements set forth in the Pricing Prospectus and the Prospectus under the captions "Description of Share Capital" and "Certain Relationships and Related Party Transactions", insofar as they purport to constitute a summary of the terms of the Securities and the other documents described therein, and the statements set forth in the Pricing Prospectus and the Prospectus under the captions "Certain Tax Considerations", "Business--Regulation", "Acquisition of Talbot--The Lloyd's Market and the London Market", "--Share Sale Agreement", and "Underwriting" insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects.
(xi) Absence of Defaults and Conflicts. Neither the Company nor any of its subsidiaries is (i) in violation of its charter, memorandum of association, bye-laws, by-laws or similar incorporation or organizational documents or (ii) in violation or default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments"), except in the case of (ii), for such violations and defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in this Agreement and in the Registration Statement, and compliance by the Company with its obligations under this Agreement, do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or result in a breach of any of the terms and provisions of, or constitute a default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments, nor will such action result in any violation of the provisions of the charter, memorandum of association, bye-laws, by-laws or similar organizational documents of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations, except in each case (other than with respect to such charter, memorandum of association, bye-laws, by-laws or similar organizational documents of the Company) for such conflicts, violations, breaches or defaults which would not result in a Material Adverse Effect. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness that is material to the operations or financial results of the Company (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary.
(xii) Financial Assistance. On the date hereof and upon the issuance of the Securities, the Company is and will be in compliance with Section 39 and/or entitled to one or more of the exclusions therefrom set forth in Section 39A of the Companies Act 1981 of Bermuda.
(xiii) Absence of Proceedings. Other than as set forth in the Pricing Prospectus and the Prospectus prior to the date hereof, or as encountered in the ordinary course of business in the Company's activities, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against the Company or any subsidiary or the properties or assets thereof, which would reasonably be expected to result in a Material Adverse Effect, or which would reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder.
(xiv) Accuracy of Exhibits. There are no contracts or documents which are required to be filed as exhibits to the Registration Statement, the Pricing Prospectus or any Issuer Free Writing Prospectus which have not been so filed as required.
(xv) Title to Intellectual Property. Other than as set forth in the Pricing Prospectus and the Prospectus, the Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them except where the failure to own or possess, or to be able to acquire such Intellectual Property, would not have a Material Adverse Effect, and, other than as set forth in the Pricing Prospectus and the Prospectus, neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, exemption, qualification or decree of, any court or governmental authority or agency or any sub-division thereof is required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities under this Agreement or the consummation of the transactions contemplated by this Agreement, except (i) such as have been already obtained or as may be required under the 1933 Act or the rules and regulations of the Commission thereunder and state securities or blue sky laws, (ii) such as have been obtained from the Bermuda Monetary Authority and (iii) [the Pricing Prospectus and] the Prospectus will be filed at the Registrar of Companies in Bermuda pursuant to the laws of Bermuda.
(xvii) Licenses and Permits. Other than as set forth in the Pricing Prospectus and the Prospectus, each of the Company and its subsidiaries possesses all consents, authorizations, approvals, orders, licenses, certificates, or permits issued by any regulatory agencies or bodies (collectively, "Permits") which are necessary to conduct the business now conducted by it as described in the Pricing Prospectus and the Prospectus, except where the failure to possess such Permits, individually or in the aggregate, would not have a Material Adverse Effect; all of such Permits are valid and in full force and effect, except where the invalidity of such Permits or the failure to be in full force and effect, individually or in the aggregate, would not have a Material Adverse Effect. There is no pending, or to the Company's knowledge, threatened action, suit, proceeding or investigation against or involving the Company or its subsidiaries (and the Company knows of no reasonable basis for any such action, suit, proceeding or investigation) that individually or in the aggregate would reasonably be expected to lead to the revocation, modification, termination, suspension or any other impairment of the rights of the holder of any such Permit which revocation, modification, termination, suspension or other impairment would have a Material Adverse Effect.
(xviii) Compliance with Applicable Laws. Other than as set forth in the Pricing Prospectus and the Prospectus, neither the Company nor any of its subsidiaries is in violation or default of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any such subsidiary or any of its properties, as applicable, except for such violations or defaults which, individually or in the aggregate, would not have a Material Adverse Effect.
(xix) No Material Adverse Effect. Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Pricing Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus, and since the date as of which information is given in the Pricing Prospectus, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity, results of operations or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, otherwise than as set forth or contemplated in the Pricing Prospectus.
(xx) Stabilization. Neither the Company nor any of its affiliates (including any subsidiary) has taken, nor will the Company or any of its affiliates take, directly or indirectly, any action which is designed to or which has constituted or which would be expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Securities in violation of the Exchange Act of 1934, as amended (the "1934 Act").
(xxi) Tax Liabilities and Reserves. Other than as set forth in the Pricing Prospectus and the Prospectus, any tax returns required to be filed by the Company or any of its subsidiaries in any jurisdiction have been filed and any taxes, including any withholding taxes, excise taxes, penalties and interest, assessments and fees and other charges due or claimed to be due from such entities have been paid, other than any of those being contested in good faith and for which adequate reserves have been provided or any of those currently payable without penalty or interest, except to the extent that the failure to so file or pay would not result in a Material Adverse Effect; provided, that this representation and warranty in respect of the Talbot Group, extends only to the best knowledge of the Company after due inquiry. Other than as set forth in the Pricing Prospectus and the Prospectus, to the knowledge of the Company and its subsidiaries, there is no material proposed tax deficiency, assessment, charge or levy against the Company or any of its subsidiaries, as to which a reserve would be required to be established under U.S. GAAP, that has not been so reserved or that should be disclosed in the Registration Statement that has not been so disclosed, except for any such deficiency, assessment, charge or levy which, individually or in the aggregate, would not have a Material Adverse Effect.
(xxii) Accounting Controls. The Company and each of its subsidiaries maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its system of internal control over financial reporting; and since the date of the latest audited financial statements included in the Pricing Prospectus, there has been no change in the Company's system of internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's system of internal control over financial reporting.
(xxiii) Disclosure Controls. The Company and each of its subsidiaries maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that comply with the requirements of the 1934 Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company's principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective.
(xxiv) Investment Company Act. The Company is not and, after giving effect to the offer and sale of the Securities and the application of the proceeds thereof, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended (the "Act").
(xxv) Passive Foreign Investment Company. The Company does not believe it is a "passive foreign investment company" (a "PFIC") as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder, for 2006, and does not expect to be classified as a PFIC in the foreseeable future.
(xxvi) Rule 405. At the time of filing the Initial Registration Statement, the Company was not and is not an "ineligible issuer" as defined in Rule 405 under the 1933 Act.
(xxvii) Stamp Duty, Excise Tax, Etc. No stamp or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable by or on behalf of the Underwriters to Bermuda or any political subdivision or taxing authority thereof or therein in connection with (A) the issuance, sale and delivery by the Company to or for the respective accounts of the Underwriters of the Securities or (B) the sale or delivery outside Bermuda by the Underwriters of the Securities to the initial purchasers thereof, other than as described in the opinion of Conyers Dill & Pearman delivered pursuant to Section 6(c) of this Agreement.
(xxviii) Currency Exchange Control. Other than as set forth in the Pricing Prospectus and the Prospectus, there are no currency exchange control laws or withholding taxes, in each case of Bermuda, that would be applicable to the payment of dividends on the Securities by the Company (other than as may apply to residents of Bermuda for Bermuda exchange control purposes).
(xxix) Registration Rights. Except as disclosed in the Pricing Prospectus or the Prospectus, there are no persons with registration rights or other similar rights to have any securities registered pursuant to the Registration Statement or otherwise registered by the Company under the 1933 Act.
(xxx) No Ratings Downgrade. Except as disclosed in the Pricing Prospectus and the Prospectus, the Company has no knowledge of any threatened or pending downgrade of any of its or its subsidiaries' financial strength rating by A.M. Best Company Inc. ("A.M. Best"), which currently has publicly released a financial strength rating of A- (Excellent).
(xxxi) Listing Approval. The Securities have been approved for listing on the New York Stock Exchange (the "Exchange").
(b) Representations, Warranties and Covenants by the Selling Shareholders. Each Selling Shareholder represents and warrants, severally and not jointly and solely with respect to itself, to each Underwriter as of the date hereof and as of each Time of Delivery referred to in Section 2(d) hereof, and agrees with each Underwriter, as follows:
(i) Accurate Disclosure. To (and only to) the extent that any statements or omissions made in the Registration Statement, the Prospectus, the Pricing Prospectus, any Preliminary Prospectus or any Issuer Free Writing Prospectus, or any further amendments or supplements thereto are made in reliance upon and in conformity with information furnished to the Company by and relating to such Selling Shareholder expressly for use therein: (i) the Registration Statement did not, when it became effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) the Prospectus, the Pricing Prospectus and such Preliminary Prospectus, and any further amendments or supplements thereto, as of their respective dates, did not and will not, as the case may be, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (iii) such Issuer Free Writing Prospectus listed on Schedule III hereto does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and such Selling Shareholder is not prompted to sell the Securities to be sold by such Selling Shareholder hereunder by any material information specifically concerning the Company which is not set forth in the Registration Statement, the Pricing Prospectus or the Prospectus or any Issuer Free Writing Prospectus filed with the Commission, and any further amendments or supplements thereto.
(ii) Authorization of this Agreement. This Agreement, the Custody Agreement signed by such Selling Shareholder and [ ], as custodian (the "Custodian"), relating to the deposit of the Securities to be sold by such Selling Shareholder (the "Custody Agreement") and the irrevocable power of attorney appointing certain individuals as such Selling Shareholder's attorneys in fact to the extent set forth therein relating to the transactions contemplated hereby and by the Registration Statement (the "Power of Attorney") have each been duly authorized, executed and delivered by or on behalf of such Selling Shareholder.
(iii) Consents. All consents, approvals, authorizations and orders necessary for the execution and delivery by such Selling Shareholder of this Agreement, the Custody Agreement and the Power of Attorney, and for the sale and delivery of the Securities to be sold by such Selling Shareholder hereunder, have been obtained; and such Selling Shareholder has full right, power and authority to enter into this Agreement, the Custody Agreement and the Power of Attorney and to sell, assign, transfer and deliver the Securities to be sold by such Selling Shareholder hereunder.
(iv) Noncontravention. The sale of such Selling Shareholder Firm Securities and the Selling Shareholders' Optional Securities to be sold by such Selling Shareholder
hereunder, the execution of this Agreement, the Custody Agreement and the Power of Attorney and the compliance by such Selling Shareholder with all of the provisions hereof and the consummation by such Selling Shareholder of the transactions contemplated herein will not conflict with or result in a material breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Selling Shareholder is a party or by which such Selling Shareholder is bound or to which any of the property or assets of such Selling Shareholder is subject, nor will such action result in any violation of the provisions of the Memorandum of Association, Bye-laws or similar organizational documents of such Selling Shareholder or any statute or any order, rule or regulation of any governmental agency having jurisdiction over such Selling Shareholder or the property of such Selling Shareholder.
(v) Valid Title. Such Selling Shareholder has, and immediately prior to each Time of Delivery, such Selling Shareholder will have, good and valid title to the Securities to be sold by it hereunder, free and clear of all liens, encumbrances, equities or claims; and, upon delivery of such Securities and payment therefor pursuant hereto, good and valid title to such Securities, free and clear of all liens, encumbrances, equities or claims, will pass to the several Underwriters.
(vi) Lock-up Period. Except as otherwise indicated in the lock-up
agreement in the Form of Exhibit A hereto, such Selling Shareholder agrees not
to offer, sell, contract to sell, pledge, grant any option to purchase, make any
short sale or otherwise dispose of the Common Shares or any securities of the
Company substantially similar to the Common Shares, including but not limited to
any options or warrants to purchase any securities or any securities convertible
into, exchangeable for or that represent the right to receive any Common Shares
or any securities of the Company substantially similar to the Common Shares,
whether now owned or hereinafter acquired, during the period from the date of
the Prospectus continuing through the date that is 180 days after the date of
the Prospectus (the initial "Lock-Up Period"), except with the prior written
consent of the Lead Representatives; provided, however, that the initial Lock-Up
Period will be automatically extended if: (1) during the last 17 days of the
initial Lock-Up Period, the Company issues an earnings release or announces
material news or a material event or (2) prior to the expiration of the initial
Lock-Up Period, the Company announces that it will release earnings results
during the 15-day period following the last day of the initial Lock-Up Period,
then in each case the Lock-Up Period will be automatically extended until the
expiration of the 18-day period beginning on the date of earnings release or the
announcement of the material news or material event, as applicable, unless each
Lead Representative each waives, in writing, such extension; such Selling
Shareholder hereby acknowledges that the Company has agreed herein to provide
Selling Shareholders, among others, who execute and deliver lock-up agreements
substantially in the form of Exhibit A hereto ("Lock-Up Agreements") pursuant to
Section 12 hereof prior written notice of any such announcement giving rise to
an extension of the Lock-Up Period and agrees that any such notice properly
delivered will be deemed to have been given to, and received by, such Selling
Shareholder; such Selling Shareholder hereby further agrees that, prior to
engaging in any transaction or taking any other action that is subject to the
terms of this provision during the period from the date hereof to and including
the 34th day following the expiration of the initial Lock-Up Period, it will
give notice thereof to the Company and will not consummate such transaction or
take any such action unless it has received written
confirmation from the Company that the Lock-Up Period (as such may have been extended pursuant to the previous paragraph) has expired.
(vii) No Association with NASD. Other than as disclosed to the Lead Representatives in writing, neither such Selling Shareholder nor any of its affiliates directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, or is a person associated with (within the meaning of Article I (dd) of the By-laws of the National Association of Securities Dealers, Inc. (the "NASD")), any member firm of the NASD.
(viii) Stabilization. The Selling Shareholder has not taken and will not take, nor to the knowledge of such Selling Shareholder have any of its affiliates taken or will take, any action which is designed to or which has constituted or which would be expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Securities in violation of the 1934 Act.
(ix) Tax Equity and Fiscal Responsibility Act of 1982. In order to document the Underwriters' compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions herein contemplated, each of the Selling Shareholders that is not a "United States Person" as defined in Section 7701(a)(30) of the Code will deliver to the Lead Representatives prior to or at the First Time of Delivery (as defined in Section 2(d) hereof) a complete and accurate Internal Revenue Service ("IRS") Form W-8BEN, W-8EXP or W-8IMY(or applicable successor forms), and each of the Selling Shareholders that is a "United States Person" as defined in Section 7701(a)(30) of the Code will deliver to the Lead Representatives prior to or at the First Time of Delivery a complete and accurate IRS Form W-9 (or applicable successor form).
(x) Certificated Securities. To the extent the Securities are certificated, certificates in negotiable form representing all of the Securities to be sold by such Selling Shareholder hereunder have been, or will be at each Time of Delivery, duly and properly endorsed in blank for transfer, accompanied by all documents, including stock powers, duly and properly executed, that are necessary to validate the transfer of title thereto, to the Underwriters, free of any legend, restriction on transferability, proxy, lien or claim whatsoever.
(xi) Custody Agreement. To the extent the Securities are certificated, certificates in negotiable form have been placed in custody under the Custody Agreement, in the form heretofore furnished to, duly executed and delivered by such Selling Shareholder to the Custodian
(xii) Power of Attorneys. The Selling Shareholder has duly executed and delivered a Power of Attorney, in the form heretofore furnished to you, appointing Edward J. Noonan and Jeff Consolino, and each of them, as such Selling Shareholder's attorneys in fact (the "Attorneys in Fact") with authority to execute and deliver this Agreement on behalf of such Selling Shareholder, to determine the purchase price to be paid by the Underwriters to the Selling Shareholders as provided in Section 2 hereof, to authorize the delivery of the Securities to be sold by such Selling Shareholder hereunder and otherwise to act on behalf of such Selling
Shareholder in connection with the transactions contemplated by this Agreement and the Custody Agreement; and
(xiii) Irrevocability of Obligations. The Securities to be sold by such Selling Shareholder hereunder are subject to the interests of the Underwriters hereunder; the arrangements made by such Selling Shareholder for such custody and the appointment by such Selling Shareholder of the Attorneys in Fact by the Power of Attorney are to that extent irrevocable; the obligations of the Selling Shareholders hereunder shall not be terminated by operation of law, whether by the death or incapacity of any individual Selling Shareholder or, in the case of an estate or trust, by the death or incapacity of any executor or trustee or the termination of such estate or trust, or in the case of a partnership or corporation, by the dissolution of such partnership or corporation, or by the occurrence of any other event; if any individual Selling Shareholder or any such executor or trustee should die or become incapacitated, or if any such estate or trust should be terminated, or if any such partnership or corporation should be dissolved, or if any other such event should occur, before the delivery of the Securities hereunder, the Securities shall be delivered by or on behalf of such Selling Shareholder in accordance with the terms and conditions of this Agreement and, to the extent the Securities are certificated, the Custody Agreement; and actions taken by the Attorneys in Fact pursuant to the Powers of Attorney shall be as valid as if such death, incapacity, termination, dissolution or other event had not occurred, regardless of whether or not the Custodian, the Attorneys in Fact, or any of them, shall have received notice of such death, incapacity, termination, dissolution or other event.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Subject to the terms and conditions herein, (i) (A) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $_______, the number of Firm Securities set forth opposite the name of such Underwriter in Schedule I hereto and, (B) in the event and to the extent that the Underwriters exercise the election to purchase Optional Securities as provided below, the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (i)(A) of this Section 2(a), that portion of the number of Company Optional Securities as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Company Optional Securities by a fraction, the numerator of which is the maximum number of Company Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Company Optional Securities that all of the Underwriters are entitled to purchase hereunder; (ii) (A) each Selling Shareholder agrees, severally and not jointly, to sell to each of the Underwriters and each of the Underwriters agrees, severally and not jointly, to purchase from such Selling Shareholder, at a purchase price per share of $______, the number of Firm Securities set forth opposite the name of such Underwriter in Schedule II hereto and (B) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Securities as provided below, each Selling Shareholder agrees, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from such Selling Shareholder, at the purchase price per share set forth in clause (ii)(A)
of this Section 2(a), that portion of the number of Selling Shareholders' Optional Securities as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Selling Shareholders' Optional Securities by a fraction, the numerator of which is the maximum number of Selling Shareholders' Optional Securities which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule II hereto and the denominator of which is the maximum number of Selling Shareholders' Optional Securities that all of the Underwriters are entitled to purchase hereunder.
(b) The Company hereby grants to the Underwriters the right to purchase at their election up to the number of Company Optional Securities set forth on Schedule I hereto, at the purchase price per share set forth in Section 2(a)(i)(A) hereof, for the sole purpose of covering sales of shares in excess of the number of Firm Securities, provided that the purchase price per Company Optional Security shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Securities but not payable on the Company Optional Securities. Any such election to purchase Company Optional Securities may be exercised only by written notice from you to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the number of Company Optional Securities to be purchased and the date on which such Company Optional Securities are to be delivered, as determined by you but in no event earlier than the First Time of Delivery or, unless you and the Company otherwise agree in writing, earlier than two or later than ten Business Days (as defined below) after the date of such notice.
(c) Each Selling Shareholder hereby grants to the Underwriters the right to purchase at their election up to the number of Selling Shareholders' Optional Securities set forth opposite the name of such Selling Shareholder on Schedule II hereto, at the purchase price per share set forth in Section 2(a)(ii)(A) hereof, for the sole purpose of covering sales of shares in excess of the number of Firm Securities, provided that the purchase price per Selling Shareholders' Optional Security shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Securities but not payable on the Optional Securities. Any such election to purchase Selling Shareholders' Optional Securities may be exercised only by written notice from you to the Selling Shareholders, given within a period of 30 calendar days after the date of this Agreement, setting forth the number of Selling Shareholders' Optional Securities to be purchased and the date on which such Selling Shareholders' Optional Securities are to be delivered, as determined by you but in no event earlier than the First Time of Delivery or, unless you, the Company and such Selling Shareholder otherwise agree in writing, earlier than two or later than ten Business Days after the date of such notice.
(d) Upon the authorization by you of the release of the Firm Securities, the several Underwriters propose to offer the Firm Securities for sale upon the terms and conditions set forth in the Prospectus.
(e) (i) The Securities to be purchased by each Underwriter hereunder in definitive form, and in such authorized denominations and registered in such names as the Lead Representatives may request upon at least forty-eight hours' prior notice to the Company shall be delivered by or on behalf of the Company and the Selling Shareholders to the Lead
Representatives, through the facilities of the Depository Trust Company ("DTC"), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company to the Lead Representatives at least forty-eight hours in advance. The Company and the Selling Shareholders will cause the certificates representing the Securities, if any, to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on ______, 2007 or such other time and date as the Lead Representatives and the Company may agree upon in writing. The time and date of such delivery and payment shall be, with respect to the Firm Securities, 9:30 a.m., New York City time, on ______, 2007 or such other time and date as the Lead Representatives and the Company may agree upon in writing, and, with respect to the Optional Securities, 9:30 a.m., New York City time, on the date specified by the Lead Representatives in the written notice given by the Lead Representatives to the Underwriters' election to purchase such Optional Securities, or such other time and date as the Lead Representatives and the Company may agree upon in writing. Such time and date for delivery of the Firm Securities is herein called the "First Time of Delivery", such time and date for delivery of the Optional Securities, if not the First Time of Delivery, is herein called the "Second Time of Delivery," and each such time and date for delivery is herein called a "Time of Delivery."
(ii) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 6 hereof, including the cross receipt for the Securities and any additional documents requested by the Underwriters pursuant to Section 3 hereof, will be delivered at the offices of Cahill Gordon & Reindel LLP, Eighty Pine Street, New York, New York, 10005-1702 (the "Closing Location"), and the Securities will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at _____ p.m., New York City time, on the Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Agreement, "Business Day" shall mean each day other than a Saturday, Sunday or other day on which both the Commission and banks in New York City are closed for business.
(f) Qualified Independent Underwriter. The Company hereby confirms its engagement of Wachovia Capital Markets, LLC as, and Wachovia Capital Markets, LLC hereby confirms its agreement with the Company to render services as, a "qualified independent underwriter" within the meaning of Rule 2720(b)(15) of the NASD with respect to the offering and sale of the Securities. Wachovia Capital Markets, LLC, in its capacity as qualified independent underwriter and not otherwise, is referred to herein as the "QIU." The QIU shall receive no compensation for its services hereunder.
SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. To prepare the Prospectus in a form approved by the Lead Representatives and to file such Prospectus pursuant to Rule 424(b) under the 1933 Act not later than the
Commission's close of business on the second Business Day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the 1933 Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery which shall be disapproved by the Lead Representatives promptly after reasonable notice thereof; to advise the Lead Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish the Lead Representatives with copies thereof; to file promptly any material required to be filed by the Company with the Commission pursuant to Rule 433 under the 1933 Act within the time required by such Rule; to advise the Lead Representatives, promptly after it receives notice thereof, of the issuance by the Commission prior to the completion of the distribution of the Securities contemplated by this Agreement (the date of which shall be confirmed to the Company by the Lead Representatives) of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Securities, of any notice of objection of the Commission to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the 1933 Act, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission prior to the completion of the distribution of the Securities contemplated by this Agreement for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order; and in the event of the issuance of any such notice, promptly to amend the Registration Statement in such manner as may be required to permit offers and sales of the Securities.
(b) Qualification of Common Shares. Promptly from time to time to take such action as the Lead Representatives may reasonably request to qualify the Common Shares for offering and sale under the securities laws of such jurisdictions as the Lead Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction.
(c) Delivery of Prospectus. Prior to 3:00 P.M., New York City time, on the Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as each Lead Representative may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the 1933 Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Securities and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit
to
state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the 1933 Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus or to file under the 1934 Act any document incorporated by reference in the Prospectus in order to comply with the 1933 Act or the 1934 Act, to notify the Lead Representatives and upon their request to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as the Lead Representatives may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the 1933 Act) in connection with sales of any of the Securities at any time nine months or more after the time of issue of the Prospectus, upon the request of any Underwriter but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as such Underwriter may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the 1933 Act; the Lead Representatives will inform the Company when the Underwriters' obligation to deliver a prospectus has expired.
(d) Blue Sky Qualifications. The Company will use its reasonable
best efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of
such states and other jurisdictions (domestic or foreign) as the Lead
Representatives may reasonably designate and to maintain such
qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign company or corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself
to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the Securities
have been so qualified, the Company will file such statements and reports
as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(e) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its security holders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the 1933 Act), an earnings statement of the Company (which need not be audited) complying with Section 11(a) of the 1933 Act and the rules and regulations of the Commission thereunder (including at the option of the Company, Rule 158).
(f) Reporting Requirements. To furnish to its shareholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its shareholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; provided, however, that the foregoing requirements may be satisfied by making such information available through the Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
Furthermore, from the effective date of the Registration Statement until the earlier of (x) the three year anniversary of the Closing Date and (y) the date upon which the Company ceases to have its common shares registered under the 1934 Act, the Company will furnish to you copies of all reports or other communications (financial or other) furnished to shareholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its shareholders generally or to the Commission); provided, however, that the Company shall not be required to provide documents (x) that are available through EDGAR or (y) the provision of which would require new public disclosure by the Company under Regulation FD.
(g) Lock-up Period. The Company will not offer, sell, contract to
sell, pledge, grant any option to purchase, make any short sale or
otherwise dispose of the Common Shares or any securities of the Company
substantially similar to the Common Shares, including but not limited to
any options or warrants to purchase any securities or any securities
convertible into, exchangeable for or that represent the right to receive
any Common Shares or any securities of the Company substantially similar
to the Common Shares, whether now owned or hereinafter acquired, during
the Lock-Up Period, (other than (i) as described in the Registration
Statement, (ii) the Common Shares to be sold by the Company hereunder,
(iii) the grant of awards pursuant to employee benefit plans or
arrangements existing on the date hereof and described in the Pricing
Prospectus and (iv) pursuant to the Backstop Subscription Agreement dated
July 5, 2007 to any shareholder holding Common Shares of the Company as of
such date, except in each case with the prior written consent of the Lead
Representatives; provided, however, that the initial Lock-Up Period will
be automatically extended if: (1) during the last 17 days of the initial
Lock-Up Period, the Company issues an earnings release or announces
material news or a material event or (2) prior to the expiration of the
initial Lock-Up Period, the Company announces that it will release
earnings results during the 15-day period following the last day of the
initial Lock-Up Period, then in each case the Lock-Up Period will be
automatically extended until the expiration of the 18-day period beginning
on the date of earnings release or the announcement of the material news
or material event, as applicable, unless each Lead Representative each
waives, in writing, such extension; the Company will provide each of the
Lead Representatives, the Selling Shareholders and the directors and
officers of the Company who execute and deliver
Lock-Up Agreements pursuant to Section 12 hereof prior written notice of any such announcement giving rise to an extension of the Lock-Up Period.
(h) Net Proceeds. To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Pricing Prospectus and Prospectus under the caption "Use of Proceeds."
(i) Company Logo. Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Company's official logo for use on the website operated by such Underwriter for the sole purpose of facilitating the on-line offering of the Securities (the "License"); provided, however, that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred.
(j) 462(b). If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the 1933 Act.
SECTION 4. Free Writing Prospectus.
(a) The Company and each of the Selling Shareholders represents and agrees that, without the prior consent of each Lead Representative, it has not made and will not make any offer relating to the Securities that would constitute a "free writing prospectus" as defined in Rule 405 under the 1933 Act; and each Underwriter represents and agrees that, without the prior consent of the Company and each Lead Representative, it has not made and will not make any offer relating to the Securities that would constitute a free writing prospectus; any such free writing prospectus, the use and content of which have been consented to by the Company and each Lead Representative is listed on Schedule III hereto.
(b) The Company has complied and will comply with the requirements of Rule 433 under the 1933 Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending; and the Company represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the 1933 Act to avoid a requirement to file with the Commission any electronic road show;
(c) The Company agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Company will give prompt notice thereof to each Lead Representative pursuant to Section 12 and, if requested by the Lead Representatives, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided, however, that
this Section 4(c) shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Lead Representatives expressly for use therein.
SECTION 5. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement, the Prospectus, the Pricing Prospectus, any Preliminary Prospectus and any Issuer Free Writing Prospectus, or any further amendments or supplements thereto (including financial statements and exhibits) as originally filed, (ii) the preparation, printing and delivery to the Underwriters of this Agreement and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, printing, issuance and delivery of the certificates for the Securities to the Underwriters, including any share or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (vii) the fees and expenses of any transfer agent or registrar for the Securities, (viii) the fees and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Securities, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants[, and a proportional share of the cost of any aircraft chartered in connection with the road show] (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the NASD of the terms of the sale of the Securities and (x) the fees and expenses relating to the engagement and service of the QIU (including reasonable fees and disbursements of counsel); provided, however, except as provided in this Section 5 and Sections 7 and 9 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Securities by them, and any advertising expenses connected with any offers they may make. All payments to be made by the Company under this Agreement shall be made without withholding or deduction for or on account of any present or future taxes, duties or governmental charges whatsoever unless the Company is compelled by law to deduct or withhold such taxes, duties or charges. In that event, the Company shall pay such additional amounts as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made.
(b) Expenses of Selling Shareholders. Except as provided in the next sentence and in Section 7, the Company (as between the Company and the Underwriters) will pay all expenses relating to the registration of the Securities of the Selling Shareholders sold hereunder. Each Selling Shareholder will pay or cause to be paid (i) the underwriting discounts and
commissions to be paid to the Underwriters with respect to the Securities to be sold by such Selling Shareholder, (ii) any stamp duties, capital duties and stock transfer taxes, if any, payable upon the sale of the Securities to be sold by such Selling Shareholder to the Underwriters and (iii) the fees and disbursements of any counsel retained by any of the Selling Shareholders in connection with the sale of the Securities of the Selling Shareholders sold hereunder. All payments to be made by the Selling Shareholders under this Agreement shall be made without withholding or deduction for or on account of any present or future taxes, duties or governmental charges whatsoever unless the Selling Shareholder is compelled by law to deduct or withhold such taxes, duties or charges. In that event, the Selling Shareholder shall pay such additional amounts as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made.
(c) Allocation of Expenses. The provisions of this Section 5 shall not supersede or otherwise affect any agreement between the Company and any Selling Shareholder with respect to the sharing of such costs and expenses.
SECTION 6. Conditions of Underwriters' Obligations. The obligations of the several Underwriters hereunder as to the Securities to be delivered at each Time of Delivery shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and each Selling Shareholder contained herein, are, at and as of each such Time of Delivery, true and correct, the condition that each of the Company and each Selling Shareholder shall have performed all of its obligations hereunder theretofore to be performed, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the 1933 Act within the applicable time period prescribed for such filing by the rules and regulations under the 1933 Act and in accordance with Section 3(a) hereof and any other material required to be filed by the Company pursuant to Rule 433 under the 1933 Act shall have been filed with the Commission within the applicable time periods prescribed for such filings by Rule 433; if the Company has elected to rely upon Rule 462(b) under the 1933 Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of the Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to the Lead Representatives' reasonable satisfaction.
(b) Opinion of Counsel for Company. At each Time of Delivery the Lead Representatives shall have received the written opinion, dated as of such Time of Delivery, of Cahill Gordon & Reindel LLP, outside counsel for the Company, in the form attached as Exhibit B hereto.
(c) Opinion of Bermuda Counsel for Company. At each Time of Delivery, the Lead Representatives shall have received the written opinion, dated as of such Time of Delivery, of Conyers Dill & Pearman, special Bermuda counsel for the Company, in the form attached as Exhibit C hereto.
(d) Opinion of Counsel for Selling Shareholders. At each Time of Delivery, the Lead Representatives shall have received the written opinion, dated as of such Time of Delivery, of counsel for each of the Selling Shareholders, in the form attached as Exhibit D hereto.
(e) Opinion of Counsel for Underwriters. At each Time of Delivery, the Lead Representatives shall have received the written opinion, dated as of such Time of Delivery, of Simpson Thacher & Bartlett LLP, counsel for the Underwriters, in form and substance reasonably satisfactory to the Lead Representatives, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters.
(f) Officers' Certificate. At each Time of Delivery, the Lead
Representatives shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company, dated as of such
Time of Delivery, to the effect that (i) the representations and
warranties in Section 1(a) hereof are true and correct with the same force
and effect as though expressly made at and as of such Time of Delivery,
(ii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to such
Time of Delivery and (iii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or, to the Company's
knowledge, threatened by the Commission.
(g) Secretary's Certificate. At each Time of Delivery, the Lead Representatives shall have received a certificate of the Secretary of the Company, dated as of such Time of Delivery, substantially in the form attached hereto as Exhibit E.
(h) Certificate of Selling Shareholders. At each Time of Delivery, the Lead Representatives shall have received a certificate of each Selling Shareholder (or of a duly authorized officer of the Selling Shareholder, where the Selling Shareholder is not an individual), dated as of such Time of Delivery, to the effect that (i) the representations and warranties of such Selling Shareholder contained in Section 1(b) hereof are true and correct in all respects with the same force and effect as though expressly made at and as of First Time of Delivery and (ii) such Selling Shareholder has complied with all agreements and all conditions on its part to be performed under this Agreement at or prior to such Time of Delivery.
(i) Accountant's Comfort Letter. On (i) the date of the Prospectus at a time prior to the execution of this Agreement, (ii) the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement but prior to the last Time of Delivery and (iii) at each Time of Delivery, each of PricewaterhouseCoopers and KPMG LLP, who have certified the consolidated financial
statements of the Company and the Talbot Group, respectively, that are included in the Pricing Prospectus and the Prospectus, as applicable, shall have furnished to the Lead Representatives a "comfort" letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to the Lead Representatives.
(j) No Objection. The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.
(k) Delivery of Prospectus. The Company shall have complied with the provisions of Section 3(c) hereof with respect to the furnishing of prospectuses on the Business Day next succeeding the date of this Agreement.
(l) Lock-up Agreements. At the date of this Agreement, the Lead Representatives shall have received Lock-Up Agreements signed by the persons listed on Schedule V hereto.
(m) No Suspension or Other Occurrences. At or after the
Applicable Time, there shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities generally on
the Exchange; (ii) a suspension or material limitation in trading in the
Company's securities on the Exchange; (iii) a general moratorium on
commercial banking activities in New York or Bermuda declared by the
relevant authority or a material disruption in commercial banking or
securities settlement or clearance services in the United States or any
other relevant jurisdiction; (iv) the outbreak or escalation of
hostilities involving the United States or Bermuda or the declaration by
the United States or Bermuda of a national emergency or war if the effect
of any such event specified in this clause (iv) in the judgment of the
Lead Representatives is so material and adverse as to make it impractical
or inadvisable to proceed with the public offering or the delivery of the
Securities being delivered at such Time of Delivery on the terms and in
the manner contemplated in the Prospectus; (v) a change or development
involving a prospective change in Bermuda taxation affecting the Company;
(vi) the imposition of exchange controls by the United States or Bermuda;
or (vii) the occurrence of any other calamity or crisis or any change in
financial, political or economic conditions in the United States or
currency exchange rates or controls in the United States or Bermuda or
elsewhere, if the effect of any such event specified in this clause in the
judgment of the Lead Representatives is so material and adverse as to make
it impractical or inadvisable to proceed with the public offering or the
delivery of the Securities being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus.
(n) No Material Adverse Effect. Neither the Company nor any of its subsidiaries shall have (i) sustained since the date of the latest audited financial statements included in the Pricing Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus; and, (ii) since the date as of which information is given in the Pricing Prospectus, there has not been any
change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change or any development or event that could reasonably be expected to result in a prospective material adverse change in the financial condition, results of operations or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, otherwise than as set forth or contemplated in the Pricing Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Lead Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus.
(o) No Downgrade. On or after the Applicable Time (i) no downgrading shall have occurred in the financial strength rating of the Company or any of its subsidiaries by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, financial strength rating of the Company or any of its subsidiaries.
(p) Listing. The Securities to be sold at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange.
SECTION 7. Indemnification and Contribution.
(a) Indemnification of Underwriters.
(i) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus or any "issuer information" filed or required to be filed pursuant to Rule 433 under the 1933 Act, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred, except that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all indemnified parties, except to the extent that local counsel, in addition to its regular counsel, is required in order to effectively defend against such action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer
Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Lead Representatives expressly for use therein.
(ii) Each Selling Shareholder will, severally and not jointly, indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred, except that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all indemnified parties, except to the extent that local counsel, in addition to its regular counsel, is required in order to effectively defend against such action or proceeding, but in each case only with reference to information relating to such Selling Shareholder furnished in writing by or on behalf of such Selling Shareholder expressly for use in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus (it being understood and agreed that the only such information furnished by any such Selling Shareholder consists of the information about such Selling Shareholder under the caption "Principal and Selling Shareholders" in the Prospectus (but not the percentage set forth therein)); provided, however, that with respect to its indemnification obligations hereunder no such Selling Shareholder shall be required to pay an amount in excess of the gross proceeds (before deducting expenses) received by such Selling Shareholder from the Securities sold by it hereunder.
(iii) The Company will indemnify and hold harmless Wachovia Capital Markets, LLC, in its capacity as QIU, against any losses, claims, damages or liabilities, joint or several, to which the QIU may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus or any "issuer information" filed or required to be filed pursuant to Rule 433 under the 1933 Act, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) any act or omission to act or any alleged act or omission to act by Wachovia Capital Markets, LLC as QIU in connection with any transaction contemplated by this Agreement or undertaken in preparing for the purchase, sale and delivery of the Securities; and will reimburse the QIU for any legal or other expenses reasonably incurred by the QIU in connection with investigating or defending any such action or claim as such expenses are incurred, except that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all indemnified parties, except to the extent that local counsel, in addition to its regular counsel, is required in order to effectively defend against such action or proceeding.
(b) Indemnification of Company, Directors and Officers and Selling Shareholders. Each Underwriter will indemnify and hold harmless the Company and each Selling Shareholder against any losses, claims, damages or liabilities to which the Company may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement, or alleged untrue statement or omission, or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Lead Representatives expressly for use therein; and will reimburse the Company and the Selling Shareholders for any legal or other expenses reasonably incurred by the Company and the Selling Shareholders in connection with investigating or defending any such action or claim as such expenses are incurred.
(c) Actions against Parties; Notification. Promptly after receipt by
an indemnified party under Section 7(a) or (b) of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under such clause, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such clause. In the case of parties
indemnified pursuant to Section 7(a)(i) and (ii), counsel to the indemnified
parties shall be selected by the Lead Representatives; in the case of parties
indemnified pursuant to Section 7(a)(iii), counsel to the indemnified parties
shall be selected by the QIU; and in the case of parties indemnified pursuant to
Section 7(b), counsel to the indemnified parties shall be selected by the
Company and the Selling Shareholders. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such clause for any legal or other
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation; provided, however, (i) if the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action, (ii) if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the reasonable judgment of such
indemnified party for the same counsel to represent both the indemnified party
and the Company, (iii) if both the indemnifying party and the indemnified party
are parties to the same action and one or more defenses may be available to the
indemnified party that would not also be available to the indemnifying party or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party, then such indemnified
party shall be entitled to retain its own counsel at the expense of the
indemnifying party. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Shareholders, on the one hand, and the
Underwriters or the QIU, on the other, from the offering of the Securities. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 7(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Shareholders, on the one hand,
and the Underwriters or the QIU, on the other, in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders, on the one hand, and the Underwriters and the QIU, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and each Selling
Shareholder, bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Shareholders, on the one
hand, or the Underwriters or the QIU, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the provisions of this Section 7, no
Selling Shareholder shall be required to pay an amount in excess of the net
proceeds (before deducting expenses) received by such Selling Shareholder from
the shares sold by it hereunder.
The Company, the Selling Shareholders, the Underwriters and the QIU
agree that it would not be just and equitable if contributions pursuant to this
Section 7(d) were determined by pro rata allocation (even if, in the case of the
Underwriters, the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), (i) no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) the aggregate amount that
each Selling Shareholder shall be required to contribute shall not exceed the
amount by which the net proceeds (before deducting expenses) received by such
Selling Shareholder from the sale of Securities pursuant to this Agreement after
deducting underwriting commissions and discounts exceeds the amount of any
damages which such Selling Shareholder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, each person, if any, who controls an Underwriter or the QIU, as
the case may be, within the meaning of the 1933 Act shall have the same rights
to contribution as such Underwriter or the QIU, as the case may be, and each
officer and director of the Company, and each person, if any, who controls the
Company or any Selling Shareholder within the meaning of the 1933 Act or shall
have the same rights to contribution as the Company or any Selling Shareholder,
as the case may be. The Underwriters' obligations in this Section 7 to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) Control Persons. The obligations of the Company and the Selling Shareholders under this Section 7 shall be in addition to any liability which the Company and the respective Selling Shareholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter or the QIU, as the case may be, or, within the meaning of the 1933 Act and the obligations of the Underwriters under this Section 7, shall be in addition to any liability which the respective Underwriters or the QIU may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company or any Selling Shareholder within the meaning of the 1933 Act.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements of the Company, the Selling Shareholders and the several Underwriters as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company or any Selling Shareholder, and shall survive delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement. If this Agreement is terminated by the Lead Representatives pursuant to Section 10 hereof, such termination shall be without liability of any party to any other party except as provided in Sections 5 and 7 hereof; provided, that, except
as provided in Sections 5 and 7 hereof, if for any other reason the Securities are not delivered by or on behalf of the Company and the Selling Shareholders as provided herein, the Company will reimburse the Underwriters (other than any defaulting Underwriter) through the Lead Representatives for all out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Securities not so delivered; and provided further that Sections 1, 7 and 8 shall survive termination of this Agreement and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at a Time of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Lead Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters reasonably acceptable to the Company and the Lead Representatives, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Lead Representatives shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased at such Time of Delivery, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities is or exceeds 10% of the number of Securities to be purchased at the First Time of Delivery, this Agreement or, with respect to any Second Time of Delivery, the obligations of the Underwriters to purchase and of the Selling Shareholders to sell the Optional Securities to be purchased and sold on such Second Time of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.
No action taken to this Section 10 shall relieve any defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of this Agreement or, in the case of a Second Time of Delivery, which does not result in a termination of the obligations of the Underwriters to purchase and the Selling Shareholders to sell the relevant Optional Securities, either (i) the Lead Representatives or (ii) the Company and Selling Shareholders shall have the right to postpone the relevant Time of Delivery for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "Underwriter" includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Default by Selling Shareholders.
(a) If any Selling Shareholder shall fail at the First Time of Delivery to sell and deliver the number of Securities which such Selling Shareholder is obligated to sell
hereunder, and the remaining Selling Shareholders do not exercise the right hereby granted to increase, pro rata or otherwise, the number of securities to be sold by them hereunder to the total number to be sold by all Selling Shareholders as set forth in Schedule II hereto, then the Underwriters may, at option of the Lead Representatives, by notice from the Lead Representatives to the Company, either (i) terminate this Agreement without any liability on the fault of any non-defaulting party except that the provisions of Sections 1, 5, 6, 7 and 8 shall remain in full force and effect or (ii) elect to purchase the Securities which such Selling Shareholder has agreed to sell hereunder from the non-defaulting Selling Shareholders. No action taken pursuant to this Section 11 shall relieve such Selling Shareholder from liability, if any, in respect of such default.
(b) In the event of a default by any Selling Shareholder as referred to in this Section 11, each of the Lead Representatives and the Company shall have the right to postpone First Time of Delivery for a period not exceeding seven days in order to effect any required change in the Registration Statement or Prospectus or in any other documents or arrangements.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Lead Representatives at Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, attention: Registration
Department; and Merrill Lynch, Pierce, Fenner & Smith Incorporated, World
Financial Center, 4 World Financial Center, New York, New York 10080, attention:
Syndicate Department; notices to the Company shall be directed to it at 19
Par-La-Ville Road, Hamilton HM11, Bermuda, attention: Chief Financial Officer;
and notices to the Selling Shareholders shall be directed to Edward J. Noonan
and Jeff Consolino at 19 Par-La-Ville Road, Hamilton HM11, Bermuda.
SECTION 13. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters, the Company and the Selling Shareholders and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm, company or corporation, other than the Underwriters, the Company and the Selling Shareholders and their respective successors and the controlling persons and officers and directors referred to in Section 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and the Selling Shareholders and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm, company or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW; TIME APPOINTMENT OF AGENT FOR SERVICE. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
EACH OF THE PARTIES HERETO IRREVOCABLY (i) AGREES THAT ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY BROUGHT BY ANY UNDERWRITER OR BY ANY PERSON WHO CONTROLS ANY UNDERWRITER ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE INSTITUTED IN ANY UNITED STATES FEDERAL OR STATE COURT IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, STATE OF NEW YORK (A "NEW YORK COURT"), (ii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING AND (iii) SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH NEW YORK COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE COMPANY EXPRESSLY CONSENTS TO THE JURISDICTION OF ANY NEW YORK COURT IN RESPECT OF ANY SUCH ACTION, AND WAIVES ANY OTHER REQUIREMENTS OF OR OBJECTIONS TO PERSONAL JURISDICTION WITH RESPECT THERETO.
The Company hereby irrevocably appoints CT Corporation System in New York City as its agent for service of process in any suit, action or proceeding described in the preceding paragraph. The Company agrees that service of process in any such suit, action or proceeding may be made upon it at the office of its agent. The Company waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto. The Company represents and warrants that its agent has agreed to act as agent for service of process, and agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect.
SECTION 15. Waiver of Immunity. To the extent that the Company or any Selling Shareholder has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court of from set-off or any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) with respect to itself or any of its property, it irrevocable waives, to the fullest extent permitted by law, such immunity in respect of its obligations under this Agreement.
SECTION 16. Judgment Currency. In respect of any judgment or order given or made for any amount due hereunder that is expressed and paid in a currency (the "judgment currency") other than United States dollars, the Company and the Selling Shareholders, as the case may be, will indemnify each Underwriter against any loss incurred by such Underwriter as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the judgment currency for the purpose of such judgment or order and (ii) the rate of exchange at which an Underwriter is able to purchase United States dollars with the amount of the judgment currency actually received by such Underwriter. The foregoing indemnity shall constitute a separate and independent obligation of the Company and the Selling Shareholders and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of or conversion into United States dollars.
SECTION 17. Miscellaneous. The Company and each of the Selling Shareholders acknowledges and agrees that (i) the purchase and sale of the Securities pursuant to
this Agreement is an arm's-length commercial transaction between the Company and the Selling Shareholders, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Company or any of the Selling Shareholders, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company or any of the Selling Shareholders with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or any of the Selling Shareholders on other matters) or any other obligation to the Company or any of the Selling Shareholders except the obligations expressly set forth in this Agreement and (iv) the Company and each of the Selling Shareholders has consulted its own legal and financial advisors to the extent it deemed appropriate.
This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company, the Selling Shareholders and the Underwriters, or any of them, with respect to the subject matter hereof.
The Company, each of the Selling Shareholders and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
Each of the Company and the Selling Shareholders agrees that it will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.
Time shall be of the essence of this Agreement.
SECTION 18. Effect of Headings. The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
[Remainder of Page Left Intentionally Blank]
If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters, the Company and the Selling Shareholders in accordance with its terms.
Very truly yours,
VALIDUS HOLDINGS, LTD.
Title:
SELLING SHAREHOLDERS NAMED ON SCHEDULE II
HERETO, ACTING SEVERALLY
CONFIRMED AND ACCEPTED,
as of the date first above written:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
For themselves and as Representatives of the other Underwriters named in Schedule I hereto.
SCHEDULE I
Number of Number of Selling Company Shareholders' Optional Optional Securities to Securities to be Number of be Purchased if Purchased if Firm Over-Allotment Over-Allotment Securities to Option is Fully Option is Fully Name of Underwriter be Purchased Exercised Exercised ------------------- ------------ --------- --------- Goldman, Sachs & Co. ............ Merrill Lynch, Pierce, Fenner & Smith Incorporated............... Deutsche Bank Securities Inc..... J.P. Morgan Securities Inc. ..... UBS Securities LLC............... Wachovia Capital Markets, LLC.... Cochran Caronia Waller Securities LLC................... Dowling & Partners Securities, LLC.............................. Keefe, Bruyette & Woods, Inc. ... ABN AMRO Rothschild LLC ......... Scotia Capital (USA) Inc. ....... Calyon Securities (USA) Inc...... Comerica Securities, Inc......... HSBC Securities (USA) Inc. ...... ING Financial Markets LLC........ Total............................ 13,415,501 1,512,325 836,819 |
Sch I - 1
SCHEDULE II
Number of Selling Shareholders' Optional Securities to be Sold if Number of Over-Allotment Firm Option is Fully Name of Selling Shareholder Securities to be Sold Exercised --------------------------- --------------------- --------- BERCO Limited (Greenaap) Caisse de Depot et Placement du Quebec Fried Frank Loeb Partners Mercury Trust (Saul Fox) New Mountain Pequot Total........................... 2,245,462 836,819 |
Sch II - 1
SCHEDULE III
Issuer Free Writing Prospectuses
1. Electronic roadshow as filed on www.retailroadshow.com.
2. Electronic roadshow as filed on www.netroadshow.com.
Sch III - 1
SCHEDULE IV
List of Subsidiaries of the Company
Validus Reinsurance, Ltd.
Validus Research Inc.
Validus Specialty Inc.
Talbot Holdings Ltd.
Talbot 2002 Underwriting Capital Ltd.
Talbot Insurance (Bermuda) Ltd.
Talbot Underwriting Holdings Ltd.
Talbot Capital Ltd.
Talbot Underwriting Capital Ltd.
Talbot Underwriting Ltd.
Underwriting Risk Services Ltd.
Talbot Underwriting Services Ltd.
Sch IV - 1
SCHEDULE V
List of Persons and Entities Subject to Lock-Up
Edward J. Noonan
George P. Reeth
Joseph E. (Jeff) Consolino
Stuart W. Mercer
Conan M. Ward
C. Jerome Dill
Matthew J. Grayson
Jeffrey W. Greenberg
John J. Hendrickson
Stuart A. Katz
Sander M. Levy
Jean-Marie Nessi
Mandakini Puri
Alok Singh
Christopher E. Watson
Allegheny New Mountain Partners (Cayman), L.P.
Aquiline Financial Services Fund L.P.
Aquiline Professionals
Aquiline Limited Partners (1)
BERCO Limited
Caisse de Depot et Placement du Quebec
Conti Investments LLC
Chrystallite Investment Pte Ltd
DK Acquisition Partners, L.P.
GMI Investments, Inc.
Greenhill Capital Partners II, L.P.
Greenhill Capital Partners (Cayman) II, L.P.
Greenhill Capital Partners (Executives) II, L.P.
Greenhill Capital Partners (Employees) II, L.P.
GSCP V AIV, L.P.
GS Capital Partners V Employees Fund, L.P.
GS Capital Partners V Offshore, L.P.
GS Capital Partners V GmbH & Co. KG
GSCP V Institutional AIV, LTD.
GS Private Equity Partners 1999, L.P.
GS Private Equity Partners 1999 Offshore, L.P.
GS Private Equity Partners 1999--Direct Investments Funds, L.P.
GS Private Equity Partners 2000, L.P.
GS Private Equity Partners 2000 Offshore Holdings, L.P.
GS Private Equity Partners 2000--Direct Investment Fund, L.P.
Loeb Partners Corporation
Loeb Marathon Offshore Fund, LTD.
Loeb Marathon Fund, LP
Sch V -1
Loeb Offshore Fund, LTD.
Loeb Arbitrage Fund
Lemming Capital Partners, LLC
Mercury Trust
Merrill Lynch Ventures L.P. 2001
ML Global Private Equity Fund, L.P.
New Mountain Partners II (Cayman), L.P.
New Mountain Affiliated Investors II (Cayman), L.P.
Pequot Diversified Master Fund, Ltd.
Pequot Core Investors Fund, Inc.
Pequot Institutional Fund, Inc.
Pequot International Fund, Inc.
Pequot Mariner Master Fund, L.P.
Pequot Navigator Offshore Fund, Inc.
Pequot Scout Fund, L.P.
Premium Series PCC Limited - Cell 33
Premium Series PCC Limited - Cell 34
Vestar AIV Employees Validus Ltd.
Vestar AIV Holdings B L.P.
Vestar AIV Holdings A L.P.
Driscoll, Kean
Clements, Jeffrey
Bardill, Stephen
Roberts, Paul
2005 CGR Partnership
Tiete Representacoes S.A.
SFRi, LLC
Financial Stocks Capital Partners IV L.P.
FFHSJ VA Investment 2005 LLC
Michael Carpenter
Sch V - 2
Exhibit 3.2
AMENDED AND RESTATED(1)
BYE-LAWS
OF
VALIDUS HOLDINGS, LTD.
(adopted on January 11, 2007)
(1) To become effective, subject to shareholder approval, upon the pricing of the Company's initial public offering of its Common Shares.
TABLE OF CONTENTS
Page ---- 1. Definitions........................................................ 1 2. Power to Issue Shares.............................................. 8 3. Redemption and Purchase of Shares.................................. 9 4. Rights Attaching to Shares......................................... 10 5. Calls on Shares.................................................... 14 6. Joint and Several Liability to Pay Calls........................... 14 7. Forfeiture of Shares............................................... 14 8. Share Certificates................................................. 15 9. Fractional Shares.................................................. 15 10. Register of Members................................................ 16 11. Registered Holder Absolute Owner................................... 16 12. Transfer of Registered Company Securities.......................... 16 12A. Tag-Along Rights................................................... 17 12B. Additional Conditions to Tag-Along Sales........................... 21 13. Transmission of Registered Shares.................................. 21 14. Power to Alter Capital............................................. 22 15. Variation of Rights Attaching to Shares............................ 22 16. Dividends.......................................................... 23 17. Power to Set Aside Profits......................................... 23 18. Method of Payment.................................................. 23 19. Capitalisation..................................................... 24 20. Annual General Meetings............................................ 24 21. Special General Meetings........................................... 24 22. Notice............................................................. 24 23. Giving Notice...................................................... 25 24. Postponement of General Meeting.................................... 25 25. Participating in Meetings by Telephone............................. 26 26. Quorum at General Meetings......................................... 26 27. Chairman to Preside................................................ 26 28. Voting on Resolutions.............................................. 26 29. Instrument of Proxy................................................ 27 30. Representation of Corporate Member................................. 27 31. Adjournment of General Meeting..................................... 28 32. Written Resolutions................................................ 28 33. Directors Attendance at General Meetings........................... 29 34. Election of Directors.............................................. 29 35. Number of Directors................................................ 29 36. Term of Office of Directors........................................ 29 37. Removal of Directors............................................... 30 38. Vacancy in the Office of Director.................................. 30 39. Remuneration of Directors.......................................... 31 40. Defect in Appointment of Director.................................. 31 41. Directors to Manage Business....................................... 31 |
Page ---- 42. Powers of the Board of Directors................................... 31 43. Register of Directors and Officers................................. 33 44. Officers........................................................... 33 45. Appointment of Officers............................................ 33 46. Duties of Officers................................................. 33 47. Remuneration of Officers........................................... 33 48. Conflicts of Interest.............................................. 33 49. Indemnification and Exculpation of Directors and Officers.......... 34 49A. Waiver of Claim by Members......................................... 34 49B. Directors of Certain Subsidiaries.................................. 35 50. Board Meetings..................................................... 35 51. Notice of Board Meetings........................................... 35 52. Participation in Meetings by Telephone............................. 36 53. Quorum at Board Meetings........................................... 36 54. Board to Continue in the Event of Vacancy.......................... 36 55. Chairman to Preside................................................ 36 56. Written Resolutions................................................ 36 56A. Dissent of Directors............................................... 36 57. Validity of Prior Acts of the Board................................ 37 58. Minutes............................................................ 37 59. Form and Use of Seal............................................... 37 60. Books of Account................................................... 37 61. Financial Year End................................................. 38 62. Audit.............................................................. 38 63. Appointment of Auditors............................................ 38 64. Remuneration of Auditors........................................... 38 65. Duties of Auditor.................................................. 38 66. Distribution of Auditor's Report................................... 38 67. Distribution of Financial Statements and Directors' Report......... 39 68. Winding-Up......................................................... 39 69. Changes to Bye-laws................................................ 39 70. Changes to the Memorandum of Association........................... 39 71. Discontinuance..................................................... 40 |
VALIDUS HOLDINGS, LTD.
INTERPRETATION
1. DEFINITIONS
1.1 In these Bye-laws, the following words and expressions shall, where not inconsistent with the context, have the following meanings, respectively:
Affiliate with respect to any person, any other person directly or indirectly Controlling, Controlled By or Under Common Control With such person, provided that no Member of the Company shall be deemed an Affiliate of any other Member solely by reason of any investment in the Company. For the purpose of this definition, the term "Control" (including, with correlative meanings, the terms "Controlling", "Controlled By" and "Under Common Control With"), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise; Aggregate Ownership with respect to any Member or Group of Members, the total amount of Company Securities "beneficially owned" (as such term is defined in Rule 13d-3 of the Exchange Act) (without duplication) by such Member or Group of Members as of the date of such calculation, calculated on a Fully-Diluted basis; Auditor includes an individual or partnership; Board the board of directors appointed or elected pursuant to these Bye-laws and acting at a meeting of directors at which there is a quorum or by written resolution in accordance with these Bye-laws; Business Day any day except a Saturday, Sunday or other day on which commercial banks in New York, New York or Bermuda are not open for business; Bye-laws these Bye-laws as altered from time to time; Cause willful misconduct, fraud, gross negligence, embezzlement or a conviction of, or a plea of "guilty" or |
VALIDUS HOLDINGS, LTD. "no contest" to, a felony or other crime involving moral turpitude; Change of Control the occurrence of one or more of the following events: (i) a majority of the board of directors (or equivalent governing body) of a Member shall consist of persons who were not (a) a member of the board of directors (or equivalent governing body) of such Member on the Commencement Date or (b) nominated for election or elected to the board of directors (or equivalent governing body) of such Member, with the affirmative vote of a majority of persons who were members of such board of directors (or equivalent governing body) at the time of such nomination or election or (ii) the acquisition by any person or Group of the power, directly or indirectly, to vote or direct the voting of securities having more than 50% of the ordinary voting power for the election of the directors of a Member (other than Permitted Transferees, persons, Groups or their Affiliates who had such power when such Member first became a Member or acquisitions approved in advance by a majority of the members of the board of directors (or equivalent governing body) of such Member or upon the death or disability of a natural person); Commencement Date December 7, 2005; Common Stock collectively, the Voting Common Stock and the Non-Voting Common Stock; Company the company for which these Bye-laws are approved and confirmed; Company Securities (i) Common Stock, (ii) securities convertible into or exchangeable for Common Stock and (iii) options, warrants or other rights to acquire Common Stock; Controlled Shares in reference to any person means: (i) all Company Securities directly, indirectly or constructively owned by such person within the meaning of Section 958 of the Internal Revenue Code of 1986, as amended, of the United States of America; and |
VALIDUS HOLDINGS, LTD.
(ii) all Company Securities directly, indirectly or constructively owned by any person or "group" of persons within the meaning of Section 13(d)(3) of the Exchange Act; Designated Company a person elected as a director of a Director Designated Company in accordance with Bye-law 50B; Director a director, including a sole director, for the time being of the Company; Exchange Act the Securities Exchange Act of 1934, as amended, of the United States of America and the rules and regulations promulgated thereunder; First Public Offering the first public offering of shares pursuant to an effective registration statement under the Securities Act after the Commencement Date; Founder collectively, the group of funds affiliated with Aquiline Capital Partners LLC which are holders of Company Securities; Fully-Diluted with respect to Company Securities, all outstanding shares of Common Stock and all shares issuable in respect of securities convertible into or exchangeable for such shares, all stock appreciation rights, options, warrants and other rights to purchase or subscribe for such Company Securities or securities convertible into or exchangeable for such Company Securities, provided that, if any of the foregoing stock appreciation rights, options, warrants or other rights to purchase or subscribe for such Company Securities are subject to vesting, the Company Securities subject to vesting shall be included in the definition of "Fully-Diluted" only upon and to the extent of such vesting; Group a group of related persons for purposes of Section 13(d) of the Exchange Act; GSCP V collectively, the group of funds administered by the Principal Investment Area of The Goldman Sachs Group, Inc. which are holders of Company Securities; |
VALIDUS HOLDINGS, LTD.
Law The Companies Act 1981 and every modification, reenactment or revision thereof for the time being in force; Member the person registered in the Register of Members as the holder of shares in the Company and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as one of such joint holders or all of such persons, as the context so requires, and, for purposes of Bye-law 12B, any person holding any other Company Securities, as contained in the records of the Company; Memorandum of the Memorandum of Association of the Association Company; Merrill collectively, the group of funds/entities affiliated with Merrill Lynch, Pierce, Fenner & Smith Incorporated which are holders of Company Securities; month calendar month; New Mountain collectively, the group of funds affiliated with New Mountain Capital, L.L.C. which are the holders of Company Securities; Non-Voting Common non-voting common shares, par value Stock US$0.10 per share, of the Company and any shares into which such shares may thereafter be converted or changed; notice written notice as further provided in these Bye-laws unless otherwise specifically stated; Offering Memorandum the offering memorandum, dated October 13, 2005, as amended and supplemented prior to the closing of the offering described therein; Officer any person appointed by the Board to hold an office in the Company; ordinary resolution a resolution passed at a general meeting (or, if so specified, a meeting of Members holding a class of shares) of the Company at which a quorum is present by a simple majority of the votes of the Voting |
VALIDUS HOLDINGS, LTD.
Common Stock cast, or a written resolution passed by the unanimous consent of all Members entitled to vote; paid-up paid-up or credited as paid-up; Permitted Transferee any of the following, as applicable, (i) an Affiliate of a Member, provided that such person remains at all times an Affiliate of the original Member, (ii) in the case of any Member or investor in a Member that is a partnership, corporation or limited liability company, the partners, shareholders or members thereof or (iii) in the case of any Member or an investor in a Member that is an individual, one or more of such Member's spouse or lineal relatives, or any custodian or trust for the benefit of any of the foregoing or the estate of such Member or investor; Person an individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof; Pro Rata Portion with respect to any Member, as of the date of any determination, the percentage represented by the quotient of (i) the number of shares of Common Stock outstanding owned by such Member as of such date divided by (ii) the total number of shares of Common Stock outstanding owned by all Members as of such date; Qualified Public the first Public Offering in which gross Offering proceeds of not less than $150.0 million (at a per share price of not less than $10 per share, as adjusted to give effect to stock splits, recombinations and other reclassifications) are raised for the Company and/or for selling shareholders after the date hereof; Register of Directors and Officers the register of directors and officers referred to in these Bye-laws; Register of Members the register of Members referred to in these Bye-laws; |
VALIDUS HOLDINGS, LTD.
Registered Office the registered office for the time being of the Company;
Resident Representative any person appointed to act as resident
representative and includes any deputy or assistant resident representative; Seal the common seal or any official or duplicate seal of the Company; Secretary the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or assistant secretary and any person appointed by the Board to perform any of the duties of the Secretary; Securities Act the Securities Act of 1933, as amended, of the United States of America and the rules and regulations promulgated thereunder; share includes a fraction of a share; Shareholder shall have the same meaning as the term "Member" in the Act and means the Person registered in the Register of Members as the holder of shares (sometimes referred to in these Bye-laws as the direct holder) of the Company or, when two or more Persons are so registered as joint holders of shares, means the Person whose name stands first in the Register of Members as one of such joint holders or all of such Persons as the context so requires; Shareholders' the Shareholders' Agreement dated as of Agreement December 7, 2005, among the Company and the shareholders named therein; special resolution a resolution passed at a general meeting (or, if so specified, a meeting of Members holding a class of shares) of the Company at which a quorum is present by not less than two-thirds of the votes of the Voting Common Stock cast, as provided in the Law, or a written resolution passed by unanimous consent of all Members entitled to vote; Sponsor individually, Aquiline, GSCP V, New Mountain, Vestar and Merrill; |
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Tag-Along Portion for any Tag-Along Sale, that number of Company Securities equal to the number of Company Securities proposed to be Transferred in such Tag-Along Sale (with warrants, vested options and other Common Stock equivalents counted on an as-converted or as-exercised basis), multiplied by a fraction, the numerator of which is the Aggregate Ownership of Company Securities by the Tag-Along Seller or the Tagging Person, as the case may be, immediately prior to the proposed Transfer and the denominator of which is the Aggregate Ownership of Company Securities by all of the Tag-Along Sellers and Tagging Persons immediately prior to the proposed Transfer. (The terms "Tag-Along Sale", "Tag-Along Seller", "Tag-Along Notice" and "Tagging Person" shall have the meanings ascribed thereto in Bye-law 12A); Transfer with respect to any Company Securities (i) when used as a verb, to sell, assign, dispose of, exchange or otherwise transfer such Company Securities or any participation or interest therein, whether directly or indirectly, or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange or other transfer of such Company Securities or any participation or interest therein or any agreement or commitment to do any of the foregoing; U.S. Person a United States person as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended; Vestar means, collectively, the group of funds affiliated with Vestar Capital Partners which are holders of Company Securities; Voting Common Stock the shares of voting common shares, par value US$0.10 per share, of the Company and any shares into which such shares may be converted or changed; written resolution a resolution passed in accordance with Bye-law 32 or 56; and year calendar year. |
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1.2 In these Bye-laws, where not inconsistent with the context:
(a) words denoting the plural number include the singular number and vice versa;
(b) words denoting the masculine gender include the feminine and neuter genders;
(c) words importing persons include companies, associations or bodies of persons whether corporate or not;
(d) the words:
(i) "may" shall be construed as permissive; and
(ii) "shall" shall be construed as imperative;
(e) a reference to statutory provision shall be deemed to include any amendment or re-enactment thereof; and
(f) unless otherwise provided herein, words or expressions defined in the Law shall bear the same meaning in these Bye-laws.
1.3 In these Bye-laws expressions referring to writing or its cognates shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in visible form.
1.4 Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof.
1.5 For the avoidance of doubt, each reference in these Bye-laws to holders of a majority in voting power (and other terms of similar import relating to voting provisions) is deemed to mean after application of the provisions of Bye-law 4.3.
SHARES
2. POWER TO ISSUE SHARES
Subject to these Bye-laws, to the Shareholders' Agreement and to any resolution of the Members to the contrary, and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, the Board shall have the power to issue any unissued shares of the Company on such terms and conditions as it may determine and any shares or class of shares (including the issue or grant of options, warrants and other rights, renounceable or otherwise in respect of shares) may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital, or otherwise as the Board may by resolution
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prescribe; provided that no share shall be issued at a discount except in accordance with the Law.
3. REDEMPTION AND PURCHASE OF SHARES
3.1 Subject to the Law, the Company is authorised to issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or a Member.
3.2 Each Member shall provide the Company with such information regarding such Member as the Company may reasonably request, subject to reasonable confidentiality provisions, and, subject to the Law, the Company shall, by resolution of the Board, have the right to repurchase, at fair market value as determined by the Board in its reasonable discretion, any and all Company Securities owned by a Member (other than Company Securities that have been sold pursuant to an effective registration statement under the Securities Act) (i) if the Board, in its reasonable judgment, after consultation with its legal counsel, determines that such repurchase is required in order to avoid or ameliorate adverse legal, tax or regulatory consequences or (ii) if such Member has undergone a Change of Control. Shares purchased by the Company shall be cancelled and shall cease to confer any right or privilege on the Member from whom the shares are purchased.
3.3 The Company is hereby authorised to make payments in respect of the redemption of its shares out of capital or out of any other account or fund which can be authorised for this purpose in accordance with the Law.
3.4 The redemption price of a redeemable share, or the method of calculation thereof, shall be fixed by the Board at or before the time of issue.
3.5 Every share certificate representing a redeemable share shall indicate that the share is redeemable.
3.6 In the case of shares redeemable at the option of a Member a redemption notice from a Member may not be revoked without the agreement of the Board.
3.7 At the time or in the circumstances specified for redemption the redeemed shares shall be cancelled and shall cease to confer on the relevant Member any right or privilege, without prejudice to the right to receive the redemption price, which price shall become payable as soon as it can with due dispatch be calculated, but subject to surrender of the relevant share certificate for cancellation (and reissue in respect of any balance).
3.8 The redemption price may be paid in any manner authorised by these Bye-laws for the payment of dividends.
3.9 A delay in payment of the redemption price shall not affect the redemption but, in the case of a delay of more than thirty days, interest shall be paid for the period
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from the due date until actual payment at a rate which the Directors, after due enquiry, estimate to be representative of the rates being offered by major commercial banks in Bermuda for thirty-day deposits in the same currency.
3.10 Subject as aforesaid, the Directors may determine, as they think fit, all questions that may arise concerning the manner in which the redemption of the shares shall or may be effected.
3.11 No share may be redeemed unless it is fully paid-up.
3.12 Subject to the Shareholders' Agreement, in addition to the power set forth in Bye-law 3.2, the Board may exercise all the powers of the Company to purchase all or any part of its own shares in accordance with the Law. Shares purchased by the Company shall be cancelled and shall cease to confer any right or privilege on the Member from whom the shares are purchased.
4. RIGHTS ATTACHING TO SHARES
4.1 Subject to Bye-law 2 and the Memorandum of Association, the holders of the Common Stock shall, subject to the provisions of these Bye-laws:
(a) subject to Bye-law 4.3, be entitled to one vote per share of Voting Common Stock;
(b) be entitled to such dividends as the Board may from time to time declare;
(c) in the event of a liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganization or otherwise or upon any distribution of capital, be entitled to the surplus assets of the Company;
(d) generally be entitled to enjoy all of the rights attaching to the Common Stock.
(e) [Reserved].
4.1A The holders of Non-Voting Common Stock shall not have any voting rights, except that the holders of Non-Voting Common Stock shall be entitled to vote as a separate class on any amendment to this Bye-law 4.1A and on any amendment, repeal or modification of any provision of these Bye-laws or the Memorandum of Association that adversely affects the powers, preferences or rights of holders of Non-Voting Common Stock in a manner different than the adverse effect on the powers, preferences or special rights of holders of Common Stock. So long as GSCP V or any of its Affiliates that is a fund owns any Company Securities, all shares of Common Stock issued to or otherwise held by GSCP V or any of its Affiliates (including through the conversion of warrants or other convertible secur-
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ities) shall be Non-Voting Common Stock and all shares of Common Stock Transferred to GSCP V or any of its Affiliates shall automatically convert into Non-Voting Common Stock. If Merrill owns any Company Securities on the date that the Company files a registration statement with respect to the First Public Offering, all shares of Common Stock issued to or otherwise held by Merrill or any of its Affiliates (including through the conversion of warrants or other convertible securities) shall automatically convert into Non-Voting Common Stock on such date and thereafter all shares of Common Stock Transferred or issued to or otherwise held by Merrill or any of its Affiliates (including through the conversion of warrants or other convertible securities) shall be or shall automatically convert into, as applicable, Non-Voting Common Stock; provided that the provisions of this sentence shall not apply from and after the date that Merrill no longer holds any Company Securities.
4.1B Except as set forth in Bye-law 4.1A, the rights and preferences of the Non-Voting Common Stock and the Voting Common Stock shall be identical in all respects; provided that if any dividend or other distribution paid by the Company in respect of the Common Stock is paid in the form of capital stock of the Company, such capital stock paid as a dividend or other distribution in respect of the Non-Voting Common Stock shall be non-voting to the extent set forth in Bye-law 4.1A and shall be subject to the provisions of Bye-laws 4.1C, 4.1D, 4.1E and 4.1F, but shall be identical in all other respects to the capital stock paid as a dividend in respect of the Voting Common Stock.
4.1C Subject to the Law and all other applicable laws, and subject to compliance with Bye-law 4.1D, each share of Non-Voting Common Stock shall be converted into one share of Voting Common Stock in connection with the transfer of such share of Non-Voting Common Stock by the holder thereof to any person (other than an Affiliate of such Holder). Under no other circumstances shall Non-Voting Common Stock convert to Voting Common Stock.
4.1D To convert Non-Voting Common Stock into Voting Common Stock, a holder must: (i) complete and sign a conversion notice on the back of the stock certificate or deliver written notice to the Company (or, if a Conversion Agent has been designated, to such agent), which notice shall state that Bye-law 4.1C has been complied with and shall provide sufficient information regarding the number of Non-Voting Common Stock to be converted and the identity of the transferee; (ii) surrender the stock certificate to the officer or agent designated by the Company, in a written notice to such holder, as conversion agent (the "Conversion Agent"), or if no Conversion Agent is so designated, to the Company; and (iii) furnish appropriate endorsements and transfer documents if required by the Registrar for the Company's stock or the Conversion Agent. The date on which the holder of Common Stock or Non-Voting Common Stock satisfies all of the foregoing requirements (i) through (iii) is the conversion date. The person(s) in whose name(s) the certificate or certificates are registered shall be treated as a
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stockholder or stockholders of record on and after the conversion date. If less than all the shares represented by the stock certificate are being converted, a new certificate representing the unconverted shares of Non-Voting Common Stock shall be promptly issued by the Company to the holder thereof.
4.1E The Company shall reserve out of its authorised but unissued Voting Common Stock sufficient shares of Voting Common Stock to permit the conversion of outstanding shares of Non-Voting Common Stock pursuant to these Bye-laws. All shares of Voting Common Stock issued upon such conversion shall be fully paid and non-assessable.
4.1F The Company shall reserve out of its authorised but unissued Common Stock sufficient shares of Voting Common Stock and Non-Voting Common Stock to permit the conversion of convertible securities of the Company into Voting Common Stock or Non-Voting Common Stock, as the case may be, in accordance with the terms hereof and thereof. All shares of Voting Common Stock or Non-Voting Common Stock issued upon such conversion shall be fully paid and non-assessable.
4.2 The Board is authorised, without obtaining any vote or consent of the holders of any class or series of shares of the Company unless expressly provided by the terms of issue of such class or series, subject to any limitations prescribed by Law, to provide from time to time for the issuance of other classes or series of shares, and to establish the characteristics of each class or series including, without limitation, the following:
(a) the number of shares of that class or series, which may subsequently be increased or decreased (but not below the number of shares of that class or series then outstanding) by resolution of the Board, and the distinctive designation thereof;
(b) the voting powers, full or limited (including the right to appoint directors of the Company), if any, of the shares of that class or series;
(c) the rights in respect of dividends on the shares of that class or series, whether dividends shall be cumulative and, if so, from which date or dates and the relative rights or priority, if any, of payment of dividends on shares of that class or series and any limitations, restrictions or conditions on the payment of dividends;
(d) the relative amounts, and the relative rights or priority, if any, of payment in respect of shares of that class or series, which the holders of the shares of that class or series shall be entitled to receive upon any liquidation, dissolution or winding-up of the Company;
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(e) the terms and conditions (including the price or prices, which may vary under different conditions and at different redemption dates), if any, upon which all or any part of the shares of that class or series may be redeemed, and any limitations, restrictions or conditions on such redemption; (f) the terms, if any, of any purchase, retirement or sinking fund to be provided for the shares of that class or series; (g) the terms, if any, upon which the shares of that class or series shall be convertible into or exchangeable for shares of any other class, classes or series, or other securities, whether or not issued by the Company; (h) the restrictions, limitations and conditions, if any, upon issuance of indebtedness of the Company so long as any shares of that class or series are outstanding; and (i) any other preferences and relative, participating, optional or other rights and limitations not inconsistent with applicable law or the provisions of Bye-law 2 or 4. 4.3 (a) Every Member of record owning shares conferring the right to vote present in person or by proxy shall have one vote, or such other number of votes as may be specified in the terms of the issue and rights and privileges attaching to such shares or in these Bye-laws, for each such share registered in such Member's name in the register; provided that if and so long as the votes conferred by the Controlled Shares of any person would otherwise represent more than 9.09% of the aggregate voting power of the Company Securities entitled to vote, the votes conferred by the Controlled Shares of such person are hereby reduced (and shall be automatically reduced in the future) by whatever amount is necessary so that after any such reduction the votes conferred by the Controlled Shares of such person shall represent 9.09% of the aggregate voting power of the Company Securities entitled to vote. (b) Notwithstanding the foregoing provisions of this Bye-law 4.3, after having applied such provisions as best as they consider reasonably practicable, the Board may make such final adjustments to the aggregate number of votes conferred, directly or indirectly or by attribution, by the Controlled Shares on any U.S. Person that they consider fair and reasonable in all the circumstances to ensure that such votes represent 9.09% of the aggregate voting power of the votes conferred by all the Company Securities entitled to vote generally at any election of Directors; such adjustments are intended to implement the limitation set forth in paragraph (a) of this Bye-law 4.3. (c) Each Member shall provide the Company with such information as the Company may reasonably request, subject to reasonable confidentiality |
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provisions, so that the Company and the Board may make determinations as to the ownership (direct or indirect or by attribution) of Controlled Shares by such Member or by any person to which Shares may be attributed as a result of the ownership of Shares by such Member.
(d) The Board may take all other appropriate steps, and require such other documentation, subject to reasonable confidentiality provisions, to effectuate the foregoing.
(e) For the purposes of this Bye-law, "person" shall mean any
individual, firm, partnership, corporation, association, or
other entity, or any "group" of persons within the meaning of
Section 13(d)(3) of the Exchange Act.
5. CALLS ON SHARES
5.1 The Board may make such calls as it thinks fit upon the Members in respect of any monies (whether in respect of nominal value or premium) unpaid on the shares allotted to or held by such Members and, if a call is not paid on or before the day appointed for payment thereof, the Member may at the discretion of the Board be liable to pay the Company interest on the amount of such call at such rate as the Board may determine, from the date when such call was payable up to the actual date of payment. Any call made under this Bye-law 5.1 must be made upon all Members owing monies to the Company in respect of issued and outstanding Company Securities and shall be made on a pro rata basis, determined with respect to each Member by the amount of monies owed to the Company in respect of issued and outstanding Company Securities held by such Member in relation to the total amount of the call.
5.2 The Company may accept from any Member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up.
6. JOINT AND SEVERAL LIABILITY TO PAY CALLS
The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.
7. FORFEITURE OF SHARES
7.1 If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward such Member a notice in writing in the form, or as near thereto as circumstances admit, of the following:
Notice of Liability to Forfeiture for Non-Payment of Call VALIDUS HOLDINGS, LTD. (the "Company")
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You have failed to pay the call of [amount of call] made on the [ ] day of [ ], 200[ ], in respect of the [number] share(s) [number in figures] standing in your name in the Register of Members of the Company, on the [ ] day of [ ], 200[ ], the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest thereon at the rate of [ ] per annum computed from the said [ ] day of [ ], 200[ ] at the registered office of the Company the share(s) will be liable to be forfeited.
Dated this [ ] day of [ ], 200[ ]
7.2 If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine. Without limiting the generality of the foregoing, the disposal may take place by sale, repurchase, redemption or any other method of disposal permitted by and consistent with these Bye-laws and the Law.
7.3 A Member whose share or shares have been forfeited as aforesaid shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture and all interest due thereon.
7.4 The Board may accept the surrender of any shares which it is in a position to forfeit on such terms and conditions as may be agreed. Subject to those terms and conditions, a surrendered share shall be treated as if it had been forfeited.
8. SHARE CERTIFICATES
8.1 Every Member shall be entitled to a certificate under the seal of the Company (or a facsimile thereof) specifying the number of shares held by such Member and whether the same are fully paid up and, if not, how much has been paid thereon. The Board may by resolution determine, either generally or in a particular case, that any or all signatures on certificates may be printed thereon or affixed by mechanical means.
8.2 If any share certificate shall be proved to the satisfaction of the Board to have been worn out, lost, mislaid, or destroyed the Board may cause a new certificate to be issued and request an indemnity for the lost certificate if it sees fit.
8.3 Share certificates may not be issued in bearer form.
9. FRACTIONAL SHARES
The Company may issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of
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whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding-up.
REGISTRATION OF SHARES
10. REGISTER OF MEMBERS
The Board shall cause to be kept in one or more books a Register of Members which may be kept outside Bermuda at such place as the Directors shall appoint and shall enter therein the particulars required by the Law.
11. REGISTERED HOLDER ABSOLUTE OWNER
11.1 The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable claim or other claim to, or interest in, such share on the part of any other person.
11.2 No person shall be entitled to recognition by the Company as holding any share upon any trust and the Company shall not be bound by, or be compelled in any way to recognise (even when having notice thereof), any equitable, contingent, future or partial interest in any share or any other right in respect of any share except an absolute right to the entirety of the share in the holder. If, notwithstanding this Bye-law 11, notice of any trust is at the holder's request entered in the Register or on a share certificate in respect of a share, then, except as aforesaid:
(a) such notice shall be deemed to be solely for the holder's convenience;
(b) the Company shall not be required in any way to recognise any beneficiary, or the beneficiary, of the trust as having an interest in the share or shares concerned;
(c) the Company shall not be concerned with the trust in any way, as to the identity or powers of the trustees, the validity, purposes or terms of the trust, the question of whether anything done in relation to the shares may amount to a breach of trust or otherwise; and
(d) the holder shall keep the Company fully indemnified against any liability or expense which may be incurred or suffered as a direct or indirect consequence of the Company entering notice of the trust in the Register of Members or on a share certificate and continuing to recognise the holder as having an absolute right to the entirety of the share or shares concerned.
12. TRANSFER OF REGISTERED COMPANY SECURITIES
12.1 No transfers of Company Securities, other than those made in compliance with these Bye-laws, shall be registered in the Register of Members.
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12.2 An instrument of transfer shall be in writing in such form as the Board may accept.
12.3 Such instrument of transfer shall be signed by or on behalf of the transferor and transferee; provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members.
12.4 The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate in respect of the shares to which it relates and by such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer.
12.5 The joint holders of any share may transfer such share to one or more of such joint holders, and the surviving holder or holders of any share previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member.
12A. TAG-ALONG RIGHTS
12A.1(a) Subject to Bye-law 12B, if, prior to the first anniversary of the Qualified Public Offering, any Member (or Group of Members) or one or more Members acting together propose to Transfer, in a transaction otherwise permitted by these Bye-laws (whether by waiver or otherwise), a number of Company Securities equal to or exceeding 5% (in either voting power or value) of the outstanding Company Securities, in a single transaction or in a series of related transactions (a "Member Tag-Along Sale" and the Member or such Members acting together (or Group of Members) proposing such Transfer being a "Member Tag-Along Seller"): (x) the Member Tag-Along Seller shall provide each other Member notice of the terms and conditions of such proposed Transfer ("Member Tag-Along Notice") and offer each other Member the opportunity to participate in such Transfer, and (y) each other Member may elect, at its option, to participate in the proposed Transfer (each such electing other Member, a "Member Tagging Person"); |
provided that (i) the tag-along rights contained in this Bye-law 12A.1(a) shall not apply to (x) any Transfer to a Permitted Transferee or to any Transfer pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 promulgated thereunder and (y) any Member who was not a Member immediately preceding the First Public Offering and (ii) until 180 days following the First Public Offering, no Member shall have the benefit of the tag-along rights
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contained in this Bye-law 12A.1(a) with respect to any Company Securities acquired pursuant to an employment agreement or a long term incentive plan approved by the Board.
(b) To the extent the provisions of Bye-law 12A.1(a) are not applicable and subject to Bye-law 12B, if, prior to the Qualified Public Offering, any Sponsor proposes to Transfer, in a transaction otherwise permitted by these Bye-laws (whether by waiver or otherwise), any Company Securities (a "Sponsor Tag-Along Sale" and the Sponsor proposing such Transfer being a "Sponsor Tag-Along Seller"):
(x) the Sponsor Tag-Along Seller shall provide each other Sponsor notice of the terms and conditions of such proposed Transfer ("Sponsor Tag-Along Notice") and offer each other Sponsor the opportunity to participate in such Transfer, and
(y) each other Sponsor may elect, at its option, to
participate in the proposed Transfer (each such electing other Sponsor, a "Sponsor Tagging Person"); provided that the tag-along rights contained in this Bye-law 12A.1(b) shall not apply to any Transfer to a Permitted Transferee or to any Transfer pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 promulgated thereunder. As used in these Bye-laws, (i) the term "Tag-Along Sale" is a reference to a Member Tag-Along Sale or a Sponsor Tag-Along Sale, as applicable, (ii) the term "Tag-Along Seller" is a reference to a Member Tag-Along Seller or a Sponsor Tag-Along Seller, as applicable, (iii) the term "Tag-Along Notice" is a reference to a Member Tag-Along Notice or a Sponsor Tag-Along Notice, as applicable, and (iv) the term "Tagging Person" is a reference to a Member Tagging Person or a Sponsor Tagging Person, as applicable. 12A.2 The Tag-Along Notice shall identify the number of Company Securities proposed to be Transferred in such Tag-Along Sale (with warrants, options and other Common Stock equivalents counted on a Fully-Diluted basis) including the number of Company Securities proposed to be sold by the Tag-Along Seller, the consideration for which the Transfer is proposed to be made and all other material terms and conditions of the Tag-Along Offer, including the form of the proposed agreement, if any, and a firm offer by the proposed transferee to purchase Company Securities, from the transferors in accordance with this Bye-law 12A (including a specification of the maximum number of Company Securities the proposed transferee is willing to purchase) (the "Tag-Along Offer"). 12A.3 From the date of its receipt of the Tag-Along Notice, each Tagging Person shall have the right (a "Tag-Along Right"), exercisable by written notice ("Tag-Along Response Notice") given to the Tag-Along Seller and the Company within ten (10) calendar days after its receipt of the Tag-Along Notice (the "Tag-Along No- |
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tice Period"), to request that the Tag-Along Seller include in the proposed Transfer the number of Company Securities held by such Tagging Person as is specified in the Tag-Along Response Notice; provided that, if the aggregate number of Company Securities proposed to be sold by the Tag-Along Seller and all Tagging Persons in any such transaction exceeds the number of Company Securities that can be sold on the terms and conditions set forth in the Tag-Along Offer, then each Tag-Along Seller and each Tagging Person shall be entitled to include in the Tag-Along Sale only up to the lesser of (i) its Tag-Along Portion of Company Securities and (ii) the number of Company Securities specified in the Tag-Along Offer (in the case of the Tag-Along Seller) or in its Tag-Along Response Notice (in the case of a Tagging Person) (such lesser amount being the "Maximum Allocation"); provided, further, that, if any Company Securities remain unallocated after applying the cut-back requirement of the immediately preceding proviso, then such unallocated Company Securities shall be allocated pro rata based on ownership of each participant that shall have elected to sell more than its Tag-Along Portion, but in no event shall any such participant be required to sell more than its Maximum Allocation. 12A.4 Each Tag-Along Response Notice shall include wire transfer instructions for payment of the purchase price for the Company Securities to be sold in such Tag-Along Sale. Each Tagging Person that exercises its Tag-Along Rights hereunder shall deliver to the Company (or its designated agent), no later than five (5) calendar days prior to the proposed closing date for the Tag-Along Sale, the certificate or certificates representing the Company Securities of such Tagging Person to be included in the Tag-Along Sale, together with a limited power-of-attorney authorising the Tag-Along Seller to enter into any purchase agreement and other agreements required by the buyer of such Company Securities and to Transfer such Company Securities on the terms set forth in the Tag-Along Notice and such agreements. Delivery of the Tag-Along Response Notice shall constitute an irrevocable acceptance of the Tag-Along Offer by such Tagging Persons; provided, however, in the event that there is a material change of the Tag-Along Offer, the Tag-Along Seller shall give written notice of such change to each Tagging Person, and each Tagging Person shall have the right to revoke its election to participate in the Tag-Along Sale by providing written notice to the Company within five (5) calendar days of receiving the notice of the change in terms. To the extent the Company Securities sold or transferred pursuant to this Bye-law 12A.4 consist of options, warrants or other rights to acquire Common Stock, the price to be paid for such options, warrants or other rights to acquire Common Stock shall be the as-converted or as-exercised price less the exercise price of such options, warrants or other rights to acquire Common Stock. 12A.5 If at the termination of the Tag-Along Notice Period, a Member shall not have elected to participate in the Tag-Along Sale, such Member shall be deemed to have waived its rights under this Bye-law 12A with respect to the Transfer of its Company Securities pursuant to such Tag-Along Sale; provided that in the event |
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that there is a material change to the terms of the Tag-Along Offer, the Tag-Along Seller shall give written notice of such change to each such Member and each such Member shall have the right to participate in the Tag-Along Sale by providing written notice to the Tag-Along Seller within seven (7) calendar days after its receipt of the notice of change of terms. 12A.6 The Tag-Along Seller shall Transfer, on behalf of itself and any Tagging Person, the Company Securities subject to the Tag-Along Offer and elected to be Transferred at the price set forth in, and on the terms and conditions not materially inconsistent with those set forth in the Tag-Along Notice within 120 days after the last day of the Tag-Along Notice Period (but not earlier than the end of the periods referred to in Bye-laws 12A.4 and 12A.5, as applicable) (which 120-day period shall be extended if any of the transactions contemplated by the Tag-Along Offer are subject to regulatory approval until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days after the last day of the Tag-Along Notice Period). 12A.7 Concurrently with the consummation of the Tag-Along Sale, (i) the Tag-Along Seller shall notify the Tagging Persons thereof (including identifying the manner of delivery for any non-cash consideration), (ii) the total consideration due to each Tagging Person shall be remitted to such person, with the cash portion of the purchase price paid by wire transfer of immediately available funds in accordance with the wire transfer instructions in the applicable Tag-Along Response Notices and (iii) promptly after the consummation of such Tag-Along Sale, the Tag-Along Seller shall furnish such other evidence of the completion and the date of completion of such transfer and the terms thereof as may be reasonably requested by the Company for the benefit of the Tagging Persons. 12A.8 If, at the end of the 120-day period immediately following the last day of the Tag-Along Notice Period (or such longer period as extended under Bye-law 12A.6), the Tag-Along Seller has not completed the Transfer of all such Company Securities at the price and on substantially the same terms and conditions set forth in the Tag-Along Notice, (i) the Company (or its designated agent) shall return to each Tagging Person, to the extent previously provided, the limited power-of-attorney (and all copies thereof) together with all certificates representing the Company Securities that such Tagging Person delivered for Transfer pursuant to this Bye-law 12A and any other documents executed by the Tagging Persons in connection with the proposed Tag-Along Sale and (ii) the Tag-Along Seller shall not conduct any Transfer of Company Securities without again complying with this Bye-law 12A. 12A.9 Notwithstanding anything contained in this Bye-law 12A, there shall be no liability on the part of the Tag-Along Seller to the Tagging Persons if the Transfer of Company Securities pursuant to this Bye-law 12A is not consummated for any reason. Whether to effect a Transfer of Company Securities pursuant to this Bye- |
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law 12A by the Tag-Along Seller, or to terminate any such transaction prior to consummation, is in the sole and absolute discretion of the Tag-Along Seller. 12A.10 For purposes of this Bye-law 12A, (i) any increase to the price payable in connection with any Tag-Along Offer shall be deemed to be a material change only if such increase is more than 2% and (ii) any decrease to the price payable in connection with any Tag-Along Offer shall be deemed to be a material change. |
12B. ADDITIONAL CONDITIONS TO TAG-ALONG SALES
Notwithstanding anything contained in Bye-laws 12A to the contrary, the rights and obligations of Members to participate in a Tag-Along Sale are subject to the following additional conditions:
12B.1 Upon the consummation of such sale, except for the reduction in purchase price to reflect the exercise price of any options, warrants and other rights being sold, all of the Members participating therein will receive the same form and amount of consideration per share, or, if any Members are given an option as to the form and amount of consideration to be received, all Members participating therein will be given the same option. 12B.2 No person shall be obligated to pay any expenses incurred in connection with any unconsummated sale and each participating Member shall be obligated to pay only its pro rata share (based on the number of Company Securities Transferred) of expenses incurred in connection with a consummated sale to the extent such expenses are incurred for the benefit of all Members and are not otherwise paid by the Company or another person. 12B.3 Each Tagging Person shall (i) make such representations and warranties and covenants and enter into such definitive agreements as are customary for transactions of the nature of the proposed Transfer and as are consistent with, or no less favorable to the seller than, those applicable to the applicable seller, (ii) be subject to all of the same provisions of the definitive agreements as the applicable seller and (iii) be required to bear their proportionate share of any escrows, holdbacks or adjustments in purchase price. |
13. TRANSMISSION OF REGISTERED SHARES
13.1 In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member's interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by such deceased Member with other persons.
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13.2 Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient.
13.3 On the presentation of the foregoing to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member. Notwithstanding the foregoing, the Board shall, in any case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member's death or bankruptcy, as the case may be.
13.4 Where two or more persons are registered as joint holders of a share or shares, then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.
ALTERATION OF SHARE CAPITAL
14. POWER TO ALTER CAPITAL
14.1 The Company may if authorised by resolution of the Members increase, divide, consolidate, subdivide, change the currency denomination of, diminish or otherwise alter or reduce its share capital in any manner permitted by the Law.
14.2 Where, on any alteration or reduction of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit.
15. VARIATION OF RIGHTS ATTACHING TO SHARES
If, at any time, the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound up, be varied with the consent in writing of all the holders issued shares of that class or with the sanction of a resolution passed by a majority of the votes cast at a separate general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class or series, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
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DIVIDENDS AND CAPITALISATION
16. DIVIDENDS
16.1 The Board may, subject to these Bye-laws and in accordance with the Law, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets. No unpaid dividend shall bear interest as against the Company.
16.2 The Board may fix any date as the record date for determining the Members entitled to receive any dividend.
16.3 The Company may pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.
16.4 The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company. No unpaid distribution shall bear interest as against the Company.
17. POWER TO SET ASIDE PROFITS
The Board may, before declaring a dividend, set aside out of the surplus or profits of the Company, such sum as it thinks proper as a reserve to be used to meet contingencies or for equalising dividends or for any other purpose.
18. METHOD OF PAYMENT
18.1 Any dividend, interest or other monies payable in cash in respect of the shares may be paid by cheque or draft sent through the post directed to the Member at such Member's address in the Register of Members, or to such person and to such address as the holder may in writing direct.
18.2 In the case of joint holders of shares, any dividend, interest or other monies payable in cash in respect of shares may be paid by cheque or draft sent through the post directed to the address of the holder first named in the Register of Members, or to such person and to such address as the joint holders may in writing direct. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares.
18.3 The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company on account of calls or otherwise.
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19. CAPITALISATION
19.1 The Board may resolve to capitalise any sum for the time being standing to the credit of any of the Company's share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro rata to the Members.
19.2 The Board may resolve to capitalise any sum for the time being standing to the credit of a reserve account or sums otherwise available for dividend or distribution by applying such amounts in paying up in full partly paid or nil paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or distribution.
MEETINGS OF MEMBERS
20. ANNUAL GENERAL MEETINGS
The Company shall in each year hold a general meeting as its annual general meeting. The annual general meeting of the Company may be held at such time and place as the Chairman or the Board shall appoint.
21. SPECIAL GENERAL MEETINGS
21.1 General meetings other than annual general meetings shall be called special general meetings.
21.2 The Chairman or any two Directors who are Directors at the time these Amended and Restated Bye-laws first become effective, or a majority of the Board may convene a special general meeting of the Company whenever in their judgment such a meeting is necessary.
21.3 Class or series meetings and class or series votes may be called at the direction of the Board.
22. NOTICE
22.1 At least five Business Days' notice of an annual general meeting shall be given to each Member entitled to attend and vote thereat, stating the date, place and time at which the meeting is to be held and the other business to be conducted at the meeting.
22.2 At least five Business Days' notice of a special general meeting shall be given to each Member entitled to attend and vote thereat, stating the date, place and time at which the meeting is to be held and the general nature of the business to be considered at the meeting.
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22.3 The Board may fix any date as the record date for determining the Members entitled to receive notice of and to vote at any general meeting of the Company but, unless so fixed, as regards the entitlement to receive notice of a meeting or notice of any other matter, the record date shall be the date of dispatch of the notice and, as regards the entitlement to vote at a meeting, and any adjournment thereof, the record date shall be the date of the original meeting.
22.4 A general meeting of the Company shall, notwithstanding that it is called on shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to attend and vote thereat in the case of a special general meeting.
22.5 The accidental omission to give notice of a general meeting to, or the non-receipt of a notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.
23. GIVING NOTICE
23.1 A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member's address in the Register of Members or to such other address given for the purpose. For the purposes of this Bye-law, a notice may be sent by letter mail, courier service, cable, telex, telecopier, facsimile, electronic mail or other mode of representing words in a legible form.
23.2 Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares.
23.3 Any notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission (which shall be deemed to be two calendar days from deposit in the case of mail) and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or to the cable company or transmitted by telex, facsimile, electronic mail, or such other method, as the case may be.
24. POSTPONEMENT OF GENERAL MEETING
The Board may postpone any general meeting called in accordance with the provisions of these Bye-laws provided that notice of postponement is given to each Member before the time for such meeting. Fresh notice of the date, time and place for the postponed
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meeting shall be given to each Member in accordance with the provisions of these Bye-laws.
25. PARTICIPATING IN MEETINGS BY TELEPHONE
Members may participate in any general meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.
26. QUORUM AT GENERAL MEETINGS
26.1 At any general meeting of the Company two or more persons present in person and representing in person or by proxy in excess of 50% of the total issued voting shares in the Company throughout the meeting shall form a quorum for the transaction of business; provided that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting of the Company held during such time.
26.2 If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Board may determine.
27. CHAIRMAN TO PRESIDE
Unless otherwise agreed by a majority of those attending and entitled to vote thereat, the Chairman, if there be one, shall act as chairman at all meetings of the Members at which such person is present. In his absence a chairman shall be appointed or elected by those present at the meeting and entitled to vote.
28. VOTING ON RESOLUTIONS
28.1 Subject to the provisions of the Law and these Bye-laws, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the provisions of these Bye-laws and in the case of an equality of votes the resolution shall fail.
28.2 No Member shall be entitled to vote at a general meeting unless such Member has paid all the calls on all shares held by such Member.
28.3 At any general meeting every Member present in person and every person holding a valid proxy at such meeting shall be entitled to one vote per share, subject to Bye-laws 4.1(a) and 4.3, on each resolution put to the vote of the meeting.
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28.4 At any general meeting if an amendment shall be proposed to any resolution under consideration and the chairman of the meeting shall rule on whether the proposed amendment is out of order, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling.
28.5 At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to the provisions of these Bye-laws, be conclusive evidence of that fact.
29. INSTRUMENT OF PROXY
29.1 An instrument appointing a proxy shall be in writing or transmitted by electronic mail in such form as the chairman of the meeting shall accept.
29.2 The instrument of proxy shall be signed or, in the case of a transmission by electronic mail, electronically signed in a manner acceptable to the chairman of the meeting, by the appointor or by the appointor's attorney duly authorised in writing, or if the appointor is a corporation, either under its seal or signed or, in the case of a transmission by electronic mail, electronically signed in a manner acceptable to the chairman, by a duly authorised officer or attorney.
29.3 A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf.
29.4 The decision of the chairman of any general meeting as to the validity of any appointment of a proxy shall be final.
30. REPRESENTATION OF CORPORATE MEMBER
30.1 A corporation which is a Member may, by written instrument, authorise such person or persons as it thinks fit to act as its representative at any meeting of the Members and any person so authorised shall be entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member, and that Member shall be deemed to be present in person at any such meeting attended by its authorised representative or representatives.
30.2 Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he thinks fit as to the right of any person to attend and vote at general meetings on behalf of a corporation which is a Member.
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31. ADJOURNMENT OF GENERAL MEETING
The chairman of a general meeting may, with the consent of a majority in voting power of the Members at any general meeting at which a quorum is present, and shall if so directed, adjourn the meeting. Unless the meeting is adjourned to a specific date, place and time announced at the meeting being adjourned, fresh notice of the date, place and time for the resumption of the adjourned meeting shall be given to each Member entitled to attend and vote thereat in accordance with the provisions of these Bye-laws.
32. WRITTEN RESOLUTIONS
32.1 Subject to the following, anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members may, without a meeting and without any previous notice being required, be done by resolution in writing signed by, or in the case of a Member that is a corporation whether or not a company within the meaning of the Law, on behalf of, all the Members who at the date of the resolution would be entitled to attend the meeting and vote on the resolution.
32.2 A resolution in writing may be signed by, or in the case of a Member that is a corporation whether or not a company within the meaning of the Law, on behalf of, all the Members, or all the Members of the relevant class thereof, in as many counterparts as may be necessary.
32.3 A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, and any reference in any Bye-law to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.
32.4 A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of the Law.
32.5 This Bye-law shall not apply to:
(a) a resolution passed to remove an Auditor from office before the expiration of his term of office; or
(b) a resolution passed for the purpose of removing a Director before the expiration of his term of office.
32.6 For the purposes of this Bye-law, the date of the resolution is the date when the resolution is signed by, or in the case of a Member that is a corporation whether or not a company within the meaning of the Law, on behalf of, the last Member to sign and any reference in any Bye-law to the date of passing of a resolution is, in
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relation to a resolution made in accordance with this Bye-law, a reference to such date.
33. DIRECTORS ATTENDANCE AT GENERAL MEETINGS
The Directors of the Company shall be entitled to receive notice of, attend and be heard at any general meeting.
DIRECTORS AND OFFICERS
34. ELECTION OF DIRECTORS
34.1 The Board shall be elected or appointed in the first place at the statutory meeting of the Company and thereafter, except in the case of a casual vacancy and except as otherwise provided in Bye-law 36, at the annual general meeting or at any special general meeting called for that purpose.
34.2 The Directors may from time to time appoint any person to be a Director to fill a vacancy. A Director so elected or appointed shall hold office until such Director's office is otherwise vacated and shall serve within the same class of Directors as the predecessor.
34.3 At any election of Directors, nominees shall be elected by a plurality of the votes cast.
35. NUMBER OF DIRECTORS
The Board shall consist of not less than nine and not more than twelve Directors (as determined by resolution of the Board), with the number of Directors to be determined from time to time by resolution adopted by the affirmative vote of at least a two-thirds majority of the Board then in office; provided, however, that, if no such resolution shall be in effect, the Board shall consist of eleven Directors. Any increase in the size of the Board pursuant to this Bye-law 35 may be filled in accordance with Bye-law 34.2 hereof.
36. TERM OF OFFICE OF DIRECTORS
At the time when these Bye-laws come into effect, the Directors shall be divided into three classes designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of Directors constituting the entire Board. The Directors in each class shall serve as follows: (i) the Class I Directors shall initially serve a one year term of office (expiring at the annual general meeting of Shareholders for 2008), (ii) the Class II Directors shall initially serve a two year term of office (expiring at the annual general meeting of Shareholders in 2009), (iii) the Class III Directors shall initially serve a three year term of office (expiring at the annual general meeting of Shareholders in 2010) and (iv) in each case the successors to each class of Directors who retire at an annual general meeting shall retire at the next or subsequent an-
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nual general meeting following the third anniversary of such retirement. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any additional Director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director. A Director shall hold office until the annual general meeting of Shareholders for the year in which his term expires, subject to his office being vacated pursuant to Bye-law 34, 37 or 38. Notwithstanding the foregoing, each Director shall hold office until such Director's successor shall have been duly elected or until such Director is removed from office pursuant to Bye-law 37 or 38 or such Director's office is otherwise vacated.
37. REMOVAL OF DIRECTORS
37.1 The Shareholders may, at any annual general or special general meeting convened and held in accordance with these Bye-laws, remove a Director before the stated expiry of his term only for Cause by the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the votes cast in accordance with the provisions of these Bye-laws; provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served upon such Director not less than 14 days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director's removal without prejudice to Bye-law 32.
37.2 A vacancy on the Board created by the removal of a Director under the provisions Bye-law 37.1 may be filled by the Shareholders by the affirmative vote of Shareholders holding at least a majority of the total combined voting power of all of the issued and outstanding shares of the Company at the meeting at which such Director is removed and, in the absence of such election or appointment, the Board may fill the vacancy. A Director so elected or appointed shall hold office until such Director's office is otherwise vacated and shall serve within the same class of Directors as the predecessor.
37.3 The Board may, at any meeting of the Board convened and held in accordance with these Bye-laws, remove a Director before the stated expiry of his term only for Cause by a resolution of the Board carried by the affirmative vote of at least a two-thirds majority of the Board then in office.
38. VACANCY IN THE OFFICE OF DIRECTOR
The office of Director shall be vacated if the Director:
(a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law;
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(b) is or becomes bankrupt, or makes any arrangement or composition with his creditors generally;
(c) is or becomes of unsound mind or an order for his detention is made under the applicable laws of Bermuda or any analogous law of a jurisdiction outside Bermuda, or dies; or
(d) resigns his office by notice in writing to the Company.
39. REMUNERATION OF DIRECTORS
The remuneration (if any) of the Directors shall, subject to any direction that may be given by the Company in general meeting, be determined by the Directors as they may from time to time determine and shall be deemed to accrue from day to day. The Directors may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from the meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally.
40. DEFECT IN APPOINTMENT OF DIRECTOR
All acts done in good faith by the Board or by a committee of the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.
41. DIRECTORS TO MANAGE BUSINESS
The business of the Company shall be managed and conducted by the Board. In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by the Law or by these Bye-laws, required to be exercised by the Company in general meeting subject, nevertheless, to these Bye-laws, the provisions of the Law and to such directions as may be prescribed by the Company in general meeting.
42. POWERS OF THE BOARD OF DIRECTORS
Without limiting the generality of Bye-law 41, subject to the limitations set forth therein, the Board may:
(a) appoint, suspend or remove any manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties;
(b) exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether out-
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right or as security for any debt, liability or obligation of the Company or any third party;
(c) appoint one or more Directors to the office of managing director or chief executive officer of the Company, who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company;
(d) appoint a person to act as manager of the Company's day-to-day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business;
(e) by power of attorney, appoint any company, firm, person or
body of persons, whether nominated directly or indirectly by
the Board, to be an attorney of the Company for such
purposes and with such powers, authorities and discretions
(not exceeding those vested in or exercisable by the Board)
and for such period and subject to such conditions as it may
think fit and any such power of attorney may contain such
provisions for the protection and convenience of persons
dealing with any such attorney as the Board may think fit
and may also authorise any such attorney to sub-delegate all
or any of the powers, authorities and discretions so vested
in the attorney. Such attorney may, if so authorised under
the seal of the Company, execute any deed or instrument
under such attorney's personal seal with the same effect as
the affixation of the seal of the Company;
(f) procure that the Company pays all expenses incurred in promoting and incorporating the Company;
(g) delegate any of its powers (including the power to sub-delegate) to a committee of one or more Directors appointed by the Board and every such committee shall conform to such directions as the Board shall impose on them. Subject to any directions or regulations made by the Board for this purpose, the meetings and proceedings of any such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, including provisions for written resolutions;
(h) present any petition and make any application in connection with the liquidation or reorganisation of the Company;
(i) in connection with the issue of any share, pay such commission and brokerage as may be permitted by law; and
(j) authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument on behalf of the Company.
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43. REGISTER OF DIRECTORS AND OFFICERS
The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Law.
44. OFFICERS
The Officers shall consist of Chief Executive Officer, President, Chief Financial Officer, Secretary and such additional Officers as the Board may determine all of whom shall be deemed to be Officers for the purposes of these Bye-laws.
45. APPOINTMENT OF OFFICERS
The Chief Executive Officer, President, Chief Financial Officer, Secretary (and additional Officers, if any) shall be appointed by the Board from time to time.
46. DUTIES OF OFFICERS
The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.
47. REMUNERATION OF OFFICERS
The Officers shall receive such remuneration as the Board may determine.
48. CONFLICTS OF INTEREST
48.1 Any Director, or any Director's firm, partner or any company with whom any Director is associated, may act in any capacity for, be employed by or render services to the Company and such Director or such Director's firm, partner or company shall be entitled to remuneration as if such Director were not a Director. Nothing herein contained shall authorise a Director or Director's firm, partner or company to act as Auditor to the Company.
48.2 A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company or any of its subsidiaries shall declare the nature of such interest to the Board, whether or not such declaration is required by law.
48.3 Following a declaration being made pursuant to this Bye-law 48.3, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested and may be counted in the quorum for such meeting.
VALIDUS HOLDINGS, LTD.
49. INDEMNIFICATION AND EXCULPATION OF DIRECTORS AND OFFICERS
(a) The Company shall, in the case of Directors and Officers, and may (in the discretion of the Board) in the case of employees and agents, indemnify, in accordance with and to the full extent now or hereafter permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the Company), by reason of his acting in such capacity or his acting in any other capacity for, or on behalf of, the Company, against any liability or expense actually and reasonably incurred by such person in respect thereof. The Company shall, in the case of Directors and Officers, and may, in other cases, advance the expenses of defending any such act, suit or proceeding in accordance with and to the full extent now or hereafter permitted by law;
(b) The Board may authorise the Company to purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, or in a fiduciary or other capacity with respect to any employee benefit plan maintained by the Company, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of this Bye-law 49;
(c) Directors and Officers of the Company shall have no personal liability to the Company or its Members for any action or failure to act to the fullest extent for which they are indemnified hereunder; and
(d) The indemnification, expense reimbursement and other provisions provided by this Bye-law 49 shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of Members or Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
49A. WAIVER OF CLAIM BY MEMBERS
Each Member agrees (to the fullest extent it may lawfully do so) to waive any claim or right of action such Member might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action in the performance of his duties with or for the Company; provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer.
VALIDUS HOLDINGS, LTD.
49B. DIRECTORS OF CERTAIN SUBSIDIARIES
With respect to any direct or indirect wholly-owned subsidiary of the Company that is not a U.S. corporation or that is not treated as a pass-through or disregarded entity for U.S. federal income tax purposes (together, the "Designated Companies"), unless otherwise designated by the Board (i) the board of directors of each such Designated Company shall consist, from and after the time such entity becomes a wholly-owned subsidiary, of the persons who have been elected by the Members by resolution in general meeting or by written resolution as Designated Company Directors and (ii) the Members by resolution in general meeting or by written resolution may designate the persons to be removed as directors of such Designated Company (the "Removed Company Directors").
Notwithstanding the general authority set out in Bye-law 41, the Board shall vote all shares owned by the Company in each Designated Company (i) to elect the Designated Company Directors as the directors of such Designated Company and to remove the Removed Company Directors as directors of such Designated Company, and (ii) to ensure that the constitutional documents of such Designated Company require such Designated Company Directors to be elected and such Removed Company Directors to be removed as provided in this Bye-law 49B. The Board and the Company shall ensure that the constitutional documents of each such Designated Company shall effectuate or implement this Bye-law 49B. The Company shall also enter into agreements with each such Designated Company to effectuate or implement this Bye-law 49B and take such other actions as are necessary to effectuate or implement this Bye-law 49B.
MEETINGS OF THE BOARD OF DIRECTORS
50. BOARD MEETINGS
The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit. A resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail.
51. NOTICE OF BOARD MEETINGS
Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally (in person or by telephone) or otherwise communicated or sent to such Director by post, cable, telex, telecopier, facsimile, electronic mail or other mode of representing words in a legible form at such Director's last known address or any other address given by such Director to the Company for this purpose.
VALIDUS HOLDINGS, LTD.
52. PARTICIPATION IN MEETINGS BY TELEPHONE
Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.
53. QUORUM AT BOARD MEETINGS
The quorum necessary for the transaction of business at a meeting of the Board shall be a majority of Directors then in office, either present in person or represented by a duly authorised representative appointed in accordance with the Law.
54. BOARD TO CONTINUE IN THE EVENT OF VACANCY
The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or Director may act for the purpose of (i) summoning a general meeting of the Company; or (ii) preserving the assets of the Company.
55. CHAIRMAN TO PRESIDE
The Chairman, if there be one, shall act as chairman at all meetings of the Board at which such person is present. In his absence a chairman shall be appointed or elected by the Directors present at the meeting.
56. WRITTEN RESOLUTIONS
A resolution signed by all the Directors, which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be effective on the date on which the last Director signs the resolution.
57A. DISSENT OF DIRECTORS
A Director of the Company who is present at a meeting of the Board at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the Minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the secretary of the meeting before the termination thereof or shall forward such dissent by registered mail to the Secretary of the Company immediately after the termination of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action.
VALIDUS HOLDINGS, LTD.
57. VALIDITY OF PRIOR ACTS OF THE BOARD
No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made.
CORPORATE RECORDS
58. MINUTES
The Board shall cause minutes to be duly entered in books provided for the purpose:
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and
(c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board, meetings of managers and meetings of committees appointed by the Board.
59. FORM AND USE OF SEAL
59.1 The seal of the Company shall be in such form as the Board may determine. The Board may adopt one or more duplicate seals for use in or outside Bermuda.
59.2 The seal of the Company shall not be affixed to any instrument except attested by the signature of (i) a Director and the Secretary; or (ii) any two Directors; or (iii) any person appointed by the Board for that purpose, provided that any Director, Officer or Resident Representative may affix the seal of the Company attested by such Director, Officer or Resident Representative's signature to any authenticated copies of these Bye-laws, the incorporating documents of the Company, the minutes of any meetings or any other documents required to be authenticated by such Director, Officer or Resident Representative.
ACCOUNTS
60. BOOKS OF ACCOUNT
The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:
(a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;
(b) all sales and purchases of goods by the Company; and
(c) all assets and liabilities of the Company.
VALIDUS HOLDINGS, LTD.
61. FINANCIAL YEAR END
The financial year end of the Company shall be the 31st December in each year but, subject to any direction of the Company in general meeting, the Board may from time to time prescribe some other period to be the financial year; provided that the Board may not without the sanction of an ordinary resolution prescribe or allow any financial year longer than eighteen months.
AUDITS
62. AUDIT
The accounts of the Company shall be audited at least once in every year.
63. APPOINTMENT OF AUDITORS
63.1 Subject to the Law, the Company shall in general meeting appoint Auditors to hold office for such period as the Members may determine.
63.2 Whenever there are no Auditors appointed as aforesaid or a usual vacancy occurs in the office of the Auditors, the Directors may appoint Auditors to hold office for such period as the Directors may determine subject to earlier removal from office by the Company in general meeting.
63.3 The Auditor may be a Member but no Director, Officer or employee of the Company shall, during his continuance in office, be eligible to act as an Auditor of the Company.
64. REMUNERATION OF AUDITORS
Unless fixed by the Company in general meeting the remuneration of the Auditor shall be as determined by the Directors.
65. DUTIES OF AUDITOR
The Auditor shall make a report to the Members on the accounts examined by him and on every set of financial statements examined by him.
66. DISTRIBUTION OF AUDITOR'S REPORT
The Auditor's report, if any, shall be laid before the Company in general meeting and circulated to Members, no less than 90 days after the end of the financial year.
VALIDUS HOLDINGS, LTD.
67. DISTRIBUTION OF FINANCIAL STATEMENTS AND DIRECTORS' REPORT
The financial statements and Directors' report shall be laid before the Company in general meeting and circulated to Members, no later than 90 days after the end of the financial year.
The Company shall use commercially reasonable efforts to provide promptly to each Member such information as may be reasonably requested by such Member (x) to enable such Member to comply with the accounting and disclosure requirements of the US Securities and Exchange Commission, as in effect from time to time, and (y) as is required to complete its US Federal income tax or information returns.
VOLUNTARY WINDING-UP AND DISSOLUTION
68. WINDING-UP
68.1 The Company may be voluntarily wound up, liquidated or dissolved (or engage in any comparable transaction) by a special resolution of the Members.
68.2 If the Company shall be wound up the liquidator may, with the sanction of a special resolution, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in the trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.
CHANGES TO CONSTITUTION
69. CHANGES TO BYE-LAWS
Subject to the Law, the conditions contained in the Memorandum of Association or these Bye-laws, the Company may alter or add to the Bye-laws by a resolution of the Board and by a resolution of holders of a majority in voting power of the aggregate voting power of the Common Stock.
70. CHANGES TO THE MEMORANDUM OF ASSOCIATION
Subject to the Law, the Company may from time to time by a resolution of the Board and by a resolution of holders of a majority in voting power of the aggregate voting power of the Common Stock alter the Memorandum of Association with respect to any objects, powers or other matters specified therein.
VALIDUS HOLDINGS, LTD.
71. DISCONTINUANCE
The Board may, subject to an ordinary resolution, exercise all the powers of the Company to transfer by way of continuation the Company to a named country or jurisdiction outside of Bermuda pursuant to the Law.
Exhibit 10.18
AMENDED AND RESTATED
VALIDUS HOLDINGS, LTD.
2005 LONG TERM INCENTIVE PLAN
1. Purposes.
The purposes of the Amended and Restated 2005 Long Term Incentive Plan are to advance the interests of Validus Holdings, Ltd. and its shareholders by providing a means to attract, retain, and motivate employees, consultants and directors of Validus Holdings, Ltd., its subsidiaries and affiliates, to provide for competitive compensation opportunities, to encourage long term service, to recognize individual contributions and reward achievement of performance goals, and to promote the creation of long term value for shareholders by aligning the interests of such persons with those of shareholders.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) "Affiliate" means any entity other than the Company and its Subsidiaries that is designated by the Board or the Committee as a participating employer under the Plan; provided, however, that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other Share-Based Award granted to an Eligible Person under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have been designated by an Eligible Person in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under this Plan upon the death of the Eligible Person, or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means consummation of (i) a sale of
all or substantially all of the consolidated assets of the Company and its
Subsidiaries to a person who is not either a member of, or an affiliate of a
member of, the Initial Investor Group (as defined below); or (ii) a sale by the
Company, one or more members of the Initial Investor Group or any of their
respective affiliates resulting in more than 50% of the voting stock of the
Company ("Voting Shares") being held by a person or group (as such terms are
used in the Exchange Act) that does not include any member of the Initial
Investor Group or any of their respective affiliates; or (iii) a merger or
consolidation of the Company into another person as a result of which a person
or group acquires more than 50% of the Voting Shares of the Company that does
not include any member of, or an affiliate of a member of, the Initial Investor
Group; provided, however, that a Change in Control shall occur if and only if
after any such event listed in (i)-(iii) above the Initial Investor Group is
unable to elect a majority of the board of directors (or other governing body
equivalent thereto) of the entity that purchased the assets in the case of an
event described in (i) above, the Company in the case of an event described in
(ii) above, or the resulting entity in the case of an event described in (iii)
above, as the case may be. The "Initial Investor Group" shall mean (i) Aquiline
Financial Services Fund L.P., and (ii) the other Investors under Subscription
Agreements with the Company dated December 9, 2005.
(g) "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.
(h) "Committee" means the Compensation Committee of the Board, or such other Board committee (which may include the entire Board) as may be designated by the Board to administer the Plan.
(i) "Company" means Validus Holdings, Ltd., a corporation organized under the laws of Bermuda, or any successor corporation.
(j) "Director" means a member of the Board who is not an employee of the Company, a Subsidiary or an Affiliate.
(k) "Dividend Equivalent" means a right, granted under Section
5(g), to receive cash, Shares, or other property equal in value to dividends
paid with respect to a specified number of Shares. Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award, and may be
paid currently or on a deferred basis.
(l) "Effective Date" has the meaning set forth in Section 7(k) below.
(m) "Eligible Person" means (i) an employee or consultant of the Company, a Subsidiary or an Affiliate, including any director who is an employee, or (ii) a Director.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder.
(o) "Fair Market Value" means, with respect to Shares or other property on a day, the fair market value of such Shares or other property determined by such methods or procedures as shall be established from time to time by the Committee. If the Shares are listed on any established stock exchange or a national market system, unless otherwise determined by the Committee in good faith, the Fair Market Value of Shares on a day shall mean the closing price per Share on the day (or, if the Shares were not traded on that day, the next preceding day that the Shares were traded) on the principal exchange or market system on which the Shares are traded, as such prices are officially quoted on such exchange.
(p) "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.
(q) "NQSO" means any Option that is not an ISO.
(r) "Offering" has the meaning set forth in the Offering Memorandum relating to Company equity dated October 13, 2005, as supplemented.
(s) "Option" means a right, granted under Section 5(b), to purchase Shares.
(t) "Other Share-Based Award" means a right, granted under
Section 5(h), that relates to or is valued by reference to Shares.
(u) "Participant" means an Eligible Person who has been granted an Award under the Plan.
(v) "Performance Share" means a performance share granted under Section 5(f).
(w) "Performance Unit" means a performance unit granted under
Section 5(f).
(x) "Plan" means this Amended and Restated 2005 Long Term Incentive Plan.
(y) "Restricted Shares" means an Award of Shares under Section 5(d) that may be subject to certain restrictions and to a risk of forfeiture.
(z) "Restricted Share Unit" means a right, granted under
Section 5(e), to receive Shares or cash at the end of a specified deferral
period.
(aa) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
(bb) "SAR" or "Share Appreciation Right" means the right, granted under Section 5(c), to be paid an amount measured by the difference between the exercise price of the right and the Fair Market Value of Shares on the date of exercise of the right, with payment to be made in cash, Shares, or property as specified in the Award or determined by the Committee.
(cc) "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.
(dd) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns shares possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
(ee) "Termination of Service" means, unless otherwise defined in an applicable Award Agreement, the termination of the Participant's employment, consulting services or directorship with the Company, its Subsidiaries and its Affiliates, as the case may be. A Participant employed by a Subsidiary of the Company or one of its Affiliates shall also be deemed to incur a Termination of Service if the Subsidiary of the Company or Affiliate ceases to be such a Subsidiary or an Affiliate, as the case may be, and the Participant does not immediately thereafter become an employee or director of, or a consultant to, the Company, another Subsidiary of the Company or an Affiliate. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries and Affiliates shall not be considered a Termination of Service. If the Participant has a written employment agreement with the Company, a Subsidiary or Affiliate that defines "Date of Termination", unless otherwise determined by the Committee, the Participant shall be treated as having terminated employment for purposes of this Plan on the Date of Termination.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the Committee, and the Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:
(i) to select Eligible Persons to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each Eligible Person;
(iv) to determine the type and number of Awards to be granted, the number of Shares to which an Award may relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price, or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, exercisability, or settlement of an Award, and waiver or accelerations thereof, and waivers of performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award;
(v) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what circumstances cash, Shares, other Awards, or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee, or at the election of the Eligible Person;
(vii) to prescribe the form of each Award Agreement, which need not be identical for each Eligible Person;
(viii) to adopt, amend, suspend, waive, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder;
(x) to accelerate the exercisability or vesting of all or any portion of any Award or to extend the period during which an Award is exercisable;
(xi) to determine whether uncertificated Shares may be used in satisfying Awards and otherwise in connection with the Plan; and
(xii) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall have sole discretion in exercising its authority under the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive, and binding on all persons, including the Company, Subsidiaries, Affiliates, Eligible Persons, any person claiming any rights under the Plan from or through any Eligible Person, and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to other members of the Board or officers or managers of the Company or any Subsidiary or Affiliate the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to Awards granted to persons not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b-3 (if applicable) and applicable law.
(c) Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any Subsidiary or Affiliate, the Company's independent certified public accountants, or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, and no officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.
(d) No Option or SAR Repricing Without Shareholder Approval. Except as provided in the first sentence of Section 4(b) hereof relating to certain antidilution adjustments, unless the approval of shareholders of the Company is obtained, Options and SARs issued under the Plan shall not be amended to lower their exercise price, Options and SARs issued under the Plan will not be exchanged for other Options or SARs with lower exercise prices, and no other action shall be taken with respect to Options or SARs that would be treated as a repricing under the rules of the principal stock exchange on which the Shares are listed.
(e) Limitation on Committee's Authority under 409A. Anything in this Plan to the contrary notwithstanding, the Committee's authority to modify outstanding Awards shall be limited to the extent necessary so that the existence of such authority does not (i) cause an Award that is not otherwise deferred compensation subject to Section 409A of the Code to become deferred compensation subject to Section 409A of the Code or (ii) cause
an Award that is otherwise deferred compensation subject to Section 409A of the Code to fail to meet the requirements prescribed by Section 409A of the Code.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(b) hereof,
(i) the total number of Shares reserved for issuance in connection with Awards
under the Plan shall be _______________,1 and (ii) the total number of Shares
which may be issued under ISOs granted under the Plan shall be 15,000,000. No
Award may be granted if the number of Shares to which such Award relates, when
added to the number of Shares previously issued under the Plan, exceeds the
number of Shares reserved for issuance under the Plan in clause (i) of the
preceding sentence. If any Awards are forfeited, canceled, terminated, exchanged
or surrendered or such Award is settled in cash or otherwise terminates without
a distribution of Shares to the Participant, any Shares counted against the
number of Shares reserved and available under the Plan with respect to such
Award shall, to the extent of any such forfeiture, settlement, termination,
cancellation, exchange or surrender, again be available for Awards under the
Plan. Upon the exercise of any Award granted in tandem with any other Awards,
such related Awards shall be canceled to the extent of the number of Shares as
to which the Award is exercised.
(b) In the event that the Committee shall determine that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, extraordinary distribution, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Eligible Persons under the Plan, then the Committee shall make such equitable changes or adjustments as it deems appropriate and, in such manner as it may deem equitable, (i) adjust any or all of (x) the number and kind of shares which may thereafter be issued under the Plan, (y) the number and kind of shares, other securities or other consideration issued or issuable in respect of outstanding Awards, and (z) the exercise price, grant price, or purchase price relating to any Award or (ii) provide for a distribution of cash or property in respect of any Award; provided, however, in each case that, with respect to ISOs, such adjustment shall be made in accordance with Section 424(a) of the Code, unless the Committee determines otherwise; provided further, however, that no adjustment shall be made pursuant to this Section 4 that causes any Award to be
treated as deferred compensation pursuant to Section 409A of the Code. If an extraordinary cash dividend is declared and paid on Shares after the grant of an Option or SAR and before the exercise of the Option or SAR, unless otherwise expressly provided in an applicable Award Agreement, the holder of the Option or SAR will have a right to receive an amount equal to the amount of the dividend per Share times the number of Shares subject to the Option or SAR; provided , however, that, unless otherwise determined by the Committee, no amount will be paid in respect of an Option or SAR unless and until the Option or SAR (or the portion thereof on which the amount is paid) has vested, and it is intended that the dividend right will otherwise be structured to comply with Section 409A of the Code, to the extent applicable. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria and performance objectives, if any, included in, Awards in recognition of unusual or non-recurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, or in response to changes in applicable laws, regulations, or accounting principles.
(c) In the event that the Company is a party to a merger or consolidation or a Change in Control shall occur, outstanding Awards shall be subject to the agreement of merger or consolidation or other applicable transaction agreement. Such agreement, without the Participants' consent, may provide for: (i) continuation or assumption of such outstanding Awards under the Plan by the Company (if it is the surviving corporation) or by the surviving corporation or its parent; (ii) substitution by the surviving corporation or its parent of awards with substantially the same terms for such outstanding Awards (and, if the Company is not a publicly traded entity, substitution of shares with equity of the surviving corporation or its parent with substantially the same terms as the outstanding Shares); (iii) acceleration of the vesting of or right to exercise such outstanding Awards immediately prior to or as of the date of the merger or consolidation or Change in Control, and the expiration of such outstanding Awards to the extent not timely exercised by the date of the merger, consolidation, Change in Control or other date thereafter designated by the Board; or (iv) cancellation of all or any portion of the outstanding Awards by a cash payment of the excess, if any, of the Fair Market Value of the shares subject to such outstanding Awards or portion thereof being canceled over the aggregate exercise price, if any, with respect to such Awards or portion thereof being canceled.
(d) Any Shares distributed pursuant to an Award 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. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth in this Section 5. In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to Section 7(d)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms regarding forfeiture of Awards or continued exercisability of Awards in the event of Termination of Service by the Eligible Person.
(b) Options. The Committee is authorized to grant Options, which may be NQSOs or ISOs, to Eligible Persons on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an Option shall be determined by the Committee; provided, however, that the exercise price per Share shall not be less than the Fair Market Value per Share on the date of grant.
(ii) Option Term. The term of each Option shall be determined by the Committee; provided, however, that such term shall not be longer than ten years from the date of grant of the Option.
(iii) Time and Method of Exercise. The Committee shall determine at the date of grant or thereafter the time or times at which an Option may be exercised in whole or in part (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), the methods by which such exercise price may be paid or deemed to be paid (including, without limitation, broker-assisted exercise arrangements), the form of such payment (including, without limitation, cash, Shares, notes or other property), and the methods by which Shares will be delivered or deemed to be delivered to Eligible Persons.
(iv) Early Exercise. The Committee may provide at the time of grant or any time thereafter, in its sole discretion, that any Option shall be exercisable with respect to Shares that otherwise would not then be exercisable, provided that, in connection with such exercise, the Participant enters into a form of Restricted Share agreement approved by the Committee with respect to the Shares received on exercise.
(v) ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not limited to the requirement that the ISO shall be granted within ten years from the earlier of the date of adoption or shareholder approval of the Plan. ISOs may only be granted to employees of the Company or a Subsidiary.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation Rights) to Eligible Persons on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Eligible Person to whom it is granted a right to receive with respect to each Share subject thereto, upon exercise thereof, the excess of (1) the Fair Market Value of one Share on the date of exercise
over (2) the exercise price per Share of the SAR, as determined by the Committee as of the date of grant of the SAR (which shall not be less than the Fair Market Value per Share on the date of grant.
(ii) Other Terms. The Committee shall determine, at the time of grant, the time or times at which a SAR may be exercised in whole or in part (which shall not be more than ten years after the date of grant of the SAR), the method of exercise, method of settlement, form of consideration payable in settlement, method by which Shares will be delivered or deemed to be delivered to Eligible Persons, whether or not a SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR. Unless the Committee determines otherwise, a SAR (1) granted in tandem with an NQSO may be granted at the time of grant of the related NQSO or at any time thereafter and (2) granted in tandem with an ISO may only be granted at the time of grant of the related ISO.
(d) Restricted Shares. The Committee is authorized to grant Restricted Shares to Eligible Persons on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances (including, without limitation, upon achievement of performance criteria if deemed appropriate by the Committee), in such installments, or otherwise, as the Committee may determine. Except to the extent restricted under the Award Agreement relating to the Restricted Shares, an Eligible Person granted Restricted Shares shall have all of the rights of a shareholder including, without limitation, the right to vote Restricted Shares and the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, at the date of grant or thereafter, upon Termination of Service during the applicable restriction period, Restricted Shares and any accrued but unpaid dividends or Dividend Equivalents that are at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Shares will be waived in whole or in part in the event of Termination of Service resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Shares are registered in the name of the Eligible Person, such cer-
tificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Shares, and, unless otherwise determined by the Committee, the Company shall retain physical possession of the certificate and the Participant shall deliver a stock power to the Company, endorsed in blank, relating to the Restricted Shares.
(iv) Dividends. Dividends paid on Restricted Shares shall be either paid at the dividend payment date, or deferred for payment to such date, and subject to such conditions, as determined by the Committee, in cash or in restricted or unrestricted Shares having a Fair Market Value equal to the amount of such dividends. Unless otherwise determined by the Committee, Shares distributed in connection with a Share split or dividend in Shares, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Shares with respect to which such Shares or other property has been distributed.
(v) Early Exercise Options. The Committee shall award Restricted Shares to a Participant upon the Participant's early exercise of an Option under Section 5(b)(iv) hereof. Unless otherwise determined by the Committee, the lapse of restrictions with respect to such Restricted Shares shall occur on the same schedule as the exercisability of the Option for which the Restricted Shares were exercised.
(e) Restricted Share Units. The Committee is authorized to grant Restricted Share Units to Eligible Persons, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case may be, will occur upon expiration of the deferral period specified for Restricted Share Units by the Committee (or, if permitted by the Committee, as elected by the Eligible Person). In addition, Restricted Share Units shall be subject to such restrictions as the Committee may impose, if any (including, without limitation, the achievement of performance criteria if deemed appropriate by the Committee), at the date of grant or thereafter, which restrictions may lapse at the expiration of the deferral period or at earlier or later specified times, separately or in combination, in installments or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee at the date of grant or thereafter, upon Termination of Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Share Units), or upon failure to satisfy any other conditions precedent to the delivery of Shares or cash to which such Restricted Share Units relate, all Restricted Share Units that are at that time subject to deferral or restriction shall be forfeited; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any indi-
vidual case, that restrictions or forfeiture conditions relating to Restricted Share Units will be waived in whole or in part in the event of Termination of Service resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Share Units.
(iii) Dividend Equivalents. Unless otherwise determined by the Committee at the date of grant, Dividend Equivalents on the specified number of Shares covered by a Restricted Share Unit shall be either (A) paid with respect to such Restricted Share Unit at the dividend payment date in cash or in restricted or unrestricted Shares having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Share Unit and the amount or value thereof automatically deemed reinvested in additional Restricted Share Units or other Awards, as the Committee shall determine or permit the Participant to elect.
(f) Performance Shares and Performance Units. The Committee is authorized to grant Performance Shares or Performance Units or both to Eligible Persons on the following terms and conditions:
(i) Performance Period. The Committee shall determine a performance period (the "Performance Period") of one or more years or other periods and shall determine the performance objectives for grants of Performance Shares and Performance Units. Performance objectives may vary from Eligible Person to Eligible Person and shall be based upon the performance criteria as the Committee may deem appropriate. The performance objectives may be determined by reference to the performance of the Company, or of a Subsidiary or Affiliate, or of a division or unit of any of the foregoing. Performance Periods may overlap and Eligible Persons may participate simultaneously with respect to Performance Shares and Performance Units for which different Performance Periods are prescribed.
(ii) Award Value. At the beginning of a Performance Period, the Committee shall determine for each Eligible Person or group of Eligible Persons with respect to that Performance Period the range of number of Shares, if any, in the case of Performance Shares, and the range of dollar values, if any, in the case of Performance Units, which may be fixed or may vary in accordance with such performance or other criteria specified by the Committee, which shall be paid to an Eligible Person as an Award if the relevant measure of Company performance for the Performance Period is met.
(iii) Significant Events. If during the course of a Performance Period there shall occur significant events as determined by the Committee which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective.
(iv) Forfeiture. Except as otherwise determined by the Committee, at the date of grant or thereafter, upon Termination of Service during the applicable Performance Period, Performance Shares and Performance Units for which the Performance Period was prescribed shall be forfeited; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in an individual case, that restrictions or forfeiture conditions relating to Performance Shares and Performance Units will be waived in whole or in part in the event of Terminations of Service resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Performance Shares and Performance Units.
(v) Payment. Each Performance Share or Performance Unit may be paid in whole Shares, or cash, or a combination of Shares and cash either as a lump sum payment or in installments, all as the Committee shall determine, at the time of grant of the Performance Share or Performance Unit or otherwise, commencing as soon as practicable after the end of the relevant Performance Period.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to Eligible Persons. The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, or other investment vehicles as the Committee may specify; provided, however, that, unless otherwise determined by the Committee, Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all conditions and restrictions of any underlying Awards to which they relate.
(h) Other Share-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Eligible Persons such
other Awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Shares, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, unrestricted shares awarded purely as a "bonus" and not subject to
any restrictions or conditions, other rights convertible or exchangeable into
Shares, purchase rights for Shares, Awards with value and payment contingent
upon performance of the Company or any other factors designated by the
Committee, and Awards valued by reference to the performance of specified
Subsidiaries or Affiliates. The Committee shall determine the terms and
conditions of such Awards at date of grant or thereafter. Shares delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 5(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Shares,
notes or other property, as the Committee shall determine. Cash awards, as an
element of or supplement to any other Award under the Plan, shall also be
authorized pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted to Eligible Persons either alone or in addition to, in tandem with, or in exchange or substitution for, any other Award granted under the Plan or any award granted under any other plan or agreement of the Company, any Subsidiary or Affiliate, or any business entity to be acquired by the Company or a Subsidiary or Affiliate, or any other right of an Eligible Person to receive payment from the Company or any Subsidiary or Affiliate. Awards may be granted in addition to or in tandem with such other Awards or awards, and may be granted either as of the same time as, or a different time from, the grant of such other Awards or awards. Subject to the provisions of Section 3(d) hereof prohibiting Option and SAR repricing without shareholder approval, the per Share exercise price of any Option, or grant price of any SAR, which is granted in connection with the substitution of awards granted under any other plan or agreement of the Company or any Subsidiary or Affiliate, or any business entity to be acquired by the Company or any Subsidiary or Affiliate, shall be determined by the Committee, in its discretion.
(b) Term of Awards. The term of each Award granted to an Eligible Person shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any Option or SAR exceed a period of ten years from the date of its grant (or, in the case of ISOs, such shorter period as may be applicable under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may be made in such forms as the Committee shall determine at the date of grant or thereafter, including, without limitation, cash, Shares, notes or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The Committee may make rules relating to installment or deferred payments with respect to Awards, including the rate of interest to be credited with respect to such payments, and the Committee may require deferral of payment under an Award if, in the sole judgment of the Committee, it may be necessary in order to avoid nondeductibility of the payment under Section 162(m) of the Code.
(d) Nontransferability. Unless otherwise set forth by the Committee in an Award Agreement, Awards shall not be transferable by an Eligible Person except by will or the laws of descent and distribution (except pursuant to a Beneficiary designation) and shall be exercisable during the lifetime of an Eligible Person only by such Eligible Person or his guardian or legal representative. An Eligible Person's rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to claims of the Eligible Person's creditors.
(e) Noncompetition. The Committee may, by way of the Award Agreements or otherwise, establish such other terms, conditions, restrictions and/or limitations, if any, of any Award, provided they are not inconsistent with the Plan, including, without limitation, the requirement that the Participant not engage in competition with, solicit customers or employees of, or disclose or use confidential information of the Company or its Affiliates.
7. General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan, the granting and exercising of Awards thereunder, and the other obligations of the Company under the Plan and any Award Agreement, shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any stock exchange, regulatory or governmental agency as may be required. The Company, in its discretion, may postpone the issuance or delivery of Shares under any Award until completion of such stock exchange or market system listing or registration or qualification of such Shares or any required action under any state, federal or foreign law, rule or regulation 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, state or foreign law. The Shares issued under the Plan may be subject to such other restrictions on transfer as determined by the Committee.
(b) No Right to Continued Employment or Service. Neither the Plan nor any action taken thereunder shall be construed as giving any employee, consultant or director the right to be retained in the employ or 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 employee's, consultant's or director's employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to an Eligible Person, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Eligible Persons to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of an Eligible Person'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, including employment taxes, required to be withheld under applicable Federal, state and local law.
(d) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue, or terminate the Plan or the Committee's authority
to grant Awards under the Plan without the consent of shareholders of the
Company or Participants, except that any such amendment or alteration shall be
subject to the approval of the Company's shareholders (i) to the extent such
shareholder approval is required under the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted, or
(ii) as it applies to ISOs, to the extent such shareholder approval is required
under Section 422 of the Code; provided, however, that, without the consent of
an affected Participant, no amendment, alteration, suspension, discontinuation,
or termination of the Plan may materially and adversely affect the rights of
such Participant under any Award theretofore granted to him or her. The
Committee may waive any conditions or rights under, amend any terms of, or
amend, alter, suspend, discontinue or terminate, any Award theretofore granted,
prospectively or retrospectively; provided, however, that, without the consent
of a Participant, no amendment, alteration, suspension, discontinuation or
termination of any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him or her.
(e) No Rights to Awards; No Shareholder Rights. No Eligible Person or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons and employees. No Award shall confer on any Eligible Person any of the rights of a shareholder of the Company unless and until Shares are duly issued or transferred to the Eligible Person in accordance with the terms of the Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan to deliver cash, Shares, other Awards, or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.
(g) 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 incentive arrangements as it may deem desirable, including, without limitation, the granting of options and other awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this Plan shall be deemed salary or compensation for the purpose of computing benefits under any benefit plan or other arrangement of the Company for the benefit of its employees, consultants or directors unless the Company shall determine otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the laws of New York, without giving effect to principles of conflict of laws thereof.
(k) Effective Date; Plan Termination. This Amendment and Restatement of 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 on the date which is ten (10) years after the Effective Date.
(l) Section 409A . It is intended that the Plan and Awards issued thereunder will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder) to the extent the Awards are subject thereto, and the Plan and such Awards shall be interpreted on a basis consistent with such intent. The Plan and any Award Agreements issued thereunder may be amended in any respect deemed by the Board or the Committee to be necessary in order to preserve compliance with Section 409A of the Code.
(m) 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 10.30
Dated May 2007
THE PERSONS NAMED IN SCHEDULE 1
and
VALIDUS HOLDINGS LTD
SHARE SALE AGREEMENT
relating to the sale and purchase of the whole of the issued share capital of Talbot Holdings Ltd
LINKLATERS LLP
One Silk Street
London EC2Y 8HQ
Telephone: (44-20) 7456 2000
Facsimile: (44-20) 7456 2222
Ref: AIC
TABLE OF CONTENTS
CLAUSE PAGE ------ ---- 1 Interpretation........................................................ 2 2 Agreement to Sell the Shares.......................................... 14 3 Consideration......................................................... 15 4 Conditions............................................................ 20 5 Actions Pending Completion............................................ 22 6 Completion............................................................ 28 7 Leakage............................................................... 29 8 Warranties............................................................ 30 9 Whole Agreement and Remedies.......................................... 32 10 Other Provisions...................................................... 33 Schedule 1 Particulars of Sellers, Shares Sold etc....................... 48 Schedule 2 Particulars of the Company and Subsidiaries................... 49 Schedule 3 Completion Obligations........................................ 60 Schedule 4 Warranties given by the Sellers and Warrantors under Clause 8...................................................... 63 Schedule 5 Limitation of Liability under Clause 8.1...................... 81 Schedule 6 Properties.................................................... 89 Schedule 7 Optionholders................................................. 94 Schedule 8 Employment parties............................................ 96 Schedule 9 Terms applicable to the Base Share Consideration.............. 97 Schedule 10 Rule 3b-4 of the Exchange Act and definition of US Person.... 99 Schedule 11 Share Election Form.......................................... 101 |
AGREEMENT FOR SALE OF SHARES
THIS AGREEMENT is made on May 2007
BETWEEN:
(1) THE PERSONS named in Schedule 1 (the "SELLERS" and each a "SELLER"); and
(2) VALIDUS HOLDINGS LTD, a company with limited liability organised under the laws of Bermuda (Registration No. EC37417) whose principal place of business is at 19 Par La Ville Road, Hamilton, HM11, Bermuda (the "PURCHASER").
WHEREAS:
(A) The Sellers have agreed to sell the Shares (as defined below) and to assume the obligations imposed on the Sellers under this Agreement subject to and in accordance with the terms of this Agreement.
(B) The Purchaser has agreed to purchase the Shares and assume the obligations imposed on the Purchaser under this Agreement subject to and in accordance with the terms of this Agreement.
(C) The Shares which those Employee Sellers who are Optionholders will sell to the Purchaser in accordance with the terms of this Agreement will include:
(i) the EBT Common Shares which will be transferred by the EBT to certain of the Optionholders prior to, and conditional upon, Completion pursuant to the exercise by them of all of the Options held by them over Common Shares as at the date of this Agreement in accordance with the Share Option Scheme; and
(ii) the Class B Common Shares which will be issued to certain of the Optionholders prior to, and conditional upon, Completion pursuant to the exercise by them of all of the Options held by them over Class B Common Shares as at the date of this Agreement in accordance with the Share Option Scheme,
such transactions, the "OPTIONS TRANSACTIONS".
(D) Simultaneously with the execution and delivery of this Agreement, each of the persons identified in Schedule 8 hereto has entered into a term sheet between such person and a Group Company, contemplating the execution and delivery of an amendment and restatement of such person's existing employment arrangement with such Group Company to be effective at Completion.
It is agreed as follows:
1 INTERPRETATION
In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:
1.1 DEFINITIONS
"A PREFERENCE SHARES" means the 60,504,000 7.5 per cent. cumulative, convertible, redeemable A preference shares with a par value of US$0.002 each in the capital of the Company;
"2005 ACCOUNTS" means the audited consolidated financial statements of the Group as at 31 December 2005;
"ACCOUNTS" means the audited consolidated financial statements of the Group as at the Accounts Date;
"ACCOUNTS DATE" means 31 December 2006;
"ACCRUED PREFERENCE DIVIDEND" means the dividend which will be accrued and payable on the A Preference Shares pursuant to the Byelaws in respect of the period from (but excluding) 1 November 2006 up to (and including) the date of Completion, together with all other amounts accrued but unpaid on the A Preference Shares pursuant to the Byelaws;
"ACTUARIAL RESERVES REVIEW" means the actuarial reserves review dated 9 February 2007 prepared by EMB Consultancy in respect of the Group;
"AGREED TERMS" means, in relation to a document, such document in the terms agreed between the parties and signed for identification by or on behalf of the Purchaser and the Sellers' Solicitors with such alterations as may be agreed in writing between the parties from time to time for any reason including to take account of any changes between the date of this Agreement and Completion;
"B PREFERENCE SHARES" means the 12,499,000 convertible, redeemable B convertible preference shares with a par value of US$0.002 each in the capital of the Company;
"BASE SHARE CONSIDERATION" has the meaning set out in Clause 3.1.1(ii);
"BMA" means the Bermuda Monetary Authority;
"BONUS LETTERS" means the letters dated 25 February 2004 from Talbot Underwriting Ltd to each of VG Southey and AJ Keys relating to certain cash payments, which letters are disclosed in the Data Room;
"BUSINESS DAY" means a day on which banks are open for business in London and Bermuda (excluding Saturdays, Sundays and public holidays);
"BYELAWS" means the Byelaws of the Company as at the date of this Agreement;
"CASH COMPONENT" has the meaning set out in Clause 3.1.4(ii);
"CLASS B COMMON SHARES" means the 7,462,500 Class B Common Shares of par value US$0.002 each in the capital of the Company into which Options over Class B Common Shares will be converted prior to, and conditional upon, Completion in accordance with the Share Option Scheme;
"CODAN" means Codan Trust Company Limited, acting solely in its capacity as trustee of whichever Trust or Trusts is or are then relevant;
"COMMON SHARES" means the 50,000,000 common shares of par value US$0.002 each in the capital of the Company in issue as at the date of this Agreement which include, for the avoidance of doubt, the EBT Common Shares;
"COMPANY" means Talbot Holdings Ltd, a company incorporated in Bermuda (Registration No. 31149) whose registered office is at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda;
"COMPANY PENSION SCHEME" means the defined contribution group personal pension scheme sponsored by the Group;
"COMPLETION" means the completion of the sale and purchase of the Shares pursuant to Clause 6;
"CONSIDERATION" has the meaning set out in Clause 3.1.1;
"CONDITIONS PRECEDENT" means the conditions set out in Clause 4.1;
"CONFIDENTIALITY AGREEMENT" means the agreement dated 25 January 2007 and made between the Purchaser (1) and the Company (2) pursuant to which the Company made available certain confidential information relating to the Group;
"CORE WARRANTIES" means those Warranties set out in paragraphs 1.2, 1.5, 2.2, 2.5, 2.6.1, 2.11.1 and 2.11.2 of Schedule 4;
"CURE PERIOD" has the meaning given to that term in the definition of Material Adverse Event in this Clause 1.1;
"DATA ROOM" means the virtual data room administered by Merrill Corporation Limited the contents of which are listed in the Data Room Index;
"DATA ROOM INDEX" means the index of documents included in the Data Room attached as Schedule 2 of the Disclosure Letter;
"DISCLOSURE LETTER" means the letter of even date with this Agreement from the Warrantors to the Purchaser;
"DORMANT SUBSIDIARIES" means the Subsidiaries set out in Section B of Part 2 of Schedule 2;
"DUE DILIGENCE REPORTS" means the Vendor Due Diligence Report, the Tax Due
Diligence Report and the Actuarial Reserves Review and each a "DUE
DILIGENCE REPORT";
"EARLIEST COMPLETION DATE" means the date falling two Business Days after the Conditions Precedent have been satisfied or waived and the Sellers have provided evidence of their ability to satisfy the obligations specified in Schedule 3;
"EBT" means the Talbot Holdings Employee Benefit Trust;
"EBT COMMON SHARES" means the 875,000 common shares of par value US$0.002 each in the capital of the Company currently held by Codan (in its capacity as trustee of the EBT) which will be transferred to those Optionholders who have Options over Common Shares on the exercise by them of those Options prior to, and conditional upon, Completion in accordance with the Share Option Scheme;
"EBT LOAN" means the loan from the Company to the EBT for the purpose of acquiring Common Shares from departing employees, which amounts to US$517,500 and L49,980.87;
"EMPLOYEE" means an employee of any Group Company, including a Senior Employee;
"EMPLOYEE SELLER CASH CONSIDERATION" has the meaning set out in Clause 3.1.1(ii);
"EMPLOYEE SELLER CONSIDERATION" has the meaning set out in Clause 3.1.1(ii);
"EMPLOYEE SELLERS" means the Sellers listed in Part 1 of Schedule 1 (other than PC Churchill, DK Newbigging, DP Redhead, the Ashdown Trust, the Dynevor Trust and the Rams Hill Trust) and each an "EMPLOYEE SELLER";
"EMPLOYEE SHAREHOLDERS' AGREEMENT" means the agreement dated 16 February 2002 between, inter alia, the Company and certain of the Employee Sellers as disclosed in the Data Room;
"ENCUMBRANCE" means any claim, charge, mortgage, security, lien, option, power of sale, hypothecation or other third party right, retention of title, right of pre-emption, right of first refusal or security interest of any kind;
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as amended;
"EXERCISE PRICE" means the total aggregate exercise price payable by each Optionholder as set out against his/her name in column (3) of Schedule 7 in respect of all of the Options to be exercised by him/her prior to, and conditional upon, Completion;
"FAL" or "FUNDS AT LLOYD'S" has the meaning given to that term under the Lloyd's Membership Byelaw (No. 5 of 2005);
"FAL PROVIDERS' AGREEMENT" means the Amended and Restated FAL Providers' Agreement dated 29 November 2006 (document 6.1.8.3 of the Data Room Index);
"FSA" means the UK Financial Services Authority;
"GROUP" or "GROUP COMPANIES" means the Company and the Subsidiaries and "GROUP COMPANY" means any one of them;
"GROUP'S CAPITAL STACK" means the leveraged capital structure employed by the Group to meet its Funds at Lloyd's requirements in respect of any Lloyd's year of account, the details of which are disclosed in the Data Room;
"INFORMATION MEMORANDUM" means the Information Memorandum relating to the Company dated January 2007;
"INSTITUTIONAL SELLERS" means the Sellers listed in Part 3 of Schedule 1 and each an "INSTITUTIONAL SELLER";
"INTEREST RATE" means the rate per annum of two per cent above the base rate from time to time of Lloyds TSB Bank plc;
"LEAKAGE" means (whether direct or indirect):
(a) any (A) dividend or distribution declared, paid or made, whether or not in specie, by any Group Company to any shareholders of the Company including any of the Sellers or their connected persons, other than the payments referred to in sub-paragraph (j) below, or (B) investment or loan (other than season ticket loans made to employees in accordance with their employment arrangements) made, or committed to be made, by any Group Company in or to any shareholder of the Company (including any of the Sellers) or their respective connected persons (other than to another Group Company);
(b) any payments or accruals made, or agreed to be made, by any Group Company, to (or assets transferred to or liabilities assumed, indemnified or incurred for the
benefit of) any of the Sellers or their connected persons by any Group Company other than payments or accruals made, or required to be made, pursuant to the terms of commercial agreements in the ordinary course of any Group Company's trading which, for the avoidance of doubt, shall include all of the payments or accruals referred to in sub-paragraphs (k) and (l) below;
(c) any payments or accruals made, or agreed to be made, by any Group Company to any of the Sellers or their connected persons, in respect of any share capital or other securities or debt obligations of any Group Company being issued, redeemed, purchased, repaid or prepaid, or any other return of capital;
(d) the waiver by any Group Company of any amount owed to that Group Company by the Sellers or their connected persons, other than any of the waivers referred to in sub-paragraph (k) below;
(e) any fees, costs or expenses incurred, paid or accrued or agreed to be incurred, paid or accrued by any Group Company of professional fees incurred in connection with this Agreement or the transactions to be entered into pursuant to this Agreement ("PROFESSIONAL FEES"); and
(f) any payment made or agreed to be made to any pension scheme of any of the Sellers or their connected persons in excess of payments made in the ordinary course of business pursuant to that Seller's contractual entitlement to the same,
but shall not include (each of the following, a "PERMITTED LEAKAGE"):
(g) payments and accruals of salary, employer's National Insurance contributions, employee benefits and directors' fees and expenses required to be made in accordance with the existing contractual terms included in documents listed in the Data Room Index (or otherwise required by applicable law or regulation or arising from the transactions to be entered into pursuant to this Agreement);
(h) payments, awards and allocations of bonuses and accruals of entitlements to, and discretionary amounts, which may be considered to have accrued, in respect of, any bonuses in accordance with the terms of the Staff Profit Share Plan or the Bonus Letters;
(i) payments and accruals of expenses made to any of the Sellers in the ordinary and usual course of business;
(j) payments and accruals of the Accrued Preference Dividend;
(k) payments made or accrued, or waivers granted or entitlements arising in relation to any of 1384 Capital Limited, the Shrewsbury Companies or participants in the Group's Capital Stack (including all interest and other payments on or in respect of the Group's Capital Stack) in each case required to be made in accordance with existing contractual terms of documents listed in the Data Room Index;
(l) any management fees paid or accrued up to the date of Completion by
any Group Company to Olympus or The Black Diamond Group LLC required
to be made pursuant to the Management Fee Agreements (but excluding:
(i) any pre-paid amount of such management fees to the extent that it
relates to a period which is unexpired as at the date of Completion;
and (ii) for the avoidance of doubt, any fees or expenses, whether
payable pursuant to such agreements or otherwise, in relation to any
of the transactions to be entered into pursuant to this Agreement);
(m) the amount of L230,000 accrued in the Accounts in respect of the Vendor Due Diligence Report;
(n) any employer's National Insurance required to be paid in relation to any acceleration of payments made under the Staff Profit Share Plan or in respect of unpaid bonuses as disclosed in the Disclosure Letter and/or the exercise of the Options by the Optionholders, as the case may be;
(o) the cost of any directors and officers insurance and run-off insurance cover and the cost of any pension trustee liability insurance and any run-off insurance cover;
(p) any other Leakage which has been provided for in the Accounts; or
(q) any payments agreed to be made or accrued or interest payments or other amounts due to any of the Sellers or their connected persons as a result of any of the matters listed in (g) to (p) above,
provided that Permitted Leakage, other than waivers, may only be made in cash (and not other assets);
"LEASES" means the leases and licence held by the Group in respect of the Properties as described in more detail in Schedule 6;
"LLOYD'S" means the Council and Society of Lloyd's incorporated under the Lloyd's Acts 1871 to 1982 of England and Wales;
"LOSSES" means all losses, liabilities, costs (including legal costs), charges, expenses, actions, proceedings, claims, damages and demands;
"MANAGEMENT FEE AGREEMENTS" means the terms of an engagement letter dated 5 December 2001 from Black Diamond Group LLC to the Company, as subsequently extended by further letters, most recently a letter dated 9 February 2006 and the management fee agreement dated 25 November 2003 between Olympus Advisory Partners Inc. and the Company, in each case as disclosed in the Data Room;
"MANAGEMENT PRESENTATIONS" means the presentations by management of the Group to the Purchaser and its advisers on 19, 20 and 21 March 2007;
"MANAGEMENT WARRANTIES" means the Warranties set out in paragraph 2 of Schedule 4, and each a "MANAGEMENT WARRANTY";
"MATERIAL ADVERSE EFFECT" means any breach as set out in paragraphs (i),
(ii) or (iii) of the definition of Material Adverse Event (in the case of
Clauses 5.1 and 5.2 and any deemed repetition at Completion of the Core
Warranties occurring after the date of this Agreement and in any other case
occurring at any time) which reduces the net asset value of the Group by
more than US$40 million below the net asset value of the Group as stated in
the Accounts, but shall not include any such breach resulting from:
(i) events or factors affecting the insurance industry or the economy generally unless they affect the Group disproportionately in relation to other companies with similar exposures and to a material extent;
(ii) the identity of, or facts relating uniquely to, the Purchaser; or
(iii) any action required to be taken in order to implement any transactions contemplated by this Agreement;
"MATERIAL ADVERSE EVENT" means any of the following:
(i) there having been a breach by the Sellers of Clauses 5.1 or 5.2 which could reasonably have been avoided or prevented by the Sellers;
(ii) other than the Core Warranties (to which sub-paragraph (iii) below shall apply), there having been a breach of the Warranties as at the date of this Agreement, which breach would not have arisen but for the fraud or wilful default of any of the Sellers; or
(iii) there having been a breach of any of the Core Warranties, including a breach were any such Core Warranties deemed to be repeated at any time prior to Completion, which, in the case of the Core Warranties set out in paragraphs 2.5 and 2.6.1 of Schedule 4, could reasonably have been avoided or prevented by any of the Warrantors,
and which in each case (a) (except in the case of Core Warranties 1.2 and 1.5 of Schedule 4) has a Material Adverse Effect and (b) (if capable of remedy) (and a breach of Core Warranties 2.11.1 and 2.11.2 shall be deemed not to be capable of remedy) has not been remedied within 14 days of the Purchaser giving notice to the Sellers of the occurrence of the Material Adverse Event or, if earlier, by the Earliest Completion Date (provided that the Purchaser has given such notice) (the "CURE PERIOD");
"NET CASH CONSIDERATION" means:
(i) in respect of a Non-Employee Seller, the amount of Non-Employee Cash Consideration set out next to his/her/its name in column (8) of Schedule 1 less his/her/its pro rata share (by reference to his/her/its percentage shareholding in the Company on a fully diluted basis) of the Permitted Deductions;
(ii) in respect of an Employee Seller (other than in respect of their Option Shares to which the provisions of (iii) below shall apply), the amount of Employee Seller Cash Consideration set out next to his/her name in column (8) of Schedule 1 less his/her pro rata share (by reference to his/her percentage shareholding in the Company (excluding his/her Option Shares) on a fully diluted basis) of the Permitted Deductions; and
(iii) in respect of an Optionholder in relation to the Employee Seller Cash Consideration payable to that Optionholder in respect of his/her Option Shares, the amount set out against his/her name in column (9) of Schedule 1 after deducting therefrom (i) the amount of that Optionholder's Exercise Price, (ii) his/her pro rata share (by reference to the percentage his/her Option Shares bears to the total share capital of the Company on a fully diluted basis) of the Permitted Deductions; and (iii) any amount required to be deducted by Talbot Underwriting Services Ltd under PAYE or in respect of employees' National Insurance, in accordance with applicable legislation in connection with the exercise of the Options of each Optionholder;
"MINIMUM CASH AMOUNT" means, in respect of each Employee Seller, an amount equal to the following:
(i) his/her pro rata share of the Permitted Deductions (as set out in paragraphs (ii) and/or (iii) of the definition of Net Cash Consideration in this Clause 1.1 as applicable);
(ii) the Exercise Price (if any) payable by that Employee Seller in respect of his/her Option Shares; and
(iii) the amount (if any) required to be deducted by Talbot Underwriting Services Ltd under PAYE or in respect of employee's National Insurance, in each case in accordance with applicable legislation in connection with any exercise by that Employee Seller of his/her Options;
"NON-EMPLOYEE SELLER CASH CONSIDERATION" has the meaning set out in Clause 3.1.1(i);
"NON-EMPLOYEE SELLERS" means all of the Sellers other than Employee Sellers, and each a "NON-EMPLOYEE SELLER";
"OLYMPUS" means each of OGF III (Caymans 1), L.P., OGF IV (Caymans 1), L.P. and Olympus Executive Fund, L.P. or, where the context so requires, all of them together;
"OPTIONHOLDERS" means the Employee Sellers who hold options over shares in the Company as at the date of this Agreement, and who will exercise those options for shares in the Company prior to, and conditional upon, Completion being those Employee Sellers listed in column (1) of Schedule 7, and each an "OPTIONHOLDER";
"OPTIONS" means the options over the share capital of the Company held as at the date of this Agreement by the Optionholders, such Options being as listed against the names of each Optionholder in column (2) of Schedule 7 (being all of the options in existence as at the date of this Agreement under the Share Option Scheme);
"OPTION SHARES" means the Shares received by each Optionholder on the exercise of his/her Options (all of which Options shall be exercised in full on or before Completion);
"OPTIONS TRANSACTIONS" has the meaning given in recital (C);
"PAYMENT INSTRUCTIONS" has the meaning set out in Clause 3.1.9(i);
"PERMITTED DEDUCTIONS" means any professional fees or expenses which the Company has contracted to pay and which are payable by the Sellers in connection with this Agreement as approved by any two of MEA Carpenter, CNR Atkin, GAM Bonvarlet, JS Clouting or ND Wachman, provided that at least one of the approving persons must be MEA Carpenter, GAM Bonvarlet or ND Wachman;
"PROPERTIES" means the leasehold properties, brief details of which are set out in Schedule 6 and "PROPERTY" means any one of or any part or parts of any one of them;
"PURCHASER'S GROUP" means the Purchaser and its subsidiaries and holding company from time to time and any subsidiaries of such holding company (and, following Completion, shall include the Group Companies);
"PURCHASER'S SOLICITORS" means Kendall Freeman of One Fetter Lane, London
EC4A 1JB;
"REGISTRATION RIGHTS AGREEMENT" means the agreement dated 24 November 2003 between (inter alia) the Company, its shareholders, Olympus, Reservoir Capital Partners L.P., Reservoir Capital Master Fund L.P. and Intermediate Capital Group PLC as disclosed in the Data Room;
"RELEVANT REGULATOR" means each of Lloyd's, the FSA and the BMA;
"RESERVOIR AGENT" means Reservoir Capital Group LLC;
"RESERVOIR LETTER OF CREDIT" means the letter of credit provided by Reservoir Capital Partners, L.P., Reservoir Capital Master Fund, L.P., Reservoir Capital Master Fund II, L.P. and Reservoir Capital Investment Partners, L.P;
"RING FENCING LETTERS" means the three letters from Lloyd's addressed to Talbot Underwriting Ltd dated 9 November 2001, 11 February 2002 and 19 November 2003 relating to past liabilities of Shrewsbury Underwriting Capital Ltd and Shrewsbury Underwriting Capital (Bermuda) Ltd;
"SELLERS' SOLICITORS" means Linklaters LLP of One Silk Street, London EC2Y 8HQ;
"SENIOR EMPLOYEE" means each of MEA Carpenter, CNR Atkin, ND Wachman, GAM Bonvarlet, JS Clouting, NJ Hales, GS Langford, MS Johnson, JE Skinner, JG Ross, SF Lloyd, RW Fielder, JRA Bamford, SEH Barr, G Cooke, JAJA McDonald, LE Nevill, DG Burns, JAA Colquhoun, I Fordham, JG Cutts and PJ Miller;
"SHAREHOLDERS' AGREEMENT" means the agreement dated 25 November 2003 between the Company and its shareholders as disclosed in the Data Room;
"SHARE CONSIDERATION" has the meaning set forth in Clause 3.1.4(i);
"SHARE OPTION SCHEME" means the Talbot Holdings Ltd. Share Option Plan, details of which are included in the Data Room and pursuant to which options have been granted over 875,000 Common Shares and 7,462,500 Class B Common Shares;
"SHARES" means the Common Shares, Class B Common Shares, A Preference Shares and B Preference Shares, which together will constitute the whole of the issued share capital of the Company as at the date of Completion;
"SHREWSBURY COMPANIES" means Shrewsbury Underwriting Capital Ltd, Shrewsbury Underwriting Capital (Bermuda) Ltd and Shrewsbury Holdings Ltd;
"SHREWSBURY TRANSACTIONS" means: (a) the sale by the Company of all of the
issued share capital of Shrewsbury Holdings Limited to Rupert Atkin,
Michael Carpenter, Jane Clouting and Nigel Wachman as trustees for the then
existing shareholders in the Company in proportion to their then existing
holdings; and (b) the subsequent sale by Shrewsbury Holdings Limited of:
(i) (A) all of the 67,746,236 issued A common shares of $1.00 each in the
capital of Shrewsbury Underwriting Capital (Bermuda) Ltd; and (B) all of
the 58,006,255 issued A ordinary shares of L1.00 each in the capital of
Shrewsbury Underwriting Capital Ltd to FOSPV Limited; and (ii) (A) all of
the 1,357,640 issued C common shares of $0.05 each in the capital of
Shrewsbury Underwriting Capital (Bermuda) Ltd; and (B) all of the 1,162,450
issued C ordinary shares of L0.05 each in the capital of Shrewsbury
Underwriting Capital Ltd to Global Securitisation Services Limited, in its
capacity as trustee of Great Ormond Street;
"STAFF PROFIT SHARE PLAN" means the staff profit share plan adopted by Talbot Underwriting Ltd on 6 May 2003, as subsequently amended on 26 October 2005, 14 March 2006 and 27 April 2007, and which is disclosed in the Data Room;
"SUBSIDIARIES" means the subsidiaries of the Company details of which are contained in Part 2 of Schedule 2;
"SYNDICATE 1183" means the Lloyd's syndicate in respect of which Talbot Underwriting Ltd. acts as managing agent (as defined in the Underwriting Byelaw (No. 2 of 2003));
"TALBOT 2002" means Talbot 2002 Underwriting Capital Ltd, details of which are set out in Section A of Part 2 of Schedule 2;
"TAXATION" or "TAX" means all forms of taxation and statutory, governmental, state, federal, provincial, local, government or municipal charges, duties, imposts, deductions, liabilities to account, contributions, withholdings, liabilities and levies, including US federal excise tax and other premium tax (and any other tax whatsoever) whether of the United Kingdom, the United States, Bermuda or elsewhere in the world, and any interest, penalty, charges, fines or surcharge relating thereto whether the Company or any of the Subsidiaries is primarily liable or secondarily liable;
"TAXATION AUTHORITY" means any taxing, government, local government, fiscal or other authority (whether within or outside the United Kingdom) competent to impose, assess, administer or collect any Taxation, including Her Majesty's Revenue & Customs (and any predecessor authority) and the United States Internal Revenue Service;
"TAX DUE DILIGENCE REPORT" means the tax due diligence report dated 9 March 2007, together with the erratum issued on 4 May 2007, prepared by KPMG in respect of the Group;
"TCGA" means the Taxation of Chargeable Gains Act 1992;
"TERMINATION AGREEMENTS" means the agreements to terminate each of the Shareholders' Agreement, the Employee Shareholders' Agreement, the Management Fee Agreements and the Registration Rights Agreement, in each case in Agreed Terms;
"TITLE AND CAPACITY WARRANTIES" means the Warranties set out in Part 1 of Schedule 4 and each a "TITLE AND CAPACITY WARRANTY";
"TRUSTS" means those trusts whose assets include, or as at Completion will include, Shares and each a "TRUST";
"TRUSTEES" means Codan and Heidi Hutter solely in their capacity as trustee of the relevant trust and each a "TRUSTEE";
"UK GAAP" means generally accepted accounting practices and principles in the United Kingdom for non public companies;
"US" means the United States of America;
"US DOLLAR" or "US$" means the lawful currency of the US;
"US GAAP" means generally accepted accounting practices and principles in the US for non public companies;
"US SELLERS" means the Sellers listed in Part 2 of Schedule 1 and each a
"US SELLER";
"VALIDUS" means the Purchaser;
"VALIDUS BYE-LAWS" means the bye-laws of Validus as originally adopted on December 7, 2005 and as in effect from time to time;
"VALIDUS COMMON SHARES" means the voting common shares of the Purchaser, par value US$0.10 per share;
"VALIDUS SECURITIES" means the Validus Common Shares to be issued to Employee Sellers as contemplated under Clause 3 of this Agreement;
"VAT" means United Kingdom Value Added Tax;
"VATA" means the Value Added Tax Act 1994;
"VENDOR DUE DILIGENCE REPORT" means the vendor due diligence report dated 7 March 2007 prepared by PricewaterhouseCoopers in respect of the Group;
"WARRANTIES" means the warranties set out in Schedule 4 and "WARRANTY" means any one of them; and
"WARRANTORS" means MEA Carpenter, CNR Atkin, ND Wachman, GAM Bonvarlet, JS Clouting, NJ Hales, GS Langford, MS Johnson, DP Redhead and JG Ross and each a "WARRANTOR".
1.2 SUBORDINATE LEGISLATION
References to a statutory provision include any subordinate legislation made from time to time under that provision which is in force at the date of this Agreement.
1.3 MODIFICATION ETC. OF STATUTES
References to a statute or statutory provision include that statute or provision as from time to time modified or re-enacted or consolidated whether before or after the date of this Agreement so far as such modification, re-enactment or consolidation applies or is capable of applying to any transactions entered into in accordance with this Agreement prior to Completion and (so far as liability thereunder may exist or can arise) shall include also any past statutory provision (as from time to time modified, re-enacted or consolidated) which such provision has directly or indirectly replaced except to the extent that any statutory provision made or enacted after the date of this Agreement would create or increase a liability of any party under this Agreement.
1.4 CONNECTED PERSONS
1.4.1 A person who is an individual shall be deemed to be connected with another individual if that person is the individual's wife or husband, or is a relative, or the wife or husband of a relative, of the individual or of the individual's wife or husband.
1.4.2 A company is connected with another company:
(i) if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other; or
(ii) if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.
A company is connected with another person if that person has control of it or if that person and persons connected with him together have control of it.
1.4.3 Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one
another and with any person acting on the directions of any of them to secure or exercise control of the company.
1.4.4 Any general partner of any of the Institutional Sellers shall be deemed to be connected with that Institutional Seller.
1.4.5 In this Clause 1.4:
(i) "company" includes any body corporate or unincorporated association;
(ii) "relative" means brother, sister, ancestor or lineal descendant;
(iii) "control" means the exercise, or the ability to exercise or the entitlement to acquire, direct or indirect control over the company's affairs, and in particular, but without prejudice to the generality of the preceding words, the possession of or the entitlement to acquire:
(a) the greater part of the share capital or issued share capital of the company or of the voting power in the company; or
(b) such part of the issued share capital of the company as would, if the whole of the income of the company were in fact distributed among the participators (without regard to any rights which he/she or any other person has as a loan creditor), entitle him/her to receive the greater part of the amount so distributed; or
(c) such rights as would, in the event of the winding-up of the company or in any other circumstances, entitle him to receive the greater part of the assets of the company which would then be available for distribution among the participators.
1.5 ACCOUNTS
Any reference to "audited accounts" shall include, where applicable, the directors' and auditors' reports, and consolidated financial statements comprising the consolidated balance sheets of the Company and subsidiaries as of the Accounts Date and 31 December 2005, and the related consolidated statements of income/(loss) and comprehensive income/(loss), changes in shareholders' equity and cash flows for the years then ended and all accompanying notes to the consolidated financial statements, together with all documents which are or would be required by law to be annexed to that company's accounts to be laid before that company in general meeting in respect of the accounting reference period in question.
1.6 COMPANIES ACT 1985
The words "HOLDING COMPANY" and "SUBSIDIARY" shall have the same meanings in this Agreement as their respective definitions in the Companies Act 1985.
1.7 INTERPRETATION ACT 1978
The Interpretation Act 1978 shall apply to this Agreement in the same way as it applies to an enactment.
1.8 INCLUDING, ETC
Any phrase introduced by the terms "INCLUDING", "INCLUDE," "IN PARTICULAR" or any similar expression shall be construed as illustrative and shall not limit the generality of the words preceding those terms nor shall any words following such terms be considered an exhaustive list.
1.9 CLAUSES, SCHEDULES ETC.
References to this Agreement include any recitals and Schedules to it and references to Clauses and Schedules are to clauses of and schedules to this Agreement. References to paragraphs within a Schedule are to paragraphs of that Schedule.
1.10 INFORMATION
Any reference to books, records or other information means books, records or other information in any form including paper, electronically stored data, magnetic media, film and microfilm.
1.11 HEADINGS
Headings shall be ignored in construing this Agreement.
2 AGREEMENT TO SELL THE SHARES
2.1 SALE AND PURCHASE OF SHARES
2.1.1 On and subject to the terms of this Agreement, on Completion:
(i) each Seller (as to those of the Shares specified against his/her/its name in columns (3) to (7), as the case may be, of Schedule 1) agrees to sell or procure to be sold; and
(ii) the Purchaser, relying on the several warranties and undertakings contained in this Agreement, agrees to purchase,
the Shares.
2.1.2 The Shares shall be sold with full title guarantee free from all Encumbrances and together with all rights and advantages now and hereafter attaching to them as at Completion (including the right to receive all dividends or distributions declared, made or paid on or after Completion other than any unpaid Accrued Preference Dividend).
2.1.3 None of the parties shall be obliged to complete the acquisition or sale of the Shares unless the acquisition and sale of all of the Shares is completed simultaneously.
2.2 RIGHTS OF PRE-EMPTION
The Sellers hereby waive irrevocably: (i) any and all rights of pre-emption over the Shares conferred either by the Byelaws or by any other document or in any other way; and (ii) any and all rights conferred by the Employee Shareholders' Agreement on the UK Steering
Group (as defined therein) to specify the transferee of any of the Shares and any obligation imposed by that agreement on an Employee Seller to notify the UK Steering Group of his/her intention to sell the Shares in accordance with the terms of this Agreement and shall procure that on or prior to Completion any and all such rights and obligations are waived irrevocably by any other person entitled thereto.
2.3 TERMINATION OF CERTAIN EXISTING AGREEMENTS
On Completion, the parties to each of the Shareholders' Agreement, the Employee Shareholders' Agreement, the Management Fee Agreements and the Registration Rights Agreement who are parties to this Agreement agree that the Shareholders' Agreement, the Employee Shareholders' Agreement, the Management Fee Agreements and the Registration Rights Agreement shall be terminated with effect from Completion and no party shall have any claim against the other or against any Group Company in respect thereof other than, in the case of the Management Fee Agreements, any fees and expenses accrued up to the date of Completion.
2.4 Each Seller, on behalf of itself and any person controlled by that Seller, effective upon Completion, hereby unconditionally waives any change of control or other similar right or provision or any right which it might have (whether pursuant to the FAL Providers' Agreement or otherwise) to participate in the Group's Capital Stack or otherwise to provide FAL in respect of the underwriting of Talbot 2002 in relation to the 2008 or any subsequent underwriting year of account, or to negotiate or meet with the Group Companies with respect to funding the Group's Capital Stack or otherwise providing FAL in respect of the underwriting of Talbot 2002 in relation to the 2008 or any subsequent underwriting year of account. For the avoidance of doubt, notwithstanding any other provision of this Agreement, except as specifically stated in this Clause 2.4 nothing in this Agreement will be construed or interpreted as waiving, relinquishing, restricting or limiting any rights relating to the Group's Capital Stack held by any Seller who participates in the Group's Capital Stack under the FAL Providers' Agreement, any previous FAL providers' agreement or any other relevant document.
3 CONSIDERATION
3.1 AMOUNT
3.1.1 The deemed aggregate consideration for the purchase of the Shares under this Agreement shall be US$410,000,000.00 in cash and Validus Common Shares (the "CONSIDERATION").
The Consideration shall be allocated and paid as follows:
(i) with respect to the aggregate Shares owned at Completion by Non-Employee Sellers, cash consideration in the amount of US$302,999,413.64 ("NON-EMPLOYEE SELLER CASH CONSIDERATION"), to be allocated among the Non-Employee Sellers as set out in Clause 3.1.2 below; and
(ii) with respect to the aggregate Shares owned at Completion by
Employee Sellers: (a) consideration in the amount of
US$79,176,543.36 payable as set forth in Clauses 3.1.3 and 3.1.4
("EMPLOYEE SELLER CASH CONSIDERATION"); and (b) 1,209,741 Validus
Common Shares (such
number of shares to be appropriately adjusted for any stock dividends, stock splits or recombinations or similar transactions after the date of this Agreement and prior to Completion) duly authorised by Validus and, upon Completion, to be allocated in accordance with Clause 3.1.5(i) and validly issued, fully paid and non-assessable (meaning that no further sums are required to be paid by holders thereof in connection with the issue thereof) and entitled to vote and participate in distributions and dividends on a pari passu basis with the Validus Common Shares then in issue, in accordance with the Validus Bye-Laws (the "BASE SHARE CONSIDERATION" and, together with the Employee Seller Cash Consideration, the "EMPLOYEE SELLER CONSIDERATION"). The Employee Seller Consideration shall be allocated among the Employee Sellers as set out in Clauses 3.1.3 to 3.1.7 below.
3.1.2 The Non-Employee Seller Cash Consideration shall be paid by the Purchaser to the Sellers' Solicitors (to hold on trust for the Non-Employee Sellers) at Completion in accordance with Clause 6.3 by crediting the account which shall have been notified to the Purchaser in accordance with Clause 10.11. Such amount shall be allocated among the Non-Employee Sellers such that each Non-Employee Seller shall be paid his/her/its Net Cash Consideration and his/her/its pro rata amount of the Permitted Deductions shall be paid in accordance with Clause 3.1.8. Such amount shall be paid by the Sellers' Solicitors to each of the Non-Employee Sellers by crediting the account of that Non-Employee Seller which shall have been notified to the Sellers' Solicitors in accordance with Clause 10.11. For the avoidance of doubt, provided the Purchaser has delivered the aggregate Non-Employee Seller Cash Consideration to the Sellers' Solicitors in accordance with this Clause 3.1.2, the Purchaser shall be deemed to have delivered the Non-Employee Seller Cash Consideration to the Non-Employee Sellers and shall have no responsibility with respect to the allocation among the Non-Employee Sellers set out above, including the timing or method of it.
3.1.3 Subject to any elections made by any Employee Sellers pursuant to Clause 3.1.4, the Employee Seller Cash Consideration amounts shall be paid by the Purchaser to the Sellers' Solicitors (to hold on trust for the Employee Sellers) at Completion in accordance with Clause 6.3 by crediting the account which shall have been notified to the Purchaser in accordance with Clause 10.11. Except in the case of the Option Shares to which the provisions of Clause 3.1.7 shall apply, the Employee Seller Cash Consideration shall be allocated among the Employee Sellers such that each Employee Seller shall be paid his/her Net Cash Consideration and his/her/its pro rata amount of the Permitted Deductions shall be paid in accordance with Clause 3.1.8. Such amount shall be paid by the Sellers' Solicitors to each of the Employee Sellers by crediting the account of that Employee Seller which shall have been notified to the Sellers' Solicitors in accordance with Clause 10.11. For the avoidance of doubt, provided the Purchaser has delivered the aggregate Employee Seller Cash Consideration to the Sellers' Solicitors in accordance with this Clause 3.1.3, the Purchaser shall be deemed to have delivered the Employee Seller Cash Consideration to the Employee Sellers and shall have no responsibility with respect to the allocation among the Employee Sellers set out above, including the timing or method of it.
3.1.4
(i) The Employee Seller Cash Consideration payable to any Employee Seller will, subject to the following proviso, be paid by the Purchaser in cash; provided however that any Employee Seller may elect, which election, once duly made in accordance with the terms hereof, shall be irrevocable (such election, being hereinafter referred to as "SHARE ELECTION") to receive (subject to the provisions of sub-paragraph (ii) below) a portion of the Employee Seller Cash Consideration payable to him/her in an amount of Validus Common Shares equal to (a) the portion of such Employee Seller Cash Consideration subject to such Share Election divided by (b) US$23.00 (such number of shares to be appropriately adjusted by the Purchaser for any stock dividends, stock splits or recombinations or similar transactions after the date of this Agreement and prior to Completion) duly authorised by Validus and, upon Completion, to be validly issued, fully paid and non-assessable (meaning that no further sums are required to be paid by holders thereof in connection with the issue thereof) and entitled to vote and participate in distributions and dividends on a pari passu basis with the Validus Common Shares then in issue, in accordance with the Validus Bye-Laws. A Share Election will only be effective if the applicable Employee Seller delivers to Validus (with a copy to the Company Secretary of the Company) a duly executed and completed Share Election Form in the form attached hereto as Schedule 11 (a "SHARE ELECTION FORM") within two weeks of the date of this Agreement. Validus Common Shares issued pursuant to this Clause 3.1.4(i) are referred to herein as "ELECTION SHARE CONSIDERATION" and, taken together with Base Share Consideration, "SHARE CONSIDERATION." For the avoidance of doubt, any Employee Seller Cash Consideration with respect to which a Share Election was not duly made in accordance with the terms hereof shall be payable in cash.
(ii) To the extent that any Share Election made by an Employee Seller would result in the cash component of the Employee Seller Consideration payable to that Employee Seller (the "CASH COMPONENT") being less than his/her Minimum Cash Amount, his/her Share Election shall be amended and the percentage amount included in his/her Share Election Form reduced such that the amount of the Cash Component payable to that Employee Seller is not less than the Minimum Cash Amount.
3.1.5
(i) The Base Share Consideration shall be issued by the Purchaser to each Employee Seller as to the number of Validus Common Shares set out against his/her name in column (10) of Schedule 1 in accordance with terms set out in Clause 3.1.1(ii) and Schedule 9, including the provisions with respect to transfer restrictions, forfeiture and repurchase by Validus for nominal consideration on the terms set out in Schedule 9.
(ii) The Election Share Consideration (if any) shall be issued by the Purchaser to each Employee Seller who has made a valid election in accordance with the terms set out in Clause 3.1.4. For the avoidance of doubt, the provisions with respect to transfer restrictions, forfeiture and repurchase by
Validus for nominal consideration on the terms set out in Schedule 9 shall not apply to the Election Share Consideration.
(iii) Notwithstanding the foregoing, Validus will pay cash in lieu of any fractional Validus Common Shares otherwise issuable to any Employee Seller as Share Consideration, at a rate of US$23.00 per whole Validus Common Share (pro rated for such fractional share).
3.1.6
(i) On Completion, the Purchaser shall provide each Employee Seller with a duly certified extract from the Validus share register, showing the registration of the Validus Common Shares issued to him/her as Share Consideration in the name of such Employee Seller. An issue of Validus Common Shares in accordance with Clauses 3.1.4 to 3.1.6, shall be a good discharge by the Purchaser of its obligation under this Agreement to issue the Validus Common Shares representing the Share Consideration.
(ii) Validus Common Shares issued as Share Consideration will be subject to the Validus Bye-laws, including without limitation the restrictions on transfer contained therein, and each Employee Seller hereby agrees to execute and hereby agrees to be bound by any lock-up or similar agreement generally executed by members of management of Validus or its subsidiaries in connection with the initial public offering of common shares of Validus.
3.1.7 Subject to any elections made by any Employee Sellers in respect of their Option Shares pursuant to Clause 3.1.4, the total aggregate amount of the Employee Seller Cash Consideration payable to the Optionholders on Completion in respect of their Option Shares shall be allocated and paid by the Sellers' Solicitors as follows:
(i) the total amount of the Exercise Prices due from Optionholders to the Company on the issue to them of Class B Common Shares will be paid to the Company;
(ii) such amount of the Exercise Prices due from Optionholders to the EBT on the transfer to them of the EBT Common Shares as is required to repay in full the amount outstanding under the EBT Loan as at the date of Completion shall be paid to the Company and such payment by the Sellers' Solicitors to the Company shall be good discharge to the EBT of its obligation to the Company under the EBT Loan and shall constitute full and final settlement of the same;
(iii) subject to (ii) above, the remaining amount (if any) due from Optionholders to the EBT on the transfer to them of the EBT Common Shares shall be paid to the EBT;
(iv) any amount required to be deducted by Talbot Underwriting Services Ltd under PAYE or in respect of employees' National Insurance in accordance with applicable legislation in connection with the exercise of the Options shall be paid to Talbot Underwriting Services Ltd;
(v) each Optionholder shall be paid his/her Net Cash Consideration; and
(vi) each Optionholder's pro rata amount of the Permitted Deductions shall be paid in accordance with Clause 3.1.8,
by crediting the appropriate account, in each case, which shall have been notified to the Sellers' Solicitors in accordance with Clause 10.11.
3.1.8 Permitted Deductions shall be paid by the Sellers' Solicitors in accordance with the Payment Instructions as follows:
(i) to the extent that such Permitted Deductions relate to professional fees and expenses which constitute Leakage, an amount equal to such Leakage, as set out in the Payment Instructions, will be paid to the Company on Completion; and
(ii) the remaining amount of Permitted Deductions shall be paid to the relevant advisers, in the amounts set out in the Payment Instructions, by crediting the appropriate account, in each case, which shall have been notified to the Sellers' Solicitors in accordance with Clause 10.11.
3.1.9
(i) No later than three Business Days prior to Completion, the persons listed in Clause 10.5 shall notify the Sellers' Solicitors of the amounts payable in accordance with Clauses 3.1.2 to 3.1.8 to each of the Non-Employee Sellers, each of the Employees Sellers, the Company, the EBT, Talbot Underwriting Services Ltd, each Optionholder and each adviser (as the case may be) (the "PAYMENT INSTRUCTIONS").
(ii) The Sellers' Solicitors shall be entitled to rely upon the Payment Instructions and shall be under no obligation to verify the accuracy or otherwise of such instructions. For the avoidance of doubt, the Sellers' Solicitors shall have no liability to any person, and each of the Sellers and the Purchaser waives any right to bring or make any claim or otherwise to seek any recourse or compensation against or from the Sellers' Solicitors, for any payments made by the Sellers' Solicitors in accordance with the Payment Instructions and the provisions of Clauses 3.1.2 to 3.1.8.
3.1.10 Validus hereby agrees that to the extent Validus files a registration statement on Form S-3 (or successor form) with the US Securities Exchange Commission in connection with a shelf-registration of Validus Common Shares and generally offers Validus senior management shareholders the opportunity to register a portion of their Validus Common Shares as selling shareholders in such registration statement, Validus will offer the Employee Sellers an opportunity to participate therein on substantially similar terms with respect to a portion of their Share Consideration, subject to applicable law and the Validus Bye-Laws. Notwithstanding the foregoing, Validus shall not be required to include such Validus Common Shares in such registration statement to the extent such shares are then freely tradeable without restriction under the US Securities Act of 1933, as amended, either pursuant to an exemption available with respect thereto under Rule 144(k) or Regulation S promulgated thereunder.
3.2 REDUCTION OF CONSIDERATION
If any payment is made by any Seller to the Purchaser in respect of any claim against that Seller for any breach of any of the Warranties, the pre-Completion covenants in Clause 5 or any other provision of this Agreement (or any agreement entered into pursuant to this Agreement), the payment shall be made by way of adjustment of the Consideration paid to that Seller and the amount of the Consideration paid to that Seller shall be deemed to have been reduced by the amount of such payment.
4 CONDITIONS
4.1 CONDITIONS PRECEDENT
4.1.1 The respective obligations of each of the parties hereto to effect Completion of this Agreement are conditional upon:
(i) the FSA having given notice in writing in terms satisfactory to the Sellers and the Purchaser (each acting reasonably and in good faith) that the FSA approves or has no objection to the Purchaser and any other relevant member of the Purchaser's Group and any controller (within the meaning of the Financial Services and Markets Act 2000) of any of them acquiring control (within the meaning of the Financial Services and Markets Act 2000) of Talbot Underwriting Ltd and Underwriting Risk Services Ltd pursuant to this Agreement or, in the absence of such notice, the three month period within which the FSA may serve a notice of objection under those provisions having elapsed without the FSA having served any notice of objection;
(ii) the BMA having given notice in writing in terms satisfactory to the Sellers and the Purchaser (each acting reasonably and in good faith) that the BMA approves or has no objection to the Purchaser or any other relevant member of the Purchaser's Group acquiring control of the Company, Talbot Capital Ltd and Talbot Insurance (Bermuda) Ltd pursuant to this Agreement and to becoming an indirect shareholder controller of Talbot Insurance (Bermuda) Ltd in accordance with the Bermuda Insurance Act 1978;
(iii) Lloyd's having given notice in writing in accordance with paragraph 12 of the Membership Byelaw (No. 5 of 2005) in terms satisfactory to the Sellers and the Purchaser (each acting reasonably and in good faith) that it approves or has no objection to the Purchaser and any other relevant member of the Purchaser's Group and any controller (within the meaning of the Definitions Byelaw (No. 7 of 2005)) acquiring control (within the meaning of the Definitions Byelaw (No. 7 of 2005)) of Talbot 2002 and Talbot Underwriting Capital Ltd;
(iv) the Franchise Board (being a board established by Lloyd's with that name) having given notice in writing in accordance with paragraph 43 of the Underwriting Byelaw (No. 2 of 2003) in terms satisfactory to the Sellers and the Purchaser (each acting reasonably and in good faith) that it approves or has no objection to the Purchaser and any other relevant member of the Purchaser's Group and any controller acquiring control ("control" and
"controller" being within the meaning of the Definitions Byelaw (No. 7 of 2005)) of Talbot Underwriting Ltd; and
(v) the persons mentioned in paragraph 9 of the undertaking given by Underwriting Risk Services Ltd as part of its coverholder application form having been notified of the matters required to be notified pursuant to such paragraph (including any changes to the information requested in paragraph k of Part A, Section 1 of such application form as a result of Completion).
4.1.2 The obligation of the Purchaser to effect Completion of this Agreement is conditional upon Talbot Underwriting Ltd having received written confirmation from Lloyd's that the sale of the Shares to the Purchaser will not affect any assurance or commitment given by Lloyd's in the Ring Fencing Letters.
4.2 RESPONSIBILITY FOR SATISFACTION
4.2.1 The parties shall use all reasonable endeavours to ensure the satisfaction of the Conditions Precedent as soon as reasonably practicable, including procuring the making of all requisite applications and notifications and using reasonable endeavours to procure the provision as promptly as possible of all such information as is requested by any Relevant Regulator in connection with the satisfaction of the Conditions Precedent. Each Party undertakes to inform the other party of all communications (whether in writing or otherwise) with any Relevant Regulator as soon as reasonably practicable and to provide such other party with copies of all documents provided to any such body.
4.2.2 Without prejudice to Clause 4.2.1, the Sellers and the Purchaser agree that all requests and enquiries from any Relevant Regulator, government, governmental, supranational or trade agency, court or other regulatory body shall be dealt with by the Sellers and the Purchaser in consultation with each other and the Sellers and the Purchaser shall promptly co-operate with and provide all necessary information and assistance reasonably required by such regulator, government, agency, court or body upon being requested to do so by the other.
4.3 NON-SATISFACTION
4.3.1 The Purchaser shall promptly give notice to the Sellers, and the Sellers shall promptly give notice to the Purchaser, of the satisfaction of the Conditions Precedent as soon as reasonably practicable, and in any event within five Business Days of becoming aware of the same. If the Conditions Precedent are not satisfied on or before 24 August 2007 or such other date as the Purchaser and the Sellers may agree, the Purchaser or (in the case of the Conditions Precedent contained in Clause 4.1.1 only) the Sellers may in its or their sole discretion terminate this Agreement. Where this Agreement is terminated under this Clause 4.3, no party shall have any claim against any other under it, save for fraud or any claim arising from breach of any undertaking contained in Clause 4.2, and that provision along with the provisions of Clauses 10.2, 10.3, 10.10, 10.14, 10.17 and 10.18, shall remain in full force and effect notwithstanding this Agreement having otherwise terminated.
4.3.2 Notwithstanding the foregoing, neither the Sellers nor the Purchaser may rely, either as a basis for not consummating Completion or terminating this Agreement and abandoning the transactions contemplated hereby, on the failure of any condition set out in Clause 4.1 to be satisfied if such failure was caused by such party's breach of any provision of this Agreement or failure to use its reasonable endeavours to consummate Completion, as required by and subject to Clause 4.2.
5 ACTIONS PENDING COMPLETION
5.1 SELLERS' GENERAL OBLIGATIONS
Each Seller shall use all reasonable endeavours to procure that, pending Completion, subject to Clause 5.5 and save insofar as agreed in writing by the Purchaser (such agreement not to be unreasonably withheld or delayed):
5.1.1 subject to any restrictions imposed on the Group Companies pursuant to this Clause 5 or any other obligations with which the Purchaser has requested in writing that any Group Company comply, each Group Company will carry on its business (including the management and operation of Syndicate 1183) in all material respects in the ordinary and usual course and substantially consistent with its practice in the 12 months prior to Completion, provided that this shall not prohibit any action that is required to be taken in order to effect (in accordance with the terms of this Agreement) the transactions contemplated by this Agreement;
5.1.2 each Group Company shall not make or agree to make any payment other than normal course payments in the ordinary and usual course of business and consistent with past practice;
5.1.3 each Group Company shall manage its working capital and maintain its accounting records in the ordinary and usual course of business and in all material respects in a manner consistent with the 12 months ended 31 December 2006;
5.1.4 each Group Company will:
(i) maintain in force all insurance policies normally kept in force by it for the benefit of it and/or the Group Companies (which, for the avoidance of doubt, does not include any inwards or outwards insurance or reinsurance contracts or any other insurance or reinsurance contracts entered into by Syndicate 1183 or Talbot 2002);
(ii) will not amend any such insurance policies but, for the avoidance of doubt, the Company shall not be precluded from notifying its insurers about, and making such amendments to its directors and officers insurance cover as the directors of the Company (acting reasonably) may consider prudent in respect of, the Purchaser's forthcoming public offering of its securities or the transactions contemplated by this Agreement;
(iii) will make all insurance claims under such policies in relation to itself and/or the Group Companies in accordance with the ordinary course of business and its previous practice of making such insurance claims; and
(iv) will not settle any such claim below the amount claimed;
5.1.5 each Group Company shall operate materially in accordance with all regulatory requirements (including the Lloyd's Byelaws and the regulations of the Lloyd's Franchise Board from time to time);
5.1.6 Talbot 2002 shall not amend, terminate or waive the benefits of or permit the amendment, termination or waiver of, any agreement in relation to the Group's Capital Stack;
5.1.7 prompt written notice is provided to the Purchaser at any time any undertaking or warranty of the Sellers or the Warrantors ceases to be accurate in any material respect (whether or not such warranty is required to be reaffirmed at any time after the date of this Agreement); and
5.1.8 to the extent reasonably requested by the Purchaser, senior management of the Company cooperate and assist the Purchaser in obtaining waivers and consents from Lloyds TSB of any change of control or other rights arising or resulting from Completion.
5.2 RESTRICTIONS ON THE SELLERS
Without prejudice to the generality of Clause 5.1, each Seller shall, between the date of this Agreement and Completion, use all reasonable endeavours to procure, that each Group Company shall not, except to the extent expressly set forth in this Agreement to give effect to, and to comply with, this Agreement or any other agreement to which both the Company and the Purchaser is a party, without the prior written consent of the Purchaser such consent not to be unreasonably withheld or delayed, directly or indirectly:
5.2.1 incur or enter into any agreement or commitment involving any capital expenditure in excess of L250,000 singly or together with other capital expenditures exclusive of VAT, except as otherwise set out in the Disclosure Letter;
5.2.2 save as permitted under Clause 5.2.1, enter into or amend any contract not in the ordinary and usual course of business and which either: (i) is not capable of being terminated by the Group Companies in their sole discretion at any time with twelve months' notice or less without compensation, penalty or premium; or (ii) involves total expenditure in excess of L150,000, taken together with all other contracts so entered into or amended;
5.2.3 permit or cause any Leakage except Permitted Deductions which shall be repaid to the Company on Completion pursuant to Clause 3.1.8(i);
5.2.4 in relation to any Property:
(i) apply for any planning permission;
(ii) effect any change of use of such Property;
(iii) except as disclosed in the Disclosure Letter, terminate or serve any notice to terminate, surrender or accept any surrender of or waive the terms of any lease, tenancy or licence;
(iv) agree any new rent or fee payable under any lease, tenancy or licence, provided that no such consent shall be required in respect of any increase in rent payable in respect of any Property pursuant to a rent review in
accordance with the terms of the existing lease or licence with any unconnected third party;
(v) enter into or vary any agreement, lease, tenancy, licence or other commitment; or
(vi) sell, convey, transfer, assign or charge any Property or grant any rights or easements over any Property or enter into any covenants affecting any Property or agree to do any of the foregoing;
5.2.5 (i) incur any borrowings or any other indebtedness or request the issue of any letter of credit in the aggregate in excess of L100,000 all of which shall be prepayable at any time without penalty or premium; (ii) prepay any indebtedness prior to its scheduled maturity or amend the terms governing any indebtedness; (iii) otherwise pay, discharge or satisfy any claims, liabilities or obligations (whether absolute, accrued, contingent or otherwise) except (in the case of this sub-clause (iii) only but subject to the other terms of this Agreement) in the ordinary course of business consistent with previous practice;
5.2.6 except as required by law, contemplated by the term sheets referred to in recital (D) or as disclosed in the Disclosure Letter:
(i) make any amendment (whether to take effect prior to, on or after Completion) to the terms and conditions of employment of any Employee, consultant or officer of any Group Company (including as to remuneration, pension entitlements or other benefits) or agree to provide any gratuitous payment or benefit to any such person or any of his or her dependents; or
(ii) terminate or take any steps to terminate the contract of employment of, or dismiss (constructively or otherwise), any Employee, consultant or officer (except in accordance with normal disciplinary procedures); or
(iii) engage or appoint any employee with a salary of L100,000 or more per annum;
5.2.7 discontinue or amend the Company Pension Scheme or commence to wind it up or communicate to any employee any plan, proposal or intention to amend, wind up, terminate or exercise any discretion other than in accordance with the terms of the documents governing, the Company Pension Scheme;
5.2.8 amend the Staff Profit Share Plan or the Bonus Letters or, except as disclosed in the Disclosure Letter, communicate to any employee any plan, proposal or intention to amend, terminate or exercise any discretion, or accelerate the payment of any amount deferred or deferrable thereunder;
5.2.9 pay, or agree to pay, or accelerate the payment of:
(i) any gratuitous bonus; or
(ii) any benefits under the Company Pension Scheme, the Staff Profit Share Plan or the Bonus Letters, each as in effect on the date of this Agreement, or any other bonus arrangement other than scheduled payments as required by the terms of the documents governing such scheme, plan or bonus arrangement or other than as disclosed in the Disclosure Letter;
5.2.10 introduce or seek to introduce any new pension scheme, profit share plan or other bonus or incentive compensation arrangements or any employee benefit plan or arrangements;
5.2.11 other than any acquisition, disposal or investment (or any agreement to do any of the foregoing) in respect of the assets of Syndicate 1183 and alterations made to the investment portfolio containing the assets of the Group comprising the Funds at Lloyd's arrangements, in each case in accordance with the applicable investment management guidelines and investment policies and guidelines, each as in effect on the date of this Agreement and in the ordinary course of business, acquire or agree to acquire or dispose of or agree to dispose of any assets for amounts which when aggregated exceed L250,000, exclusive of VAT;
5.2.12 amend any of the terms on which facilities or services which are material to the Group are supplied, except where required to do so in order to comply with any applicable legal or regulatory requirements or in respect of the negotiations discussed in the disclosures against paragraphs 2.5.2 and 2.21.3 of Schedule 4 in the Disclosure Letter;
5.2.13 save as required in connection with the Options Transactions, create, allot, issue, reduce, redeem or repurchase any share or loan capital (or option to subscribe for or right to acquire the same) of any Group Company other than to another Group Company;
5.2.14 other than as disclosed in the Disclosure Letter or any acquisition, disposal or investment (or any agreement to do any of the foregoing) in respect of the assets of Syndicate 1183 and alterations made to the investment portfolio containing the assets of the Group comprising the Funds at Lloyd's arrangements, in each case in accordance with the applicable investment management guidelines and investment policies and guidelines, each as in effect on the date of this Agreement and in the ordinary course of business, acquire or agree to acquire any share, shares or other interest in any company, partnership or other venture;
5.2.15 other than as disclosed in the Disclosure Letter, make any change to its accounting practices or policies (except to the extent required to comply with any changes after the date of the Agreement, in UK GAAP or US GAAP as applicable) or amend its memorandum, articles of association or byelaws (as applicable) except as required by law;
5.2.16 save for claims under inwards and outwards insurance and reinsurance policies and broker and coverholder disputes in Syndicate 1183's ordinary course of business, commence any litigation or arbitration proceedings to which a Group Company is a party which are material and/or involve a potential liability of L100,000 or more or settle any such litigation or arbitration proceedings which were commenced prior to the date of this Agreement;
5.2.17 make any change to the nature or organisation of its business;
5.2.18 discontinue or cease to operate all or any part of its business;
5.2.19 materially alter, amend, vary, cancel or commute any material reinsurance arrangements to which any Group Company is a party;
5.2.20 make or change any tax election, file an amendment to any tax return or settle or compromise any tax liability, except where required to do so in order to comply with any applicable legal or regulatory requirement;
5.2.21 enter into any transaction with or for the benefit of any of its directors or any other person who is connected with any of its directors (within the meaning of section 839 of the Income and Corporation Taxes Act 1988) other than on normal arm's length terms;
5.2.22 appoint new auditors;
5.2.23 fail to deal with customer information as required by applicable law or contract or fail to maintain proprietary information consistent with, and on the same basis as, past practice;
5.2.24 fail to keep accounting records on a basis consistent with applicable law and past practice;
5.2.25 save for ex gratia payments arising in the ordinary course of business of Syndicate 1183, make any ex gratia payments;
5.2.26 save as disclosed in the Disclosure Letter, change the investment managers appointed by any Group Company or alter or amend or deviate from the investment policy, guidelines or criteria of the Group Companies as in effect on the date of this Agreement;
5.2.27 alter or amend its line structure or write any new classes of business (in each case from those disclosed in the Data Room) which would be material to the Group; or
5.2.28 authorise any of, or agree to take or cause any of, the foregoing actions.
5.3 TERMINATION
5.3.1 The Purchaser shall be entitled by notice in writing to the Sellers to terminate this Agreement (other than Clauses 1, 10.3,10.10,10.14, 10.17 and 10.18) if prior to the Earliest Completion Date a Material Adverse Event has occurred and is continuing at the date such notice is served provided that the Purchaser cannot terminate this Agreement pursuant to this Clause 5.3.1 in respect of a Material Adverse Event that has a Cure Period until such period has expired without the Material Adverse Event being remedied.
5.3.2 For the avoidance of doubt, the Purchaser's right of termination under Clause 5.3.1 shall terminate and cease to have any further effect on the Earliest Completion Date, whether or not Completion shall occur on that date.
5.3.3 Any failure by the Purchaser to exercise its right to terminate this Agreement under this Clause 5.3 shall not constitute a waiver of any other rights of the Purchaser under this Agreement arising out of any breach of any Warranty or Clauses 5.1 or 5.2.
5.4 OTHER RELEVANT SELLERS' OBLIGATIONS PRIOR TO COMPLETION
5.4.1 Without prejudice to the generality of Clauses 5.1 and 5.2, prior to Completion each Seller shall use reasonable endeavours to procure that the Group Companies shall:
(i) allow the Purchaser and its agents (including legal advisers, auditors, financial advisers and actuaries), upon reasonable notice, reasonable access to, and to take copies of, the books, records and documents of or relating in whole or in part to the Group, provided that the obligations of the Sellers under this Clause 5.4.1(i) shall not extend to allowing access to information which would compromise litigation privilege or which might compromise privilege in respect of future litigation or which is reasonably regarded as confidential to the activities of the Sellers otherwise than in relation to the Group Companies ; and
(ii) (a) maintain their respective books and records in all material respects in the same manner and with the same degree of care that such books and records have been maintained prior to the date of this Agreement and in accordance with all applicable laws and Lloyd's requirements; and (b) provide to the Purchaser, if requested, promptly after they become available, all statutory or other similar statements and reports filed with any Relevant Regulator, including all such statements and reports required by Lloyd's, and all such statements shall be prepared on a basis consistent with previous practice and in accordance with the regulations applicable thereto; and (c) allow the Purchaser to appoint an observer to attend any board meetings of any Group Company or any meetings of the audit, remuneration, independent review or investment committees of the board of any Group Company and provide at least 48 hours notice of, and the agenda relating to, the same.
5.4.2 Prior to Completion, none of the Warrantors will knowingly and deliberately take any action which they could reasonably have avoided or prevented that would or is reasonably likely to result in any of the Warranties ceasing to be true (whether or not such Warranty is required to be reaffirmed at any time after the date of this Agreement).
5.5 NORMAL COURSE PAYMENTS
For the avoidance of doubt, nothing in any of the foregoing provisions of this Clause 5 or any other provision of this Agreement shall restrict the ability of any Group Company (without the need to obtain the Purchaser's consent) to make payments or accruals or to accrue liabilities in the ordinary course of business as carried on at the date of this Agreement, which shall include:
5.5.1 payments or accruals required by contract or by law or regulation in respect of the Group's Capital Stack (including all applicable interest payments);
5.5.2 payments or accruals of the Accrued Preference Dividend;
5.5.3 Permitted Leakage; and
5.5.4 Permitted Deductions, and to the extent such payments constitute Leakage they shall be repaid to the Company on Completion pursuant to Clause 3.1.8(i).
5.6 RESTRICTIVE COVENANTS
5.6.1 Each Seller which is a body corporate shall not (and undertakes to procure that no person controlled by it shall), and each Seller that is not a body corporate
undertakes that he/she shall not, either directly or indirectly and either alone or in conjunction with or on behalf of any other person (whether on his/her/its own account or as a principal, partner, shareholder, director, employee, consultant, agent or in any other capacity whatsoever):
(i) either pending or within two years after Completion, solicit, induce or endeavour to entice to leave the service or the employment of any member of the Group, any Senior Employee with whom that Seller had dealings in the 12 months prior to Completion (whether or not such Senior Employee would breach their contract of employment or engagement by reason of leaving the service of the business in which they work) provided, however, that the foregoing will not prohibit any Seller from (i) making generalised searches for employees by the use of advertisements in the media (including trade media) or by engaging search firms to engage in searches that are not targeted or focused on any Senior Employee; or (ii) hiring any person whose employment has been terminated by the Purchaser's Group or any Group Company on or after Completion; and/or
(ii) without limitation to the provisions of this Clause 5.6 and without limitation in time, use any trade or business or domain name or e-mail address or distinctive mark, style or logo used by or in the business of any member of the Group at any time during the two years before Completion or anything intended or likely to be confused with the same, except to the extent relevant to ongoing employment with any Group Company or the Purchaser's Group.
5.6.2 Each undertaking contained in Clause 5.6.1 shall be construed as a separate and severable undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade or unenforceable in whole or in part for any reason, the remaining undertakings or parts thereof, as appropriate, shall continue to bind the Sellers with such deletion or modification as may be necessary to make it valid and enforceable.
5.6.3 The Sellers agree that the undertakings contained in Clause 5.6.1 are reasonable and are entered into for the purpose of protecting the goodwill and confidential information of the business of each Group Company and that accordingly the benefit of the undertakings in Clause 5.6.1 may be assigned by the Purchaser and its successors in title without the consent of the Sellers.
6 COMPLETION
6.1 DATE AND PLACE
Completion shall take place at the offices of the Sellers' Solicitors or at such other place as may reasonably be agreed between the Purchaser and the Sellers two Business Days following fulfilment of the Conditions Precedent or on such other date as may be agreed between the Purchaser and the Sellers.
6.2 OBLIGATIONS ON COMPLETION
On Completion the Sellers and the Purchaser shall each procure that their obligations specified in Schedule 3 are fulfilled.
6.3 PAYMENT OF PRICE
Against compliance with the foregoing provisions the Purchaser shall pay the Consideration to the Sellers in accordance with the provisions of Clause 3.1.
6.4 RIGHT TO TERMINATE
If the foregoing provisions of this Clause 6 are not complied with in any material respect by either the Sellers or the Purchaser to the reasonable satisfaction of the other by or on the date set for Completion, the non-defaulting party shall be entitled (in addition to and without prejudice to all other rights or remedies available to it including the right to claim damages) by written notice to the defaulting party served on such date:
6.4.1 to elect to terminate this Agreement without liability on the part of the non-defaulting party; or
6.4.2 to effect Completion so far as practicable having regard to the defaults which have occurred; or
6.4.3 to fix a new date for Completion (not being more than 20 Business Days after the agreed date for Completion) in which case the foregoing provisions of this Clause 6 shall apply to Completion as so deferred.
7 LEAKAGE
7.1.1 In the event of any Leakage which constitutes a breach of Clause 5.2.3 or the warranty set out in paragraph 2.15.3 of Schedule 4, the only person(s) who shall be liable for such breach shall be the Seller(s) who (or whose connected persons) received such Leakage and in such instance:
(i) prior to Completion, the Purchaser may (at its election) either (a)
deduct an amount equal to such Leakage received by that Seller(s) (or
his/her/its connected persons) from the Consideration due to that
Seller and his/her/its Net Cash Consideration shall be reduced
accordingly or (b) recover such Leakage in accordance with sub-clause
(ii) below; and
(ii) after Completion, the Seller who received any Leakage (either directly or through his/her/its connected persons) shall pay, on demand, to the Company (or such Group Company as the Purchaser may direct) an amount of cash equal to the Leakage received by him/her/it or his/her/its connected persons.
7.1.2 No later than two Business Days prior to Completion, there shall be delivered to the Purchaser a statement (in such form as shall be agreed between the Purchaser and the Sellers, acting reasonably) providing details of any Leakage which has occurred between the Accounts Date and the date of Completion, together with details of any payments made or to be made or costs incurred or to be incurred by any Group Company between the Accounts Date and the date of Completion under sub-paragraphs (j), (k), (l) and (o) of the definition of Permitted Leakage.
8 WARRANTIES
8.1 INCORPORATION OF SCHEDULE 4
8.1.1 Each Seller warrants to the Purchaser in the terms set out in paragraph 1 of Schedule 4, each Warrantor warrants to the Purchaser in the terms set out in paragraph 2 of Schedule 4 and in each case subject to:
(i) the matters referred to in Clause 8.2;
(ii) any matter or thing hereafter done or omitted to be done pursuant to and in accordance with this Agreement or otherwise at the request in writing or with the approval in writing of the Purchaser; and
(iii) the limitations of liability set out in Schedule 5.
Each Employee Seller warrants to the Purchaser in the terms set out in paragraph 3 of Schedule 4.
8.1.2 Each Seller (as to the Warranties set out in paragraph 1 of Schedule 4 only) and Warrantor (as to the Warranties set out in paragraph 2 of Schedule 4) acknowledges that the Purchaser has entered into this Agreement in reliance upon the Warranties given by him/her/it. Save as expressly otherwise provided, the Warranties shall be separate and independent and shall not be limited by reference to any other paragraph of the said Schedule or by anything in this Agreement.
8.1.3 Any statement qualified by the expression "so far as the Warrantors are aware", "to the Warrantors' knowledge, information and belief", "known to the Warrantors" or any similar expression shall be deemed to refer only to matters within the actual knowledge of the Warrantors having made due and careful enquiries of each other.
8.1.4 Each of the Sellers agrees and undertakes that (in the absence of fraud) he/she/it has no rights against and shall not make any claim against any Employee, director, agent or officer of any Group Company on whom he/she/it may have relied or from whom he/she/it requested information or assistance in respect of giving the Warranties, preparing the Disclosure Letter or agreeing to any other term of this Agreement or any other agreement or documents entered into pursuant to this Agreement.
8.2 SELLERS' DISCLOSURES
8.2.1
(i) The Warranties, other than the Core Warranties, are subject to the following matters:
(a) any matter which is fairly disclosed in this Agreement, the Disclosure Letter or in any of the documents listed in the Data Room Index; and
(b) all matters fairly disclosed in the Due Diligence Reports. For the avoidance of doubt any disclaimers or limitations of liability included in the Due Diligence Reports will not constitute fair disclosure.
(ii) The Core Warranties are subject only to matters fairly disclosed in the Disclosure Letter.
8.2.2 References in the Disclosure Letter to paragraph numbers shall be to paragraph numbers in Schedule 4 to which the disclosure is most likely to relate. Such references are given for convenience only and shall not limit the effect of any of the disclosures, all of which are made against the Warranties as a whole. Information set out in the Disclosure Letter is included solely to qualify the Warranties, is not an admission of liability with respect to the matters covered by the information, is not warranted in any respect whatsoever and may not be required to be disclosed pursuant to this Agreement. The inclusion of any specific item or amount in the Disclosure Letter is not intended to imply that such item or amount (or higher or lower amounts) is or is not material, and no party shall use the fact of the inclusion of any such item or amount in the Disclosure Letter in any dispute as to whether any obligation, item, amount or matter not described therein is or is not material for the purposes of this Agreement.
8.2.3 References to matters being "FAIRLY DISCLOSED" means to matters fairly disclosed with sufficient detail to identify the nature and scope of the same and to provide an understanding of the matters and their effects.
8.3 EFFECT OF COMPLETION
The Warranties and, insofar as the same shall not have been performed at Completion, all other provisions of this Agreement shall not be extinguished or affected by Completion, or by any other event or matter whatsoever (including any satisfaction of the Conditions Precedent), except by a specific and duly authorised written waiver or release by the Purchaser (in the case of the Warranties) and the beneficiary of such provision (in the case of any other provision of this Agreement).
8.4 WARRANTIES BY THE PURCHASER
The Purchaser warrants to the Sellers in the following terms:
8.4.1 the Purchaser has the requisite corporate power and authority to enter into and perform this Agreement;
8.4.2 this Agreement will, when executed by the Purchaser, constitute a valid and binding obligation on the Purchaser enforceable in accordance with its terms subject with respect to enforceability to the effect of bankruptcy, insolvency, reorganisation, moratorium or similar laws now or hereafter affecting the enforcement of creditors' rights generally and to the availability of equitable remedies; and
8.4.3 except for the consents of the Relevant Regulators specified in the Conditions Precedent, no consent, approval, authorisation or order of any court or government or local agency or body or any other person is required by the Purchaser for the execution or implementation of this Agreement and compliance with the terms of this Agreement.
9 WHOLE AGREEMENT AND REMEDIES
9.1 WHOLE AGREEMENT
This Agreement contains the whole agreement between the parties relating to the subject matter of this Agreement at the date hereof to the exclusion of any terms implied by law which may be excluded by contract and supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement.
9.2 ACKNOWLEDGEMENT
9.2.1 The Purchaser acknowledges and agrees (in the absence of fraud or wilful default) that it has not been induced to enter into this Agreement by any representation, warranty or undertaking not expressly incorporated into this Agreement.
9.2.2 Without prejudice to Clauses 6.4, 9.1, 9.2.1 and 10.3, the Purchaser agrees and undertakes that (in the absence of fraud) it has no rights against and shall not make any claim, in each case with respect to the terms of this Agreement and the purchase of the Shares, against any employee, director, agent, officer (other than any Seller solely in respect of his/her/its Warranties and other obligations of that Seller hereunder, but subject to the terms of this Agreement) of any Group Company or of any Seller on whom it may have relied solely in connection with its decision to enter into this Agreement and any other agreement or document entered into pursuant to this Agreement.
9.3 REMEDIES
So far as permitted by law and except in the case of fraud or wilful default or as otherwise expressly set out in this Agreement, each party agrees and acknowledges that its only right and remedy in relation to any representation, warranty or undertaking made or given in connection with this Agreement or any other breach of this Agreement shall be for damages for breach of the terms of this Agreement against the person who breached the terms in question to the exclusion of all other rights and remedies (including those in tort or arising under statute or any right of termination or rescission). Notwithstanding the foregoing, in the event of any breach of Clauses 5.6, 10.3 or 10.9, the Purchaser shall be entitled to seek an injunction or specific performance as relevant.
9.4 REASONABLENESS OF THIS CLAUSE
Each party to this Agreement confirms it has received independent legal advice relating to all the matters provided for in this Agreement, including the provisions of this Clause, and agrees, having considered the terms of this Clause and the Agreement as a whole, that the provisions of this Clause are fair and reasonable.
9.5 INTERPRETATION
In Clauses 8.4, 9.1 and 9.4, "THIS AGREEMENT" includes the Disclosure Letter, the Confidentiality Agreement, and all documents entered into pursuant to this Agreement.
10 OTHER PROVISIONS
10.1 LIMITATIONS ON SELLERS' LIABILITY
No liability shall attach to any Seller or Warrantor in respect of any claims under a Warranty or any other provision of this Agreement other than the covenants set out in Clauses 5.1, 5.2, 5.6 and 7 to the extent that a limitation set out in Schedule 5 applies. Each provision of Schedule 5 shall be read and construed without prejudice to each of the other provisions of Schedule 5.
10.2 ANNOUNCEMENTS
No announcement or circular in connection with the existence or the subject matter of this Agreement shall be made or issued by or on behalf of the Sellers or the Purchaser without the prior written approval of the Sellers and the Purchaser (such approval not to be unreasonably withheld or delayed). This shall not affect any announcement or circular which, in the judgement of the party (acting reasonably) making the announcement or releasing the circular, is required by law or any regulatory body or the rules of any recognised stock exchange or is otherwise determined by such person (acting reasonably) to be required to be made in a registration statement filed with the Securities and Exchange Commission provided that a copy of such announcement or circular shall, after making such announcement or sending such circular, be provided to each of the people listed in Clause 10.5. For the purpose of this Clause 10.2 the press releases agreed between the parties relating to the announcement of the transaction contemplated by this Agreement shall not require any further approval.
10.3 CONFIDENTIALITY
10.3.1 This Clause 10.3 shall be without prejudice to the Confidentiality Agreement, which agreement shall continue notwithstanding Completion. In the event of any conflict between the Confidentiality Agreement and this Clause 10.3 this Clause shall prevail.
10.3.2 Subject to Clause 10.3.4, each of the Sellers shall treat (and procure that its connected persons treat) as confidential and not disclose or use any information received or obtained as a result of entering into this Agreement (or any agreement entered into pursuant to this Agreement) which relates to:
(i) the provisions of this Agreement and any agreement entered into pursuant to this Agreement;
(ii) the negotiations relating to this Agreement (and such other agreements); or
(iii) the Purchaser's Group or any Group Company's business, financial or other affairs (including the business, financial or other affairs of the Group Companies and including, in each case, future plans and targets).
10.3.3 Subject to Clause 10.3.4, the Purchaser shall treat (and procure that its connected persons treat) as confidential and not disclose or use any information received or obtained as a result of entering into this Agreement (or any agreement entered into pursuant to this Agreement) which relates to:
(i) the provisions of this Agreement and any agreement entered into pursuant to this Agreement;
(ii) the negotiations relating to this Agreement (and such other agreements); or
(iii) any Seller's business, financial or other affairs (including future plans and targets).
10.3.4 Neither Clause 10.3.2 nor 10.3.3 shall prohibit disclosure or use of any information if and to the extent:
(i) the disclosure or use is, in the judgement of the party (acting reasonably) disclosing or using any such information, required by law, any regulatory body or the rules and regulations of any recognised stock exchange or is otherwise determined by such person acting reasonably to be required or needed to be made in a registration statement filed with the Securities and Exchange Commission or is required or needed in connection with discussions with any rating or similar agency;
(ii) the disclosure or use is required to vest the full benefit of this Agreement in any of the Sellers or the Purchaser, as the case may be;
(iii) the disclosure or use is required for the purpose of any judicial proceedings arising out of this Agreement or any other agreement entered into under or pursuant to this Agreement or the disclosure is reasonably required to be made to a Taxation Authority in connection with the Taxation affairs of the disclosing party;
(iv) the disclosure is made to professional advisers of the Purchaser or any of the Sellers on terms that such professional advisers undertake to comply with the provisions of Clause 10.3.2 or 10.3.3 in respect of such information as if they were a party to this Agreement;
(v) the disclosure is made by the Purchaser to its directors, shareholders or capital providers;
(vi) the disclosure is made by any Institutional Seller to:
(a) any general partner, limited partner, trustee, nominee or manager of, any Institutional Seller or to any group undertaking of any Institutional Seller, or any investor or potential investor in any of them; or
(b) any employee or officer of any Institutional Seller;
(vii) the information is or becomes publicly available (other than by breach of the Confidentiality Agreement or of this Agreement);
(viii) the other party has given prior written approval to the disclosure or use; or
(ix) the information is independently developed after Completion,
provided that prior to disclosure or use of any information pursuant to Clause 10.3.4(i) or (iii) (except in the case of disclosure to a Taxation Authority or a registration statement or other filing filed with the Securities and Exchange Commission or a disclosure to any stock exchange, rating or similar agency or capital provider), the party concerned shall promptly notify the other party of such
requirement with a view to providing the other party with a reasonable opportunity to agree the content of such disclosure or use. In relation to a registration statement or other filing filed with the Securities and Exchange Commission or a disclosure to any stock exchange, rating or similar agency or capital provider, a copy of such statement or other filing shall, after filing or making such statement or other filing, be provided to each of the people listed in Clause 10.5.
10.4 SUCCESSORS AND ASSIGNS
10.4.1 Subject to Clause 10.4.2, this Agreement is personal to the parties to it. Accordingly, neither the Purchaser nor the Sellers may assign, hold on trust or otherwise transfer the benefit of all or any of the other's obligations under this Agreement, or any benefit arising under or out of this Agreement nor shall the Purchaser be entitled to make any claim against the Sellers in respect of any loss which it does not suffer in its own capacity as beneficial owner of the Shares except as contemplated by Clause 10.4.2.
10.4.2 Subject to Clause 10.4.3 and except as otherwise expressly provided in this Agreement, either the Sellers or the Purchaser may, without the consent of the other, assign to a connected company the benefit of all or any of the other party's obligations under this Agreement, provided, however, that such assignment shall not be absolute but shall be expressed to have effect only for so long as the assignee remains a connected company and that immediately before ceasing to be a connected company, the assignee shall assign the benefit to a connected company of the party concerned. For the purposes of this sub-clause a connected company is a company which is a subsidiary of the party concerned or which is a holding company of such party or a subsidiary of such holding company.
10.4.3 In no circumstances shall the liability of a party under this Agreement to an assignee be greater than it would have been in if no assignment had been made.
10.5 ACTION BY THE SELLERS
Where this Agreement or any other documents, agreements or arrangements contemplated hereby or delivered in connection herewith provides or requires consent, approval or agreement to be obtained from the Sellers (or any relevant group of them), such provision or requirement will be satisfied by obtaining the approval and agreement of the following people:
10.5.1 MEA Carpenter and CNR Atkin jointly in respect of the Employee Sellers, PC Churchill, DK Newbigging, DP Redhead, the Ashdown Trust, the Dynevor Trust and the Rams Hill Trust;
10.5.2 Heidi Hutter in respect of the Non-Employee Sellers holding Common Shares;
10.5.3 Jim Quinn in respect of the Non-Employee Sellers holding A Preference Shares (other than those referred to in Clause 10.5.1); and
10.5.4 Craig Huff in respect of the Non-Employee Sellers holding B Preference Shares,
and all of the parties to this Agreement shall be entitled to rely on any consent, approval or agreement of the people listed in 10.5.1 to 10.5.4 above as the consent, approval or agreement of all of the Employee Sellers and/or Non-Employee Sellers, as the case may
be, (or any relevant group of them) for the purposes of this Agreement without further enquiry.
10.6 THIRD PARTY RIGHTS
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
10.7 VARIATION
No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the Purchaser and the Sellers. Any amendment to this Agreement which disproportionately affects any one or more of the Sellers shall require the specific consent of such Seller(s).
10.8 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement both as regards any dates and periods mentioned and as regards any dates and periods which may be substituted for them in accordance with this Agreement or by agreement in writing between the parties.
10.9 FURTHER ASSURANCE
At any time after the date of this Agreement, each Seller shall and shall use all reasonable endeavours to procure that any necessary third party shall execute such documents and do such acts and things as the Purchaser may reasonably require for the purpose of vesting title to the Shares in the Purchaser.
10.10 COSTS
Except for the amount referred to in sub-paragraph (m) of the definition of Leakage in Clause 1.1, the Sellers (and, for the avoidance of doubt, not any Group Company) shall bear all costs incurred by them in connection with the preparation negotiation and entering into this Agreement and the sale of the Shares, including the preparation of the Due Diligence Reports. The Purchaser shall bear all such costs incurred by it.
10.11 METHOD OF PAYMENT
Wherever in this Agreement provision is made for the payment by one party to the other, such payment shall be effected by crediting for same day value the account specified by the payee to the payer reasonably in advance and in sufficient detail (including name, account number, sort code and account location) to enable payment by telegraphic or other electronic means to be effected on or before the due date for payment.
10.12 STAMP DUTY, FEES AND TAXES
The Purchaser shall bear the cost of all UK, Bermuda, US and Cayman Island stamp duty and registration and transfer taxes payable as a result of the acquisition by the Purchaser of the Shares.
10.13 INTEREST
If any Seller or the Purchaser defaults in the payment when due of any sum payable under this Agreement (howsoever determined), the liability of the relevant Seller or the Purchaser (as the case may be) shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (as well after as before judgment) at the Interest Rate. Such interest shall accrue from day to day.
10.14 NOTICES
10.14.1 Any notice, claim or demand in connection with this Agreement shall be in writing in English (a "NOTICE") and shall be sufficiently given or served if delivered or sent:
In the case of any of the Sellers: To the address shown next to their name in Schedule 1 provided that, for the purposes of Clauses 5.3, 10.2 and 10.3.4 only, delivery by the Purchaser of any such notice, claim or demand to the people listed in 10.5.1 to 10.5.4 above at their respective addresses shall be deemed to be delivery of such notice, claim or demand to all Employee Sellers and/or Non Employee Sellers, as the case may be, (or any relevant group of them) for the purposes of this Agreement In the case of the Purchaser: Validus Holdings, Ltd. 19 Par-La-Ville Road Hamilton HM11 Bermuda, Attention: Chief Financial Officer and General Counsel (Facsimile: (441) 278-9090) with copies to: Kendall Freeman One Fetter Lane London EC4A 1JB Attention: Richard Spiller and Ashwani Kochhar Reference: RXS/AKK/01143617 (Facsimile: +44 (0)20 7353 7377) Cahill Gordon & Reindel LLP 80 Pine St. New York, New York 10005 Attention: Michael A. Becker, Esq. and Christopher T. Cox, Esq. (Facsimile: (212) 269-5420) |
or (in any of the above cases) to such other address or fax number in the United Kingdom as the relevant party may have notified to the other in accordance with this Clause.
10.14.2 Any Notice may be delivered by hand or sent by fax or prepaid post (first class in the case of service in the United Kingdom and airmail in the case of international service). Notices may not be sent by email. Without prejudice to the foregoing, any Notice shall conclusively be deemed to have been received on the next working day in the place to which it is sent, if sent by fax (provided no notice of non-delivery or non-receipt has been received by the sender), or 48 hours from the time of posting (if sent by first class post to an address in the United Kingdom) or 96 hours from the time of posting (if sent by post to an address outside of the United Kingdom), or at the time of delivery, if delivered by hand.
10.15 INVALIDITY
If any term in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, under any enactment or rule of law, such term or part shall to that extent be deemed not to form part of this Agreement, but the legality, validity or enforceability of the remainder of this Agreement shall not be affected.
10.16 COUNTERPARTS
This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart.
10.17 GOVERNING LAW AND SUBMISSION TO JURISDICTION
10.17.1 This Agreement and the documents to be entered into pursuant to it shall be governed by and construed in accordance with English law.
10.17.2 All the parties irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. All the parties irrevocably submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.
10.18 APPOINTMENT OF PROCESS AGENT
10.18.1 Each of OGF III (Caymans 1), L.P., OGF IV (Caymans 1), L.P. and Olympus Executive Fund, L.P. irrevocably appoints Hackwood Secretaries Limited at its registered office for the time being, (being at the date hereof at One Silk Street, London EC2Y 8HQ) as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of or in connection with this Agreement, service upon which shall be deemed completed whether or not forwarded to or received by the other parties.
10.18.2 Each of Reservoir Capital Partners and Reservoir Master Fund irrevocably appoints Ashurst (attention Mark Vickers/Shawn Er) of Broadwalk House, 5 Appold Street, London EC2A 2HA as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of or in connection with this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the other parties.
10.18.3 Each of the US Sellers irrevocably appoints Reed Smith Richards Butler LLP of Minerva House, 5 Montague Close, London SE1 9BB or any successor firm as his/her/its agent to accept service of process in England and Wales in any legal action or proceedings arising out of or in connection with this Agreement, service upon which shall be deemed completed whether or not forwarded to or received by the other parties.
10.18.4 Intermediate Capital GP Limited irrevocably appoints Intermediate Capital Investments Limited at its registered office for the time being, (being at the date hereof at 20 Old Broad Street, London EC2N 1DP) as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of or in connection with this Agreement, service upon which shall be deemed completed whether or not forwarded to or received by the other parties.
10.18.5 Codan irrevocably appoints Hackwood Secretaries Limited at its registered office for the time being, (being at the date hereof at One Silk Street, London EC2Y 8HQ) as its agent to accept service of process in England and Wales in any legal action or proceedings arising out of or in connection with this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the other parties.
10.18.6 The Purchaser hereby irrevocably appoints Fetter Secretaries Limited of One Fetter Lane, London EC4A 1JB as its agent to accept service of process in England in any legal action or proceedings arising out of this Agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Purchaser.
10.18.7 Each party that has a process agent appointed agrees to inform the other parties, in writing, of any change in the address of such process agent within 28 days.
10.18.8 If such process agent ceases to be able to act as such or to have an address in England, each of the parties irrevocably agrees to appoint a new process agent in England acceptable to the other parties and to deliver to the other parties within 14 days a copy of a written acceptance of appointment by the process agent.
10.18.9 Nothing in this Agreement shall affect the right to serve process in any other manner permitted by law or the right to bring proceedings in any other jurisdiction for the purposes of the enforcement or execution of any judgement or other settlement in any other courts.
10.19 SHARE AWARDS
Validus undertakes to the Employee Sellers to comply with the terms set out in Annex A of its offer letter dated 18 April 2007 in respect of the issue of US$15,000,000.00 of Validus Common Shares to Employees in accordance with the terms of that Annex A (subject to such amendments as may be agreed between Validus and the Employee Sellers) (the "SHARE AWARDS"). The allocations of Share Awards that have already been provided for in the term sheets referred to in Recital (D) shall form part of the US$15,000,000.00 of Validus Common Shares referred to above.
IN WITNESS whereof this Agreement has been duly executed.
SIGNED by VALIDUS HOLDINGS, LTD.: ) ) ) ) SIGNED by MEA CARPENTER: ) ) ) ) SIGNED by CNR ATKIN: ) ) ) ) SIGNED by ND WACHMAN: ) ) ) ) SIGNED by GAM BONVARLET: ) ) ) ) SIGNED by NJ HALES: ) ) ) ) SIGNED by MS JOHNSON: ) ) ) ) SIGNED by JS CLOUTING: ) ) ) ) SIGNED by JG ROSS: ) ) ) ) |
SIGNED by RI FAULKNER: ) ) ) ) SIGNED by MEA Carpenter as ) attorney for the following: WM ) ABSOLOM, M APICELLA, J BAMFORD, ) SEH BARR, JP BOSWORTH, RM ) BOULTWOOD, DG BURNS, S CALLAGHAN, ) JG CUTTS, PJ DANIEL, KF DOWNEY, ) TM EDWARDS, PC FERGUSON, A FOORD, ) TM FRENCH, P FURLONG, N HASSAM, S ) HOUSE, D HUGHES, A KEOGAN, SF ) LLOYD, M LUCAS PJ MILLER, SJ ) MORRITT, AP OAKLEY, N PATEL, DI ) WATSON, A WEST, LJ WILEY AND JC ) WILLIAMS ) SIGNED by C.N. Rupert Atkin as ) attorney for the following: M ) ALCOTT, R BEAN, G COOKE, J ) COURTNEY, JD EWINGTON, RW ) FIELDER, SA FORBES, CJ GRANT, R ) HARRIS, C KOSTIS, JAJA MCDONALD, ) M PERRY, JE SKINNER, S TEBBUTT ) AND DK NEWBIGGING ) SIGNED by RI Faulkner as attorney ) for the following: G LANGFORD, LE ) NEVILL, PC CHURCHILL ) AND DARREN REDHEAD ) |
SIGNED by Peter AS Pearman on ) behalf of Codan Trust Company ) Limited in its capacity as ) trustee of the ASHDOWN TRUST ) (BEING A TRUST OF CNR ATKIN & ) FAMILY) ) SIGNED by Peter AS Pearman on ) behalf of Codan Trust Company ) Limited in its capacity as ) trustee of the DYNEVOR TRUST ) (BEING A TRUST OF MEA CARPENTER & ) FAMILY) ) SIGNED by Peter AS Pearman on ) behalf of Codan Trust Company ) Limited in its capacity as ) trustee of the RAMS HILL TRUST ) (BEING A TRUST OF JE SKINNER & ) FAMILY) ) |
SIGNED by HE HUTTER ) ) ) ) SIGNED by HE HUTTER ) in her capacity as trustee of ) HE HUTTER IRREVOCABLE TRUST 1 ) ) SIGNED by HE HUTTER ) in her capacity as trustee of HE ) HUTTER IRREVOCABLE TRUST 2 ) ) SIGNED by J SLATTERY ) ) ) ) SIGNED by J SLATTERY ON BEHALF OF ) JPS & CO. LLC ) ) SIGNED by BP REICH ) ) ) ) SIGNED by JA NOVIK ) ) ) ) SIGNED by EF LEMIEUX ) ) ) ) |
SIGNED by DJ GROSS ) ) ) ) SIGNED by Andrew Lerner on behalf ) of INTER ATLANTIC ADVISERS LTD, ) the general partner of ) INTER-ATLANTIC FUND, LP. ) |
SIGNED by James J. Quinn on ) behalf of OGF III (Caymans) Ltd, ) a general partner, on behalf of ) OGF III (CAYMANS 1), L.P. ) SIGNED by James J. Quinn on ) behalf of OGF IV (Caymans Ltd), a ) general partner, on behalf of OGF ) IV (CAYMANS 1), L.P. ) SIGNED by James A. Conroy, acting ) by JAC, L.L.C. on behalf of OEF, ) L.P., a general partner, on ) behalf of OLYMPUS EXECUTIVE FUND, ) L.P. ) |
SIGNED by Craig Huff being a ) person who in accordance with the ) law of Delaware, United States of ) America is acting under the ) authority of Reservoir Capital ) Group, L.L.C. as general partner ) of RESERVOIR CAPITAL PARTNERS, ) L.P. AND RCP GP, LLC AS GENERAL ) PARTNER OF RESERVOIR CAPITAL ) MASTER FUND, L.P. ) |
SIGNED by MEA Carpenter as ) attorney for INTERMEDIATE CAPITAL ) GP LIMITED ) ) SIGNED by MEA Carpenter as ) attorney for INTERMEDIATE CAPITAL ) INVESTMENTS LIMITED ) ) |
Schedule 1 Particulars of Sellers, Shares Sold etc.
Part 1 - Employee Sellers
Shares
-------------------------------------------------------------------------------------------------------------------------------- 1 2 NAME OF SHAREHOLDER SHAREHOLDER ADDRESS --------------------------------------------------------------------------------------------------------------------------------- WM Absolom 113 Kensington Road, Southend of Sea, Essex, SS1 2SY M Alcott Croft House, 30 Halstead Road, Earls Colne, Colchester, Essex CO6 2NG M Apicella 88 Rayleigh Road, Eastwood, Leigh on Sea, Essex, SS9 5UX CNR Atkin Shepherds Gate, Colemans Hatch, Hartfield, East Sussex, TN7 4HF Codan Trust Company Limited as trustee of the Ashdown Trust (being a trust of CNR Atkin & family) Richmond House, 12 Par le Ville Road, Hamilton, Bermuda J Bamford 20 Granard Road, London SW12 8UL SEH Barr Hammonds Farm, Hemps Green, Fordham, Colchester, Essex, CO6 3LS R Bean 42 St John's Road, Westcliffe on Sea, Essex SS0 7JZ G Bonvarlet 11 Acfold Road, London SW6 2AJ JP Bosworth Hillcroft, Heaverham Road, Kemsing, Kent, TN15 6NE RM Boultwood Tower House, 229 Ongar Road, Writtle, Chelmsford, Essex, CM1 3NS D Burns 46 Leamington Road, Harold Hill, Essex, RM3 9TT S Callaghan 14 St Barnabas Court, Cambridge, CB1 2BZ MEA Carpenter 14 Dynevor Road, Richmond, Surrey TW10 6PF Codan Trust Company Limited as trustee of the Dynevor Trust (being a trust of MEA Carpenter & family) Richmond House, 12 Par le Ville Road, Hamilton, Bermuda PC Churchill 4 Woodpeckers Park Road, Winchester, Hants, SO23 7BQ JS Clouting 19 Prusom's Island, 135 Wapping High St, London E1W 3NH G Cooke 5 The Bridle Path, East Ewell, Epsom, Surrey, KT17 3EE J Courtney 13 Riverside Drive, Earlsfield, London SW18 4UR JG Cutts 45 Kenneth Road, Benfleet, Essex, SS7 3AU P Daniel 27 Junction Road, South Croydon, CR2 6RB KP Downey 57 Bailey Road, Leigh on Sea, Essex, SS9 3PJ TM Edwards 6 Ives Road, Bengeo, Herts, SG14 3AU JD Ewington 26b London Fields Eastside, London E8 3SA RI Faulkner 60 Christchurch Road, Tring, Herts, HP23 4EJ PC Ferguson 151 Pump Lane, Rainham, Gillingham, Kent, ME8 7AP RW Fielder 80 Copers Cope Road, Beckenham, Kent, BR3 1RJ A Foord 171 Melrose Avenue, Willesden Green, London NW2 4NA S Forbes Marley, 128 St Stephens Road, Canterbury, Kent, CT2 7JS |
------------------------------------------------------------------------------------------------------------ 1 3 4 5 6 7 A B CLASS B COMMON PREFERENCE PREFERENCE EBT COMMON COMMON NAME OF SHAREHOLDER SHARES SHARES SHARES SHARES SHARES ------------------------------------------------------------------------------------------------------------ WM Absolom 125,000 M Alcott 75,000 75,000 M Apicella 50,000 CNR Atkin 5,000,000 1,250,000 Codan Trust Company Limited as trustee of the Ashdown Trust (being a trust of CNR Atkin & family) 502,000 J Bamford 100,000 150,000 SEH Barr 500,000 R Bean 100,000 100,000 G Bonvarlet 317,000 1,750,000 JP Bosworth 125,000 RM Boultwood 125,000 D Burns 150,000 S Callaghan 62,500 MEA Carpenter 5,000,000 500,000 Codan Trust Company Limited as trustee of the Dynevor Trust (being a trust of MEA Carpenter & family) 502,000 PC Churchill 625,000 JS Clouting 1,500,000 G Cooke 500,000 J Courtney 50,000 JG Cutts 125,000 125,000 P Daniel 125,000 KP Downey 125,000 TM Edwards 250,000 JD Ewington 125,000 75,000 RI Faulkner 125,000 PC Ferguson 125,000 RW Fielder 500,000 A Foord 125,000 S Forbes 125,000 |
---------------------------------------------------------------------------------------------------------------------- 1 8 9 EMPLOYEE SELLER CASH EMPLOYEE SELLER CASH CONSIDERATION (EBT CONSIDERATION (COMMON COMMON SHARES AND SHARES, A PREFERENCE CLASS B COMMON SHARES AND B PREFERENCE SHARES OF EXERCISE OF NAME OF SHAREHOLDER SHARES) OPTIONS) ---------------------------------------------------------------------------------------------------------------------- WM Absolom $261,885.16 $0.00 M Alcott $0.00 $406,597.99 M Apicella $0.00 $135,532.66 CNR Atkin $9,949,465.26 $3,388,247.57 Codan Trust Company Limited as trustee of the Ashdown Trust (being a trust of CNR Atkin & family) $1,577,581.81 $0.00 J Bamford $0.00 $677,663.31 SEH Barr $1,047,540.63 $0.00 R Bean $0.00 $542,130.65 G Bonvarlet $996,202.06 $4,743,551.19 JP Bosworth $261,885.16 $0.00 RM Boultwood $261,885.16 $0.00 D Burns $0.00 $406,597.99 S Callaghan $0.00 $177,460.08 MEA Carpenter $9,949,465.26 $1,355,303.63 Codan Trust Company Limited as trustee of the Dynevor Trust (being a trust of MEA Carpenter & family) $1,577,581.81 $0.00 PC Churchill $1,964,120.78 $0.00 JS Clouting $3,142,598.88 $0.00 G Cooke $1,047,540.63 $0.00 J Courtney $0.00 $135,532.66 JG Cutts $261,885.16 $338,843.16 P Daniel $261,885.16 $0.00 KP Downey $261,885.16 $0.00 TM Edwards $523,770.31 $0.00 JD Ewington $261,885.16 $203,310.49 RI Faulkner $261,885.16 $0.00 PC Ferguson $261,885.16 $0.00 RW Fielder $1,047,540.63 $0.00 A Foord $0.00 $338,843.16 S Forbes $0.00 $330,333.16 |
-------------------------------------------------------------------------- 1 10 SHARE CONSIDERATION (NUMBER OF VALIDUS NAME OF SHAREHOLDER COMMON SHARES) --------------------------------------------------------------------------- WM Absolom 5,693 M Alcott 2,817 M Apicella 939 CNR Atkin 274,065 Codan Trust Company Limited as trustee of the Ashdown Trust (being a trust of CNR Atkin & family) 0 J Bamford 4,695 SEH Barr 22,772 R Bean 3,756 G Bonvarlet 32,869 JP Bosworth 5,693 RM Boultwood 5,693 D Burns 2,817 S Callaghan 824 MEA Carpenter 259,978 Codan Trust Company Limited as trustee of the Dynevor Trust (being a trust of MEA Carpenter & family) 0 PC Churchill 0 JS Clouting 68,317 G Cooke 22,772 J Courtney 939 JG Cutts 8,040 P Daniel 5,693 KP Downey 5,693 TM Edwards 11,386 JD Ewington 7,101 RI Faulkner 5,693 PC Ferguson 5,693 RW Fielder 22,772 A Foord 2,347 S Forbes 2,717 |
-------------------------------------------------------------------------------------------------------------------------------- 1 2 NAME OF SHAREHOLDER SHAREHOLDER ADDRESS --------------------------------------------------------------------------------------------------------------------------------- TM French Columba, The Street, Wormshall, Sittingbourne, Kent, ME9 0TU P Furlong 1 D'Arcy Road, North Cheam, Surrey, SM3 8NH CJ Grant 115 Westfields Avenue, Barnes, London, SW13 0AY NJ Hales Coldhams Fee, Draycott Rise, Palgrave, Diss, Norfolk IP22 1AJ R Harris 10 Rectory Close, Guildford, Surrey, GU4 7AR N Hassam 2 Ladygrove, Pixton Way, Croydon, CR0 9LR S House 3 The Maltings, Oxted, Surrey, RH8 9DZ D Hughes Flat 23, 11 Kidbrooke Grove, Blackheath, London SE3 0PP MS Johnson Holmbury, South View Road, Wadhurst, East Sussex TN5 6TN A Keogan 289 Perrysfiled Road, Cheshunt, Waltham Cross, Herts, EN8 0TP C Kostis 72 Palace Gates Road, London, N22 7BL G Langford Kingsholm, Hedgerow Walk, Cheshunt, Herts EN8 9DT S Lloyd 35 Lewes Road, Haywards Heath, West Sussex, RH17 7SY M Lucas 138 Tilkey Road, Coggeshall, Colchester, Essex, CO6 1QN JAJA McDonald May Stables, Park Farm, Queen Street, Paddock Wood, Kent, TN12 6NS P Miller Hawthorns, Ulley Road, Kennington, Ashford, Kent, TN24 9HX SJ Morritt 20 Southborough Road, Surbiton, KT6 6JN D Newbigging 119 Old Church Street, London SW3 6EA AP Oakley 112 Wingletye Lane, Hornchurch, Essex, RM11 3AU N Patel 13 Coppice Way, South Woodford, London, E18 2DU LE Patterson Beech Corner, 21 Cayton Road, Netherene on the Hill, Surrey, CR5 1LT M Perry 174 Great George, Lee Chapel South, Basildon, Essex, SS16 5DF DP Redhead 31A Forest View, North Chingford, London, E4 7AU JG Ross Beechy Lees, Row Dow, Otford, Sevenoaks, Kent TN14 5RY JE Skinner Rams Hill, Maidstone Road, Horsmonden, Kent, TN12 8DB Codan Trust Company Limited as trustee of Rams Hill Trust (being a trust of JE Skinner & family) Richmond House, 12 Par le Ville Road, Hamilton, Bermuda S Tebbutt 123 Thomas More Street, Hermitage Waterside, Wapping, London E1W 1YD ND Wachman 71 Brodrick Road, London SW17 7DX DI Watson 35 Ditton Road, Surbiton, Surrey, KT6 6RE A West 85 Powers Hall End, Witham, Essex, CM8 1NH LJ Wiley 138 London Road, Abridge, Romford, Essex, RM4 1XX JC Williams 26A Quinton Street, London, SW18 3QS |
-------------------------------------------------------------------------------------------------------------- 1 3 4 5 6 7 A B CLASS B COMMON PREFERENCE PREFERENCE EBT COMMON COMMON NAME OF SHAREHOLDER SHARES SHARES SHARES SHARES SHARES --------------------------------------------------------------------------------------------------------------- TM French 125,000 P Furlong 62,500 CJ Grant 500,000 NJ Hales 625,000 R Harris 62,500 N Hassam 62,500 S House 62,500 D Hughes 87,500 MS Johnson 1,000,000 A Keogan 62,500 C Kostis 125,000 G Langford 500,000 S Lloyd 625,000 M Lucas 62,500 JAJA McDonald 500,000 P Miller 250,000 250,000 SJ Morritt 125,000 D Newbigging 500,000 AP Oakley 125,000 N Patel 125,000 LE Patterson 125,000 75,000 M Perry 125,000 DP Redhead 1,500,000 JG Ross 625,000 125,000 500,000 JE Skinner 1,000,000 Codan Trust Company Limited as trustee of Rams Hill Trust (being a trust of JE Skinner & family) 265,000 S Tebbutt 75,000 75,000 ND Wachman 1,500,000 DI Watson 500,000 A West 62,500 LJ Wiley 125,000 JC Williams 250,000 |
--------------------------------------------------------------------------------------------------------------------- 1 8 9 EMPLOYEE SELLER CASH EMPLOYEE SELLER CASH CONSIDERATION (EBT CONSIDERATION (COMMON COMMON SHARES AND SHARES, A PREFERENCE CLASS B COMMON SHARES AND B PREFERENCE SHARES OF EXERCISE OF NAME OF SHAREHOLDER SHARES) OPTIONS) --------------------------------------------------------------------------------------------------------------------- TM French $261,885.16 $0.00 P Furlong $0.00 $177,460.08 CJ Grant $1,047,540.63 $0.00 NJ Hales $1,309,425.78 $0.00 R Harris $0.00 $177,460.08 N Hassam $0.00 $177,460.08 S House $0.00 $177,460.08 D Hughes $0.00 $507,770.23 MS Johnson $2,095,081.25 $0.00 A Keogan $0.00 $177,460.08 C Kostis $261,885.16 $0.00 G Langford $0.00 $1,321,286.63 S Lloyd $0.00 $1,660,106.78 M Lucas $0.00 $177,460.08 JAJA McDonald $1,047,540.63 $0.00 P Miller $523,770.31 $660,643.31 SJ Morritt $261,885.16 $0.00 D Newbigging $0.00 $1,571,296.63 AP Oakley $261,885.16 $0.00 N Patel $261,885.16 $0.00 LE Patterson $261,885.16 $203,310.49 M Perry $0.00 $330,333.16 DP Redhead $4,713,889.88 $0.00 JG Ross $1,309,425.78 $1,668,616.78 JE Skinner $1,817,471.25 $0.00 Codan Trust Company Limited as trustee of Rams Hill Trust (being a trust of JE Skinner & family) $832,787.21 $0.00 S Tebbutt $0.00 $406,597.99 ND Wachman $3,142,598.88 $0.00 DI Watson $1,047,540.63 $0.00 A West $0.00 $177,460.08 LJ Wiley $261,885.16 $0.00 JC Williams $523,770.31 $0.00 |
----------------------------------------------------------------------- 1 10 SHARE CONSIDERATION (NUMBER OF VALIDUS NAME OF SHAREHOLDER COMMON SHARES) ------------------------------------------------------------------------ TM French 5,693 P Furlong 824 CJ Grant 22,772 NJ Hales 28,465 R Harris 824 N Hassam 824 S House 824 D Hughes 3,542 MS Johnson 45,544 A Keogan 824 C Kostis 5,693 G Langford 10,870 S Lloyd 13,218 M Lucas 824 JAJA McDonald 22,772 P Miller 16,821 SJ Morritt 5,693 D Newbigging 0 AP Oakley 5,693 N Patel 5,693 LE Patterson 7,101 M Perry 2,717 DP Redhead 0 JG Ross 41,313 JE Skinner 57,614 Codan Trust Company Limited as trustee of Rams Hill Trust (being a trust of JE Skinner & family) 0 S Tebbutt 2,817 ND Wachman 68,317 DI Watson 22,772 A West 824 LJ Wiley 5,693 JC Williams 11,386 |
Part 2 - US Sellers
-------------------------------------------------------------------------------------------------------------------------------- 1 2 NAME OF SHAREHOLDER SHAREHOLDER ADDRESS -------------------------------------------------------------------------------------------------------------------------------- HE Hutter 11209 Solitary Fawn Trail, Austin, Texas, 78735, USA HE Hutter Irrevocable Trust 1 11209 Solitary Fawn Trail, Austin, Texas, 78735, USA HE Hutter Irrevocable Trust 2 11209 Solitary Fawn Trail, Austin, Texas, 78735, USA J Slattery and JPS & Co LLC 67 Fable Farms Road, New Canaan, Connecticut 06840, USA BP Reich 42 Cowdin Circle, Chappaqua, New York, NY 10514, USA JA Novik 2528 Harris Boulevard, Austin, Texas, 78703, USA EF Lemieux 75 Half Mile Road, Guilford, Connecticut 06437 USA DJ Gross 50 Central Park West, Apt 10B, New York, NY 10023, USA Inter Atlantic Fund L.P. 400 Madison Avenue, 16th Floor, New York, NY 10017, USA |
-------------------------------------------------------------------------------------------------------------------------------- 1 3 4 5 6 7 8 EBT COMMON COMMON CLASS B NON-EMPLOYEE CASH NAME OF SHAREHOLDER SHARES A PREF B PREF SHARES SHARES CONSIDERATION ------------------------------------------------------------------------------------------------------------------------------- HE Hutter 3,950,000 $12,413,243.35 HE Hutter Irrevocable Trust 1 500,000 $1,571,296.63 HE Hutter Irrevocable Trust 2 500,000 $1,571,296.63 J Slattery and JPS & Co LLC 4,950,000 $15,555,836.60 BP Reich 2,834,500 $8,907,680.57 JA Novik 4,950,000 $15,555,836.60 EF Lemieux 4,950,000 $15,555,836.60 DJ Gross 250,000 $785,648.31 Inter Atlantic Fund L.P. 2,115,500 $6,648,156.03 |
Part 3 - Institutional Sellers
-------------------------------------------------------------------------------------------------------------------------------- 1 2 NAME OF SHAREHOLDER SHAREHOLDER ADDRESS -------------------------------------------------------------------------------------------------------------------------------- OGF III (Caymans 1), L.P. PO Box 1350 GT, The Huntlaw Building, Fort Street, George Town, Grand Cayman, Cayman Islands OGF IV (Caymans 1), L.P. PO Box 1350 GT, The Huntlaw Building, Fort Street, George Town, Grand Cayman, Cayman Islands Olympus Executive Fund, L.P. Metro Centre, One Station Place, Stamford, Connecticut, CT 06-902, USA Reservoir Capital Partners, L.P. 650 Madison Avenue, 26th Floor, New York, NY 10022, USA Reservoir Capital Master Fund, L.P. 650 Madison Avenue, 26th Floor, New York, NY 10022, USA Intermediate Capital Investments Limited 20 Old Broad Street, London, EC2N 1DP Intermediate Capital GP Limited PO Box 76, Wests Centre, St Hellier, Jersey JE4 8PQ, Channel Islands |
-------------------------------------------------------------------------------------------------------------------------------- 1 3 4 5 6 7 8 EBT COMMON COMMON CLASS B NON-EMPLOYEE CASH NAME OF SHAREHOLDER SHARES A PREF B PREF SHARES SHARES CONSIDERATION ------------------------------------------------------------------------------------------------------------------------------- OGF III (Caymans 1), L.P. 20,967,500 $65,892,324.02 OGF IV (Caymans 1), L.P. 31,451,000 $98,837,700.39 Olympus Executive Fund, L.P. 449,500 $1,412,595.67 Reservoir Capital Partners, L.P. 5,181,000 5,352,000 $33,100,934.73 Reservoir Capital Master Fund, L.P. 869,000 897,500 $5,551,390.98 Intermediate Capital Investments Limited 4,999,500 $15,711,394.97 Intermediate Capital GP Limited 1,250,000 $3,928,241.57 |
SCHEDULE 2
PARTICULARS OF THE COMPANY AND SUBSIDIARIES
PART 1
PARTICULARS OF THE COMPANY
TALBOT HOLDINGS LTD REGISTERED NUMBER: 31149 REGISTERED OFFICE: Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda DATE AND PLACE OF INCORPORATION: 15 October 2001, Bermuda DIRECTORS: CNR Atkin MEA Carpenter GB Collis HE Hutter A Goodfellow C Huff DK Newbigging JA Novik JJ Quinn P A Rubin ND Wachman GAM Bonvarlet BP Reich SECRETARY: TW Hall ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Common shares of US$0.002 each 405,350,000 Class B common shares of US$0.002 each 10,000,000 A preference shares of US$0.002 each 70,400,000 B preference shares of US$0.002 each 14,250,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Common shares of US$0.002 each 50,000,000 Class B common shares of US$0.002 each -- A preference shares of US$0.002 each 60,504,000 B preference shares of US$0.002 each 12,499,000 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Refer to Schedule 1 |
PART 2
PARTICULARS OF THE SUBSIDIARIES
SECTION A - ACTIVE SUBSIDIARIES
1 TALBOT UNDERWRITING HOLDINGS LTD
REGISTERED NUMBER: 02180028 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch Street, London EC3V 0JP DATE AND PLACE OF INCORPORATION: 19 October 1987, England and Wales DIRECTORS: CNR Atkin MEA Carpenter GAM Bonvarlet JS Clouting HE Hutter AJ Keys DK Newbigging JA Novik JJ Quinn DP Redhead JG Ross VG Southey ND Wachman SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Ordinary L1 Shares 4,620,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary L1 Shares 1,255,100 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Holdings Ltd 1,255,100 |
2 TALBOT INSURANCE (BERMUDA) LTD
REGISTERED NUMBER: 33308 REGISTERED OFFICE: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda DATE AND PLACE OF INCORPORATION: Bermuda, 3 March 2003 DIRECTORS: CNR Atkin MEA Carpenter GAM Bonvarlet JS Clouting GB Collis A Goodfellow R Spencer-Arscott ND Wachman SECRETARY: TW Hall ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Common shares of US$1 each 120,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Common shares of US$1 each 120,000 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Holdings Ltd 120,000 |
3 TALBOT 2002 UNDERWRITING CAPITAL LTD
REGISTERED NUMBER: 04257249 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch Street, London EC3V 0JP DATE AND PLACE OF INCORPORATION: 23 July 2001, England and Wales DIRECTORS: CNR Atkin MEA Carpenter JS Clouting GAM Bonvarlet ND Wachman SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Ordinary L1 shares 50,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary L1 shares 1 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Holdings Ltd 1 |
4 TALBOT CAPITAL LTD
REGISTERED NUMBER: 31148 REGISTERED OFFICE: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda DATE AND PLACE OF INCORPORATION: 15 October 2001, Bermuda DIRECTORS: CNR Atkin MEA Carpenter JS Clouting GB Collis C Garrod ND Wachman GAM Bonvarlet SECRETARY: TW Hall ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Auditors plc AUTHORISED SHARE CAPITAL: Common shares of US$1 each 12,000 Class A shares of Bermuda $0.01 each 100 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Common shares of US$1 each 12,000 Class A shares of Bermuda $0.01 each -- INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Holdings Ltd 12,000 |
5 TALBOT UNDERWRITING LTD
REGISTERED NUMBER: 02202362 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch Street, London EC3V 0JP DATE AND PLACE OF INCORPORATION: 3 December 1987, England and Wales DIRECTORS: CNR Atkin MEA Carpenter GAM Bonvarlet JS Clouting HE Hutter MS Johnson AJ Keys GS Langford DK Newbigging JJ Quinn DP Redhead JG Ross VG Southey ND Wachman SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Ordinary L1 shares 400,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary L1 shares 400,000 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Underwriting Holdings Ltd 400,000 |
6 UNDERWRITING RISK SERVICES LTD
REGISTERED NUMBER: 03260112 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch Street, London EC3V 0JP DATE AND PLACE OF INCORPORATION: 08 October 1996, England and Wales DIRECTORS: CNR Atkin GAM Bonvarlet JP Bosworth MEA Carpenter JS Clouting NJ Hales AJ Keys PJ Miller ND Wachman SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Ordinary L1 shares 2,500,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary L1 shares 25,000 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Underwriting Holdings Ltd 25,000 |
7 TALBOT UNDERWRITING SERVICES LTD
REGISTERED NUMBER: 03043304 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch Street, London EC3V 0JP DATE AND PLACE OF INCORPORATION: 7 April 1995, England and Wales DIRECTORS: CNR Atkin GAM Bonvarlet JS Clouting MEA Carpenter ND Wachman SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: KPMG Audit plc AUTHORISED SHARE CAPITAL: Ordinary L1 shares 100 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary L1 shares 1 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Underwriting Holdings Ltd 1 |
SECTION B - DORMANT SUBSIDIARIES
1 TALBOT UNDERWRITING CAPITAL LTD
REGISTERED NUMBER: 3439486 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch Street, London EC3V 0JP DATE AND PLACE OF INCORPORATION: 19 September 1997, England and Wales DIRECTORS: CNR Atkin MEA Carpenter JS Clouting ND Wachman SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: Dormant - not audited AUTHORISED SHARE CAPITAL: Ordinary L1 shares 1,000,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary L1 shares 956,560 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Holdings Ltd 956,560 |
2 MARINASURE LTD
REGISTERED NUMBER: 2745324 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch St, London EC3V 0JP DATE AND PLACE OF INCORPORATION: England and Wales, 7 September 1992 DIRECTORS: MEA Carpenter SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: Dormant - not audited AUTHORISED SHARE CAPITAL: Ordinary shares of L1 each 100 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary shares of L1 shares 2 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Underwriting Holdings Ltd 2 |
3 YACHTSURE LTD
REGISTERED NUMBER: 2978236 REGISTERED OFFICE: Gracechurch House, 55 Gracechurch St, London EC3V 0JP DATE AND PLACE OF INCORPORATION: England and Wales, 6 October 1994 DIRECTORS: CNR Atkin MEA Carpenter NJ Hales PJ Miller SECRETARY: JS Clouting ACCOUNTING REFERENCE DATE: 31 December AUDITORS: Dormant - not audited AUTHORISED SHARE CAPITAL: Ordinary shares of L0.01 each 100,000 ISSUED AND FULLY PAID-UP SHARE CAPITAL: Ordinary shares of L0.01 shares 10 INDIVIDUAL SHAREHOLDERS NO. OF SHARES Talbot Underwriting Holdings Ltd 10 |
SCHEDULE 3
COMPLETION OBLIGATIONS
1 SELLERS' OBLIGATIONS
1.1 GENERAL
On Completion each Seller shall, in accordance with Clause 6, exercise his/her/its votes as a shareholder in and/or (where applicable) as a director of the Company (or any Group Company as appropriate) to procure the delivery to the Purchaser of, and, in the case of paragraph 1.1.1, shall deliver to the Purchaser:
1.1.1 transfers of his/her/its Shares duly executed by the registered holders in favour of the Purchaser or as it may direct accompanied by the relevant share certificates (or an express indemnity in a form reasonably satisfactory to the Purchaser in the case of any certificate found to be missing) save that no share certificates shall have been issued, and accordingly none shall be delivered, in respect of the Class B Common Shares issued to the Optionholders in respect of the exercise of their Options;
1.1.2 the Termination Agreements duly executed by those Sellers who are parties to them and in relation to the Management Fee Agreements by all parties thereto;
1.1.3 evidence of the due fulfilment of the Condition Precedent set out in Clause 4.1.2;
1.1.4 evidence of the consummation of the Options Transactions; and
1.1.5 a duly certified copy of any power of attorney under which any person who executes this Agreement, the Disclosure Letter and/or any transfer of Shares on behalf of any Seller is authorised to do so.
1.2 RESIGNATIONS
On Completion, the Sellers shall procure the delivery to the Purchaser of:
1.2.1 (if so required by the Purchaser) signed resignation letters from the auditors of each Group Company other than the Dormant Subsidiaries resigning their office as such, to take effect immediately upon Completion, and acknowledging that they have no claim against any Group Company and, in the case of each Group Company incorporated in England and Wales, containing a statement pursuant to section 394(1) of the Companies Act 1985 that there are no circumstances connected with their ceasing to hold office which they consider should be brought to the attention of any members or creditors; and
1.2.2 signed resignation letters from each of the following directors resigning from each Group Company of which he/she is a director:
(i) DK Newbigging;
(ii) HE Hutter;
(iii) JA Novik;
(iv) JJ Quinn;
(v) DP Redhead;
(vi) C Huff;
(vii) PA Rubin; and
(viii) BP Reich.
1.3 BOARD RESOLUTIONS OF THE GROUP COMPANIES
On Completion each Seller who is a director of any Group Company shall exercise his/her votes as a director of the relevant Group Company to procure the passing of Board Resolutions of each Group Company inter alia:
1.3.1 (if so required by the Purchaser) revoking all existing authorities to bankers in respect of the operation of its bank accounts and giving authority in favour of such persons as the Purchaser may nominate to operate such accounts;
1.3.2 approving the registration of the share transfers referred to in paragraph 1.1.1 of this Schedule;
1.3.3 appointing each of the persons notified by the Purchaser to the Seller not more than 48 hours before Completion as a director of each of the Group Companies identified by the Purchaser in such notice, such appointments to take effect immediately upon Completion, subject to FSA and Lloyd's approval of such appointments having been obtained;
1.3.4 accepting each of the resignations referred to in paragraph 1.2 above;
1.3.5 (if so required by the Purchaser) appointing PricewaterhouseCoopers to replace the existing auditors of each Group Company other than the Dormant Subsidiaries,
1.3.6 in the case of the Company, approving the transfers of the Shares for registration and the updating of the Company's statutory books to reflect the same; and
1.3.7 approving the delivery of the statutory books (which shall be written up to but not including the date of Completion) to or to the order of the Purchaser, and shall hand to the Purchaser duly certified copies of such Resolutions.
1.4 ADOPTION OF NEW BYELAWS
On Completion the Sellers shall, if requested by the Purchaser, procure that new Byelaws of the Company, in the form notified to the Sellers by the Purchaser, are adopted conditional upon and with effect from Completion.
2 PURCHASER'S OBLIGATIONS
On Completion the Purchaser shall deliver to the Sellers:
2.1 evidence of the due fulfilment of the Conditions Precedent set out in Clauses 4.1.1;
2.2 evidence that the Purchaser is authorised to execute this Agreement and the Disclosure Letter; and
2.3 a duly certified extract of Validus' share register showing the Share Consideration issued to each of the relevant Employee Sellers in accordance with Clause 3.1.6(i).
SCHEDULE 4
WARRANTIES GIVEN BY THE SELLERS AND WARRANTORS UNDER CLAUSE 8
1 WARRANTIES BY THE SELLERS
Each Seller severally warrants to the Purchaser in the following terms:
1.1 CAPACITY AND AUTHORITY OF THE SELLERS
He/she/it has the requisite capacity and authority to enter into and perform this Agreement.
1.2 TITLE
He/she/it is, and on Completion will be, the sole legal and beneficial owner of the Shares listed against his/her/its name in Schedule 1.
1.3 EFFECT OF COMPLETION
This Agreement will, when executed by him/her/it, constitute a valid and binding obligation on him/her/it enforceable in accordance with its terms, subject with respect to enforceability to the effect of bankruptcy, insolvency, reorganisation, moratorium or similar laws now or hereafter affecting the enforcement of creditors' rights generally and to the availability of equitable remedies.
1.4 CONSENTS AND AUTHORISATIONS
No consent, approval, authorisation or order of any court or government or local agency or body or any other person is required by him/her/it for the execution or implementation of this Agreement and compliance with the terms of this Agreement, other than the consents of the Relevant Regulators specified in the conditions precedent set out in Clause 4.1.1.
1.5 THE SHARES
There are, and on Completion will be, no Encumbrances on, over or affecting the Shares listed against his/her/its name in Schedule 1.
1.6 DIVIDENDS AND DISTRIBUTION
Since the Accounts Date, except for the Accrued Preference Dividend and the amounts provided for in the Accounts or fairly disclosed in the Disclosure Letter, no dividend or other payment or distribution has been, or prior to Completion will be, received by him/her/it from the Company or any of the Group Companies.
2 WARRANTIES BY THE WARRANTORS
Each Warrantor severally warrants to the Purchaser in the following terms:
2.1 INCORPORATION, AUTHORITY AND NON-CONTRAVENTION
Each Group Company is duly incorporated and validly existing under its respective laws of incorporation.
2.2 GROUP COMPANIES
2.2.1 The information set out in Schedule 2 is accurate in all material respects.
2.2.2 The Shares will represent and constitute the entire issued and outstanding share capital (including options or rights to acquire additional share capital) of the Company as at the date of Completion.
2.2.3 The Company is not directly or indirectly, including through any Group Company the holder or beneficial owner of any shares or securities of any other person (whether incorporated in the United Kingdom or elsewhere) other than the Subsidiaries and has not agreed to acquire any such shares or securities.
2.2.4 The Company, directly or indirectly, legally and beneficially owns, and on Completion will own, free from Encumbrances the whole of the issued share capital of the Subsidiaries and all such shares are fully paid or credited as fully paid and no other person or entity has any rights, entitlements, claims, options or warrants with respect to any share in any of the Subsidiaries.
2.3 PRE-EMPTION ETC.
Except in respect of the A Preference Shares, the B Preference Shares and the Options currently in issue, no person has the right (whether exercisable now or in the future and whether contingent or not) to call for the allotment, conversion or issue of any share or loan capital or any other security giving rise to a right over the capital of any Group Company under any option or other agreement (including conversion rights and rights of pre-emption) or otherwise and there are no Encumbrances on the shares of any Subsidiary or any arrangements or obligations to create any Encumbrances.
2.4 STATUTORY BOOKS AND RECORDS
2.4.1 The statutory books, books of accounts and other records of a material nature of each Group Company are up-to-date and accurately reflect what is required by law to be dealt with in such books.
2.4.2 So far as the Warrantors are aware no notice or allegation that any is incorrect or should be rectified has been received.
2.4.3 All accounts, documents and returns required by law to be delivered or made to the Registrar of Companies or any other authority in any relevant jurisdiction in respect of the Group Companies have been duly delivered or made.
2.5 LICENCES AND CONSENTS
2.5.1 LICENCES AND CONSENTS OBTAINED
All material licences, consents and registrations ("LICENCES") necessary for the carrying on of the business of the Group as now carried on have been obtained
and are in full force and effect and do not contain conditions which would hinder the ordinary and usual course of its business or are affected by the transactions contemplated by this Agreement except for the consents required under Clause 4 and have been and are being complied with in all material respects necessary for the carrying on of the business of the Group.
2.5.2 NO INVESTIGATION AS TO LICENCES
There is no investigation, enquiry or proceeding outstanding or, so far as the Warrantors are aware, anticipated which is likely to result in the suspension, cancellation, modification, revocation or non-renewal of any Licence, and so far as the Warrantors are aware, no facts or circumstances exist which are likely to give rise to any such investigation, enquiry or proceeding.
2.6 COMPLIANCE WITH LAWS
2.6.1 BUSINESS CONDUCTED IN COMPLIANCE WITH LAWS
Each of the Group Companies is conducting its business in compliance with applicable laws and regulations (including the regulations from time to time issued by the Lloyd's Franchise Board) and no entity has been in material breach of any such laws and regulations.
2.6.2 NO COMMUNICATION AS TO NON COMPLIANCE WITH LAWS
No Group Company has received any notice or other communication (official or otherwise) from any court, tribunal, arbitrator, governmental agency or regulatory body with respect to an alleged, actual or potential violation and/or failure to comply with any applicable law or regulation, or requiring it to take or omit any action.
2.7 LITIGATION
Save as disclosed in the information in the Data Room or in the Disclosure Letter and save for claims under inwards and outwards insurance and reinsurance policies and broker and coverholder disputes in Syndicate 1183's ordinary course of business, there are not, nor have there been in the two years prior to the date hereof, nor, so far as the Warrantors are aware, are there threatened, any disputes, claims, proceedings, suits or actions directly involving a Group Company or, so far as the Warrantors are aware, pending or threatened against any officer or director of any Group Company with respect to the business of any Group Company, including in relation to the conduct of the underwriting of Syndicates 376 and 1183 by Talbot Underwriting Ltd or to any agreement or arrangement with any broker, agent or intermediary in respect of the placing of insurance or reinsurance business with Syndicates 376 or 1183.
2.8 VENDOR DUE DILIGENCE REPORT
2.8.1 The Warrantors are not aware of any material inaccuracy in any of the factual information contained in the Vendor Due Diligence Report.
2.8.2 The Warrantors are not aware of any facts or circumstances relating to the Group not stated in the Vendor Due Diligence Report, the omission of which makes any statements contained therein misleading in any material respect.
2.9 TAX DUE DILIGENCE REPORT
2.9.1 The Warrantors are not aware of any material inaccuracy in any of the factual information contained in the Tax Due Diligence Report.
2.9.2 The Warrantors are not aware of any facts or circumstances relating to the Group not stated in the Tax Due Diligence Report, the omission of which makes any statements contained therein misleading in any material respect.
2.10 ACTUARIAL RESERVES REVIEW
2.10.1 The Warrantors are not aware of any material inaccuracy in any of the factual information contained in the Actuarial Reserves Review.
2.10.2 The Warrantors are not aware of any facts or circumstances relating to the Group not stated in the Actuarial Reserves Review, the omission of which makes any statements contained therein misleading in any material respect.
2.11 LATEST ACCOUNTS
2.11.1 The Accounts and the 2005 Accounts have been prepared:
(i) in accordance with applicable law and in accordance with US GAAP applied on a consistent basis throughout the periods presented; and
(ii) subject to paragraph 2.11.1(i), on a basis consistent with that adopted in preparing the audited accounts of the Company for the previous two financial years.
2.11.2 The Accounts and the 2005 Accounts each present fairly, in all material respects, the financial position of the Group as at the Accounts Date and 31 December 2005 (as the case may be) and the results of their operations and their cash flows for the years then ended in conformity with US GAAP.
2.11.3
(i) The public accountants whose report is attached to the Accounts are independent within the meaning of both the Auditing Practices Board guidance and the Independent Federation of Accountants (the relevant guidance for Bermuda) and that report has not been withdrawn or modified.
(ii) The public accountants are, as at the date of this Agreement, independent within the meaning of the US Securities Act of 1933.
2.11.4 The estimated 30 June 2007 consolidated balance sheet of the Group Companies, a true and accurate copy of which is contained as Document 4.11.1 in the Data Room Index, was prepared (i) on a basis consistent with the Accounts and (ii) in good faith and based on assumptions which, on the date such balance sheet was prepared, were believed by the Warrantors to be reasonable and to fairly present in all material respects the consolidated estimated financial position of all entities and persons required by US GAAP to be included therein.
2.11.5 The 2008 quarterly financial projection materials, a true and accurate copy of which is contained as Document 4.11.2 in the Data Room Index were prepared (i) on a basis consistent with the Accounts and (ii) in good faith and based on assumptions which on the date such projection materials were prepared were believed by the Warrantors to be reasonable and to fairly present in all material respects the data they purported to present.
2.11.6 The forecasted financial and operating data contained in the Information Memorandum have each been prepared in good faith based upon assumptions that, as at the date of preparation of the Information Memorandum, were believed by the Warrantors to be reasonable and to fairly present the data it purported to present.
2.12 OWNERSHIP OF ASSETS
Other than as set forth in the Accounts or the notes thereto, all assets included in the Accounts or acquired by any of the Group Companies or which have otherwise arisen since the Accounts Date, other than any assets disposed of or realised in the ordinary and usual course of business:
2.12.1 are legally and beneficially owned by the Group Companies; and
2.12.2 are free from Encumbrances, other than those arising by operation of law or in the ordinary and usual course of business and, for the avoidance of doubt, Encumbrances in the ordinary and usual course of business shall include all Encumbrances over:
(i) assets of the Group Companies which relate to the Group's Funds at Lloyd's arrangements which Encumbrances arise because of such arrangements;
(ii) the assets of Syndicate 1183, which Encumbrances arise pursuant to Lloyd's premium trust deeds; and
(iii) the designated insurer trust accounts of Underwriting Risk Services Ltd, which Encumbrances arise pursuant to regulatory requirements and contractual obligations in relation to client money.
2.13 SUFFICIENCY OF ASSETS
So far as the Warrantors are aware, the property, rights and assets owned, leased or otherwise used by the Group Companies comprise all the property, rights and assets necessary for the carrying on of the business of each Group Company in the manner in, and to the extent to, which it is presently conducted.
2.14 LIABILITIES
2.14.1 So far as the Warrantors are aware, there are no liabilities,
whether actual or contingent, of any of the Group Companies other than
(i) liabilities disclosed or provided for in the Accounts; (ii)
liabilities incurred in the ordinary and usual course of business
since the Accounts Date, none of which has had or, so far as the
Warrantors are aware, may have a material adverse effect on the
financial or
trading position of the Group; or (iii) liabilities disclosed elsewhere in this Agreement.
2.14.2 No Group Company has any liability in relation to insurance business written by it into years of account prior to 2002.
2.14.3 Except as expressly stated in the Accounts or in the Disclosure Letter, no Group Company is subject to any material exposure, individually or in the aggregate, under any futures or option contracts, swaps, hedges or similar instruments to which any Group Company is a party.
2.15 IMPORTANT BUSINESS SINCE THE ACCOUNTS DATE
2.15.1 Since the Accounts Date, save as disclosed in the information contained in the Data Room or in the Disclosure Letter, there has not been any material adverse change in the business, assets, liabilities, operations, employee or customer relations or financial or trading position of any Group Company to an extent which is material in the context of the Group taken as a whole and the Warrantors are not aware of any event which is likely to give rise to any such change.
2.15.2 Since the Accounts Date:
(i) no loan or loan capital has been repaid by any Group Company in whole or in part or has become liable to be so repaid; and
(ii) no shareholders' resolution of any Group Company has been passed other than resolutions relating to the routine business of annual shareholders' meetings.
2.15.3 Other than as disclosed in the Disclosure Letter, between the Accounts Date and the date of this Agreement, no Group Company has taken any of the actions set out in Clauses 5.2.1 to 5.2.3, 5.2.5, 5.2.11, 5.2.13, 5.2.14, 5.2.17, 5.2.18, 5.2.21, 5.2.22 and 5.2.25 to 5.2.27 which would have been a breach of such covenants if they were deemed to have been given for the period between Accounts Date and the date of this Agreement.
2.16 INTELLECTUAL PROPERTY
2.16.1 OWNERSHIP OF INTELLECTUAL PROPERTY
So far as the Warrantors are aware, each of the Group Companies owns or possesses, or has the right to use or can acquire on reasonable terms, all know-how (including proprietary or confidential information, systems or procedures), trade marks, trade names, logos or other intellectual property (including the "Talbot", "Marinasure" and "Yachtsure" trade names and logos) (collectively, "INTELLECTUAL PROPERTY") or valid and enforceable licences of Intellectual Property necessary for the Group to carry on its business in the manner and to the extent to which it is presently conducted.
2.16.2 NO INFRINGEMENT OF INTELLECTUAL PROPERTY
No Group Company has received any notice and the Warrantors are not otherwise aware of any actual or potential infringement of, or conflict with, asserted rights of
others with respect to any Intellectual Property or any licences of Intellectual Property owned by the Group or necessary for the Group to carry on its business.
2.17 INSURANCE
2.17.1 The Data Room contains details of all outwards reinsurance treaties and other reinsurance arrangements incepting on or after 1 January 2007 which are material to the Group, together with details as at the date hereof of any material claims made by any Group Company under them which are outstanding.
2.17.2 Each Group Company has complied with its payment obligations under all outstanding outwards reinsurance treaties to which it is a party.
2.17.3 No Group Company is a party to any contracts designed to obscure or conceal the true financial position of the Group.
2.17.4 So far as the Warrantors are aware there is no material commission nor any material termination or compensation payment due under any reinsurance contract which will become payable by any Group Company as a result of the acquisition contemplated by this Agreement.
2.17.5 Copies of all of the material insurance policies of each Group Company, currently in effect, (excluding all inwards and outwards insurance contracts and all other insurance or reinsurance contracts entered into by Syndicate 1183 and/or Talbot 2002) and details of related premiums are contained in the Data Room or in the Disclosure Letter.
2.17.6 Such insurances are in effect and, so far as the Warrantors are aware, there are no circumstances which might lead to any liability under such insurance being avoided by the insurers.
2.17.7 In respect of all such insurances, there is no insurance claim pending or outstanding for loss or damage in excess of L100,000 and, as far as the Warrantors are aware, there are no circumstances likely to give rise to any such claim.
2.18 EMPLOYMENT
2.18.1 The Data Room contains materially accurate details as at 1 April 2007 in relation to each Group Company of:
(i) the total number of Employees (including those who are on maternity, paternity, adoption or parental leave, secondment or absent on the grounds of disability or other long-term leave of absence, and have or may have a statutory or contractual right to return to work in a Group Company);
(ii) the salary of each such Employee;
(iii) the terms of the contract of employment of each Senior Employee;
(iv) the standard terms and conditions of employment applicable to all other Employees of the Group and any non-standard terms and conditions of employment; and
(v) the benefits provided to each category of Employee.
2.18.2 No Group Company has made any proposal to terminate the employment of any Employee or to vary or amend the terms of employment of any Employee (whether to their detriment or benefit).
2.18.3 Save to the extent to which provision or allowance has been made in the Accounts or save as disclosed in the Data Room or in the Disclosure Letter:
(i) there are no amounts owing or promised to any present or former directors or Employees of any Group Company other than remuneration accrued due or for reimbursement of business expenses; and
(ii) no liability has been incurred by any Group Company for breach of any employment contract or consultancy agreement, for redundancy payments (including protective awards) or for compensation for wrongful dismissal or unfair dismissal or discrimination (of any kind) or breach of statutory duty or for failure to comply with any order for the reinstatement or re-engagement of any Employee or for the actual or proposed termination or suspension of employment or variation of any terms of employment of any Employee or former employee of any Group Company or for any other employment-related claim, right of action or liability.
2.18.4 Except as disclosed in the Data Room or in the Disclosure Letter, no material employment problem, dispute, disturbance or litigation involving any of the Employees or former employees of any Group Company exists or, so far as the Warrantors are aware, is current, outstanding and/or imminent.
2.18.5 Save as disclosed in the Data Room or in the Disclosure Letter, there is not in existence nor has any Group Company proposed to introduce any share incentive, share option, profit sharing, bonus or other incentive arrangements for or affecting any Employees.
2.18.6 There is no notice outstanding that terminates the contract of any Senior Employee (whether given by the Senior Employee or the relevant Group Company).
2.18.7 No offer of a contract of employment or a consultancy agreement has been made by any Group Company to any individual which has not yet been accepted or which has been accepted but where the individual's employment or engagement has not yet started.
2.18.8 No trade union, staff association or any other body representing workers is recognised by any Group Company and no request for such recognition has been received and there are no collective agreements relating to workers of any Group Company.
2.18.9 Save as disclosed in the Data Room, no Group Company has within the three years preceding the date hereof entered into any agreement which involved any Group Company acquiring or disposing of any undertaking or part of one such that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (or equivalent provisions in any relevant jurisdiction) applied thereto.
2.18.10 Save as disclosed in the Disclosure Letter or in the documents listed in the Data Room Index, no Group Company has entered into any material outsourcing agreement or arrangement for the management or operation of its business or any part thereof other than with its Employees.
2.18.11 All salaries, fees and wages and other remuneration and benefits of all workers or any Group Company have, to the extent due, been paid or discharged in full together with all related payments to third party providers and the relevant authorities.
2.19 COMPANY PENSION SCHEME
2.19.1 The Company Pension Scheme is the only pension scheme or pension arrangements and/or commitments operated or sponsored by the Group or to which any Group Company may be required to make any pension related payment.
2.19.2 The Data Room contains a copy of the rules currently governing the Company Pension Scheme, the latest explanatory booklet and any relevant and material announcements relating to the Company Pension Scheme.
2.19.3 The Data Room contains details of the rate at which contributions to the Company Pension Scheme are being paid.
2.19.4 All contributions due to the Company Pension Scheme have been paid within any relevant time limits and details of all and any commitments (whether contractual or otherwise) relating to employer pension contributions have been fairly disclosed in the Data Room.
2.19.5 Save as disclosed in the Data Room or the Disclosure Letter, no Group Company has received notice of any material dispute about the benefits payable under the Company Pension Scheme in respect of any present or former employee or director of any Group Company and, so far as the Warrantors are aware, there are no circumstances which might give rise to any such dispute.
2.19.6 So far as the Warrantors are aware, the Company Pension Scheme complies with, and has been managed in all material respects in accordance with, all applicable laws and no Employee has been excluded from the Company Pension Scheme or provided with different benefits under the Company Pension Scheme directly or indirectly because of their sex or because they were employed on a part-time basis.
2.20 THE PROPERTIES
2.20.1 In addition to Clause 1 of this Agreement, in this paragraph 2.20 of Schedule 4, unless the context otherwise requires:
"ENVIRONMENTAL LAWS" means all applicable laws, statutes, regulations, secondary legislation, bye-laws, common law, directives, treaties and other measures, judgments and decisions of any court or tribunal, codes of practice and guidance notes which are legally binding and in force as at the date of this Agreement in so far as they relate to or apply to the Environment, including Part IIA of the Environmental Protection Act 1990 and any regulations and guidance made or issued thereunder;
2.20.2 The Properties comprise all of the premises and land owned, occupied or otherwise used in connection with the businesses of the Group or in which any Group Company has an interest or obligation.
2.20.3 No Group Company or any company which was previously a Subsidiary of the Company has any continuing liability in respect of any leasehold property other than the Properties.
2.20.4 The requisite details in relation to the Properties set out in Schedule 6 are true, complete and accurate in all material respects.
2.20.5 In relation to each Property:
(i) so far as the Warrantors are aware, there is no material subsisting breach, nor any material non-observance of any covenant, condition or agreement contained in the Lease on the part of any Group Company or the relevant landlord;
(ii) no landlord has refused to accept rent or made any complaint or objection and the receipt for the payment of rent which fell due immediately prior to the date of this Agreement is unqualified; and
(iii) the Warrantors are not aware of any liabilities arising from Environmental Laws affecting any Group Company which are not set out in the Disclosure Letter.
2.21 CONTRACTS
2.21.1 Other than insurance and reinsurance contracts entered into by Syndicate 1183 and/or Talbot 2002 in the ordinary course of business with persons who are not connected to the Group as at the date of this Agreement, each contract which is of material importance to the business of the Group has been included in the Data Room.
2.21.2 Save as in respect of Talbot 2002's membership of Syndicate 1183, none of the Group Companies is a member of any joint venture, consortium, partnership or other unincorporated association (other than a recognised trade association) which is material to the operation of the business of the Group.
2.21.3 Other than insurance and reinsurance contracts entered into by Syndicate 1183 and/or Talbot 2002 in the ordinary course of business, all contracts to which any Group Company is a party and which are of material importance to the business of the Group as now carried on are binding obligations of that Group Company and, so far as the Warrantors are aware:
(i) the terms thereof have been complied with in all material respects by that Group Company;
(ii) there are no grounds for rescission, avoidance or repudiation of any such contracts including upon giving effect to Completion (except for such consents as are identified in the Disclosure Letter); and
(iii) no notices of termination or of intention to terminate have been received or sent by any Group Company.
2.21.4 No Group Company has any liability or obligation to any broker, investment banker, financial adviser or other person, including any Seller, or any of its connected persons with respect to fees, expenses, commissions or other amounts that arise solely in relation to the sale of the Shares.
2.21.5 There are no powers of attorney or other authorities (express or implied) which are still outstanding or effective to or in favour of any person to enter into any contract or commitment on behalf of any Group Company (other than any power of attorney or other authority given to directors or employees in the normal course or given pursuant to ordinary course binder and lineslip business).
2.22 AGREEMENTS WITH CONNECTED PARTIES
2.22.1 Save as disclosed in the Data Room or the Disclosure Letter, there is not outstanding:
(i) any loan made by any Group Company to, or debt owing to any Group Company by, any director, officer, secretary or shareholder of the Company, or any of their connected persons; or
(ii) any agreement or arrangement to which any Group Company is a party and in which any director, officer, secretary or shareholder of the Company or any such connected person is interested (other than employment contracts, the Profit Share Plan, directors service contracts, the Shareholders' Agreement, the Employee Shareholders' Agreement and the various agreements included in the Data Room whereby shareholders provide Funds at Lloyd's to the Group).
2.22.2 Syndicate 1183 has not paid any commissions or other incentives to a broker for business offered by that broker to Syndicate 1183 which the Warrantors know to be illegal or contrary to any relevant rule or regulation.
2.22.3 During the two years prior to the date of this Agreement no Group Company has entered into an agreement with any broker whereby additional commissions were payable but not disclosed on the slip.
2.23 INDEBTEDNESS
2.23.1 No outstanding indebtedness of any Group Company has become repayable before its stated maturity, nor has any security in respect of such indebtedness become enforceable by reason of default by any Group Company (except that the indebtedness under each of the Group's $25,000,000 facility with Lloyds TSB and the Group's $30,000,000 letter of credit arrangements shall become repayable upon a change of control of the Company and the Reservoir Letters of Credit impose an obligation on the Company, upon request from the Reservoir Agent, to use best endeavours to procure that Talbot 2002 uses best endeavours to procure that the letters of credit are redelivered by Lloyd's and dealt with in the same way as Released Funds as set out in the FAL Providers' Agreement on a change of control (both Released Funds and change of control used in relation to the Reservoir Letter of Credit, have the meanings set out in the FAL Providers' Agreement)).
2.23.2 No Group Company has received notice from any person demanding or threatening to demand repayment of, or to take any steps to enforce any security for, any indebtedness of any Group Company which is repayable on demand.
2.23.3 All the Group Companies' borrowing facilities have been duly executed on behalf of the relevant Group Company and are in full force and effect and as far as the Warrantors are aware (save as specified in paragraph 2.23.1 above):
(i) all undrawn amounts under such borrowing facilities are or will be capable of drawdown; and
(ii) there is nothing which could cause any undrawn amounts under any such borrowing facilities to be unavailable for drawing as required.
2.23.4 The amounts borrowed by each Group Company do not exceed any limitation on its borrowing contained in its bye-laws or articles of association, any debenture or other deed or document binding upon it.
2.23.5 No Group Company is engaged in financing of a type which would not require to be shown or reflected in audited accounts.
2.24 INSOLVENCY
2.24.1 No order has been made, members resolution passed or meeting convened for the winding up (or other process whereby the business is terminated and the assets of the company concerned are distributed amongst the creditors and/or shareholders or other contributors) of any Group Company and no cases or proceedings under any applicable insolvency, reorganisation, or similar laws in any jurisdiction have been brought against or notified to any Group Company and, so far as the Warrantors are aware, no events have occurred which, under applicable laws, would justify any such cases or proceedings.
2.24.2 As far as the Warrantors are aware, no petition has been presented or other proceedings commenced for an administration order to be made (or any other order to be made by which during the period it is in force, the affairs, business and assets of the Group Company concerned are managed by a person appointed for the purpose by a court, governmental agency or similar body) in relation to any Group Company, nor has any such order been made.
2.24.3 No receiver (including an administrative receiver), liquidator, trustee, administrator, custodian or similar official has been appointed in any jurisdiction in respect of the whole or any part of the business or assets of any Group Company and, so far as the Warrantors are aware, no step has been taken for or with a view to the appointment of such a person.
2.24.4 No Group Company is insolvent (which shall include being unable to pay its debts as they fall due and/or its assets being less than the amount of its liabilities, taking into account its contingent and prospective liabilities).
2.25 TAXATION
2.25.1 All returns and computations of the Group for Taxation purposes have been made within the requisite period and are complete and correct in all material respects. None of such returns or computations is the subject of any dispute with the Group or any claim against the Group by any Taxation Authority. Each Group Company has timely paid all Taxes due and payable by it, including any US federal excise tax or premium tax imposed by any Taxation Authority, and has timely withheld and
paid to the appropriate Taxation Authority all Taxes required to be withheld and paid by it.
2.25.2 No action, suit, proceeding or audit or any notice of inquiry of any of the foregoing is pending, or has, so far as the Warrantors are aware, been threatened, against or with respect to any Group Company regarding Taxes.
2.25.3 So far as the Warrantors are aware, each Group Company is, and has at all times been, resident for all Taxation purposes in the country of its incorporation including for the purposes of any double taxation arrangements. No claim has ever been made against a Group Company by a Taxation Authority in a jurisdiction where any Group Company does not file tax returns that such company is or may be subject to Taxes in such jurisdiction. No Group Company, excluding for these purposes Syndicate 1183, has, nor has it any time ever had, a branch agency, permanent establishment or any person with a binding authority outside the United Kingdom or Bermuda. So far as the Warrantors are aware, no Group Company has any liability, direct or indirect, absolute or contingent, for the Taxes of any other person (other than another Group Company). No extension for the period of assessment or collection of any Tax is currently in effect.
2.25.4 Each Group Company has complied in all material respects with all statutory requirements, orders, provisions, directions or conditions relating to VAT, including (for the avoidance of doubt) the terms of any agreement reached with any Taxation Authority.
2.25.5 No Group Company has at any time been a member of a group registration made pursuant to Sections 43 to 43C VATA (other than a group registration of which all of the other members of which were Group Companies).
2.25.6 Each document in the possession or under the control of a Group Company, or to the production of which the Group Company is entitled and on which the Group Company relies, and which in the UK, Bermuda or elsewhere requires any stamp or mark to denote that:
(i) any duty, tax or fee required to be paid by law has been paid; or
(ii) a duty, tax or fee referred to in paragraph 2.25.7(i) is not required to be paid, or that the document in question or the event evidenced by it qualifies from a relief or exemption from such duty, tax or fee; or
(iii) the document has been produced to the appropriate authority,
has been properly stamped or marked as appropriate and no such document which is outside the UK or Bermuda would attract stamp duty if it were to be brought into the UK or Bermuda respectively.
2.25.7 So far as the Warrantors are aware, except for the Subsidiaries that are Non-U.S. Corporate Underwriters, within the meaning of the Closing Agreement between the Council of Lloyd's and the Internal Revenue Service, dated 1 January 2005, as amended (the "CLOSING AGREEMENT"), no Group Company has been engaged in a trade or business in the United States during the last ten years. So far as the Warrantors are aware, each Subsidiary that is a Non-U.S. Corporate Underwriter is an Eligible Corporate Underwriter, as defined in the Closing Agreement, and the only income of each such Subsidiary that is effectively connected with a trade or
business in the United States is such Subsidiary's taxable USCI or USCL (as such terms are defined in the Closing Agreement).
2.25.8 So far as the Warrantors are aware, no Group Company or Syndicate 1183 has been a party to or otherwise involved in a transaction or series of transactions where the main purpose, or one of the main purposes, was the avoidance of Taxation or obtaining increased benefits under the UK/US income tax treaty and no Group Company or Syndicate 1183 has been required to disclose any transactions, arrangements or schemes to any Taxation Authority pursuant to any Taxation statute, law, rule or regulation. So far as the Warrantors are aware, no Group Company or Syndicate 1183 has been the subject of any notification to the Internal Revenue Service pursuant to section 11 of the 2005 FET Closing Agreement between Lloyd's, certain underwriters at Lloyd's and the United States Commissioner of Internal Revenue. No syndicate level or member level reinsurance ceded has been reported to Lloyd's as having been entered into as part of a conduit arrangement.
2.25.9 So far as the Warrantors are aware, each Group Company has correctly deducted all income tax which is deductible and payable under the PAYE system and/or any Taxation statute, law, rule or regulation and all such amounts due to be paid to the relevant Taxation Authority prior to the date of this Agreement have been so paid, including all Taxation chargeable on benefits provided for directors, employees or former employees of the Company or any persons required to be treated as such.
2.25.10 So far as the Warrantors are aware, all material transactions entered into between a Group Company and another member or any former member of the Group, with effect from 1 January 2002 where one of the entities involved was resident in a jurisdiction other than the UK and with effect from 1 January 2005 where both of the entities involved were resident in the UK, in the last two years have been entered into on an arm's length basis and the consideration (if any) charged, received or paid by each Group Company on all transactions entered into by them has been equal to the consideration which might have been expected to be charged, received or paid (as appropriate) between independent persons dealing at arm's length. So far as the Warrantors are aware, no Taxation Authority has made any claim that any such transactions have been entered into other than on an arms length basis.
2.25.11 No shares in or assets of a Group Company are subject to any charge by any Taxation Authority or any power of sale, charge or mortgage in connection with any inheritance tax or similar tax or estate duty and, so far as the Warrantors are aware, no Taxation Authority has made any claim to charge, or order the power of sale, charge or mortgage of, the shares or assets of a Group Company with an unsatisfied liability to inheritance tax or similar tax or estate duty.
2.25.12 No Group Company has agreed, undertaken or arranged, and nor is any Group Company under any obligation, to reimburse, indemnify, discharge or make good, any Taxation or any amount in respect of Taxation which is the primary liability of another person other than a Group Company.
2.26 RELEVANT REGULATORS
2.26.1 Syndicate 1183 and each Group Company which is regulated by a Relevant Regulator (a "REGULATED COMPANY") has obtained all necessary consents, registrations and approvals from the Relevant Regulator and the Registrar of Companies in Bermuda, if applicable.
2.26.2 No Regulated Company in the last three years has been notified of any actual or proposed complaint, disciplinary inquiry or proceeding by a Relevant Regulator and/or the Registrar of Companies in Bermuda, if applicable, against any Regulated Company, or any directors, officers or employees of any Regulated Company and no Regulated Company or any directors, officers or employees of a Regulated Company is or are currently a party to such proceedings and the Warrantors are not aware of any grounds for any such complaint, disciplinary inquiry or proceeding.
2.26.3 So far as the Warrantors are aware, nothing has been done or omitted to be done by any Regulated Company in the last three years which would constitute a material failure to comply with any applicable law or any bye-law or other rule, regulation, requirement or code of conduct of any Relevant Regulator and/or the Registrar of Companies in Bermuda, if applicable, and no Regulated Company has any outstanding liabilities in respect of any such failure.
2.26.4 No guarantee, indemnity or undertaking currently in force, apart from in the ordinary course of business, has been given to any Relevant Regulator by or in respect of any Regulated Company.
2.26.5 The audited accounts for Syndicate 1183 for the year ended 31 December 2006 have been prepared by Talbot Underwriting Ltd in accordance with the requirements of the Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2004 (S.2004/3319) and the Syndicate Accounting Bye-Law (No.8 of 2005).
2.26.6 The Ring-Fencing Letters are true, complete and accurate copies of the originals, represent all of the material provided to any Group Company by Lloyd's in connection with the subject matter thereof, the Company has received no intimation from Lloyd's that Lloyd's would act in a manner contrary to that stated in the Ring-Fencing Letters in relation to the subject matter of the letters, the arrangements contemplated therein have not been rescinded by Lloyd's and, so far as the Warrantors are aware, there is no reason to believe that they would be rescinded in the future.
2.26.7 No Group Company in the last three years has received any notice from Lloyd's including the Lloyd's Franchise Board limiting, or indicating the possibility of a limitation of, the scope or quantum of any of the Group's business activities and, so far as the Warrantors are aware, no such notice is likely or expected.
2.27 UNDERWRITING
2.27.1 All minutes of the Group's Independent Review Committee in respect of meetings of the same held in the one year period prior to the date of this Agreement are in the Data Room.
2.27.2 All actuarial reports, actuarial certificates and loss and loss adjustment expense reports prepared by EMB Consulting in respect of Syndicate 1183 in the last 12 months have been made available to the Purchaser upon the execution, by the Purchaser of an appropriate release letter addressed to EMB Consulting.
2.28 SHREWSBURY TRANSACTIONS AND THE TRANSFER OF SYNDICATE 376
There have been no claims (i) under the warranties given by the Company in respect of the Shrewsbury Transactions or the indemnities given by Talbot Underwriting Ltd in respect of the transfer of Syndicate 376; and (ii) made against the Company in respect of any transaction associated with the Shrewsbury Transactions or against Talbot Underwriting Ltd in respect of any transaction associated or connected with the transfer of Syndicate 376.
2.29 LLOYD'S
2.29.1 Other than those persons who are party to agreements entered into by Talbot 2002 in relation to the Group's Capital Stack which are contained in the documents in the Data Room Index, no person currently provides (or has procured the provision of) Funds at Lloyd's for the benefit of Talbot 2002 in respect of the 2007 or prior underwriting years of account or is entitled to any fee or payment in respect of the provision of Funds at Lloyd's for the benefit of Talbot 2002.
2.29.2 No current or past provider of Funds at Lloyd's for the benefit of Talbot 2002 has any right to participate in or share profits in relation to any Funds at Lloyd's for the benefit of Talbot 2002 for the 2008 or any subsequent year of account without the prior agreement of Talbot 2002 and no such agreement currently exists.
2.29.3 No person who currently provides (or procures the provision of) Funds at Lloyd's for the benefit of Talbot 2002 (whether for the 2007 or any prior year of account) is entitled to any premium fee or other payment in respect thereof, save as set out in the agreement by virtue of which that person assumed the obligation to provide such Funds at Lloyd's.
2.29.4 The 2002, 2003 and 2004 years of account of Syndicate 1183 have closed, all fees due to any person in respect of the provision of Funds at Lloyd's for the benefit of Talbot 2002 in its underwriting at Lloyd's during those years of account have been, or shortly will be, paid and the Group has complied with all agreements entered into with the providers of Funds at Lloyd's in respect of those years of account.
2.29.5 No member of the Group, other than Talbot 2002, has underwritten at Lloyd's in the 2002 or subsequent years of account and no agreements or arrangements for the provision of Funds at Lloyd's in respect of the underwriting of any other member of the Group in the 2001 or prior years of account remain in effect.
2.29.6 Talbot 2002 has not at any time underwritten insurance at Lloyd's other than on Syndicate 1183.
2.29.7 Talbot 2002 is not currently and, so far as the Warrantors are aware, has not at any time been in breach of, or given notice of any intention to change the terms of, its agreement(s) with any provider of Funds at Lloyd's which agreement remains in effect. So far as the Warrantors are aware, none of the other parties to such agreement(s) is currently or has at any time been in breach of it.
2.29.8 All fees, expenses and other monies payable by the Group Companies to The Law Debenture Trust Corporation plc under the terms of the various trust deeds relating to the Group's Funds at Lloyd's and/or assets replacing the its Funds at Lloyd's have been paid when due and no Group Company which is a party to any of those trust arrangements or, so far as the Warrantors are aware, any other party thereto has at any time been in breach of them.
2.29.9 No member of the Group is or has at any time during the last three years been in dispute with any person who has provided or procured the provision of Funds at Lloyd's for the benefit of Talbot 2002.
2.29.10 No person other than National Indemnity Company has any option, right of first refusal or other legal entitlement to provide reinsurance to close or any other reinsurance to Syndicate 1183 as a result of its current or previous participation as a provider of Funds at Lloyd's to Talbot 2002.
2.29.11 Other than as contained in the Data Room, there are no agreements (whether written or otherwise) between any member of the Group and any third party who is not a member of the Group relating to the provision of the Funds at Lloyd's for Talbot 2002 (or any other member of the Group).
2.30 COMPETITION
2.30.1 So far as the Warrantors are aware, there is, and has in the last three years been, no aspect of the conduct of the business of the Group:
(i) which infringes, or has infringed, any applicable competition law;
(ii) in respect of which any filing, registration or notification is, was or will be required by any applicable competition law (whether or not the same has in fact been made);
(iii) which is, or was, the subject of an investigation under any applicable competition law; or
(iv) in connection with which any Group Company has been subject to an order or directions or has given any undertaking or commitments or assurances under any applicable competition law.
2.30.2 No Group Company has knowingly, in the last three years, been put on notice by a competition authority of any action or investigation under any applicable competition law that will be taken against any of them in relation to any of the current activities of the Group.
2.30.3 For the purposes of paragraphs 2.30.1 and 2.30.2, the term "APPLICABLE COMPETITION LAW" means all competition laws applicable to the business of the Group, whether of the United Kingdom, the European Union, Bermuda or any other jurisdiction.
2.31 FOREIGN PRIVATE ISSUER
The Company is a "foreign private issuer" within the meaning of the definition set out in Part 1 of Schedule 10.
3 EMPLOYEE SELLER WARRANTIES (made severally by the Employee Sellers only)
Each Employee Seller on its own behalf acknowledges, agrees, represents and warrants and is aware that:
3.1.1 the Validus Securities have not been registered under the Securities Act or under any federal, foreign, state or other jurisdiction's securities laws; the transfer thereof is restricted by the Securities Act and applicable securities laws; and Validus is under no obligation to, and currently does not intend to, register or qualify the Validus Securities for resale by the Employee Seller or assist the Employee Seller in complying with any exemption under the Securities Act or the securities laws of any such jurisdiction or any other jurisdiction. An offer or sale directly or indirectly of Validus Securities by the Employee Seller will be subject to the terms and provisions of this Agreement, the Validus Bye-laws and any employment agreement that such Employee Seller may be subject to and, in the absence of registration under the Securities Act, will require the availability of an exemption thereunder. Subject to the Validus Bye-laws, this Agreement and any applicable employment agreements, certificates representing Validus Securities will contain a restrictive legend reflecting such restrictions for so long as such restrictions apply;
3.1.2 such Employee Seller confirms that he or she is not a "U.S. person" within the meaning of Regulation S of the Securities Act (a portion of which is for convenience purposes only attached hereto in Part 2 of Schedule 10); and
3.1.3 such Employee Seller is acquiring the Validus Securities for his or her own account, for investment only and not with a view toward the transfer, resale or distribution thereof in violation of applicable law.
SCHEDULE 5
LIMITATION OF LIABILITY UNDER CLAUSE 8.1
1 LIMITATION OF LIABILITY
For the avoidance of doubt:
(i) the Sellers (other than the Warrantors) shall have no liability whatsoever under this Agreement for any breach of Warranty other than a breach of the Title and Capacity Warranties and then each Seller shall only be severally liable for his/her/its own breach of the Title and Capacity Warranties given by him/her/it; and
(ii) only the Warrantors shall have any liability for any breach of the Management Warranties and their liability for any such breach shall be several.
Furthermore, notwithstanding any other provision of this Agreement, a Seller shall not have any liability for any breach of the Title and Capacity Warranties and a Warrantor shall not have any liability for any breach of the Management Warranties:
1.1 TIME LIMITS
in respect of any claim, unless notice of such claim is given in writing by the Purchaser to the relevant Seller or the Warrantors (as the case may be) setting out reasonable details so far as practicable of the specific matter in respect of which the claim is made including (if feasible) an estimate of the amount of such claim within 12 months of the date of Completion, and any such claim shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be withdrawn nine months after the date of notification of the relevant claim in accordance with this paragraph 1.1 unless legal proceedings in respect of it have been served and are being pursued with reasonable diligence (except that the time limits in this paragraph 1.1 shall not apply to any claim for a breach of the Title and Capacity Warranties);
1.2 MINIMUM CLAIMS
save for a claim for any breach of the Title and Capacity Warranties to which this paragraph 1.2 shall not apply, in respect of any claim unless and until the amount of the claim against all Warrantors (before the application of paragraphs 1.3 and 1.4 below) exceeds L100,000 ("MINIMUM CLAIM") (save that a series of claims arising from the same facts or circumstances shall be aggregated for this purpose) but none of the Warrantors shall be liable for a claim in excess of that amount unless the liability determined in respect of any such claim (excluding interest, costs and expenses) also exceeds that amount;
1.3 AGGREGATE MINIMUM CLAIMS
save for a claim for any breach of the Title and Capacity Warranties to which this paragraph 1.3 shall not apply, in respect of any claim unless the aggregate amount of all claims against all Warrantors (before the application of paragraph 1.4 below) for breach of the Management Warranties (taking no account of any claims for less than L100,000) exceeds L2,500,000 but if the aggregate liability in respect of all Minimum Claims exceeds that figure then all Minimum Claims, including all Minimum Claims previously notified, shall accrue against and be recoverable from the Warrantors (and not just the excess over L2,500,000);
1.4 MAXIMUM CLAIMS
1.4.1 in respect of a claim for breach of any of the Title and Capacity Warranties, to the extent that the total aggregate amount of the liability of the relevant Seller against whom the claim has been made for all claims made against him/her/it under this Agreement (including for breach of Warranty) would exceed (in the case of each Non-Employee Seller) the total Non-Employee Seller Cash Consideration received by him/her/it in respect of his/her/its Shares or (in the case of each Employee Seller) the total Employee Seller Cash Consideration received by him/her/it in respect of his/her/its Shares;
1.4.2 in respect of a claim for breach of any of the Management Warranties, without prejudice to the final two sentences of this paragraph 1.4.2, to the extent that the total aggregate amount of the liability of the relevant Warrantor in respect of all claims made against him/her for breaches of the Management Warranties would exceed the amount set out against his/her name below:
(i) MEA Carpenter $ 985,978 (ii) CNR Atkin $1,050,777 (iii) ND Wachman $ 282,833 (iv) GAM Bonvarlet $ 210,971 (v) JS Clouting $ 282,833 (vi) NJ Hales $ 117,847 (vii) GS Langford $ 50,004 (viii) MS Johnson $ 188,556 (ix) DP Redhead $ 282,833 (x) JG Ross $ 176,950 |
and claims under the Management Warranties shall be borne by the Warrantors as to the percentage set out against his/her name below, with each Warrantor only being liable for his/her relevant percentage amount of any claim:
(i) MEA Carpenter 4.22% (ii) CNR Atkin 4.79% (iii) ND Wachman 1.15% (iv) GAM Bonvarlet 1.58% (v) JS Clouting 1.15% (vi) NJ Hales 0.48% (vii) GS Langford 0.38% (viii) MS Johnson 0.77% (ix) DP Redhead 1.15% (x) JG Ross 0.96% |
Notwithstanding any other provision of this Agreement, the total aggregate amount of the liability of each of the Warrantors for all breaches of the Title and Capacity Warranties, the Management Warranties and any other provision of this Agreement shall not exceed the total consideration received by him/her in respect of his/her Shares. Accordingly, to the extent that any claim has been brought against a Warrantor for breach of any of the Title and Capacity Warranties or otherwise, the amount set out against his/her name in the first table of this paragraph 1.4.2 shall be reduced down to such amount (including to zero) as shall be necessary to ensure that his/her total aggregate liability under this Agreement shall not exceed the total consideration received by him/her;
1.5 CONTINGENT LIABILITIES
in respect of any liability which is contingent or otherwise not capable of being quantified (a "CONTINGENT LIABILITY") unless and until such Contingent Liability becomes an actual liability or becomes capable of being quantified and is due and payable but this paragraph 1.5 shall not operate to avoid a claim made in respect of a Contingent Liability within the applicable time limit specified in paragraph 1.1 above if the requisite details of such claim have been delivered before the expiry of such period and legal proceedings served within nine months of such Contingent Liability becoming an actual liability (or becoming capable of being quantified) (even if this does not occur until after the expiry of the relevant period) provided that if such Contingent Liability has not become an actual liability or become capable of being quantified within four years of the date of Completion, the Warrantors shall have no liability in respect of such claim;
1.6 PROVISIONS IN THE ACCOUNTS
in respect of any claim if and to the extent that:
1.6.1 provision or reserve is made specifically for the matter giving rise to the claim, or it is otherwise included as a liability or fairly disclosed, in the Accounts; or
1.6.2 any sum is received specifically in respect of the matter giving rise to the claim by any Group Company which has previously been written off or provided against as irrecoverable in the Accounts;
1.7 ADJUSTMENTS
in respect of any claim if and to the extent that the subject matter thereof is taken into account in the determination of the Consideration;
1.8 CIRCUMSTANCES ARISING
in respect of any matter, act, omission or circumstance (or any combination thereof) (including, for the avoidance of doubt, the aggravation of a matter or circumstance) to the extent that the same would not have occurred or arisen but for:
1.8.1 ACTS OF PURCHASER:
(i) any act, omission, transaction or arrangement carried out at the written request of or with the written consent of the Purchaser or any other member of the Purchaser's Group before Completion or in accordance with
the terms of this Agreement or any of the other documents entered into pursuant to this Agreement (including any such act, omission, transaction or arrangement which has any impact or effect on the tax structure, arrangements, residency or efficiency of any Group Company); or
(ii) any act, omission, admission of fact or liability, transaction or arrangement of the Purchaser or any member of the Purchaser's Group, or their respective directors, employees or agents or successors in title, after Completion (including any such act, omission, admission of fact or liability, transaction or arrangement which has any impact or effect on the tax structure, arrangement, residency or efficiency of any Group Company);
1.8.2 CHANGES IN LEGISLATION: the passing of, withdrawal of, or any change in, after the date of this Agreement, any law, rule, regulation or administrative practice (or any generally accepted interpretation or application of any of the foregoing) of any government, governmental department, agency or regulatory body including (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of relief from Taxation not actually (or prospectively) in effect at the date of this Agreement;
1.8.3 ACCOUNTING AND TAXATION CHANGES: any change in accounting or Taxation policy, bases or practice of the Purchaser or any of the Group Companies introduced or having effect after Completion,
or to the extent that it relates to any liability for Tax arising out of the ordinary course of business of the Group after the Accounts Date;
1.9 INSURANCE
in respect of any claim to the extent of any net recovery under any policy of insurance of any Group Company of a type that was in place at or prior to the date of this Agreement, for any Losses arising from such claim;
1.10 NET BENEFIT
in respect of any claim for Losses suffered by the Purchaser or any of the Group Companies to the extent of any corresponding savings by or net benefit to the Purchaser or any other member of the Purchaser's Group or any Group Company arising directly therefrom;
1.11 EQUAL TREATMENT OF THE WARRANTORS
notwithstanding any other provision of this Agreement, in respect of any claim for breach of any of the Management Warranties unless the Purchaser seeks to recover at the same time and to the same degree (taking into account the financial caps and percentage amounts set out in paragraph 1.4.2, the several liability of each Warrantor and the other limitations of liability set out in this Agreement) against each and every Warrantor and treats all Warrantors equally. If the Purchaser withdraws a claim against any of the Warrantors, the Purchaser shall also withdraw that claim against each of the other Warrantors. If the Purchaser settles a claim against a Warrantor, the Purchaser shall offer to the other Warrantors settlement terms which are the same (taking into account the financial caps and percentage amounts set out in paragraph 1.4.2 and the other limitations
of liability set out in this Agreement) as those agreed with that Warrantor with whom the Purchaser has settled; and
1.12 LOSS OF PROFITS
in respect of any claims for any losses suffered by the Purchaser or any of the Group Companies to the extent that the losses relate to indirect or consequential loss or loss of profit.
2 SELLERS LIABILITY
2.1 The liability of each Seller and Warrantor under or pursuant to this Agreement shall be several only and such liability shall be limited to the amounts set out in paragraph 1.4 of this Schedule 5. None of the Sellers or Warrantors shall be liable under this Agreement in respect of any claim for breach of this Agreement (or any of the other documents to be entered into pursuant to this Agreement) by another Seller or Warrantor.
2.2 Each Seller shall only be liable in respect of any breach of a Title and Capacity Warranty or any other claim under this Agreement and the Warrantors shall only be liable in respect of any breach of a Management Warranty if and to the extent that, in each case, such claim is admitted by the relevant Seller or the Warrantors (as the case may be) or determined by a court of competent jurisdiction.
2.3 Without prejudice to Clause 8 (Warranties), Clause 9 (Whole Agreement and Remedies) and Schedule 4 (Warranties given by the Sellers and Warrantors under Clause 8) of this Agreement, the Purchaser acknowledges and agrees that, except for the specific Warranties set out in paragraphs 2.8, 2.9 and 2.10 of Schedule 4, none of the Sellers or Warrantors gives or makes, nor shall there be implied, any warranty as to the accuracy of any information (whether in writing, verbal or howsoever provided), including the forecasts, estimates, projections, statements of intent, statements of opinion, or other forward looking statements provided to the Purchaser (howsoever provided) on or prior to the date of this Agreement, including any information in the Information Memorandum, the Management Presentations, the Data Room, the Disclosure Letter, the Due Diligence Reports, any other due diligence report prepared by or on behalf of the Purchaser or the information supplied to or made available to the Purchaser during its due diligence exercise nor, apart from the specific Warranties set out in paragraphs 2.8, 2.9 and 2.10 of Schedule 4, is any warranty given or shall any warranty be implied as to the accuracy or completeness of, or otherwise in respect of, the contents of any of the foregoing, nor is there any obligation on any Group Company, Seller or Warrantor or their respective advisers to update any of the foregoing or to correct any inaccuracies therein which may become apparent. For the avoidance of doubt, (in the case of the Warrantors only, solely in respect of the specific Warranties on the Due Diligence Reports set out in paragraphs 2.8, 2.9 and 2.10 of Schedule 4), none of the Warrantors or the Sellers shall have any liability or responsibility whatsoever in respect of any of the foregoing information or documents mentioned in this paragraph 2.3.
3 LIABILITY OF THE TRUSTEES
Notwithstanding anything else herein contained, the Trustees have entered into this Agreement solely in their capacity as trustee of each of the relevant Trusts and the benefits of this Agreement are held by the Trustees subject to the provisions of such Trusts.
Notwithstanding any other provision of this Agreement, any and all liabilities of the Trustees under this Agreement shall be limited to the extent such liability can be met from and out of the property from time to time subject to the trust funds of the relevant Trust or Trusts and, accordingly:
3.1.1 the obligations of, and rights against, the Trustees under this Agreement and any and all liability of the Trustees that may otherwise arise in connection with this Agreement and the matters contained in this Agreement shall be performed, satisfied and paid only out of, and enforced only against and recourse under this Agreement shall be had only against, the property from time to time subject to the trust funds of the relevant Trust or Trusts; and
3.1.2 no obligation of the Trustees under this Agreement or that otherwise may arise in connection with the matters contained in this Agreement is binding upon, nor in respect thereof shall any resort or recourse be had, judgment issued, or execution or other process levied against, any other property of any Trustee held in its capacity as trustee of any other trust (other than the relevant Trust or Trusts).
4 MITIGATION OF LOSS
Nothing in this Agreement shall or shall be deemed to abrogate or relieve the Purchaser of any common law or other duty to mitigate any loss or damage.
5 CONDUCT OF CLAIMS
5.1 NOTIFICATION
If the Purchaser or any Group Company becomes aware of any matter that may give rise to a claim against any Seller or the Warrantors (as the case may be) under this Agreement written notice of that fact setting out reasonable details of the specific matter in respect of which the claim is made including (if feasible) an estimate of the amount of such claim shall be given as soon as reasonably practicable to the relevant Seller or the Warrantors.
5.2 INVESTIGATION BY THE SELLERS
Without prejudice to the validity of the claim or alleged claim in question, the Purchaser shall allow, and shall procure that the relevant Group Companies allow, the Warrantors and their accountants and professional advisers reasonably to investigate the matter or circumstance alleged to give rise to such claim and whether and to what extent any amount is payable in respect of such claim and for such purpose the Purchaser shall give, and shall procure that the relevant Group Companies give, subject to their being paid all reasonable costs and expenses, all such reasonable information and assistance, including reasonable access to premises and personnel, and the right to examine and copy or photograph any assets, accounts, documents and records, as the Warrantors or their accountants or professional advisers may reasonably request. The Warrantors agree to keep all information obtained in relation to such investigation confidential and to use it only for the purpose of the claim in question.
5.3 THIRD PARTY CLAIM/LIABILITY
If the claim in question is a result of or in connection with a claim by or liability to a third party then no admission of liability shall be made by or on behalf of the Purchaser or any Group Company and the claim shall not be compromised, disposed of or settled without the consent of the Warrantors (such consent not to be unreasonably withheld or delayed).
6 PRIOR RECEIPT
If, before any Seller or the Warrantors (as the case may be) pay(s) an amount in discharge of any claim under this Agreement, the Purchaser or any member of the Purchaser's Group recovers or is entitled to recover (whether by payment, discount, credit, relief or otherwise) from a third party a sum which is directly referable to the subject matter of the claim, the Purchaser shall procure that, before steps are taken against that Seller or the Warrantors under this Agreement, reasonable steps are taken to enforce such recovery (and none of the Sellers or the Warrantors shall have any liability to pay any amount by way of damages in respect of any claim unless and until the Purchaser shall have taken such reasonable steps to enforce such recovery) and any actual recovery (less any reasonable costs and expenses incurred in such recovery) shall pro tanto reduce or satisfy, as the case may be, such claim.
7 SUBSEQUENT RECOVERY
If any Seller pays an amount in discharge of any claim under this Agreement and the Purchaser or any member of the Purchaser's Group subsequently recovers from a third party a sum which is directly referable to the subject matter of the claim, the Purchaser shall pay, or shall procure that the relevant member of the Purchaser's Group pays, promptly to that Seller an amount equal to (i) the sum recovered from the third party or (ii) if less, the amount previously paid by that Seller to the Purchaser, in each case less any reasonable costs and expenses incurred in obtaining such recovery.
8 DOUBLE CLAIMS
The Purchaser shall not be entitled to recover from any Seller or the Warrantors under this Agreement more than once in respect of the same Loss or Losses suffered.
9 FRAUD AND WILFUL DEFAULT
None of the limitations contained in this Schedule 5 shall apply to any claim against a Seller or the Warrantors (as the case may be) which arises as a result of the fraud or wilful default of that Seller or the Warrantors (as relevant).
10 NO RIGHT OF SET-OFF
No Seller shall be liable to make any payment under this Agreement nor shall the Purchaser exercise any right of set off or counter claim against or otherwise withhold payment of any sum stated to be payable by the Purchaser to any Seller under the terms of this Agreement or under any other agreement subsisting between them unless and until such liability has been agreed between the Purchaser and the relevant Seller or adjudged payable by that Seller by a court of competent jurisdiction.
In all circumstances, save to the extent of any deduction or withholding required by law, the Purchaser hereby waives and relinquishes any right of set off or counterclaim, deduction, withholding or retention which the Purchaser might otherwise have in respect of any claim under this Agreement.
11 OPPORTUNITY TO REMEDY BREACHES
Where a matter or default giving rise, or potentially giving rise, to any claim is capable of remedy, the Purchaser shall provide written notice of the claim in respect of such matter or default to the relevant person against which such claim would be made as soon as reasonably practicable and the relevant person shall only be liable to the extent the matter or default is not remedied to the satisfaction of the Purchaser (acting reasonably) without cost to the Purchaser within 30 Business Days after the date on which such notice is served.
12 TAX
12.1 In calculating the liability of any Seller or the Warrantors for any breach of this Agreement, there shall be taken into account the amount (if any) by which any Taxation for which the Purchaser or any member of the Purchaser's Group (including any Group Company) would otherwise have been accountable or liable to be assessed is actually reduced or extinguished directly as a result of the matter giving rise to such liability or any repayment of Taxation directly attributable to the matter giving rise to such liability and for the avoidance of any doubt such calculation shall only be performed and taken into account at the time the Taxation is actually reduced and extinguished and the benefit has been realised by the Purchaser or any member of the Purchaser's Group (including any Group Company) in money or money's worth.
12.2 The Purchaser shall procure that where any member of the Purchaser's Group is entitled to relief from Taxation as referred to in paragraph 12.1, the Purchaser's Group will take all reasonable steps (such steps being taken at the cost and expense of the Sellers or the Warrantors as the case may be) to obtain such relief, provided that such steps shall not include disclaiming other reliefs that might be available, claiming such relief ahead of any other relief that might be available to that member of the Purchaser's Group, utilising that relief ahead of other reliefs surrendered to it by other members of the Purchaser's Group or requiring the Purchaser or any member of the Purchaser's Group (including any Group Company) to arrange its Tax affairs in any way, or to do any matter or thing, which is unduly onerous.
SCHEDULE 6
PROPERTIES
LEASEHOLD Description: Fourth Floor, and car park stacker 3, Gracechurch House, 55 Gracechurch Street, London, EC3 Date of and parties to lease: Lease between 55 Gracechurch Street (NO. 1) Limited and 55 Gracechurch Street (NO. 2) Limited and Talbot Underwriting Services Ltd. Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: 10 years and 62 days from 23 October 2003 Rent: L314,525 per annum during the first five years of the Term, thereafter the rent determined by the rent review Next rent review: 25 December 2008 Present use: A suite of offices LEASEHOLD Description: Fifth Floor, Gracechurch House, 55 Gracechurch Street, London, EC3 Date of and parties to lease: Lease dated 23 October 2003 between 55 Gracechurch Street (NO. 1) Limited and 55 Gracechurch Street (NO. 2) Limited and Talbot Underwriting Services Ltd. Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: 10 years and 25 days from 30 November 2003 Rent: Up to and including 29 March 2008 a peppercorn (if demanded), thereafter L267,085 per annum subject to the rent review Next rent review: 25 December 2008 Present use: A suite of offices |
LEASEHOLD Description: Sixth Floor, Gracechurch House, 55 Gracechurch Street, London, EC3 Date of and parties to lease: Lease dated 23 October 2003 between 55 Gracechurch Street (NO. 1) Limited and 55 Gracechurch Street (NO. 2) Limited and Talbot Underwriting Services Ltd. Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: 10 years and 25 days from 30 November 2003 Rent: Up to and including 28 March 2008 a peppercorn, if demanded, thereafter L176,855 per annum subject to the rent review Next rent review: 25 December 2008 Present use: A suite of offices LEASEHOLD Description: Part Basement, 55 Gracechurch Street, EC3 Date of and parties to lease: Lease dated 13 January 1997 between the City of London Real Property Company Limited and Venton Services Limited (now known as Talbot Underwriting Services Ltd (the reversion of the lease was subsequently vested in 55 Gracechurch Street (NO. 1) Limited and 55 Gracechurch Street (NO. 2) Limited)) Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: 10 years from 29 September 1996 Lease expired on 28 September 2006 Rent: L2,520 per annum Next rent review: Uncertain Present use: Storage |
LEASEHOLD Description: Sub-basement Stores 1 and 12, 51 to 54 Gracechurch Street, EC3 Date of and parties to lease: lease between 51-54 Gracechurch Street (NO. 1) Limited and 51-54 Gracechurch Street (NO. 2) Limited) and Talbot Underwriting Services Ltd Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: 1 year from 23 January 2007 Rent: L5,535 per annum Next rent review: N/A Present use: Storage LICENCE Description: Car Park Stacker 3, 55 Gracechurch Street, EC3 Date of and parties to lease: Licence dated 20 March 1997 between the City of London Real Property Company Limited and Venton Services Limited (now known as Talbot Underwriting Services Ltd) The use of this Car Park Stacker is invoiced under the lease of the 4th Floor of 55 Gracechurch Street. Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: Indefinite Rent: L5,500 per annum Next rent review: N/A Present use: Parking |
LICENCE Description: Car Park Stacker 2, 55 Gracechurch Street, EC3 Date of and parties to lease: Unwritten licence from LS City & West End Limited The use of this Car Park Stacker is invoiced separately on a quarterly basis. Legal owner: Talbot Underwriting Services Ltd. Beneficial owner Talbot Underwriting Services Ltd. for and on behalf of itself and the names of Syndicate 1183 from time to time Term: Rolling on a quarterly basis Rent: L1,615.62 per quarter Next rent review: N/A Present use: Parking LEASEHOLD Description: Lloyd's Box 39, Lloyd's Building, One Lime Street, London EC3M 7HA Date of and parties to Lease: Oral lease arrangement made on 1 January 2002 between Lloyd's and Talbot Underwriting Services Ltd. Term: 1 year rolling term from 1 January 2002 Rent: L189,823 per annum Next rent review: 1 January 2008 LEASEHOLD Description: Lloyd's Box 172, Lloyd's Building, One Lime Street, London EC3M 7HA Date of and parties to Lease: Oral lease arrangement made on 1 January 2003 between Lloyd's and Talbot Underwriting Services Ltd. Term: 1 year rolling term from 1 January 2003 Rent: L60,853 per annum Next rent review: 1 January 2008 |
LEASEHOLD Description: Lloyd's Box 173, Lloyd's Building, One Lime Street, London EC3M 7HA Date of and parties to Lease: Oral lease arrangement made on 1 January 2003 between Lloyd's and Talbot Underwriting Services Ltd. Term: 1 year rolling term from 1 January 2003 Rent: L87,404 per annum Next rent review: 1 January 2008 LEASEHOLD Description: Lloyd's Box 176, Lloyd's Building, One Lime Street, London EC3M 7HA Date of and parties to Lease: Oral lease arrangement made on 1 January 2003 between Lloyd's and Talbot Underwriting Services Ltd. Term: 1 year rolling term from 1 January 2003 Rent: L51,575 per annum Next rent review: 1 January 2008 LEASEHOLD Description: Lloyd's Box 112, Lloyd's Building, One Lime Street, London EC3M 7HA Date of and parties to Lease: Oral lease arrangement made on 1 January 2007 between Lloyd's and Talbot Underwriting Services Ltd. Term: 1 year rolling term from 1 January 2007 Rent: L69,750 per annum Next rent review: 1 January 2007 |
SCHEDULE 7
OPTIONHOLDERS
(2) OPTIONS (3) (1) OVER EXERCISE NAME OF OPTIONHOLDER SHARES PRICE -------------------- --------- ------------ CLASS B SHARE OPTIONHOLDERS OPTIONS GRANTED IN 2003 Julian Ross 375,000 L 112,500 Stuart Forbes 125,000 L 37,500 Derren Hughes 125,000 L 37,500 Gillian Langford 500,000 L 150,000 Stephen Lloyd 500,000 L 150,000 Mark Perry 125,000 L 37,500 Paul Miller 250,000 L 75,000 David Newbigging 500,000 US$ 473,000 OPTIONS GRANTED IN 2004 Gilles Bonvarlet 1,250,000 US$1,182,500 Michael Carpenter 500,000 US$ 473,000 Rupert Atkin 1,250,000 US$1,182,500 OPTIONS GRANTED IN 2005 James Bamford 150,000 US$ 141,900 Danny Burns 150,000 US$ 141,900 Stephen Lloyd 125,000 US$ 118,250 Mario Apicella 50,000 US$ 47,300 Marc Alcott 75,000 US$ 70,950 Russell Bean 100,000 US$ 94,600 Jamie Courtney 50,000 US$ 47,300 Steven Tebbutt 75,000 US$ 70,950 |
(2) OPTIONS (3) (1) OVER EXERCISE NAME OF OPTIONHOLDER SHARES PRICE -------------------- --------- ------------ OPTIONS GRANTED IN 2006 Gilles Bonvarlet 500,000 US$ 473,000 Julian Ross 125,000 US$ 118,250 Sean Callaghan 62,500 US$ 100,000 Phil Furlong 62,500 US$ 100,000 Rod Harris 62,500 US$ 100,000 Nick Hassam 62,500 US$ 100,000 Susan House 62,500 US$ 100,000 Derren Hughes 62,500 US$ 100,000 Martyn Lucas 62,500 US$ 100,000 Andrew West 62,500 US$ 100,000 Andrew Keogan 62,500 US$ 100,000 EBT SHARE OPTIONHOLDERS Julian Ross 125,000 US$ 118,250 James Bamford 100,000 US$ 94,600 Mark Alcott 75,000 US$ 70,950 Russell Bean 100,000 US$ 94,600 John Cutts 125,000 US$ 118,250 John Ewington 75,000 US$ 70,950 Alex Foord 125,000 US$ 118,250 Louise Patterson 75,000 US$ 70,950 Steven Tebbutt 75,000 US$ 70,950 |
SCHEDULE 8
EMPLOYMENT PARTIES
MEA Carpenter
CNR Atkin
ND Wachman
GAM Bonvarlet
JS Clouting
NJ Hales
GS Langford
MS Johnson
JG Ross
JE Skinner
SF Lloyd
RW Fielder
JRA Bamford
SEH Barr
G Cooke
JA McDonald
LE Nevill
DG Burns
JAA Colquhoun
I Fordham
JG Cutts
PJ Miller
SCHEDULE 9
TERMS APPLICABLE TO THE BASE SHARE CONSIDERATION
1 Prior to the end of the Restricted Period (as defined below), the Base Share Consideration may not be Transferred (as defined below) by an Employee Seller.
2 If an Employee Seller's employment with the Group Companies terminates, Validus may repurchase, at a price per share equal to $0.01, such Base Share Consideration which at the time of such termination remains subject to a Restricted Period (and, for the avoidance of doubt, termination of the Restricted Period pursuant to the provisions of paragraphs 3, 4 and 5 below shall be deemed to have occurred prior to the termination of an Employee Seller's employment).
3 The Restricted Period shall begin on the date of Completion and end with respect to each Employee Seller's Base Share Consideration as follows: as to 25% of his/her Base Share Consideration, on the first anniversary of the date of Completion; as to 25% of his/her Base Share Consideration, on the second anniversary of the date of Completion; as to 25% of his/her Base Share Consideration, on the third anniversary of the date of Completion; and as to 25% of his/her Base Share Consideration, on the fourth anniversary of the date of Completion; in each case, so long as the Employee Seller remains an employee of one of the Group Companies through the applicable anniversary, except that, notwithstanding the foregoing, the Restricted Period will terminate immediately in the circumstances set out in paragraph 5 below.
4 Notwithstanding paragraph 3, the Restricted Period with respect to the Base Share Consideration to be received by Michael Carpenter will terminate as to 100% of his Base Share Consideration on the first anniversary of the date of Completion, so long as Michael Carpenter remains an employee of one of the Group Companies through such anniversary, except that, notwithstanding the foregoing, the Restricted Period will terminate immediately in the circumstances set out in paragraph 5 below.
5 The Restricted Period for each Employee Seller, with respect to that Employee Seller's Base Share Consideration will terminate immediately with respect to all of the Base Share Consideration of that Employee Seller:
5.1 at the time of termination of employment of that Employee Seller if the Employee Seller is a "Good Leaver", which means the Employee Seller's employment has terminated due to one of the following reasons:
5.1.1 agreed termination of employment;
5.1.2 injury, ill-health, disability or redundancy;
5.1.3 his/her death;
5.1.4 wrongful or unfair dismissal by the relevant Group Company;
5.1.5 the company in which he/she is employed ceasing to be a Validus Group Company (as defined below);
5.1.6 the entire or substantially the whole of the business carried on by Validus being transferred to a person other than a Validus Group Company; or
5.1.7 retirement at the normal retirement age of the relevant Group Company or early retirement on the grounds of ill health or with the consent of the board of the relevant Group Company and in accordance with the terms of the pension plan of which the Employee Seller is a member; or
5.2 on the occurrence of any transaction that constitutes a Change of Control of Validus or on any sale or disposal by Validus after Completion of the Company, Talbot Insurance (Bermuda) Ltd, Talbot Underwriting Ltd, Talbot Underwriting Services Ltd or Talbot 2002 or of a majority of the business or assets held by any such Group Company.
6 Upon Completion, the Base Share Consideration (notwithstanding the Transfer/forfeiture restrictions set out in paragraphs 1 and 2 above) shall be validly issued, fully paid and non-assessable (meaning that no further sums are required to be paid by holders thereof in connection with the issue thereof) and shall be entitled to vote and participate in distributions and dividends, pari passu with all other Validus Common Shares then in issue, in accordance with the Validus Bye-Laws.
7 For the avoidance of doubt, on termination of the Restricted Period in accordance with any of paragraphs 3, 4 or 5 above, the Transfer and forfeiture restrictions set out in paragraphs 1 and 2 above shall cease to apply and shall have no further effect.
8 In this Schedule 9, the following definitions shall apply:
"CHANGE OF CONTROL OF VALIDUS" means a change of control of Validus (as defined in the Validus 2005 Long Term Incentive Plan) where that change of control also involves Rupert Atkin and either one of Ed Noonan or George Reeth no longer continuing in a senior management role equivalent to, or of greater responsibility than, the role they held prior to the change of control.
"RESTRICTED PERIOD" shall be for the duration and have the meaning set out in paragraphs 3 and 4 (as applicable);
"TRANSFER" means, with respect to Validus Common Shares, to sell, assign, dispose of, exchange or otherwise transfer such shares or any participation interest therein (including, without limitation, voting and/or economic rights with respect thereto), whether directly or indirectly, or agreeing to do any of the foregoing; provided, however, that (i) Transfers to the shareholder's spouse or partner or lineal relatives, or any custodian or trust for the benefit of any of the foregoing or the estate of such shareholder, shall be permitted but the transferee shall agree to be bound by such transfer restrictions, and (ii) Transfers pursuant to a transaction approved by either a majority of the directors of Validus or by holders of a majority of the outstanding Validus Common Shares (or pursuant to any offer made to all holders of Validus Common Shares and accepted by holders of a majority thereof) or in a transaction that constitutes a change in control of Validus (as defined in the Validus 2005 Long Term Incentive Plan) shall be permitted; and
"VALIDUS GROUP COMPANY" means Validus or any of its subsidiaries.
SCHEDULE 10
RULE 3B-4 OF THE EXCHANGE ACT AND DEFINITION OF US PERSON
PART 1
RULE 3B-4 OF THE EXCHANGE ACT
"FOREIGN PRIVATE ISSUER" means a corporation or entity organised under the laws
of a country other than the United States, except that such corporation or
entity will not be considered a Foreign Private Issuer if more than 50 percent
of its outstanding voting securities are directly or indirectly held by
residents of the United States and any of the following apply: (i) the majority
of the executive officers or directors are United States citizens or residents;
(ii) more than 50 percent of the assets of such corporation or entity are
located in the United States; or (iii) the business of such corporation or
entity is administered principally in the United States.
PART 2
US PERSON
Set forth below is the definition of the term "U.S. PERSON" as used within the meaning of Regulation S under the United States Securities Act of 1933, as amended.
a. U.S. person.
1. "U.S. person" means:
i. Any natural person resident in the United States;
ii. Any partnership or corporation organized or incorporated under the laws of the United States;
iii. Any estate of which any executor or administrator is a U.S. person;
iv. Any trust of which any trustee is a U.S. person;
v. Any agency or branch of a foreign entity located in the United States;
vi. Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;
vii. Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and
viii. Any partnership or corporation if:
A. Organized or incorporated under the laws of any foreign jurisdiction; and
B. Formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
2. The following are not "U.S. persons":
i. Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States;
ii. Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if:
A. An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and
B. The estate is governed by foreign law;
iii. Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;
iv. An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;
v. Any agency or branch of a U.S. person located outside the United States if:
A. The agency or branch operates for valid business reasons; and
B. The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and
vi. The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.
SCHEDULE 11
SHARE ELECTION FORM
Reference is hereby made to that certain Share Sale Agreement dated May [ ], 2007 among Validus Holdings Ltd., a company organised under the laws of Bermuda ("VALIDUS"), and the sellers identified therein relating to the acquisition by Validus of all of the issued share capital of Talbot Holdings Ltd, a company organised under the laws of Bermuda (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "SHARE SALE AGREEMENT"). Capitalised terms used but not defined herein have the meaning ascribed to such terms in the Share Sale Agreement.
Pursuant and subject to Clause 3.1.4 of the Share Sale Agreement, the undersigned Employee Seller hereby makes a Share Election to receive ___% of the Employee Seller Cash Consideration due to the undersigned in Validus Common Shares. To the extent that the percentage amount referred to in the preceding sentence would result in the Cash Component payable to the undersigned Employee Seller being less than his/her Minimum Cash Amount, such percentage amount shall be reduced such that the amount of the Cash Component received by the undersigned Employee Seller is not less than the Minimum Cash Amount. This Share Election, once duly made in accordance with the terms of the Share Sale Agreement, is irrevocable.
The undersigned Employee Seller hereby acknowledges, agrees and reaffirms his/her warranties set forth in Part 3 of Schedule 4 of the Share Sale Agreement.
This Share Election Form will only be effective if executed and completed and delivered to Validus before the earlier of the expiration of the period of two weeks of the date of the Share Sale Agreement and the Business Day preceding the day on which the Conditions Precedent shall first have been fulfilled at the following address:
Validus Holdings, Ltd.
19 Par-La-Ville Road
Hamilton HM11 Bermuda,
Attention: Chief Financial Officer and General Counsel
(Facsimile: (441) 278-9090)
with a copy to the Company Secretary of Talbot Holdings Ltd
Exhibit 10.32
JUNIOR SUBORDINATED INDENTURE
between
VALIDUS HOLDINGS, LTD.
and
WILMINGTON TRUST COMPANY,
as Trustee
Dated as of June 21, 2007
TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions................................................ 1 Section 1.2. Compliance Certificate and Opinions........................ 10 Section 1.3. Forms of Documents Delivered to Trustee.................... 10 Section 1.4. Acts of Holders............................................ 11 Section 1.5. Notices, Etc. to Trustee and Company....................... 13 Section 1.6. Notice to Holders; Waiver.................................. 13 Section 1.7. Effect of Headings and Table of Contents................... 13 Section 1.8. Successors and Assigns..................................... 13 Section 1.9. Separability Clause........................................ 14 Section 1.10. Benefits of Indenture...................................... 14 Section 1.11. Governing Law.............................................. 14 Section 1.12. Submission to Jurisdiction................................. 14 Section 1.13. Non-Business Days.......................................... 14 ARTICLE II SECURITY FORMS Section 2.1. Form of Security........................................... 15 Section 2.2. Restricted Legend.......................................... 20 Section 2.3. Form of Trustee's Certificate of Authentication............ 22 Section 2.4. Temporary Securities....................................... 23 Section 2.5. Definitive Securities...................................... 24 Section 2.6. Limited Holders............................................ 25 ARTICLE III THE SECURITIES Section 3.1. Payment of Principal and Interest.......................... 23 Section 3.2. Denominations.............................................. 25 Section 3.3. Execution, Authentication, Delivery and Dating............. 25 Section 3.4. Global Securities.......................................... 26 Section 3.5. Registration, Transfer and Exchange Generally.............. 28 Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities........... 29 |
TABLE OF CONTENTS
(continued)
PAGE Section 3.7. Persons Deemed Owners...................................... 30 Section 3.8. Cancellation............................................... 30 Section 3.9. Deferrals of Interest Payment Dates........................ 30 Section 3.10. Right of Set-Off........................................... 31 Section 3.11. Agreed Tax Treatment....................................... 31 Section 3.12. CUSIP Numbers.............................................. 31 ARTICLE IV SATISFACTION AND DISCHARGE Section 4.1. Satisfaction and Discharge of Indenture.................... 32 Section 4.2. Application of Trust Money................................. 33 ARTICLE V REMEDIES Section 5.1. Events of Default.......................................... 33 Section 5.2. Acceleration of Maturity; Rescission and Annulment......... 34 Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.................................................... 35 Section 5.4. Trustee May File Proofs of Claim........................... 36 Section 5.5. Trustee May Enforce Claim Without Possession of Securities. 36 Section 5.6. Application of Money Collected............................. 36 Section 5.7. Limitation on Suits........................................ 37 Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest....................................... 38 Section 5.9. Restoration of Rights and Remedies......................... 38 Section 5.10. Rights and Remedies Cumulative............................. 38 Section 5.11. Delay or Omission Not Waiver............................... 38 Section 5.12. Control by Holders......................................... 38 Section 5.13. Waiver of Past Defaults.................................... 39 Section 5.14. Undertaking for Costs...................................... 39 Section 5.15. Waiver of Usury, Stay or Extension Laws.................... 40 ARTICLE VI THE TRUSTEE Section 6.1. Corporate Trustee Required................................. 40 |
TABLE OF CONTENTS
(continued)
PAGE Section 6.2. Certain Duties and Responsibilities........................ 40 Section 6.3. Notice of Defaults......................................... 41 Section 6.4. Certain Rights of Trustee.................................. 42 Section 6.5. May Hold Securities........................................ 43 Section 6.6. Compensation; Reimbursement; Indemnity..................... 44 Section 6.7. Resignation and Removal; Appointment of Successor.......... 45 Section 6.8. Acceptance of Appointment by Successor..................... 45 Section 6.9. Merger, Conversion, Consolidation or Succession to Business 46 Section 6.10. Not Responsible for Recitals or Issuance of Securities..... 46 Section 6.11. Appointment of Authenticating Agent........................ 46 ARTICLE VII HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.1. Company to Furnish Trustee Names and Addresses of Holders.. 48 Section 7.2. Preservation of Information, Communications to Holders..... 48 Section 7.3. Reports by Company......................................... 48 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.1. Company May Consolidate, Etc., Only on Certain Terms....... 49 Section 8.2. Successor Company Substituted.............................. 49 ARTICLE IX SUPPLEMENTAL INDENTURES Section 9.1. Supplemental Indentures without Consent of Holders......... 50 Section 9.2. Supplemental Indentures with Consent of Holders............ 51 Section 9.3. Execution of Supplemental Indentures....................... 52 Section 9.4. Effect of Supplemental Indentures.......................... 52 Section 9.5. Reference in Securities to Supplemental Indentures......... 52 ARTICLE X COVENANTS Section 10.1. Payment of Principal, Premium and Interest................. 52 Section 10.2. Money for Security Payments to be Held in Trust............ 52 Section 10.3. Statement as to Compliance................................. 54 |
TABLE OF CONTENTS
(continued)
PAGE Section 10.4. Calculation Agent.......................................... 54 Section 10.5. Additional Amounts......................................... 54 Section 10.6. Additional Covenants....................................... 55 Section 10.7. Waiver of Covenants........................................ 56 Section 10.8. Treatment of Securities.................................... 56 ARTICLE XI REDEMPTION OF SECURITIES Section 11.1. Optional Redemption........................................ 56 Section 11.2. Special Event Redemption................................... 56 Section 11.3. Election to Redeem; Notice to Trustee...................... 57 Section 11.4. Selection of Securities to be Redeemed..................... 57 Section 11.5. Notice of Redemption....................................... 57 Section 11.6. Deposit of Redemption Price................................ 58 Section 11.7. Payment of Securities Called for Redemption................ 58 ARTICLE XII SUBORDINATION OF SECURITIES Section 12.1. Securities Subordinate to Senior Debt...................... 59 Section 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc............................. 59 Section 12.3. Payment Permitted If No Default............................ 61 Section 12.4. Subrogation to Rights of Holders of Senior Debt............ 61 Section 12.5. Provisions Solely to Define Relative Rights................ 61 Section 12.6. Trustee to Effectuate Subordination........................ 62 Section 12.7. No Waiver of Subordination Provisions...................... 62 Section 12.8. Notice to Trustee.......................................... 62 Section 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent...................................................... 63 Section 12.10. Trustee Not Fiduciary for Holders of Senior Debt........... 63 Section 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights........................................... 63 Section 12.12. Article Applicable to Paying Agents........................ 63 |
SCHEDULES
Schedule A -- Determination of LIBOR
Exhibit A -- Form of Officer's Financial Certificate
JUNIOR SUBORDINATED INDENTURE, dated as of June 21, 2007, between VALIDUS HOLDINGS, LTD., a company with limited liability organized under the laws of Bermuda (the "Company"), and Wilmington Trust Company, a banking corporation organized under the laws of the State of Delaware, as debenture trustee (in such capacity, the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its unsecured junior subordinated deferrable interest debentures designated "Junior Subordinated Deferrable Interest Debentures due 2037" (the "Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, this Indenture Witnesseth:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned to them in this Article I;
(b) the words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation";
(c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;
(d) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture;
(e) the words "hereby," "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders.
"Act" when used with respect to any Holder, has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any amounts payable on the Securities, the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security, in each case to the extent legally enforceable.
"Additional Amounts" has the meaning specified in Section 10.5.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Depositary Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time.
"Applicable Insurance Regulatory Authority" means, when used with respect
to any Regulated Insurance Company, (x) the insurance department or similar
administrative authority or agency located in each state or jurisdiction
(foreign or domestic) in which such Regulated Insurance Company is domiciled or
(y) to the extent asserting regulatory jurisdiction over such Regulated
Insurance Company, the insurance department, authority or agency in each state
or jurisdiction (foreign or domestic) in which such Regulated Insurance Company
is licensed, and shall include any Federal or national insurance regulatory
department, authority or agency that may be created and that asserts insurance
regulatory jurisdiction over such Regulated Insurance Company.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.11 to act on behalf of the Trustee to authenticate the Securities.
"Bankruptcy Code" means Title 11 of the United States Code or any successor statute(s) thereto, or any similar federal or state law for the relief of debtors, in each case as amended from time to time.
"Board of Directors" means the board of directors of the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York or Bermuda are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business.
"Calculation Agent" has the meaning specified in Section 10.4.
"Common Shares" means the common shares, par value $0.175 per share, of the Company.
"Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written request or order signed in the name of the Company by its Chairman of the Board of Directors, its Vice Chairman of the Board of Directors, its Chief Executive Officer, President or a Vice President, and by its Chief Financial Officer, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of this Indenture is located at 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.
"Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or other accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii).
"Defaulted Interest" has the meaning specified in Section 3.1.
"Depositary" means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto.
"Depositary Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
"Dollar" or "$" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation, or any successor thereto.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934 or any statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section 3.9.
"Fixed Rate Period" means, with respect to any Security, the period from June 21, 2007 through but excluding June 15, 2012.
"GAAP" means United States generally accepted accounting principles, consistently applied, from time to time in effect.
"Global Security" means a Security that evidences all or part of the Securities, the ownership and transfers of which shall be made through book entries by a Depositary.
"Government Obligation" means (a) any security that is (i) a direct
obligation of the United States of America of which the full faith and credit of
the United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (b) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any
Government Obligation that is specified in clause (a) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any Government Obligation
that is so specified and held, provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of principal or
interest evidenced by such depositary receipt.
"Holder" means a Person in whose name a Security is registered in the Securities Register.
"Indenture" means this instrument as originally executed or as it may from time to time be amended or supplemented by one or more amendments or indentures supplemental hereto entered into pursuant to the applicable provisions hereof.
"Insurance Business" means one or more aspects of the business of selling, issuing or underwriting insurance or reinsurance.
"Interest Payment Date" means March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2007, during the term of this Indenture, as such dates may be adjusted pursuant to Section 1.13.
"Investment Company Act" means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation (including any announced prospective change) or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Company is or, within ninety (90) days of the date of such opinion will be, considered an "investment company" that is required to be registered under the Investment Company Act, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Securities.
"LIBOR" has the meaning specified in Schedule A.
"LIBOR Business Day" has the meaning specified in Schedule A.
"LIBOR Determination Date" has the meaning specified in Schedule A.
"Maturity," when used with respect to any Security, means the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"New York Court" has the meaning specified in Section 1.12.
"Notice of Default" means a written notice of the kind specified in
Section 5.1(c).
"Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President or a Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee.
"Operative Documents" means the Indenture, the Purchase Agreement and the Securities.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Company or any Affiliate of the Company.
"Optional Redemption Price" has the meaning set forth in Section 11.1.
"Original Issue Date" means the date of original issuance of each Security.
"Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii) Securities that have been paid or in substitution for or in lieu of which other Securities have been authenticated and delivered pursuant to the provisions of this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company;
provided, that, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor.
"Paying Agent" means the Trustee or any Person authorized by the Company to pay the principal of or any premium or interest on, or other amounts in respect of, any Securities on behalf of the Company.
"Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, government or any agency or political subdivision thereof, or any other entity of whatever nature.
"Place of Payment" means, with respect to the Securities, the Corporate Trust Office of the Trustee.
"Policies" means all insurance policies, annuity contracts, guaranteed interest contracts and funding agreements (including riders to any such policies or contracts, certificates issued with respect to group life insurance or annuity contracts and assumption certificates issued or to be issued (or filed pending current review by applicable governmental authorities) by any
Regulated Insurance Company and any coinsurance agreements entered into or to be entered into by any Regulated Insurance Company.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 12.2.
"Purchase Agreement" means the agreement, dated as of June 20, 2007, between the Company and KBW, Inc., First Tennessee Bank, N.A., Preferred Term Securities XXVI, Ltd., TWE, Ltd. and Keefe, Bruyette & Woods, Inc.
"Redemption Date" means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to be redeemed, in whole or in part, the Special Redemption Price or the Optional Redemption Price, as applicable, at which such Security or portion thereof is to be redeemed as fixed by or pursuant to this Indenture.
"Reference Banks" has the meaning specified in Schedule A.
"Regular Record Date" for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen (15) days preceding such Interest Payment Date (whether or not a Business Day).
"Regulated Insurance Company" means any Subsidiary of the Company, whether now owned or hereafter acquired, that is authorized or admitted to carry on or transact Insurance Business in any jurisdiction (foreign or domestic) and is regulated by any Applicable Insurance Regulatory Authority.
"Responsible Officer" means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.
"Rights Plan" means a plan of the Company providing for the issuance by the Company to all holders of its Common Shares of rights entitling the holders thereof to subscribe for or purchase shares of any class or series of capital stock of the Company which rights (i) are deemed to be transferred with such shares of such Common Shares and (ii) are also issued in respect of future issuances of such Common Shares, in each case until the occurrence of a specified event or events.
"Securities" or "Security" means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time.
"Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5.
"Senior Debt" means the principal of and any premium and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not such claim for post-petition interest is allowed in such proceeding) all Debt (including, without limitation, insurance obligations including obligations with respect to Policies and guarantees thereof) of the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Securities issued under this Indenture; provided, however, that Senior Debt shall not be deemed to include any other debt securities and guarantees in respect of such debt securities issued to any trust (or a trustee of any such trust), partnership or other entity affiliated with the Company that is a financing vehicle of the Company (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities that are treated as equity capital for regulatory capital purposes guaranteed by the Company pursuant to an instrument that ranks pari passu with or junior in right of payment to this Indenture.
"Significant Subsidiary(ies)" has the meaning set forth in Section 10.6.
"Special Event" means the occurrence of an Investment Company Event or a Tax Event.
"Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.1.
"Special Redemption Price" has the meaning set forth in Section 11.2.
"Stated Maturity" means June 15, 2037.
"Subsidiary" means a Person more than fifty percent (50%) of the outstanding voting stock or other voting interests of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For purposes of this definition, "voting stock" means stock that ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.
"Tax Event" means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of (a) any amendment to or change (including any announced prospective change) in the treaties or laws or any regulations thereunder of Bermuda or any taxing jurisdiction having jurisdiction over the Company or any political subdivision or taxing authority thereof or therein or any change in the application or official interpretation of such treaties, laws or regulations or (b) any judicial decision or any official administrative pronouncement or regulatory procedure, including any notice or announcement of intent to adopt
any such pronouncement or procedure (an "Administrative Action"), regardless of whether such judicial decision or Administrative Action is issued to or in connection with a proceeding involving the Company and whether or not subject to review or appeal, which amendment, change, judicial decision or Administrative Action is enacted, promulgated or announced, in each case, on or after the date of issuance of the Securities, there is more than an insubstantial risk that (i) the Company is, or will be as of the next Interest Payment Date, required to pay to any Holder of Securities Additional Amounts as provided in Section 10.5 hereunder, or (ii) interest payable by the Company on the Securities is not, or as of the next Interest Payment Date, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes.
"Transfer" means, the voluntarily or involuntarily to transfer, sell, pledge or hypothecation or otherwise dispose of, whether directly or indirectly and whether through one or a series of transactions.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and, thereafter, "Trustee" shall mean or include each Person who is then a Trustee hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and as in effect on the date as of this Indenture.
SECTION 1.2. Compliance Certificate and Opinions.
(a) Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and, if so requested by the Trustee, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with.
(b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificate provided pursuant to Section 10.3) shall include:
(i) a statement by each individual signing such certificate or opinion that such individual has read such covenant or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
(a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to such matters are erroneous.
(c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
(d) Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officers' Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally received in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments (including any appointment of an agent) is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine.
(c) The ownership of Securities shall be proved by the Securities Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
(e) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.
(f) Except as set forth in paragraph (g) of this Section 1.4, the Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date (as defined in Section 1.4(h)) by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6.
(g) The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration or rescission or annulment thereof referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(b) or (iv) any
direction referred to in Section 5.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.6.
(h) With respect to any record date set pursuant to paragraph (f) or (g) of this Section 1.4, the party hereto that sets such record date may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided, that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section 1.4, the party hereto that set such record date shall be deemed to have initially designated the ninetieth (90th) day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the one hundred eightieth (180th) day after the applicable record date.
SECTION 1.5. Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver, Act of Holders, or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with and received by the Trustee at its Corporate Trust Office, or
(b) the Company by the Trustee or any Holder shall be sufficient for every
purpose hereunder if in writing and mailed, first class, postage prepaid, to the
Company addressed to it at Validus Holdings, Ltd., Bermuda Commercial Bank
Building, 19 Par-La-Ville Road, Second Floor, Hamilton HM11 Bermuda, Attention:
Chief Financial Officer (facsimile: (441 278-9091), with a copy to Cahill Gordon
& Reindel LLP, 80 Pine Street, New York, New York 10005, Attention: Michael A.
Becker, Esq. and John Schuster, Esq. (facsimile: (212) 296-5420) or at any other
address previously furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first
class, postage prepaid, to each Holder affected by such event to the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction of this Indenture.
SECTION 1.8. Successors and Assigns.
This Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law. Except in connection with a transaction involving the Company that is permitted under Article VIII and pursuant to which the assignee agrees in writing to perform the Company's obligations hereunder, the Company shall not assign its obligations hereunder.
SECTION 1.9. Separability Clause.
If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.
SECTION 1.10. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the holders of Senior Debt, the Holders of the Securities and any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.11. Governing Law.
THIS INDENTURE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE HOLDERS, THE COMPANY AND THE TRUSTEE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
SECTION 1.12. Submission to Jurisdiction.
ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN) (COLLECTIVELY, "NEW YORK COURT"). BY EXECUTION AND DELIVERY OF THIS INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest, premium, if any, or principal or other amounts in respect of such Security shall not be made on such date, but shall be made on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, through but excluding such next succeeding Business Day) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity. If any Interest Payment Date of any Security, during the Fixed Rate Period, shall not be a Business Day, and payment of interest, premium, or principal or other amounts in respect of such Security are made on the next succeeding Business Day, additional interest shall not accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date through but excluding such next succeeding Business Day.
SECTION 1.14. No Recourse Against Others.
No director, officer, employee incorporator, Affiliate or stockholder of the Company shall have any liability for any obligations of the Company under the Securities or the Indenture or for a claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities.
SECTION 1.15. Agent for Service of Process.
The Company will designate and appoint CT Corporation System in New York City as its process agent (the "Process Agent") upon which process may be served in any action arising out of or relating to this Indenture which may be instituted in any New York Court by the Trustee or the Holders, in accordance with legal procedures prescribed for such courts within fifteen (15) days of execution of the Indenture by the parties hereto, and will expressly consent to the non-exclusive jurisdiction of any such court in respect of any such action, and waive any other requirements of or objections to personal jurisdiction with respect thereto. Such appointment
shall be irrevocable. Service of process upon the Process Agent and written notice of such service of process to it shall be deemed, in every respect, effective service of process upon the Company. Nothing herein shall in any way be deemed to limit the ability of the Trustee or the Holders to serve any such legal process, summons, notices and documents in any other manner permitted by applicable law or to obtain jurisdiction over the Company or to bring actions, suits or proceedings against the Company in such other jurisdictions, and in such manner, as may be permitted by applicable law.
SECTION 1.16. Currency Indemnity.
If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to any payment due hereunder, it becomes necessary to convert into the currency of such jurisdiction (the "Judgment Currency") any amount due hereunder in any currency other than the Judgment Currency (the "Currency Due"), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given. For this purpose, "rate of exchange" means the rate at which the Trustee is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of payment of the amount due, the Company will, on the day of payment, pay such additional amount, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount paid on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of payment is the amount then due hereunder in the Currency Due. If the amount of the Currency Due which the Trustee would be able to purchase at such rate of exchange is less than the amount of the Currency Due originally due to it, the Company shall indemnify and save the Trustee and the Holders harmless from and against loss or damage arising as a result of such deficiency. If the amount of the Currency Due which the Trustee would be able to purchase at such rate of exchange is greater than the amount of the Currency Due originally due to it, the Trustee shall promptly pay to the Company in U.S. dollars an amount equal to such excess. This indemnity shall constitute an obligation separate and independent from the other obligations contained herein, shall give rise to a separate and independent cause of action and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.
ARTICLE II
SECURITY FORMS
SECTION 2.1. Form of Security.
Any Security issued hereunder shall be in substantially the following form:
VALIDUS HOLDINGS, LTD.
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2037
No. [__] $[ ]
Validus Holdings, Ltd., a company with limited liability organized under the laws of Bermuda (hereinafter called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to [ ], or registered assigns, the principal sum of [ ] ($[ ]) in accordance with the Indenture on June 15, 2037. The Company further promises to pay interest on said principal sum from June 21, 2007, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June15, September 15 and December 15 of each year, commencing September 15, 2007, or if any such day is not a Business Day, on the next succeeding Business Day (and additional interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date through but excluding such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 8.48% per annum through but excluding June 15, 2012 and thereafter at a variable rate equal to LIBOR plus 2.95% per annum, together with Additional Amounts, if any, as provided in Section 10.5 of the Indenture, until the principal hereof is paid or duly provided for or made available for payment; provided, further, that any overdue principal, premium, if any, or Additional Amounts and any overdue installment of interest shall bear Additional Interest at a fixed rate equal to 8.48% through but excluding June 15, 2012 and thereafter at a variable rate equal to LIBOR plus 2.95% per annum; (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand, provided further that during the Fixed Rate Period if any Interest Payment Date shall not be a Business Day, and payment of interest, premium, or principal or other amounts are made on the next succeeding Business Day, additional interest shall not accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date through but excluding such next succeeding Business Day.
The amount of interest payable for any interest period shall be computed and paid (i) during the Fixed Rate Period on the basis of a 360-day year of twelve 30-day months and (ii) thereafter on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.
So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of this Security, to defer the payment of interest on this Security for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s),
no interest shall be due and payable (except any Additional Amounts that may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date, and no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. No interest shall be due and payable during an Extension Period (except any Additional Amounts that may be due and payable), except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at a fixed rate equal to 8.48% per annum through but excluding June 15, 2012 and thereafter at a variable rate equal to LIBOR plus 2.95% per annum; compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or made available for payment. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on this Security, together with such Additional Interest to Holders of record of this Security as of the record date established for the Interest Payment Date coinciding with the end of such Extension Period (regardless of who the Holders of record may have been on any date during such Extension Period). Prior to the termination of any such Extension Period, the Company may further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) consecutive quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) consecutive quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of this Security. The Company shall give the Holder of this Security and the Trustee written notice of its election to begin any such Extension Period at least five (5) Business Days prior to the next succeeding Interest Payment Date on which interest on this Security would be payable but for such deferral.
During any such Extension Period, the Company shall not, and shall not
permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's or such subsidiary's capital stock (other
than payments of dividends or distributions to the Company) or make any
guarantee payments with respect to the foregoing, (ii) make any payment of
principal of or any interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company that rank pari passu in all respects
with or junior in interest to this Security (other than, with respect to clauses
(i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares
of capital stock of the Company or any subsidiary of the Company in connection
with (1) any employment contract, benefit plan or other similar arrangement with
or for the benefit of any one or more employees, officers, directors or
consultants, (2) a dividend reinvestment or stockholder stock purchase plan
and/or (3) the issuance of capital stock of the Company or of such subsidiary
(or securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a subsidiary of
the Company) for any class or series of the Company's capital stock (or, in the
case of a subsidiary of the Company, any class or series of such subsidiary's
capital stock)or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock (or in the case of indebtedness
of a subsidiary of the
Company, of any class or series of such subsidiary's indebtedness for any class or series of such subsidiary's capital stock), (c) the purchase of fractional interests in shares of the Company's capital stock (or the capital stock of a subsidiary of the Company) pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith or (f) any repurchases, redemptions or other acquisitions of shares of capital stock of the Company or any subsidiary of the Company made by the Company or such subsidiary, which the Company's Board of Directors determine in good faith are necessary or advisable in order to avoid, ameliorate or limit any material adverse tax or regulatory consequences for the Company or its shareholders) or (iii) enter into any new (as opposed to existing) contracts on less than an arm's-length negotiation basis with shareholders holding more than 10% of the outstanding shares of Common Shares of the Company.
Payment of principal of, premium, if any, and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of this Security shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Debt, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the Company (the "Securities") issued under the Junior Subordinated Indenture, dated as of June 21, 2007 (the
"Indenture"), between the Company and Wilmington Trust Company, as Trustee (in such capacity, the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt, the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.
All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
The Company may, on any Interest Payment Date, at its option and in accordance with the Indenture, on or after June 15, 2012 and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date.
In addition, upon the occurrence and during the continuation of a Special Event, the Company may, at its option and in accordance with the Indenture, redeem this Security, in whole but not in part, subject to the terms and conditions of Article XI of the Indenture at a Redemption Price equal to
TIME PERIOD PERCENTAGE ----------- ---------- June 21, 2007 - June 14, 2008 105% June 15, 2008 - June 14, 2009 103.75% June 15, 2009 - June 14, 2010 102.5% June 15, 2010 - June 14, 2011 101.25% June 15, 2011 and thereafter 100% |
together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date.
In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security.
The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the
Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this ____ day of __________, 20__.
VALIDUS HOLDINGS, LTD.
By: ___________________________
Name:
Title:
SECTION 2.2. Restricted Legend.
(a) Any Security issued hereunder shall bear a legend in substantially the following form:
"[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF [ ] OR A NOMINEE OF [ ]. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
[ ] OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY [ ] TO A NOMINEE OF [ ] OR BY A NOMINEE OF [ ] TO
[ ] OR ANOTHER NOMINEE OF [ ]) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF [ ] TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF [ ] OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF [ ] (AND ANY PAYMENT HEREON IS MADE TO [ ]. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF [ ]), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, [ ], HAS AN INTEREST HEREIN.]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD
OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (III) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (IV)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR (V) PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF (III) OR
(V), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF COUNSEL
AND OTHER INFORMATION SATISFACTORY TO IT AND (B) THE HOLDER WILL NOTIFY
ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS
SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.
NOTWITHSTANDING THE FOREGOING, HOLDERS OF THIS SECURITY AND/OR BENEFICIAL INTERESTS THEREIN ARE LIMITED AS SET FORTH IN SECTION 2.6 OF THE INDENTURE.
HOLDERS OF THIS SECURITY AND/OR BENEFICIAL INTERESTS THEREIN ARE SUBJECT TO THE CONFIDENTIALITY PROVISIONS AS SET FORTH IN SECTION 7.3 OF THE INDENTURE."
(b) The above legends shall not be removed from any Security unless there is delivered to the Company satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under or violation of the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, the Company shall execute and deliver to the Trustee, and the Trustee shall deliver, upon receipt of a Company Order directing it to do so, a Security that does not bear the legend.
SECTION 2.3. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the following form:
This is one of the Securities referred to in the within-mentioned Indenture.
Dated:
WILMINGTON TRUST COMPANY, as Trustee
By: ________________________
Authorized signatory
SECTION 2.4. Temporary Securities.
(a) Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.
(b) If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.5. Definitive Securities.
The Securities issued on the Original Issue Date shall be in definitive form. The definitive Securities shall be printed, lithographed or engraved, or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.
SECTION 2.6. Limited Holders.
Notwithstanding anything contained in this Indenture or the Securities to
the contrary, for until the earlier of (i) June 15, 2012, (ii) the date on which
Standard & Poors ("S&P") issues any public rating on the Company or any
Significant Subsidiary for any reason or (iii) the first date on which the
Company elects to defer interest pursuant to Section 3.9, no Holder may Transfer
its Security or a beneficial interest therein if after giving effect to such
Transfer there would be greater than twenty (20) Holders of the Securities
(and/or of beneficial interests in the Securities) (the "Limited Holder
Restriction") without the prior written consent of the Company ("Limited Holder
Company Consent"), which Limited Holder Company Consent shall not be
unreasonably withheld or delayed; provided, however, that no Limited Holder
Company Consent shall be required if the Transfer of such Security or beneficial
interest in a Security is being made pursuant to the terms of the documents
governing the duties with respect to credit deterioration or substitution of a
collateral manager or trustee of a collateralized debt obligor Holder. The
Company shall notify the Trustee of the occurrence of item (ii) above. Neither
the Trustee nor the Securities Registrar shall be responsible for monitoring
compliance with any of the above limitations; provided, that the Trustee and the
Securities Registrar shall promptly respond to a Company request to identify the
Holders of the Securities. Any Transfer made in violation of the terms of this
Section 2.6 shall be an ineffective Transfer and shall be null and void.
ARTICLE III
THE SECURITIES
SECTION 3.1. Payment of Principal and Interest.
(a) The unpaid principal amount of the Securities shall bear interest at a fixed rate equal to 8.48% per annum through but excluding June 15, 2012 and thereafter at a variable rate of LIBOR plus 2.95% per annum until paid or duly provided for; such interest to accrue from June 21, 2007, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, and any overdue principal, premium, if any, or Additional Amounts and any overdue installment of interest shall bear Additional Interest at the rate equal to a fixed rate equal to 8.48% per annum through but excluding June 15, 2012 and thereafter at a variable rate of LIBOR plus 2.95% per annum; compounded quarterly from the dates such amounts are due until they are paid or funds for the payment thereof are made available for payment.
(b) Interest and Additional Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest and any Additional Interest payable on the Stated Maturity (or any date of principal repayment upon early maturity) of the principal of a Security or on a Redemption Date shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security that is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security.
(c) Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest (a "Special Record Date"), which shall be fixed in the following manner. At least thirty (30) days prior to the date of the proposed payment, the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security at the address of such Holder as it appears in the Securities Register not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date; or
(ii) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee.
(d) Payments of interest on the Securities shall include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for the Securities shall be computed and paid (i) during the Fixed Rate Period on the basis of a 360-day year of twelve 30-day months and (ii) thereafter on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period.
(e) Payment of principal of, premium, if any, and interest on the Securities shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal, premium, if any, and interest due at the Maturity of such Securities shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent and payments of interest shall be made subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at
least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.
(f) Subject to the foregoing provisions of this Section 3.1, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security.
SECTION 3.2. Denominations.
The Securities shall be in registered form without coupons and shall be issuable in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
(a) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities in an aggregate principal amount (including all then Outstanding Securities) not in excess of Two Hundred Million Dollars ($200,000,000) executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and shall be fully protected in relying upon:
(i) a copy of any Board Resolution relating thereto; and
(ii) an Opinion of Counsel substantially to the effect that: (1)
such Securities, when authenticated and delivered by the Trustee and
issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute, and the Indenture
constitutes, valid and legally binding obligations of the Company, each
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles; (2) the Securities have been duly
authorized and executed by the Company and have been delivered to the
Trustee for authentication in accordance with this Indenture; (3) the
Securities are not required to be registered under the Securities Act; and
(4) the Indenture is not required to be qualified under the Trust
Indenture Act.
(b) The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its Chief Financial Officer, its President or one of its Vice Presidents. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
(c) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.8, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
(d) Each Security shall be dated the date of its authentication.
SECTION 3.4. Global Securities.
(a) Upon the election of the Holder after the Original Issue Date, which election need not be in writing, the Securities owned by such Holder shall be issued in the form of one or more Global Securities registered in the name of the Depositary or its nominee. Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. In connection with any such election, if requested by a Holder in writing, the Company will act reasonably (including, without limitation, in light of Section 2.6 of this Indenture) in designating and entering into any necessary arrangements, at the cost of such Holder, with a Depositary reasonably acceptable to it and such Holder.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for registered Securities, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee and the Company in
writing that such Depositary is no longer willing or able to properly discharge
its responsibilities as Depositary with respect to such Global Security, and no
qualified successor is appointed by the Company within ninety (90) days of
receipt by the Company of such notice, (ii) such Depositary ceases to be a
clearing agency registered under the Exchange Act and no successor is appointed
by the Company within ninety (90) days after obtaining knowledge of such event,
(iii) the Company executes and delivers to the Trustee a Company Order stating
that the Company elects to terminate the book-entry system through the
Depositary or (iv) an Event of Default shall have occurred and be continuing.
Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv)
above, the Trustee shall notify the Depositary and instruct the Depositary to
notify all owners of beneficial interests in such Global Security of the
occurrence of such event and of the availability of Securities to such owners of
beneficial interests requesting the same. The Trustee may conclusively rely, and
be protected in relying, upon the written identification of the owners of
beneficial interests furnished by the Depositary, and shall not be liable for
any delay resulting from a delay by the Depositary. Upon the issuance of such
Securities and the registration in the Securities Register of such Securities in
the names of the Holders of the beneficial interests therein, the Trustees shall
recognize such holders of beneficial interests as Holders.
(c) If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced or increased by an amount equal to (x) the portion thereof to be so exchanged or canceled, or (y) the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Company shall execute and the Trustee shall authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.
(d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof.
(e) [Reserved].
(f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Depositary Procedures. Accordingly, any such owner's beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Securities Registrar and the Trustee shall be entitled to deal with the Depositary for all purposes of this Indenture relating to a Global Security (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole Holder of the Security and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants.
(h) No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security.
SECTION 3.5. Registration, Transfer and Exchange Generally.
(a) The Trustee shall cause to be kept at the Corporate Trust Office a register (the "Securities Register") in which the registrar and transfer agent with respect to the Securities (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee shall at all times also be the Securities Registrar. The provisions of Article VI shall apply to the Trustee in its role as Securities Registrar.
(b) Subject to compliance with Section 2.2(b), upon surrender for registration of transfer of any Security at the offices or agencies of the Company designated for that purpose the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations of like tenor and aggregate principal amount.
(c) At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive.
(d) All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.
(e) Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing.
(f) No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities.
(g) Neither the Company nor the Trustee shall be required pursuant to the provisions of this Section 3.5 (g): (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed.
(h) The Company shall designate an office or offices or agency or agencies where Securities may be surrendered for registration or transfer or exchange. The Company initially designates the Corporate Trust Office as its office and agency for such purposes. The Company shall give prompt written notice to the Trustee and to the Holders of any change in the location of any such office or agency.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
(a) If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Trustee to save the Company and the Trustee harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and aggregate principal amount and bearing a number not contemporaneously outstanding.
(b) If there shall be delivered to the Trustee (i) evidence to its satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by it to save each of the Company and the Trustee harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding.
(c) If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.
(d) Upon the issuance of any new Security under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
(e) Every new Security issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.
(f) The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any interest on such Security and for all other purposes whatsoever, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.8. Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.8, except as expressly permitted by this Indenture. All canceled Securities shall be retained or disposed of by the Trustee in accordance with its customary practices and the Trustee shall deliver to the Company a certificate of such disposition.
SECTION 3.9. Deferrals of Interest Payment Dates.
(a) So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Security, to defer the payment of interest on the Securities for a period of up to twenty (20) consecutive quarterly interest payment periods (each such period, an "Extension Period"), during which Extension Period(s), the Company shall have the right to make no payments or partial payments of interest on any Interest Payment Date (except any Additional Amounts that otherwise may be due and payable). No Extension Period shall end on a date other than an Interest Payment Date and no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. No interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest (to the extent payment of such interest would be legally enforceable) at the rate equal to a fixed rate equal to 8.48% per annum through but excluding June 15, 2012 and thereafter at a variable rate equal to LIBOR plus 2.95% per annum, compounded quarterly, from the dates on which amounts would have otherwise been due and payable until paid or until funds for the payment thereof have been made available for payment. At the end of any such Extension Period, the Company shall pay all interest then accrued and unpaid on the Securities together with such Additional Interest. Prior to the termination of any such Extension Period, the Company may extend such Extension Period and further defer the payment of interest; provided, that (i) all such previous and further extensions comprising such Extension Period do not exceed twenty (20) consecutive quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period; provided, that (i) such Extension Period does not exceed twenty (20) consecutive quarterly interest payment periods, (ii) no Extension Period shall end on a date other than an Interest Payment Date and (iii) no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities. The Company shall notify (i) the Holders of the Securities at the address provided upon request to the Securities Registrar, (ii) the Trustee at its Corporate Trust Office (iii) FTN Financial Capital Markets at 845 Crossover Lane, Suite 150, Memphis, Tennessee 38117, (800) 456-5460, (iv) Keefe, Bruyette & Woods, Inc. at 787 7th Avenue, 4th Floor, (212) 541-6668 and (v) TWE, Ltd. at c/o Maples Finance Limited,
P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands, (345) 945-7100, Attention: The Directors, in writing and by telephone (except in the case of notice to the Holders) of its election to begin any such Extension Period at least five (5) Business Days prior to the next succeeding Interest Payment Date on which interest on the Securities would be payable but for such deferral.
(b) In connection with any such Extension Period, the Company shall be subject to the restrictions set forth in Section 10.6.
SECTION 3.10. [Reserved].
SECTION 3.11. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by its acceptance or acquisition of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a direct or indirect beneficial interest in, such Security, intend and agree to treat such Security as indebtedness of the Company for United States Federal, state and local tax purposes. The provisions of this Indenture shall be interpreted to further this intention and agreement of the parties.
SECTION 3.12. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and other similar or related materials as a convenience to Holders; provided, that any such notice or other materials may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other materials and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(a) either
(i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been mutilated, destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.6 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust as provided in Section 10.2) have been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity within one year of the date of deposit, or
(C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose (x) an amount in the currency or currencies in which the Securities are payable, (y) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (z) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity (or any date of principal repayment upon early maturity) or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6, the obligations of
the Company to any Authenticating Agent under Section 6.11 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 4.1, the obligations of the Trustee under Section 4.2 and Section
10.2(e) shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of Section 10.2(e), all money or Government Obligations deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment in accordance with Section 3.1, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest (including any Additional Interest) for the
payment of which such money or obligations have been deposited with or received by the Trustee. Moneys held by the Trustee under this Section 4.2 shall not be subject to the claims of holders of Senior Debt under Article XII.
SECTION 4.3. Defeasance and Discharge of Indenture.
The Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities on the first date all the conditions set forth in the proviso below are satisfied, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to:
(a) the rights of Holders of Securities to receive, from the trust funds described in subparagraph (1) hereof, payment of the principal of (and premium, if any) and each installment of principal of (and premium, if any) or interest on the Securities on the Stated Maturity of such principal or installment of principal or interest or on a Redemption Date in accordance with the terms of this Indenture and the Securities;
(b) the Company's obligations with respect to such Securities under Sections 2.4, 3.5, 3.6, 4.2, 4.5, 7.1 and 10.2; and
(c) the obligations of the Company to the Trustee under Section 6.6,
provided that the following conditions shall have been satisfied:
(i) the Company has or caused to be irrevocably deposited (except as provided in Section 4.2) with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities,
(A) money in the currency or currencies in which the Securities are payable in an amount sufficient, or
(B) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph money in an amount, or (b) a combination of such money and such Government Obligations, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee,
to pay and discharge the principal of (and premium, if any) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest or on the applicable Redemption Date in accordance with the terms of this Indenture and of the Securities;
(ii) such deposit will not result in a breach or violation of, or constitute a default under, any applicable laws, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(iii) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and
(iv) if the deposit referred to in subparagraph (1) of this section is to be made on or prior to one year from the Stated Maturity for payment of principal of the Outstanding Securities, the Company has delivered to the Trustee an Opinion of Counsel or a favorable ruling of the Internal Revenue Service, in either case to the effect that Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred.
SECTION 4.4. Defeasance of Certain Obligations.
The Company may omit to comply with any term, provision or condition set forth in the sections of this Indenture or such Security with respect to the Securities ("Covenant Defeasance") if:
(a) with reference to this section, the Company has deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series,
(i) money in the currency or currencies in which the Securities are payable in an amount sufficient, or
(ii) (a) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph money in an amount, or (b) a combination of such money and such Government Obligation, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee,
to pay and discharge the principal of (and premium, if any) and each installment of principal (and premium, if any) and interest on the Outstanding Securities of that series on the Stated Maturity of such principal or installment of principal or interest;
(b) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(c) if the deposit referred to in subparagraph (1) of this section is to be made on or prior to one year from the Stated Maturity for payment of principal of the Outstanding Securities, the Company has delivered to the Trustee an Opinion of Counsel or a favorable ruling of the Internal Revenue Service, in either case to the effect that Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and defeasance had not occurred;
(d) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and
(e) the Company has delivered to the Trustee an Officers' Certificate (upon which the Trustee may conclusively rely) stating that all conditions precedent herein provided for relating to the defeasance contemplated by this section have been complied with.
SECTION 4.5. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or Government Obligations in accordance with Section 4.1, 4.3 or 4.4 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities of the applicable series shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.1, 4.3 or 4.4, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Obligations in accordance with Section 4.1, 4.3 or 4.4; provided that, if the Company has made any payment of principal of or interest on the Securities of any series because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or Government Obligations held by the Trustee or Paying Agent.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default" means, wherever used herein with respect to the Securities, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of thirty (30) days (subject to the deferral of any due date in the case of an Extension Period); or
(b) default in the payment of the principal of or any premium on any Security at its Maturity; or
(c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture and continuance of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least twenty five percent (25%) in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder;
(d) the entry by a court having jurisdiction in the premises of a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days;
(e) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company to the institution of bankruptcy or insolvency proceedings against it, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by the Company in furtherance of any such action; or
(f) [Reserved]; or
(g) any representation, warranty, certification or statement of fact made or deemed made by the Company herein or in any other Operative Document or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any materially adverse respect when made.
SECTION 5.2. Acceleration of Maturity; Rescission, Annulment, Audit Rights and Additional Reports.
(a) If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than twenty five percent (25%) in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders).
(b) At any time after such a declaration of acceleration with respect to Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article V, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Trustee, may rescind and annul such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum sufficient to pay:
(A) all overdue installments of interest on all Securities,
(B) any accrued Additional Interest on all Securities,
(C) the principal of and any premium on any Securities that have become due otherwise than by such declaration of acceleration and interest (including any Additional Interest) thereon at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel; and
(ii) all Events of Default with respect to Securities, other than the non-payment of the principal of Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13;
No such rescission shall affect any subsequent default or impair any right consequent thereon.
(c) In the event that either (a) an Event of Default has occurred and is continuing or (b) the Company has elected to defer payments of interest on the Securities by extending the interest payment period (as provided for in Section 3.9 hereof), Holders of not less than twenty five percent (25%) in aggregate principal amount of the Outstanding Securities may audit the quarterly and annual financial statements and statutory statements of the Company.
(d) In the event that either (a) an Event of Default has occurred and is continuing or (b) the Company has elected to defer payments of interest on the Securities by extending the interest payment period (as provided for in Section 3.9 hereof), the Company shall provide to the Trustee and the Holders quarterly and annual statutory statements, as well as quarterly updates on any of its subsidiaries or affiliates, which may be in liquidation, under supervisory regulation or in runoff.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
(a) The Company covenants that if:
(i) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of thirty
(30) days, or
(ii) default is made in the payment of the principal of and any premium on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest (including any Additional Interest) and, in addition thereto, all amounts owing the Trustee under Section 6.6.
(b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Securities, wherever situated.
(c) If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or similar judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, at the Company's expense, by intervention in such proceeding or otherwise, to take any and all actions authorized hereunder in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to first pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6.
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, subject to Article XII and after provision for the payment of all the amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or any premium or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee, any predecessor Trustee and other Persons under Section 6.6;
SECOND: To the payment of all Senior Debt of the Company if and to the extent required by Article XII;
THIRD: Subject to Article XII, to the payment of the amounts then due and unpaid upon the Securities for principal and any premium and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and any premium and interest (including any Additional Interest), respectively; and
FOURTH: The balance, if any, to the Company.
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities;
(b) the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding for sixty (60) days; and
(e) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium on such Security at its Maturity and payment of interest (including any Additional Interest) on such Security when due and payable and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. The
rights of any Holder hereunder or under any other Operative Document may be exercised by such Holder or any collateral manager thereof.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or such Holder, then and in every such case the Company, the Trustee and such Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in Section 3.6(f), no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or the Holders, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided, that:
(a) such direction shall not be in conflict with any rule of law or with this Indenture,
(b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.2, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, reasonably determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability.
SECTION 5.13. Waiver of Past Defaults.
(a) The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may waive any past Event of Default hereunder and its consequences except an Event of Default:
(i) in the payment of the principal of or any premium or interest (including any Additional Interest) on any Security (unless such Event of Default has been cured and the Company has paid to or deposited with the Trustee a sum sufficient to pay all installments of interest (including any Additional Interest) due and past due and all principal of and any premium on all Securities due otherwise than by acceleration), or
(ii) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security.
(b) Any such waiver shall be deemed to be on behalf of the Holders of all the Securities.
(c) Upon any such waiver, such Event of Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or any premium on the Security after the Stated Maturity or any interest (including any Additional Interest) on any Security after it is due and payable.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Corporate Trustee Required.
There shall at all times be a Trustee hereunder with respect to the Securities. The Trustee shall be a corporation organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or state authority and having an office within the United States. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 6.1, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.1, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI.
SECTION 6.2. Certain Duties and Responsibilities.
Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform on their face to the requirements of this Indenture.
(b) If an Event of Default known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from the Holders of at least a majority in aggregate principal amount of the Outstanding Securities, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(c) Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.2. To the extent that, at law or in equity, the Trustee has duties and liabilities relating to the Holders, the
Trustee shall not be liable to any Holder for the Trustee's good faith reliance on the provisions of this Indenture. The provisions of this Indenture, to the extent that they restrict the duties and liabilities of the Trustee otherwise existing at law or in equity, are agreed by the Company and the Holders to replace such other duties and liabilities of the Trustee.
(d) No provisions of this Indenture shall be construed to relieve the Trustee from liability with respect to matters that are within the authority of the Trustee under this Indenture for its own negligent action, negligent failure to act or willful misconduct, except that:
(i) the Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee under this Indenture; and
(iii) the Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company and money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law.
SECTION 6.3. Notice of Defaults.
Within ninety (90) days after the occurrence of any default actually known to the Trustee, the Trustee shall give the Holders notice of such default unless such default shall have been cured or waived; provided, that except in the case of a default in the payment of the principal of or any premium or interest on any Securities, the Trustee shall be fully protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of holders of Securities; and provided, further, that in the case of any default of the character specified in Section 5.1(c), no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof. For the purpose of this Section 6.3, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default.
SECTION 6.4. Certain Rights of Trustee.
Subject to the provisions of Section 6.2:
(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Indenture the Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Indenture the Trustee finds ambiguous or inconsistent with any other provisions contained herein or (iii) the Trustee is unsure of the application of any provision of this Indenture, then, except as to any matter as to which the Holders are entitled to decide under the terms of this Indenture, the Trustee shall deliver a notice to the Company requesting the Company's written instruction as to the course of action to be taken and the Trustee shall take such action, or refrain from taking such action, as the Trustee shall be instructed in writing to take, or to refrain from taking, by the Company; provided, that if the Trustee does not receive such instructions from the Company within ten Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice the Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Trustee shall deem advisable and in the best interests of the Holders, in which event the Trustee shall have no liability except for its own negligence, bad faith or willful misconduct;
(c) any request or direction of the Company shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(d) the Trustee may consult with counsel (which counsel may be counsel to the Trustee, the Company or any of its Affiliates, and may include any of its employees) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses (including reasonable attorneys' fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Trustee;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, note or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder;
(h) whenever in the administration of this Indenture the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action with respect to enforcing any remedy or right hereunder, the Trustees (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same
aggregate principal amount of Outstanding Securities as would be entitled to direct the Trustee under this Indenture in respect of such remedy, right or action), (ii) may refrain from enforcing such remedy or right or taking such action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions;
(i) except as otherwise expressly provided by this Indenture, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Indenture;
(j) without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with any bankruptcy, insolvency or other proceeding referred to in clauses (d) or (e) of the definition of Event of Default, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy laws or law relating to creditors rights generally;
(k) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate addressing such matter, which, upon receipt of such request, shall be promptly delivered by the Company;
(l) the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge or (ii) the Trustee shall have received written notice thereof from the Company or a Holder; and
(m) in the event that the Trustee is also acting as Paying Agent, Authenticating Agent or Securities Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VI shall also be afforded such Paying Agent, Authenticating Agent, or Securities Registrar.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent.
SECTION 6.6. Compensation; Reimbursement; Indemnity.
(a) The Company agrees:
(i) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(ii) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct; and
(iii) to the fullest extent permitted by applicable law, to indemnify the Trustee and its Affiliates, and their officers, directors, shareholders, agents, representatives and employees for, and to hold them harmless against, any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to (i) or (ii) hereof), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part arising out of or in connection with the acceptance or administration of this trust or the performance of the Trustee's duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
(b) To secure the Company's payment obligations in this Section 6.6, the Company hereby grants and pledges to the Trustee and the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, other than money or property held in trust to pay principal and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee.
(c) The obligations of the Company under this Section 6.6 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal of the Trustee.
(d) In no event shall the Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(e) In no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture.
SECTION 6.7. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.8.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 6.8 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series. If the
acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the first sentence of this subsection may be combined with the instrument called for by Section 6.8.
(c) Unless an Event of Default shall have occurred and be continuing, the Trustee may be removed at any time by the Company by a Board Resolution. If an Event of Default shall have occurred and be continuing, the Trustee may be removed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company.
(d) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Company, by a Board Resolution, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when an Event of Default shall have occurred and be continuing, the Holders, by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment within sixty (60) days after the giving of a notice of resignation by the Trustee or the removal of the Trustee in the manner required by Section 6.8, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of such Holder and all others similarly situated, and any resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) The Company shall give notice to all Holders in the manner provided in
Section 1.6 of each resignation and each removal of the Trustee and each
appointment of a successor Trustee. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.8. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee, each successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) of this Section 6.8.
(c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI.
SECTION 6.9. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, provided,
that such Person shall be otherwise qualified and eligible under this Article
VI. In case any Securities shall have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or consolidation
or as otherwise provided above in this Section 6.9 to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated, and in case any Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor Trustee or in the name of such successor Trustee, and in all
cases the certificate of authentication shall have the full force which it is
provided anywhere in the Securities or in this Indenture that the certificate of
the Trustee shall have.
SECTION 6.10. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof.
SECTION 6.11. Appointment of Authenticating Agent.
(a) The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any State or Territory thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or state authority. If such Authenticating Agent publishes reports of condition at least annually pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 6.11 the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.11.
(b) Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to all or substantially all of the corporate
trust business of an Authenticating Agent shall be the successor Authenticating
Agent hereunder, provided such Person shall be otherwise eligible under this
Section 6.11, without the execution or filing of any paper or any further act on
the part of the Trustee or the Authenticating Agent.
(c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, the Trustee may appoint a successor Authenticating Agent eligible under the provisions of this Section 6.11, which shall be acceptable to the Company, and shall give notice of such appointment to all Holders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.
(d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.11 in such amounts as the Company and the Authenticating Agent shall agree from time to time.
(e) If an appointment of an Authenticating Agent is made pursuant to this
Section 6.11, the Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Securities referred to in the within mentioned Indenture.
Dated:
WILMINGTON TRUST COMPANY, as Trustee
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than fifteen (15) days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing, within thirty (30) days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished,
in each case to the extent such information is in the possession or control of the Company and has not otherwise been received by the Trustee in its capacity as Securities Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Company.
(a) The Company shall furnish to (i) the Trustee, (ii) FTN Financial Capital Markets, (iii) Keefe, Bruyette & Woods, Inc. and (iv) prospective purchasers of Securities (the "Prospective Purchasers"), upon their written request, the information required to be furnished pursuant to Rule 144A(d)(4) under the Securities Act. The delivery requirements of the Company set forth in the preceding sentence may be satisfied by compliance with Section 7.3(b) hereof by the Company.
(b) The Company shall furnish to each of (i) FTN Financial Capital Markets (at 845 Crossover Lane, Suite 150, Memphis, Tennessee 38117, Attention: James D. Wingett or such other address as designated by FTN Financial Capital Markets), (ii) Keefe, Bruyette & Woods, Inc. (at 787 7th Avenue, 4th Floor, New York, New York 10019, Attention: Mitchell Kleinman or
such other address as designated by Keefe, Bruyette & Woods, Inc.), (iii) TWE, Ltd. c/o Maples Finance Limited at P.O. Box 1093 GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands, Attention: Directors and (iv) any beneficial owner of the Securities who requests the same (the Persons set forth in (b)(i) - (iii), each, a "Recipient" and, collectively, the "Recipients"), a duly completed and executed certificate substantially and substantively in the form attached hereto as Exhibit A, including all of the Company's financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Company not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Company and not later than ninety (90) days after the end of each fiscal year of the Company. Each Recipient shall maintain the confidentiality of such information except that such information may be disclosed (i) on a no-name basis to any investor in a collateralized debt obligor Holder (a "CDO Investor"), (ii) on a named-basis, to any CDO Investor or Prospective Purchaser who has agreed with such furnishing Recipient or with the Company to hold the information confidential in accordance with the terms hereof, (iii) to its officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that such Persons shall be informed of and subject to the confidentiality requirements hereof), (iv) to the extent requested by any regulatory authority, (v) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, or (vi) to the extent such information becomes publicly available other than as a result of the action of such Recipient.
(c) If the Company intends to file its annual and quarterly information with the Securities and Exchange Commission (the "Commission") in electronic form pursuant to Regulation S-T of the Commission using the Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, the Company shall notify the Trustee in the manner prescribed herein of each such annual and quarterly filing. The Trustee is hereby authorized to access the EDGAR system for purposes of retrieving the financial information so filed. Compliance with the foregoing shall constitute delivery by the Company of its financial statements to the Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable. The Trustee shall have no duty to search for or obtain any electronic or other filings that the Company makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Trustee pursuant to this Section 7.3(c) shall be solely for purposes of compliance with this Section 7.3(c) and, if applicable, with Section 314(a) of the Trust Indenture Act. The Trustee's receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Company's compliance with any of its covenants hereunder, as to which the Trustee is entitled to rely upon Officers' Certificates.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not, while any of the Securities remain outstanding, consolidate or amalgamate with or merge into any other Person or sell, convey, transfer or lease all or substantially all of its properties and assets as an entirety to any Person unless:
(a) if the Company shall consolidate or amalgamate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the entity formed by such consolidation or amalgamation or into which the Company is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Company substantially as an entirety shall be an entity organized and existing under the laws of the United States of America or any State or Territory thereof, the District of Columbia, Bermuda, the Cayman Islands or any other country or state which is a member of the Organization for Economic Cooperation and Development, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would constitute an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, any such supplemental indenture comply with this Article VIII and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1.
SECTION 8.2. Successor Company Substituted.
(a) Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1 and the execution and delivery to the Trustee of the supplemental indenture described in Section 8.1(a), the successor entity formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance or transfer, following the execution and delivery of such supplemental indenture, the Company shall be discharged from all obligations and covenants under the Indenture and the Securities.
(b) Such successor Person may cause to be executed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture.
(c) In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate to reflect such occurrence.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities; or
(b) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the other provisions of this Indenture, provided, that such action pursuant to this clause (b) shall not adversely affect in any material respect the interests of any Holders; or
(c) to add to the covenants, restrictions or obligations of the Company or to add to the Events of Default, provided, that such action pursuant to this clause (c) shall not adversely affect in any material respect the interests of any Holders; or
(d) to modify, eliminate or add to any provisions of the Indenture or the Securities to such extent as shall be necessary to ensure that the Securities are treated as indebtedness of the Company for United States Federal income tax purposes, provided, that such action pursuant to this clause (d) shall not adversely affect in any material respect the interests of any Holders; or
(e) provide for any replacement Trustee or Administrative Agent in accordance with Article VI.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
(a) With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security,
(i) change the Stated Maturity of the principal or any premium of any Security or change the date of payment of any installment of interest (including any Additional Interest) on any Security, or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or restrict or impair the right to institute suit for the enforcement of any such payment on or after such date, or
(ii) reduce the percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with any provision of this Indenture or of defaults hereunder and their consequences provided for in this Indenture, or
(iii) modify any of the provisions of this Section 9.2, Section 5.13 or Section 10.7, except to increase any percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any reason, or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security.
(b) It shall not be necessary for any Act of Holders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in conclusively relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent herein provided for relating to such action have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, indemnities or immunities under this Indenture or otherwise. Copies of the final form of each supplemental indenture shall be delivered by the Trustee at the expense of the Company to each Holder promptly after the execution thereof.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.5. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders of the Securities that it will duly and punctually pay the principal of and any premium and interest (including any Additional Interest) on the Securities in accordance with the terms of the Securities and this Indenture. As of the date of this Indenture, the Company represents that it has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Securities.
SECTION 10.2. Money for Security Payments to be Held in Trust.
(a) If the Company shall at any time act as its own Paying Agent with respect to the Securities, it will, on or before each due date of the principal of and any premium or interest (including any Additional Interest) on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium or interest (including Additional Interest) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee in writing of its failure so to act.
(b) Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m., New York City time, on each due date of the principal of or any premium or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided in the Trust Indenture Act and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act.
(c) The Company will cause each Paying Agent for the Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 10.2, that such Paying Agent will (i) comply with the provisions of this
Indenture and the Trust Indenture Act applicable to it as a Paying Agent and
(ii) during the continuance of any default by the Company (or any other obligor
upon the Securities) in the making of any payment in respect of the Securities,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
held in trust by such Paying Agent for payment in respect of the Securities.
(d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
(e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of and any premium or interest (including any Additional Interest) on any Security and remaining unclaimed for two years after such principal
and any premium or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 10.3. Statement as to Compliance.
The Company shall deliver to the Trustee, within ninety (90) days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
SECTION 10.4. Calculation Agent.
(a) The Company hereby agrees that for so long as any of the Securities remain Outstanding, there will at all times be an agent appointed to calculate LIBOR in respect of each Interest Payment Date in accordance with the terms of Schedule A (the "Calculation Agent"). The Company has initially appointed the Trustee as Calculation Agent for purposes of determining LIBOR for each Interest Payment Date. The Calculation Agent may be removed by the Company at any time. If the Calculation Agent is unable or unwilling to act as such or is removed by the Company, the Company will promptly appoint as a replacement Calculation Agent the London office of a leading bank which is engaged in transactions in Eurodollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed.
(b) The Calculation Agent shall be required to agree that, as soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date (as defined in Schedule A), but in no event later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the Calculation Agent will calculate the interest rate (the Interest Payment shall be rounded to the nearest cent, with half a cent being rounded upwards) for the related Interest Payment Date, and will communicate such rate and amount to the Company, the Trustee, each Paying Agent and the Depositary. The Calculation Agent will also specify to the Company the quotations upon which the foregoing rates and amounts are based and, in any event, the Calculation Agent shall notify the Company before 5:00 p.m. (London time) on each
LIBOR Determination Date that either: (i) it has determined or is in the process of determining the foregoing rates and amounts or (ii) it has not determined and is not in the process of determining the foregoing rates and amounts, together with its reasons therefor. The Calculation Agent's determination of the foregoing rates and amounts for any Interest Payment Date will (in the absence of manifest error) be final and binding upon all parties. For the sole purpose of calculating the interest rate for the Securities, "Business Day" shall be defined as any day on which dealings in deposits in Dollars are transacted in the placeCityLondon interbank market.
SECTION 10.5. Additional Amounts.
All payments of principal of and premium, if any, interest (including any Additional Interest) and any other amounts on, or in respect of, the Securities of any series shall be made without withholding or deduction at source for, or on account of, any present or future taxes, fees, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Bermuda or any other jurisdiction in which the Company is organized (each, a "taxing jurisdiction") or any political subdivision or taxing authority thereof or therein, unless such taxes, fees, duties, assessments or governmental charges are required to be withheld or deducted by (i) the laws (or any regulations or ruling promulgated thereunder) of a taxing jurisdiction or any political subdivision or taxing authority thereof or therein or (ii) an official position regarding the application, administration, interpretation or enforcement of any such laws, regulations or rulings (including, without limitation, a holding by a court of competent jurisdiction or by a taxing authority in a taxing jurisdiction or any political subdivision thereof).
If a withholding or deduction at source is required, the Company shall, subject to certain limitations and exceptions set forth below, pay to the Holder of any such Security such additional amounts ("Additional Amounts") as may be necessary so that every net payment of principal, premium, if any, interest (including any Additional Interest) or any other amount made to such Holder, after such withholding or deduction, shall not be less than the amount provided for in such Security and this Indenture to be then due and payable; provided, however, that the Company shall not be required to make payment of such Additional Amounts for or on account of:
(a) any tax, fee, duty, assessment or governmental charge of whatever nature which would not have been imposed but for the fact that such Holder: (A) was a resident, domiciliary or national of, or engaged in business or maintained a permanent establishment or was physically present in, the relevant taxing jurisdiction or any political subdivision thereof or otherwise had some connection with the relevant taxing jurisdiction other than by reason of the mere ownership of, or receipt of payment under, such Security; (B) presented such Security, where presentation is required, for payment in the relevant taxing jurisdiction or any political subdivision thereof, unless such Security could not have been presented for payment elsewhere; or (C) presented such Security, where presentation is required, more than thirty (30) days after the date on which the payment in respect of such Security first became due and payable or provided for, whichever is later, except to the extent that the Holder would have been entitled to such Additional Amounts if it had presented such Security for payment on any day within such period of thirty (30) days;
(b) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure by the Holder or the beneficial owner of such Security to comply with any reasonable request by the Company addressed to the Holder within ninety (90) days of such request (A) to provide information concerning the nationality, residence or identity of the Holder or such beneficial owner or (B) to make any declaration or other similar claim or satisfy any information or reporting requirement, which, in the case of (A) or (B), is required or imposed by statute, treaty, regulation or administrative practice of the relevant taxing jurisdiction or any political subdivision thereof as a precondition to exemption from all or part of such tax, assessment or other governmental charge;
(d) any withholding or deduction required to be made pursuant to any EU Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meetings of 26-27 November 2000, 3 June 2003 or any law implementing or complying with, or introduced in order to confirm to, such EU Directive; or
(e) any combination of items (a), (b), (c) and (d);
nor shall Additional Amounts be paid with respect to any payment of the principal of, or premium, if any, interest or any other amounts on, any such Security to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such Security to the extent such payment would be required by the laws of the relevant taxing jurisdiction (or any political subdivision or relevant taxing authority thereof or therein) to be included in the income for tax purposes of a beneficiary or partner or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such Additional Amounts had it been the Holder of the Security.
Whenever in this Indenture there is mentioned, in any context, the payment of the principal of or any premium, interest (including Additional Interest) or any other amounts on, or in respect of, any Security of any series or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the terms of such series established hereby or pursuant hereto to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms, and express mention of the payment of Additional Amounts (if applicable) in any provision hereof shall not be construed as excluding the payment of Additional Amounts in those provisions hereof where such express mention is not made.
SECTION 10.6. Additional Covenants.
The Company covenants and agrees with each Holder of Securities that if
(i) an Event of Default shall have occurred and be continuing, (ii) any
Significant Subsidiaries (as defined in Section 1-02(w) of Regulation S-X of the
Securities Act (the "Significant Subsidiaries") of the Company which is rated by
A.M. Best Company, Inc. and which (A) is rated B or below by A.M. Best Company,
Inc. or (B) A.M. Best Company, Inc. withdraws its rating or (iii) the Company
shall have given notice of its election to begin an Extension Period with
respect to the Securities, then, from the date on which the Company shall have
given notice of its election to begin an Extension Period through the end of any
such Extension Period (including any extension thereof), then the Company shall
not, and shall not permit any subsidiary of the Company to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any shares of the Company's or such subsidiary's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing, (ii) make any payment of principal of or any interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Securities (other than, with respect to clauses (ii) and (iii) above, (A) repurchases, redemptions or other acquisitions of shares of capital stock of the Company or any subsidiary of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company or of such subsidiary (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (B) as a result of an exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock (or in the case of a subsidiary of the Company, any class or series of such subsidiary's capital stock) or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock (or in the case of indebtedness of a subsidiary of the Company, of any class or series of such subsidiary's indebtedness for any class or series of such subsidiary's capital stock), (C) the purchase of fractional interests in shares of the Company's capital stock (or the capital stock of a subsidiary of the Company) pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (D) any declaration of a dividend in connection with any Rights Plan, the issuance of rights, stock or other property under any Rights Plan or the redemption or repurchase of rights pursuant thereto, or (E) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith or (F) any repurchases, redemptions or other acquisitions of shares of capital stock of the Company or any subsidiary of the Company made by the Company or such subsidiary, which the Company's Board of Directors determine in good faith are necessary or advisable in order to avoid, ameliorate or limit any material adverse tax or regulatory consequences for the Company or its shareholders), or (iii) enter into any new (as opposed to existing) contracts with shareholders on less than an arm's-length negotiation basis holding more than 10% of the outstanding shares of Common Shares of the Company.
SECTION 10.7. Waiver of Covenants.
The Company may omit in any particular instance to comply with any covenant or condition contained in Section 10.6 if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect.
SECTION 10.8. Treatment of Securities.
The Company will treat the Securities as indebtedness, and the amounts, other than payments of principal, payable in respect of the principal amount of such Securities as interest, for all U.S. federal income tax purposes. All payments in respect of the Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S. status for U.S. federal income tax purposes, or any other applicable form establishing a complete exemption from U.S. withholding tax.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Optional Redemption.
The Company may, at its option, on any Interest Payment Date, on or after June 15, 2012, redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof (or of the redeemed portion thereof, as applicable), together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Optional Redemption Price").
SECTION 11.2. Special Event Redemption.
Prior to June 15, 2012, upon the occurrence and during the continuation of a Special Event, the Company may, at its option, redeem the Securities, in whole but not in part, at a Redemption Price equal to
TIME PERIOD PERCENTAGE ----------- ---------- June 21, 2007 - June 14, 2008 105% June 15, 2008 - June 14, 2009 103.75% June 15, 2009 - June 14, 2010 102.5% June 15, 2010 - June 14, 2011 101.25% June 15, 2011 and thereafter 100% |
of the principal amount thereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the "Special Redemption Price"). Unless the Company defaults in the payment of the Special Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Securities called for redemption.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities, in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, not less than forty-five (45) days and not more than seventy-five (75) days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such date and of the principal amount of the Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.5. In the case of any redemption of Securities, in whole or in part, (a) prior to the expiration of any restriction on such redemption provided in this Indenture or the Securities or (b) pursuant to an election of the Company which is subject to a condition specified in this Indenture or the Securities, the Company shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction or condition.
SECTION 11.4. Selection of Securities to be Redeemed.
(a) If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected and redeemed on a pro rata basis not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Securities not previously called for redemption, provided, that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security.
(b) The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed.
(c) The provisions of paragraphs (a) and (b) of this Section 11.4 shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security.
SECTION 11.5. Notice of Redemption.
(a) Notice of redemption shall be given not later than the thirtieth
(30th) day, and not earlier than the sixtieth (60th) day, prior to the
Redemption Date to each Holder of Securities to be redeemed, in whole or in
part.
(b) With respect to Securities to be redeemed, in whole or in part, each notice of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or, if the Redemption Price cannot be calculated prior to the time the notice is required to be sent, the estimate of the Redemption Price, as calculated by the Company, together with a statement that it is an estimate and that the actual Redemption Price will be calculated on the fifth Business Day prior to the Redemption Date (and if an estimate is provided, a further notice shall be sent of the actual Redemption Price on the date that such Redemption Price is calculated);
(iii) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed;
(iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that any interest (including any Additional Interest) on such Security or such portion, as the case may be, shall cease to accrue on and after said date; and
(v) the place or places where such Securities are to be surrendered for payment of the Redemption Price.
(c) Notice of redemption of Securities to be redeemed, in whole or in part, at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security.
SECTION 11.6. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.5, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.2) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date.
SECTION 11.7. Payment of Securities Called for Redemption.
(a) If any notice of redemption has been given as provided in Section 11.5, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment specified in such notice, the Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date.
(b) Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the
Company, a new Security or Securities, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms.
(c) If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and any premium on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
ARTICLE XII
SUBORDINATION OF SECURITIES
SECTION 12.1. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XII, the payment of the principal of and any premium and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed).
SECTION 12.2. No Payment When Senior Debt in Default; Payment Over of Proceeds Upon Dissolution, Etc.
(a) In the event and during the continuation of any default by the Company in the payment of any principal of or any premium or interest on any Senior Debt (following any grace period, if applicable) when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, then, upon written notice of such default to the Company by the holders of such Senior Debt or any trustee therefor, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of or any premium or interest (including any Additional Interest) on any of the Securities, or in respect of any redemption, repayment, retirement, purchase or other acquisition of any of the Securities.
(b) In the event of a bankruptcy, insolvency or other proceeding described in clause (d) or (e) of the definition of Event of Default (each such event, if any, herein sometimes referred to as a "Proceeding"), all Senior Debt (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any of the Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities shall be paid or delivered directly to the holders of Senior Debt in accordance with the priorities
then existing among such holders until all Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) shall have been paid in full.
(c) In the event of any Proceeding, after payment in full of all sums owing with respect to Senior Debt, the Holders of the Securities, together with the holders of any obligations of the Company ranking on a parity with the Securities, shall be entitled to be paid from the remaining assets of the Company the amounts at the time due and owing on account of unpaid principal of and any premium and interest (including any Additional Interest) on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Company ranking junior to the Securities and such other obligations. If, notwithstanding the foregoing, any payment or distribution of any character or any security, whether in cash, securities or other property (other than securities of the Company or any other entity provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or any Holder in contravention of any of the terms hereof and before all Senior Debt shall have been paid in full, such payment or distribution or security shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Debt at the time outstanding in accordance with the priorities then existing among such holders as calculated and certified by the Company for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay all such Senior Debt (including any interest thereon accruing after the commencement of any Proceeding) in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Debt is hereby irrevocably authorized to endorse or assign the same.
(d) The Trustee and the Holders, at the expense of the Company, shall take such reasonable action (including the delivery of this Indenture to an agent for any holders of Senior Debt or consent to the filing of a financing statement with respect hereto) as may, in the opinion of counsel designated by the holders of a majority in principal amount of the Senior Debt at the time outstanding, be necessary or appropriate to assure the effectiveness of the subordination effected by these provisions.
(e) The provisions of this Section 12.2 shall not impair any rights, interests, remedies or powers of any secured creditor of the Company in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture.
(f) The securing of any obligations of the Company, otherwise ranking on a parity with the Securities or ranking junior to the Securities, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities.
SECTION 12.3. Payment Permitted If No Default.
Nothing contained in this Article XII or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time, except during the pendency of the conditions described in paragraph (a) of Section 12.2 or of any Proceeding referred to in Section
12.2, from making payments at any time of principal of and any premium or interest (including any Additional Interest) on the Securities or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of and any premium or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge (in accordance with Section 12.8) that such payment would have been prohibited by the provisions of this Article XII, except as provided in Section 12.8.
SECTION 12.4. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article XII (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Debt of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of and any premium and interest (including any Additional Interest) on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XII, and no payments made pursuant to the provisions of this Article XII to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt.
SECTION 12.5. Provisions Solely to Define Relative Rights.
The provisions of this Article XII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article XII or elsewhere in this Indenture or in the Securities is intended
to or shall (a) impair, as between the Company and the Holders of the
Securities, the obligations of the Company, which are absolute and
unconditional, to pay to the Holders of the Securities the principal of and any
premium and interest (including any Additional Interest) on the Securities as
and when the same shall become due and payable in accordance with their terms,
(b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than their rights in relation to
the holders of Senior Debt or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, including filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article XII of the holders
of Senior Debt to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
SECTION 12.6. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XII and appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 12.7. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of this
Section 12.7, the holders of Senior Debt may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to such Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of such Holders of the Securities to the
holders of Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt
or any instrument evidencing the same or any agreement under which Senior Debt
is outstanding, (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt, (iii) release any Person
liable in any manner for the payment of Senior Debt and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 12.8. Notice to Trustee.
(a) The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article XII or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment to or by the Trustee
in respect of the Securities, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
of Senior Debt or from any trustee, agent or representative therefor; provided,
that if the Trustee shall not have received the notice provided for in this
Section 12.8 at least two Business Days prior to the date upon which by the
terms hereof any monies may become payable for any purpose (including, the
payment of the principal of and any premium on or interest (including any
Additional Interest) on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
(b) The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor) to establish that such notice has been given by a holder of Senior Debt (or a trustee, agent, representative or attorney-in-fact therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article XII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XII, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
SECTION 12.9. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in this Article XII, the Trustee and the Holders of the Securities shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII.
SECTION 12.10. Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article XII or otherwise.
SECTION 12.11. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XII with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.
SECTION 12.12. Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article XII shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XII in addition to or in place of the Trustee; provided, that Sections
12.8 and 12.11 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent.
* * * *
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.
VALIDUS HOLDINGS, LTD.
Title:
WILMINGTON TRUST COMPANY, as Trustee
Title:
SCHEDULE A
DETERMINATION OF LIBOR
With respect to the Securities, the London interbank offered rate ("LIBOR") shall be determined by the Calculation Agent in accordance with the following provisions (in each case rounded to the nearest .000001%):
(1) On the second LIBOR Business Day (as defined below) prior to an Interest Payment Date (each such day, a "LIBOR Determination Date"), LIBOR for any given security shall for the following interest payment period equal the rate, as obtained by the Calculation Agent from Bloomberg Financial Markets Commodities News, for three-month Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions), or such other page as may replace such Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date.
(2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 or such other page as may replace such Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in the City of New York selected by the Calculation Agent are quoting on the relevant LIBOR Determination Date for three-month Eurodollar deposits in an amount determined by the Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided that, if the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination Date.
(3) As used herein: "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent; and "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London.
EXHIBIT A
FORM OF OFFICER'S FINANCIAL CERTIFICATE
The undersigned, the [Chief Financial Officer/Treasurer/Assistant Treasurer/ Secretary/Assistant Secretary, Chairman/Vice Chairman/Chief Executive Officer/President/Vice President] hereby certifies, pursuant to Section 7.3(b) and Section 10.3 of the Junior Subordinated Indenture, dated as of June 15, 2006 (the "Indenture"), among Validus Holdings, Ltd. (the "Company") and JPMorgan Chase Bank, National Association, as trustee, that, as of [date], [20__], the Company, if any, had the following unaudited ratios and balances:
[For the Company and its Subsidiary Insurance Companies (as defined below, if
any), on a consolidated basis, provide:]
[INSURANCE COMPANY]
As of [Quarterly/Annual Financial Date], 20__
NAIC Risk Based Capital Ratio (authorized control level) ________% Total Policyholders' Surplus $________ Consolidated Debt to Total Policyholders' Surplus ________% Total Assets $________ NAIC Class 1 & 2 Rated Investments to Total Fixed Income ________% Investments NAIC Class 1 & 2 Rated Investments to Total Investments ________% Return on Policyholders' Surplus ________% Net Premiums Written $________ Expense Ratio ________% Loss and LAE Ratio ________% Combined Ratio ________% Net Premiums Written (annualized) to Policyholders' Surplus ________%] |
A table describing the quarterly report calculation procedures is provided on page 3 hereof
N/A denotes "Not Applicable."
The following is a complete list as of [Quarterly/Annual Financial Date] of the
Company's companies which are authorized to write insurance business or
otherwise conduct insurance or reinsurance business (the "Subsidiary Insurance
Companies"):
[List of subsidiary insurance companies]
[FOR FISCAL YEAR END: Attached hereto are the audited consolidated financial
statements (including the balance sheet, income statement and statement of cash
flows, and notes thereto, together with the report of the independent
accountants thereon) of the Company and its consolidated subsidiaries for the
[three years] ended [date], 20__.
Pursuant to Section 10.3 of the Indenture, each of the undersigned hereby certifies that, to the knowledge of the undersigned, the Company is not in default in the performance or observance of any of the terms, provisions or conditions contained in the Indenture (without regard to any period of grace or requirement of notice provided under the Indenture), for the calendar year ending on ______________, 20__ [, except as follows: specify each such default and the nature and status thereof.]
[FOR FISCAL QUARTER END: Attached hereto are the unaudited consolidated and consolidating financial statements (including the balance sheet and income statement) of the Company and its consolidated subsidiaries for the fiscal quarter ended [date], 20__.]
The financial statements fairly present in all material respects, in accordance with U.S. generally accepted accounting principles ("GAAP"), the financial position of the Company and its consolidated subsidiaries, and the results of operations and changes in financial condition as of the date, and for the [quarter] [annual] period ended [date], 20__, and such financial statements have been prepared in accordance with GAAP consistently applied throughout the period involved (expect as otherwise noted therein).
IN WITNESS WHEREOF, the undersigned has executed this Officer's Financial Certificate as of this _______ day of __________________, 20__.
By: __________________________ Name:
Validus Holdings, Ltd.
Bermuda Commercial Bank Building
19 Par-La-Ville Road, Second Floor
Hamilton HM11 Bermuda
Attention: Chief Financial Officer
facsimile: (441 278-9091)
* Or such shorter period since the first audit performed after the Company's formation.
FINANCIAL DEFINITIONS
INSURANCE COMPANY
REPORT ITEM DESCRIPTION OF CALCULATION ------------------------------------------------------------------------------- NAIC RISK BASED CAPITAL RATIO-P&C Total Adjusted Capital/Authorized Control Level Risk-Based Capital NAIC RISK BASED CAPITAL RATIO-LIFE (Total Adjusted Capital-Asset Valuation Reserve)/Authorized Control Level Risk-Based Capital TOTAL CAPITAL AND SURPLUS-LIFE Common Capital Stock + Preferred Capital Stock + Aggregate Write-Ins for other than special surplus funds + Surplus Notes + Gross Paid-In and Contributed Surplus + Aggregate Write-Ins for Special Surplus Funds + Unassigned Funds (Surplus) -- Treasury Stock TOTAL CAPITAL AND SURPLUS-P&C Aggregate Write-Ins for Special Surplus Funds + Common Capital Stock + Preferred Capital Stock + Aggregate Write Ins for other than special surplus funds + Surplus Notes + Gross Paid-In and Contributed Surplus + Unassigned Funds (Surplus) -- Treasury Stock TOTAL CLASS 1 & 2 RATED INVESTMENTS (Total Class 1 + Total Class 2 Rated TO TOTAL FIXED INCOME INVESTMENTS Investments)/Total Fixed Income Investments TOTAL CLASS 1 & 2 RATED INVESTMENTS (Total Class 1 + Total Class 2 Rated TO TOTAL INVESTMENTS Investments)/Total Investments TOTAL ASSETS Total Assets RETURN ON POLICYHOLDERS' SURPLUS Net Income/Policyholders' Surplus EXPENSE RATIO Other Underwriting Expenses Incurred/Net premiums Earned LOSS AND LAE RATIO (Losses Incurred + Loss Expenses Incurred)/Net Premiums Earned COMBINED RATIO Expense Ratio + Loss and LAE Ratio NET PREMIUMS WRITTEN (ANNUALIZED) Net Premiums Written/Policyholders' TO POLICYHOLDERS' SURPLUS Surplus |
Exhibit 10.33
BACKSTOP SUBSCRIPTION AGREEMENT
This BACKSTOP SUBSCRIPTION AGREEMENT, dated as of July 5, 2007 (this "Agreement"), is made between VALIDUS HOLDINGS, LTD., a company with limited liability organized under the laws of Bermuda (the "Company"), and each of the undersigned (each, a "Major Investor" and collectively, the "Major Investors").
WHEREAS, the Company has entered into a Share Sale Agreement dated May 15, 2007 among the Company and the sellers identified therein relating to the acquisition (the "Talbot Acquisition") by the Company of all of the issued share capital of Talbot Holdings Ltd, a company organized under the laws of Bermuda (together with its subsidiaries, "Talbot");
WHEREAS the Company may make an offer to its members, in accordance with the provisions of Section 4.1(e) of its Bye-Laws or otherwise, offering (the "Offering") them the right to subscribe for Common Shares (as defined below) of the Company; the purpose of the Offering being to provide additional financial resources to the Company if the Talbot Acquisition is consummated prior to the consummation of a public offering that provides net proceeds to the Company of at least US$200,000,000; and
WHEREAS, each of the Major Investors, subject to the terms and conditions of this Agreement, has severally agreed (i) to purchase their Pro Rata Portion (as defined in the Bye-Laws) of any Offering and (ii) to purchase 100% of their Percentage Commitment (as indicated on Schedule A hereto) of any Common Shares not offered to (or if offered to, not for any reason subscribed for by) members (other than Major Investors) in any such Offering, in each case up to an aggregate several commitment for all Major Investors of US$200,000,000, with each Major Investor agreeing to purchase its Percentage Commitment thereof.
In consideration of the premises and mutual agreements herein contained, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
AUTHORIZATION; SUBSCRIPTION FOR SECURITIES
Section 1.1 The Securities. The Company has authorized the issuance
and sale of Voting Common Shares, par value US$0.175 per share (the "Voting
Common Shares"), and Non-Voting Common Shares, par value US$0.175 per share (the
"Non-Voting Common Shares" and, together with the Voting Common Shares, the
"Common Shares"), having a value (determined as set forth below) of
US$200,000,000, such shares each having such rights, restrictions and privileges
contained in the Memorandum of Association and Bye-Laws of the Company as in
effect from time to time (the "Memorandum of Association" and the "Bye-laws,"
respectively). Subject to the terms and conditions hereof, the purchase
severally by each of the Major Investors pursuant to this Agreement of the
Common Shares shall occur on one date (the "Closing Date") determined by the
Company and of which each of the Major Investors has been given at least ten
(10) business days' prior written notice (the "Closing Notice").
The Company acknowledges that it will not deliver a Closing Notice to a Major Investor unless a Closing Notice is delivered to each Major Investor requiring each Major Investor to purchase its full Percentage Commitment of any such Offering.
Section 1.2 Subscription for Securities Pursuant to This Agreement. Subject to the terms and conditions of this Agreement, each Major Investor, acting severally and not jointly, hereby ir-
revocably subscribes for and agrees to purchase on the Closing Date up to the number of Common Shares of the applicable series set forth opposite its name on Schedule A attached hereto (the "Securities"), for a purchase price per Security as determined by the Board of Directors (based on the recommendation by the Finance Committee) and acceptable to the Qualified Sponsors (as defined in the Bye-Laws) in their sole discretion (the "Purchase Price"). Notwithstanding any other provision of this Agreement, any Major Investor shall be entitled at any time prior to the Closing Date to designate in writing one or more entities affiliated with such Major Investor to purchase the Securities to be purchased by it.
Section 1.3 Other Subscribers. Prior to any Closing hereunder, the
Company will offer all of its members, in accordance with the provisions of
Section 4.1(e) of its Bye-Laws or otherwise, the right to subscribe for Common
Shares (as defined below) of the Company in the Offering. All such members
(other than the Major Investors) will be entitled to ten (10) business days
advance notice of the price of the Securities to be purchased in the Offering
before they are required to make an investment decision. The Company agrees that
any such member who does not subscribe for its pro rata portion of the Offering
will not be entitled to, or granted a right to, sell Common Shares in the
Company's initial public offering, without the prior written consent of the
Company and the Qualified Sponsors.
ARTICLE II
CLOSING
The closing of the purchase and sale of the Securities contemplated by this Agreement (the "Closing") shall take place as set forth below.
Section 2.1 Closing Date. On the basis of the representations and warranties hereinafter set forth and subject to the conditions hereinafter set forth, the Company will sell to the Major Investors, and each Major Investor (acting severally and not jointly) will purchase from the Company, at the Closing on the Closing Date its Percentage Commitment of the Common Shares to be sold to all of the Major Investors on the Closing Date, up to the full dollar amount of the Securities set forth in Schedule A opposite its name (except as provided therein), in each case, for a purchase price per Security equal to the Purchase Price.
Section 2.2 Payment and Delivery. Subject to the terms and conditions of this Agreement and on the basis of the representations and warranties hereinafter set forth, (A) at the Closing, each Major Investor (acting severally and not jointly) will deliver to the Company full payment of its Purchase Price for the Securities to be purchased by it by wire transfer of immediately available funds and (B) at the Closing, the Company shall cause each Major Investor's name to be entered in the register of shareholders of Common Shares against payment of its Purchase Price, and shall deliver to such Major Investor, within three (3) business days of the Closing Date, duly executed certificates evidencing the Securities, in each case, registered in the name of such Major Investor (or its nominee(s) as set forth on such Major Investor's signature page).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MAJOR INVESTORS
Each Major Investor for itself (and not any other Major Investor) hereby represents and warrants to the Company as of the date hereof and as of immediately prior to the Closing on the Closing Date as follows:
Section 3.1 Organization and Standing. The Major Investor is either an individual or a corporation (including any similar entity formed under the laws of a jurisdiction outside the U.S.), government instrumentality or partnership or limited liability company taxed as a partnership for U.S. federal income tax purposes or trust (and where such partnership or trust is not a separate legal entity from, as the case may be, the partners or beneficiaries thereof, the general or managing partner or trustee, as applicable, thereof is) duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.
Section 3.2 Authorization. This Agreement has been duly authorized, executed and delivered by the Major Investor and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of the Major Investor enforceable against the Major Investor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding at equity or at law).
Section 3.3 Investment Intent. The Major Investor is acquiring the Securities for its own account or for one or more separate accounts maintained by it or for the account of one or more pension or trust funds of which it is trustee, in each case, for investment purposes only and not with a view to distribution thereof, in whole or in part. If the Securities are acquired for the account of one or more pension or trust funds, the Major Investor represents that it is acting as sole trustee and has sole investment discretion with respect to its acquisition of the Securities and that the determination and decision on its behalf to acquire the Securities for such pension or trust funds is being made by the same individual or group of individuals who customarily pass on such investments, so that the Major Investor's decision as to acquisitions for all such funds is the result of one study and conclusion. The Major Investor has advised the Company in writing of its form of organization and the accounts for which it is purchasing, as applicable, and all such information provided to the Company is true and correct as of the date hereof.
Section 3.4 Investor Awareness. The Major Investor is aware and agrees and acknowledges that:
(a) neither the Securities nor the underlying common shares have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any federal, foreign, state or other jurisdiction's securities laws; the transfer thereof is restricted by the Securities Act and applicable securities laws; and the Company is under no obligation to, and currently does not intend to, register or qualify the Securities for resale by the Major Investor or assist the Major Investor in complying with any exemption under the Securities Act or the securities laws of any such jurisdiction or any other jurisdiction. An offer or sale directly or indirectly of Securities by the Major Investor will be subject to the terms and provisions of this Agreement, the Certificate of Designations with respect to the Common Shares and the Bye-laws and, in the absence of registration under the Securities Act, will require the availability of an exemption thereunder and an opinion of counsel of the Major Investor that is reasonably acceptable to the Company regarding the availability of such exemption. Subject to the Bye-laws and this Agreement, certificates representing Securities will contain a restrictive legend reflecting such restrictions.
(b) The Major Investor is acquiring the Securities for his or her own account, for investment only and not with a view toward the transfer, resale or distribution thereof in violation of any applicable securities law.
Section 3.5 Accredited Investor. The Major Investor is, and at the time of the offer by the Company to sell the Securities and at the time of such Major Investor's purchase of the Securities
will be, an "accredited investor," as that term is defined in Rule 501(a) of Regulation D under the Securities Act (a copy of the definition of "accredited investor" is attached hereto as Schedule B).
Section 3.6 Brokers or Finders. The Major Investor has not incurred, nor will it incur, directly or indirectly, as a result of any action taken by the Major Investor, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement and the transactions contemplated hereby.
Section 3.7 Maximum Major Investor's Holdings. To the best knowledge
of the Major Investor, it is not acquiring the Securities pursuant to this
Agreement that would cause (after giving effect to the operation of Section 4.3
of the Bye-laws) the Major Investor, if a U.S. Person (as defined below), to
own, directly, indirectly or constructively, or cause another U.S. Person that
is a Beneficial Owner (as defined below) to own, directly, indirectly or
constructively, more than (i) 9.09% of the voting power of the Company's issued
and outstanding shares of stock or (ii) 24.5% of the Company's issued and
outstanding shares of stock. As used in this Section 3.7, the term "Beneficial
Owner" means any person that owns stock or warrants of the Company directly or
indirectly; references to "direct, indirect or constructive ownership" includes
ownership within the meaning of Sections 958(a) and Section 958(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and references to "direct
or indirect ownership" includes ownership within the meaning of Section 958(a)
of the Code (but not Section 958(b) of the Code). The term "U.S. Person" means
(i) an individual who is a citizen or resident of the United States, (ii) a
corporation or partnership that is, as to the United States, a domestic
corporation or a domestic partnership, (iii) an estate or trust that is subject
to U.S. federal income tax on its income regardless of its source, or (iv) the
United States and the states thereof, including any of their political
subdivisions.
The Company represents and warrants to each Major Investor that, for purposes of such Major Investor's calculation of its total percentage ownership, the total number of Common Shares issued and outstanding as of June 30, 2007 is 59,236,096. The Company agrees that, notwithstanding any other provision of this Agreement, no Major Investor, together with its affiliates, shall be required to purchase securities pursuant to this Agreement which would result in such Major Investor, together with its affiliates, owning, directly or indirectly, or constructively, more than 24.500% of the Company's issued and outstanding shares of stock or otherwise exceeding the ownership limitations set forth in the first sentence of the preceding paragraph of this Section 3.7, with any Common Shares not being purchased pursuant to this paragraph being allocated to and purchased by the other Major Investors.
ARTICLE IV
CONDITIONS TO PURCHASE
The respective obligations of the several Major Investors to purchase the Securities under this Agreement at the Closing are subject to the satisfaction prior to or substantially concurrently with the Closing of each of the following conditions:
Section 4.1 No Public Offering. The Company shall not have completed one or more public offerings of Common Shares that provides net proceeds to the Company of at least US$200,000,000.
Section 4.2 Talbot Acquisition. The Company shall have completed, or shall concurrently complete, the Talbot Acquisition.
Section 4.3 No Injunction, etc. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the issuance and sale of the Securities pursuant to this Agreement shall be in effect or pending.
ARTICLE V
MISCELLANEOUS
Section 5.1 Termination. The several obligations of each Major Investor shall terminate on the earlier of (i) consummation of one or more public offerings of Common Shares providing net proceeds to the Company of at least US$200,000,000 and (ii) August 15, 2007; provided that if a Closing Notice has been duly delivered before any such termination the several obligation of each Major Investor to purchase Securities shall continue until satisfied.
Section 5.2 NASD Matters. The Company hereby agrees (for the benefit of each Major Investor who is affiliated with an NASD member who is or would be an underwriter of any initial public offering of securities of the Company as well for the benefit of each such underwriter), that to the extent the acquisition of Common Shares hereunder would result in underwriter's compensation to such underwriter in excess of the applicable maximum amount permitted by NASD Rule 2710 (after discussion with the NASD staff), the Company will endeavor to purchase, or if it cannot so purchase, cause the purchase of, such shares so purchased hereunder at the price paid hereunder, to the extent necessary to avoid or eliminate such excess.
Section 5.3 Other. The representations and warranties of the parties
contained in this Agreement shall survive the Closing. The parties have made no
representations or warranties other than those that are expressly set forth in
this Agreement. This Agreement (including schedules, exhibits and annexes hereto
and any other instruments delivered in connection herewith) constitutes the full
and entire understanding and agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof. Any provision of this Agreement that is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or lack of authorization without invalidating the remaining provisions hereof or
affecting the validity, unenforceability or legality of such provision in any
other jurisdiction. Any provision of this Agreement that is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or lack of authorization without invalidating the remaining provisions hereof or
affecting the validity, unenforceability or legality of such provision in any
other jurisdiction. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors, legal representatives
and permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto and their
respective successors, legal representatives and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement. This
Agreement shall not be assignable by any party without the prior written consent
of each other party hereto, except that any Major Investor may assign any or all
of its rights hereunder to any affiliates to whom any of the Securities are
transferred or who are designated by such Major Investor in accordance with
Section 1.2, in each case, provided that any such transfer is in accordance with
the Bye-laws. No provision of this Agreement may be amended, waived or otherwise
modified except by an instrument in writing executed by the parties hereto. No
provision of this Agreement may be amended, waived or otherwise modified except
by an instrument in writing executed by the parties hereto. This Agreement shall
not confer any other rights to any person other than as may be expressly set
forth herein. The headings contained in this Agreement are for convenience only
and shall not affect the meaning or interpretation of this Agreement. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which
together shall be deemed to be one and the same instrument. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.
VALIDUS HOLDINGS, LTD.
Title:
EXACT NAME(s) OF MAJOR INVESTOR(s) (If a trust, include both name of trust and name of trustee; if a partnership, include both name of partnership and name of general or managing partner. Such trustee or general managing partner will be the registered holder.)
Address (this will appear in the Share Register):
Jurisdiction of Formation /
Country of Residence:
Note: Natural persons or separate legal entities to be the registered holder of the shares. A Bermuda company does not acknowledge "underlying" trusts or beneficial interests behind the registered holder.
SCHEDULE A
SECURITIES(1)
SERIES OF COMMON SHARES NAME OF (INDICATE CURRENT PERCENTAGE MAXIMUM U.S. DOLLAR MAJOR VOTING OR PRO RATA COMMITMENT OF AMOUNT OF SECURITIES TO INVESTOR NON-VOTING) PORTION BACKSTOP(2) BE PURCHASED(3)(4) -------- ----------- ------- --------- -------------- GSCP Non-Voting 23.7% 29.4% US$58,851,664.37 Vestar Voting 14.5% 17.9% US$35,885,169.58 Aquiline Voting 11.6% 14.4% US$28,708,137.34 New Mountain Voting 11.6% 14.4% US$28,708,133.15 Caisse de Depot et Placement de Quebec Voting 9.6% 12.0% US$23,923,447.78 Merrill Non-Voting 9.6% 12.0% US$23,923,447.78 ------- ----------- 80.6% 100.0% US$200,000,000 |
(1) Unless defined in the Backstop Subscription Agreement to which this is attached, capitalized terms used in this Schedule and defined in the Bye-laws have the meaning assigned to such term in the Bye-Laws.
(2) Represents (A) ownership of the Company based on primary shares outstanding, divided by (B) aggregate ownership percentage of the Major Investors based on primary shares outstanding.
(3) Assuming no Common Shares are subscribed for in any Offering by any Members that are not Major Investors. The actual number of Common Shares purchased will be rounded to the nearest whole number.
(4) GSCP's Percentage Commitment of Backstop is capped as contemplated in
Section 3.7.
Schedule A-1
SCHEDULE B
DEFINITION OF "ACCREDITED INVESTOR"
To be an "accredited investor," an Investor must fall within any of the following categories at the time of the sale of any Securities to that Investor:
- A bank as defined in Section 3(a)(2) of the Securities Act or a
savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act, whether acting in its
individual or fiduciary capacity; a broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934; an
insurance company as defined in Section 2(13) of the Securities Act;
an investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section
2(a)(48) of that act; a Small Business Investment Company licensed
by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; a plan established
and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of
US$5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of
that act, which is either a bank, savings and loan association,
insurance company or registered investment advisor, or if the
employee benefit plan has total assets in excess of US$5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are "accredited investors";
- A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
- An organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, a corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Common Shares and with total assets in excess of US$5,000,000;
- A director or executive officer of the Company;
- A natural person whose individual net worth, or joint net worth with that person's spouse, at the time of such person's purchase of the Common Shares exceeds US$1,000,000;
- A natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
- A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Common Shares, whose purchase is directed by a sophisticated person, as described in Rule 506(b)(2)(ii) of Regulation D; and
- An entity in which all of the equity owners are "accredited investors."
Schedule B-1
As used above, the term "net worth" means the excess of total assets over total liabilities. In computing net worth for the purpose set forth above, the principal residence of the Investor must be valued at cost, including cost of improvements, or at recently appraised value by an institutional lender making a secured loan, net of encumbrances. In determining income, an Investor should add to the Investor's adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to an IRA or KEOGH retirement plan, alimony payments, and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income.
Schedule B-2
ANNEX A
Below, for your convenience only, is a summary of certain provisions of Bye-Law 4.1(e) of the Bye-Laws, which deals with the rights of Members to participate in offerings of New Securities. Capitalized terms used in this Annex have the meanings assigned to such terms in the Bye-Laws. This Annex contains a summary of a portion of the Bye-Laws and should be read in conjunction with the full Bye-Laws. This Annex does not form a part of and is not incorporated into the Backstop Subscription Agreement.
4. Rights Attaching to Shares
4.1 Subject to Bye-law 2 and the Memorandum of Association, the holders of the Common Stock shall, subject to the provisions of the Bye-laws....
(e) have a right of first refusal (the "Preemptive Right") to purchase any New Securities that the Company may, from time to time, propose to issue and sell. Such Preemptive Right shall allow each Member to purchase New Securities proposed to be issued and sold by the Company in an amount determined in accordance with Bye-law 4.1(e)A described below.
A. In the event that the Company proposes to undertake
an issuance or sale of New Securities, it shall give each
Member written notice of its intention (the "New Issue
Notice"), describing the type and number of New Securities it
intends to issue, the purchase price therefor (which shall be
payable solely in cash by a Member), and the terms and
conditions upon which the Company proposes to issue the same.
Each Member shall have five (5) Business Days following the
date the New Issue Notice is received by such Member to
determine whether to purchase all or any portion of such New
Securities for the purchase price and upon the terms and
conditions specified in the New Issue Notice by giving written
notice to the Company (a "Preemptive Rights Notice"), stating
therein the number of New Securities such Member is
subscribing to purchase (which shall not, in any event, exceed
the number of New Securities proposed to be issued), which
Preemptive Rights Notice shall be binding on such Member. If
Members subscribe for an aggregate amount of New Securities in
excess of the number of New Securities proposed to be issued
and sold by the Company as described in the New Issue Notice,
each Member exercising its Preemptive Right will be allocated
(a) first, a number of New Securities equal to the lesser of
(x) the number of New Securities requested by such Member and
(y) such Member's Pro Rata Portion of the New Securities
proposed to be issued, and (b) second, with respect to any
remaining New Securities, a number of New Securities equal to
(x) such Member's Pro Rata Portion of such remaining New
Securities or (y) if the remaining number of New Securities
requested by such Member is less than the number in clause
(b)(x), the remaining number of New Securities requested by
such Member. The calculation in clause (b) of the preceding
sentence shall be repeated as necessary until all New
Securities have been allocated. Each Member that on the date
of such New Issue Notice owns Non-Voting Common Stock shall be
entitled at its option to receive any New Securities it may
purchase pursuant to a Preemptive Right in the form of a
non-voting security, which security shall be identical to the
New Securities except that such security shall have rights
substantially similar to those set forth in Bye-law 4.1A, with
such other changes as are appropriate to make such non-voting
security substantially identical to the
Annex A-1
New Securities. Any such non-voting security shall have provisions to convert such security to a voting security otherwise substantially ide t 18 ntical thereto, which conversion provisions shall be substantially identical to the conversion provisions contained in Bye-law 4.1C and 4.1D. References in this Bye-law 4.1(e) to "New Securities" shall include such non-voting securities, to the extent applicable. For the avoidance of doubt, the Company shall not be under any obligation to issue or sell any of the New Securities proposed to be issued or sold in any New Issue Notice.
B. If the Members have not agreed to purchase all or any portion of the New Securities to be issued in accordance with the terms of any New Issue Notice and the provisions of Bye-law 4.1(e)(A), then the Company shall have the right to issue and sell all such New Securities not agreed to be purchased by the Members pursuant to Bye-law 4.1(e)(A) (the "Remaining New Securities") at a price no less than that contained in the New Issue Notice and on non-price terms no less favorable (taken as a whole) to the Company than those contained in the New Issue Notice; provided that (i) the Company has fully complied with the provisions of Bye-law 4.1(e) and (ii) such issuance and sale of Remaining New Securities is consummated by the Company within 90 days after the sending of the New Issue Notice to the Members pursuant to Bye-law 4.1(e)(A) hereof, provided that, if such issue is subject to regulatory approval, such 90-day period shall be extended until the expiration of five (5) business days after such approvals have been received, but in no event later than 180 days from the date of the New Issue Notice. In the event that the issuance and sale of the Remaining New Securities is not fully consummated by the Company prior to the end of such period, the provisions of Bye-law 4.1(e) must be again be complied with by the Company before the Company may issue or sell any additional New Securities.
C. Notwithstanding anything contained in Bye-law 4.1(e) to the contrary, the purchase price for any New Security shall be determined by the Board.
D. This Bye-law 4.1(e) shall terminate upon the First Public Offering.
Annex A-2
Exhibit 23.3
[PRICEWATERHOUSECOOPERS LOGO]
PricewaterhouseCoopers
Chartered Accountants
Dorchester House
7 Church Street
Hamilton HM 11
Bermuda
Telephone +1 (441) 295 2000
Facsimile *1(441) 295 1242
www.pwc.com/bermuda
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 PricewaterhouseCoopers Hamilton, Bermuda July 5, 2007 |
A list of partners can be obtained from the above address PricewaterhouseCoopers refers to the members of the worldwide PricewaterhouseCoopers organization
Exhibit 23.4
Consent of Independent Auditor
We consent to the use of our report dated June 5, 2007, with respect to the consolidated balance sheets of Talbot Holdings Ltd (the "Company") as of December 31, 2006 and 2005, and the related consolidated statements of income/(loss) and comprehensive income/(loss), changes in common shareholders' equity/(deficit), and cash flows for each of the three years in the period ended December 31, 2006, included herein and to the reference to our firm under the heading "Experts" in the prospectus.
Our report refers to the Company's adoption of FASB Accounting Standard 123(R)
"Share-Based Payment" with effect from January 1, 2006, and FASB Interpretation
46 (revised December 2003) "Consolidation of Variable Interest Entities" with
effect from January 1, 2005.
/s/ KPMG Audit Plc London, England July 5, 2007 |
Exhibit 99.1
CHARTER OF THE AUDIT COMMITTEE
This Charter of the Audit Committee (the "Committee") has been adopted by the Board of Directors (the "Board") of Validus Holdings, Ltd. (the "Company").
A. PURPOSE
The purpose of the Committee is to assist the Board in its oversight of (i) the integrity of the Company's financial statements and the Company's system of internal controls, (ii) the Company's compliance with legal and regulatory requirements, (iii) the independent auditors' qualifications and independence and (iv) the performance of the Company's internal audit functions and independent auditors. In fulfilling its purpose, the Committee shall maintain free and open communication with the Company's independent auditors, internal auditors and management.
The Committee shall prepare the report required to be included in the Company's annual proxy statement.
B. DUTIES AND RESPONSIBILITIES
In furtherance of its purpose, the Committee shall have the following duties and responsibilities:
1. To directly appoint, retain, compensate and oversee the work of the independent auditors engaged for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Company, and to resolve any disagreements between management and the independent auditors regarding financial reporting. The Committee shall inform the Company's independent auditors that such firm must report directly to the Committee. The Committee may terminate the independent auditors in its sole discretion. The Committee may take into account the opinions of management in its dealings with the independent auditors.
2. To establish and maintain procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential and anonymous submission by the Company's employees of concerns regarding questionable accounting or auditing matters. The Committee shall handle all such complaints in accordance with the Company's procedures.
3. To obtain and review, on an annual basis, a written report from the independent auditors describing (i) the auditing firm's internal quality control procedures, (ii) any material issues raised by the auditing firm's most recent internal quality-control review or peer reviews, or any inquiry or investigation by governmental or professional authorities within the preceding five years, relating to any independent audit conducted by the auditing firm, and the steps taken to deal with such issues and (iii) in order to assess independence, all relationships between the independent auditors and the Company.
4. To annually evaluate the experience, qualifications, performance and independence of the independent auditors, including their lead partners. The Committee should assure the regular rotation of the audit partners, including the lead and concurring audit partners, as required by applicable laws, rules and regulations. The Committee should consider whether there should be regular rotation of the independent auditors. The Committee may take into account the opinions of management and the internal auditors in its evaluation of the independent auditors. The Committee should present its conclusions with respect to the independent auditors to the full Board.
5. To meet to review and discuss with management and the independent auditors the Company's annual audited financial statements and quarterly financial statements, including reviewing the Company's specific disclosures under "Management's Discussion and Analysis of Financial Conditions and Results of Operations", and recommend to the Board whether the audited financial statements should be included in the Company's Annual Report on Form 10-K.
6. To discuss with management, the independent auditors and the internal auditors the internal control report required to be included in the Company's Annual Report on Form 10-K.
7. To discuss with management the Company's earnings press releases, as well as financial information and earnings guidance, if any, provided to analysts and rating agencies. The Committee should pay particular attention to any use of "pro forma" or "adjusted" non-GAAP information. The Committee may discuss the types of information to be disclosed and the types of presentations to be made generally and need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance.
8. To periodically meet separately with management, the internal auditors and the independent auditors.
9. To review with the independent auditors the year-end audit and any audit problems or difficulties, together with management's responses, in connection with such audit, including any restrictions on the scope of the independent auditors' activities or on access to requested information and any significant disagreements with management. The Committee should review any accounting adjustments that were noted or proposed by the independent auditor but were "passed" as immaterial or otherwise, any communications between the audit team and the independent auditors' national office respecting auditing or accounting issues presented by the engagement and any management or internal control letter issued or to be issued by the independent auditors.
10. To establish clear guidelines for the hiring of current or former employees of the Company's independent auditors.
11. To report regularly to the Board. The Committee should review with the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors or the performance of the internal audit function.
12. To review major issues regarding accounting principles,
policies, practices and judgments and financial statement
presentations, including (i) any significant changes to the
Company's selection or application of accounting principles,
(ii) the adequacy and effectiveness of the Company's internal
controls and (iii) any special audit steps adopted in light of
material control deficiencies.
13. To review analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.
14. To review the effect of regulatory and accounting initiatives and off-balance sheet structures on the Company's financial statements.
15. To review and periodically discuss with the Board the adequacy and effectiveness of the Company's internal audit function, internal control structure and procedures for financial reporting.
16. To discuss with the independent auditors any items required to be communicated by the independent auditors in accordance with Statement on Auditing Standards No. 61 not otherwise addressed in this Charter. The Committee also shall receive the written disclosure and the letter from the independent accountants required by Independence Standards Board Standard No. 1.
17. To review management's annual report on internal control over financial reporting. The Committee also should periodically discuss with the Chief Executive Officer and Chief Financial Officer (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, involving management or other employees who have a significant role in the Company's internal control over financial reporting.
18. To pre-approve all auditing services and permissible non-audit services provided by the independent auditors. The Committee also shall establish and periodically review pre-approval policies and procedures for all auditing services and permissible non-audit services provided by the independent auditors.
19. To discuss with the independent auditors prior to their audit report (i) all critical accounting policies and practices used by the Company, (ii) all alternative accounting treatments within GAAP for policies and practices related to material items that have been discussed with management, including the ramifications of
the use of such alternative treatments and the treatment preferred by the accounting firm, and (iii) other material written communications between the accounting firm and management.
20. To discuss with management and the independent auditors the independent auditors' judgments about the quality and appropriateness of the Company's accounting principles and underlying estimates in its financial statements.
21. To discuss with management the responsiveness of the independent auditors to the Company's needs.
22. To review the independent auditors' audit plan, including its scope, staffing, locations, reliance upon management and general audit approach.
23. To review and discuss with the independent auditors the quality of the Company's financial and auditing personnel and the responsibilities, budget and staffing of the Company's internal audit function.
24. To obtain from the independent auditor assurance it has complied with the provisions of Section 10A (b) of the Securities Exchange Act of 1934.
25. To review with the Company's legal counsel on an annual basis, or more frequently as circumstances dictate, any legal matters that could have a significant impact on the Company's financial statements or the Company's compliance with applicable laws, rules and regulations, any breaches of fiduciary duties and inquiries received from regulators or governmental agencies.
26. To conduct any investigation appropriate to fulfill its responsibilities with the authority to have direct access to the independent auditors as well as anyone in the Company.
27. To keep abreast of new accounting and reporting standards promulgated by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, the SEC and other relevant standard setting bodies.
28. To discuss with management, the independent auditor and any external actuary retained by the Company the reserving methodology and process of the Company and the Company's reserves, together with internal or external reports or studies.
29. To review the Company's disclosure controls and procedures and internal controls and review disclosures by the Company's Chief Executive Officer and Chief Financial Officer in connection with their certifications required under the Securities Exchange Act of 1934, as amended, the rules of the New York Stock Exchange and other applicable laws, rules or regulations.
30. To discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including
the Company's risk assessment and risk management policies. Other committees of the Board may also review such risk assessment and risk management policies.
31. To establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
32. Recommend to the Board policies and procedures for the review, approval or ratification of related party transactions required to be reported in the Company's proxy statement. The Committee shall at least annually review such policies and procedures and make recommendations to the Board for changes they may deem appropriate.
33. To perform any other activities consistent with this Charter, the Company's charter and bye-laws and applicable laws, rules and regulations as the Board deems appropriate.
34. To delegate any of its responsibility to subcommittees as the Committee may deem appropriate in its sole discretion.
C. OUTSIDE ADVISORS
The Committee shall have access to and authority to retain independent advisors, including legal counsel, external auditors and financial advisors, if and when it deems necessary to perform its duties. The Committee shall retain these advisors without seeking Board approval and shall have sole authority to approve related fees and retention terms.
D. ANNUAL PERFORMANCE EVALUATION
The Committee shall conduct an annual self-performance evaluation, including an evaluation of its compliance with this Charter. The Committee shall report on its annual self-performance evaluation to the Board.
E. MEMBERSHIP
The Committee shall consist of no fewer than three (3) directors, as determined by the Board. All Committee members shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements and at least one of them shall be an "audit committee financial expert" as defined in applicable laws, rules or regulations. The members of the Committee shall meet the independence, experience and other requirements of the New York Stock Exchange and shall comply with any other requirements set forth in applicable laws, rules and regulations. Without the consent of the Corporate Governance and Nominating Committee, committee members shall not simultaneously serve on the audit committees of more than two other public companies.
Committee members shall be appointed annually by a majority vote of the Board on the recommendation of the Corporate Governance and Nominating Committee. Each prospective Committee
member shall carefully evaluate existing time demands before accepting Committee membership. The Committee members may be removed, with or without cause, by a majority vote of the Board.
F. CHAIRMAN
The Committee shall include a Committee chairman. The Committee chairman shall be appointed by a majority vote of the Board. The Committee chairman shall be entitled to chair all regular sessions of the Committee and cast a vote to resolve any ties.
G. MEETINGS
The Committee shall meet at least one (1) time per quarter or more frequently as circumstances dictate. The Committee shall meet periodically with management (including the CEO and CFO where required by applicable law or otherwise as appropriate), the internal auditors and the independent auditor in separate executive sessions. The Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or advisors to, the Committee. All Committee members shall strive to be present at all Committee meetings.
The Committee chairman may call a Committee meeting upon due notice of each other Committee member at least twenty-four (24) hours prior to the meeting. A majority of the Committee members, acting in person or by duly authorized representative, shall constitute a quorum. The Committee shall act by majority vote. The Committee meetings shall follow a set agenda established by the Committee chairman in consultation with the Chairman of the Board. The Committee shall be responsible for maintaining minutes and other applicable records of each Committee meeting. The Committee shall report its actions and recommendations to the Board after each Committee meeting.
H. INTERPRETATION
For the avoidance of doubt, while the Committee has the responsibilities and
powers set forth in this Charter, nothing in this Charter should be interpreted
as creating any duty or obligation on the part of the Committee to plan or
conduct audits or to determine that the Company's financial statements and
disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and regulations. Also,
nothing herein should be construed as imposing on the Committee responsibility
to ensure compliance with laws and regulations and the Company's Code of
Business Conduct, or to set or determine the adequacy of the Company's reserves.
All such matters are the responsibilities of management and the independent
auditor, as appropriate.
Exhibit 99.2
CHARTER OF THE COMPENSATION COMMITTEE
This Charter of the Compensation Committee (the "Committee") has been adopted by the Board of Directors (the "Board") of Validus Holdings, Ltd. (the "Company").
A. PURPOSE
The purpose of the Committee shall be to determine the compensation of the Chief Executive Officer and executive officers, to make recommendations to the Board with respect to non-executive officer compensation, and incentive compensation and equity-based plans that are subject to Board approval and to take a leadership role in shaping the Company's compensation policies.
The Committee shall prepare the report on executive officer compensation required to be included in the Company's annual proxy statement or Annual Report on Form 10-K, in accordance with applicable rules and regulations.
B. DUTIES AND RESPONSIBILITIES
In furtherance of this purpose, the Committee shall have the following duties and responsibilities:
1. To evaluate and approve on an annual basis the corporate goals
and objectives with respect to compensation for the Chief
Executive Officer. The Committee shall evaluate at least one
(1) time per year the Chief Executive Officer's performance in
light of these established goals and objectives and evaluate
whether he or she upholds the highest standards of integrity
and professional performance and is capable of successfully
directing the Company's operations and results. Based upon
these evaluations, the Committee shall set the Chief Executive
Officer's annual compensation, including salary, bonus,
incentive and equity compensation. In determining the
long-term incentive component of the Chief Executive Officer's
compensation, the Committee shall consider the Company's
performance and relative shareholder return, the value of
similar incentive awards to chief executive officers at
comparable companies and previous awards given to the Chief
Executive Officer of the Company.
2. Based on the recommendation of the Chief Executive Officer, to annually review and approve the compensation of all executive officers, including awards under incentive compensation plans and equity-based plans.
3. To review and approve any initial offers of employment, salary increases, bonuses or other incentive payments for all executive officers. The Committee shall also review and approve all equity awards made to the Company's executive officers.
4. To review, approve and oversee the Company's incentive compensation and equity-based plans and to approve all amendments to such plans.
5. To review, approve and oversee the Company's overall programs relating to the development and continuity of able management, including, but not limited to, personnel practices, education and training programs, reassignments, transfers, promotions and the introduction of external resources.
6. To review, approve and oversee management's plans for human resources.
7. To meet to review and discuss with management the Company's disclosures made in "Compensation Discussion and Analysis" and recommend to the Board whether such disclosures should be included in the Company's annual proxy statement or Annual Report on Form 10-K.
8. To perform any other activities consistent with this Charter, the Company's charter and bye-laws and applicable laws, rules and regulations as the Board deems appropriate.
9. To delegate any of its responsibilities to subcommittees as the Committee may deem appropriate in its sole discretion.
C. OUTSIDE ADVISORS
The Committee shall have sole authority to retain and terminate any compensation consultant used to assist in the evaluation of director, Chief Executive Officer or senior executive compensation, including sole authority to approve the consultant's fees and any other retention terms. In addition, the Committee shall have access to and authority to retain independent advisors, including legal counsel, external auditors and financial advisors, if and when it deems necessary to perform its duties. The Committee may retain these advisors without seeking Board approval and shall have sole authority to approve related fees and retention terms.
D. ANNUAL PERFORMANCE EVALUATION
The Committee shall conduct an annual self-performance evaluation, including an evaluation of its compliance with this Charter. The Committee shall report on its annual self-performance evaluation to the Board.
E. MEMBERSHIP
The Committee shall consist of no fewer than three (3) directors, as determined by the Board. Each Committee member shall also have knowledge or experience relating to officer, management and employee compensation and related matters. The members of the Committee shall meet the independence requirements of the New York Stock Exchange and shall comply with any other requirements set forth in applicable laws, rules and regulations. The Committee members shall be appointed annually by a majority vote of the Board on the recommendation of the Corporate Governance and Nominating Committee. The Committee members may be removed, with or without cause, by a majority vote of the Board.
F. CHAIRMAN
The Committee shall include a Committee chairman. The Committee chairman shall be appointed by a majority vote of the Board. The Committee chairman shall be entitled to chair all regular sessions of the Committee and cast a vote to resolve any ties.
G. MEETINGS
The Committee shall meet at least one (1) time per half-year or more frequently as circumstances dictate. All Committee members shall strive to be present at all Committee meetings.
The Committee chairman may call a Committee meeting upon due notice of each other Committee member at least twenty-four (24) hours prior to the meeting. A majority of Committee members, acting in person or by duly authorized representative, shall constitute a quorum. The Committee shall act by majority vote. The committee meetings shall follow a set agenda established by the Committee chairman in consultation with the Chairman of the Board. The Committee shall be responsible for maintaining minutes and other applicable records of each Committee meeting. The Committee shall report its actions and recommendations to the Board after each Committee meeting.
Exhibit 99.3
CHARTER OF THE CORPORATE GOVERNANCE
AND NOMINATING COMMITTEE
This Charter of the Corporate Governance and Nominating Committee (the "Committee") has been adopted by the Board of Directors (the "Board") of Validus Holdings, Ltd. (the "Company").
A. PURPOSE
The Committee's purpose shall be to identify individuals qualified to become Board members, to recommend to the Board nominees to serve on the Board and each committee of the Board, to develop and recommend to the Board a set of corporate governance guidelines, to oversee the evaluation of the Board, management and the Board committees and to take a leadership role in shaping the Company's corporate governance policies.
B. DUTIES AND RESPONSIBILITIES
In furtherance of this purpose, the Committee shall have the following duties and responsibilities:
1. To lead the search for individuals qualified to become Board members to the extent necessary to fill vacancies on the Board or as otherwise desired by the Board. The Committee shall conduct all necessary and appropriate inquiries into the background and qualifications of each possible director nominee. The Committee shall recommend that the Board select director nominees for shareholder approval at the annual meetings based on criteria approved by the Board.
2. To make the recommendation to the Board whether a director meets the independence requirements of the New York Stock Exchange and any other requirements set forth in applicable laws, rules and regulations.
3. To develop and recommend to the Board for its approval a set of corporate governance guidelines. The Committee shall annually assess the adequacy of the corporate governance guidelines and recommend changes to the Board as necessary.
4. To annually review and reassess the adequacy of the Company's Code of Business Conduct and recommend changes to the Board as necessary.
5. To review requests from directors and executive officers of the Company for waivers from the Company's Code of Business Conduct and to make recommendations to the Board concerning such requests.
6. To develop and oversee an annual self-evaluation process of the Board and each of its committees.
7. To oversee the composition and function of other Board committees. The Committee shall periodically review the criteria for membership on each committee
and recommend changes to the Board as necessary. The Committee shall annually recommend to the Board director nominees for each committee. The Committee shall review the purpose, structure and operations of each committee and recommend changes to the Board as necessary. The Committee shall oversee the reporting of each committee to the Board. The Committee shall make suggestions to the Board regarding additional committees and changes to, or eliminations of, any committee and propose to the Board any additional policies and procedures in light of changing business, legislative, regulatory, legal or other conditions as necessary.
8. To annually review on behalf of the Board the charter of each committee and make recommendations to the relevant committees concerning these charters and to the Board in connection with the Board's action thereon.
9. To oversee the evaluation of management generally.
10. To review and assess the management succession plan for the Chief Executive Officer position and other members of executive management and annually review its assessment of those plans with the Board.
11. To recommend to the Board the form and amount of director compensation in consultation with senior management. In making its recommendation, the Committee shall be guided by the following principles: (a) director compensation should be comparable to companies of similar size, complexity and industry; (b) director compensation should align the interests of directors with those of the shareholders; (c) the structure of director compensation should be transparent; and (d) members of the audit committee of the Board may earn greater compensation based on the greater time commitment required, so long as the additional compensation is of the same form available to all directors. The Committee, in consultation with senior management, shall conduct an annual review of director compensation, as well as an annual review of the principles for determining compensation form and amount.
12. To, on behalf of the Board, review written communications from shareholders concerning the Company's annual general meeting and governance process including candidates for director, and make recommendations to the Board in respect thereof.
13. To perform any other activities consistent with this Charter, the Company's charter and bye-laws and applicable laws, rules and regulations as the Board deems appropriate.
14. To delegate any of its responsibilities to subcommittees as the Committee may deem appropriate in its sole discretion.
C. OUTSIDE ADVISORS
The Committee shall have sole authority to retain and terminate any search firm employed to identify director nominees, including sole authority to approve the search firm's fees and any other retention terms. In addition, the Committee shall have access to and authority to retain independent advisors, including legal counsel, external auditors and financial advisors, if and when it deems necessary to perform its duties. The Committee may retain these advisors without seeking Board approval and shall have sole authority to approve related fees and retention terms.
D. ANNUAL PERFORMANCE EVALUATION
The Committee shall conduct an annual self-performance evaluation, including an evaluation of its compliance with this Charter. The Committee shall report on its annual self-performance evaluation to the Board.
E. MEMBERSHIP
The Committee shall consist of no fewer than three (3) directors, as determined by the Board. Each Committee member shall also have knowledge or experience relating to corporate governance and related matters. The members of the Committee shall meet the independence requirements of the New York Stock Exchange and shall comply with any other requirements set forth in applicable laws, rules and regulations. The Committee members shall be appointed annually and may be removed, with or without cause, by a majority vote of the Board.
F. CHAIRMAN
The Committee shall include a Committee chairman. The Committee chairman shall be appointed by a majority vote of the Board. The Committee chairman shall be entitled to chair all regular sessions of the Committee and cast a vote to resolve any ties.
G. MEETINGS
The Committee shall meet at least one (1) time per half-year or more frequently as circumstances dictate. All Committee members shall strive to be present at all Committee meetings.
The Committee chairman may call a Committee meeting upon due notice of each other Committee member at least twenty-four (24) hours prior to the meeting. A majority of Committee members, acting in person or by duly authorized representative, shall constitute a quorum. The Committee shall act by majority vote. The Committee meetings shall follow a set agenda established by the Committee chairman in consultation with the Chairman of the Board. The Committee shall be responsible for maintaining minutes and other applicable records of each Committee meeting. The Committee shall report its actions and recommendations to the Board after each Committee meeting.