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Exhibit 10.1
SHAREHOLDERS AGREEMENT
among
ALLIED WORLD ASSURANCE HOLDINGS, LTD
and
THE SHAREHOLDERS NAMED HEREIN
November 21, 2001
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Table of Contents
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ARTICLE I
DEFINITIONS
1.1.
Definitions...........................................................2
1.2.
General
Interpretation................................................2
ARTICLE II
CORPORATE GOVERNANCE
2.1.
Board of
Directors....................................................3
2.2.
Alternate
Directors...................................................6
2.3.
Removal of
Directors..................................................6
2.4.
Replacement of
Directors..............................................6
2.5.
Initial Directors and
Bye-laws........................................6
2.6.
Action by
Directors...................................................7
2.7.
Quorum...............................................................10
2.8.
Audit Committee;
Committees..........................................12
2.9.
Executive
Officers...................................................13
2.10.
Shareholders Meeting
Chairman........................................13
2.11.
Operating Company Board of
Directors.................................13
2.12.
Depletion of Specified Shareholders'
Positions.......................15
2.13.
Warrants.............................................................17
2.14.
Waiver of
Notice.....................................................18
ARTICLE III
CERTAIN SHAREHOLDER UNDERTAKINGS
3.1.
Grant of
Proxy.......................................................18
3.2.
Restrictions on other
Agreements.....................................18
3.3.
Further
Action.......................................................18
3.4.
Exercise of Voting Rights Attributed by
Law..........................19
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ARTICLE IV
TRANSFER RESTRICTIONS
4.1.
Restrictions on Transfers of
Shares..................................19
4.2.
Transfers Under Certain
Conditions...................................20
4.3.
Transfers During Investment
Period...................................20
4.4.
General Conditions to
Transfer.......................................21
4.5.
Open Market
Sales....................................................22
4.6.
Freely Transferable
Shares...........................................22
4.7.
Effect of
Transfer...................................................23
4.8.
Compliance and
Waiver................................................23
4.9.
Minimum Ownership
Amount.............................................24
4.10.
Exchange of Non-Voting Common Stock for Voting Common
Stock..........24
4.11.
Preemptive
Rights....................................................25
4.12.
Drag-Along
Rights....................................................27
4.13.
Tag-Along
Rights.....................................................28
4.14.
Additional
Shareholders..............................................30
ARTICLE V
RESTRICTIONS ON SHARE OWNERSHIP
5.1.
Ownership
Limits.....................................................31
5.2.
Prompt Disposition of
Shares.........................................34
5.3.
Manner of
Disposition................................................34
5.4.
Issuance of Additional Securities or Repurchase of
Securities........35
ARTICLE VI
INITIAL PUBLIC OFFERING; REGISTRATION RIGHTS
6.1.
Initial Public
Offering..............................................35
6.2.
Demand
Rights........................................................35
6.3.
Obligations of the
Company...........................................37
6.4.
Underwriters'
Lockup.................................................39
6.5.
"Piggy-Back"
Rights..................................................40
6.6.
Allocation of Securities Included in a Registered Public
Offering....41
6.7.
Indemnification......................................................42
6.8.
Requirements with Respect to
Registration............................45
6.9.
Expenses.............................................................49
6.10.
Exchange Act Filings, Rule
144.......................................50
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ARTICLE VII
MISCELLANEOUS
7.1.
Accounting; Financial Statements and Other
Information...............50
7.2.
Legend on Stock Certificates,
Etc....................................51
7.3.
Acknowledgment.......................................................52
7.4.
Waiver of Claims;
Insurance..........................................52
7.5.
Confidentiality......................................................52
7.6.
Competition..........................................................54
7.7.
Amendment and Termination of this Agreement and the
Bye-laws.........55
7.8.
Notices..............................................................56
7.9.
Entire
Agreement.....................................................56
7.10.
Severability.........................................................57
7.11.
Binding Effect;
Benefit..............................................57
7.12.
Assignability........................................................57
7.13.
Headings.............................................................57
7.14.
Counterparts.........................................................57
7.15.
Applicable
Law.......................................................57
7.16.
Submission to
Jurisdiction...........................................57
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EXECUTION COPY
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of November 21, 2001, among
the
Shareholders (as such term and other capitalized terms used herein
are defined
in Annex A) named in Schedule I and that may become parties hereto
from time to
time hereafter, and to which Allied World Assurance Holdings, Ltd,
a limited
liability company organized under the laws of Bermuda (together
with any
successor thereto, the "Company"), has been made a party.
W I T N E S S E T H
WHEREAS, on the date hereof, the Company's authorized capital
stock
consists of 600,000,000 shares of Common Stock, comprised initially
of
300,000,000 shares of Voting Common Stock and 300,000,000 shares of
Non-Voting
Common Stock (all Voting Common Stock and Non-Voting Common Stock
issued from
time to time, together with any other class of stock of the Company
hereinafter
created, and all shares of capital stock issued in exchange
therefor, in
replacement thereof or otherwise in respect thereof, including
Warrant Shares
but excluding the Warrants and other rights to acquire capital
stock, being
referred to herein as "Common Stock");
WHEREAS, on the date hereof, the Company owns the entire
outstanding
capital stock of Allied World Assurance Company, Ltd, a limited
liability
company organized under the laws of Bermuda (the "Operating
Company");
WHEREAS, each of the initial Shareholders has subscribed to
purchase, or purchased the number of shares of Voting and
Non-Voting Common
Stock set forth opposite its name in Schedule I hereto;
WHEREAS, each of the Shareholders desires to promote the
interests
of the Company and the mutual interests of the Shareholders by
establishing
herein certain terms and conditions upon which the shares of Common
Stock will
be held, including provisions relating to the election of directors
and approval
of various corporate actions;
WHEREAS, each of the Shareholders has agreed to enter into this
Agreement in connection with its subscription to purchase shares of
Common Stock
and, in the case of the Founders, Warrants;
WHEREAS, each of the Shareholders has agreed that AIG and Chubb
(each an "Industry Founder") and GSCP 2000 (the "Financial Founder"
and,
together with the Industry Founders, the "Founders") shall be
entitled to
certain rights set forth herein in recognition of their
instrumental roles,
respectively, in the organization of the Company, the Operating
Company and the
launch of the Operating Company's business, which rights are
acknowledged by the
Shareholders to be customary and appropriate under the
circumstances; and
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WHEREAS, each of the Shareholders has agreed that Securitas
Allied
Holdings, Ltd ("Securitas" and, together with the Industry
Founders, the
"Designating Shareholders" and, together with the Founders, the
"Specified
Shareholders") and its Affiliate, Swiss Re, shall be entitled to
certain rights
hereunder in recognition of Securitas's investment in the Company
and the
insurance industry expertise of Swiss Re, which rights are
acknowledged by the
Shareholders to be customary and appropriate under the
circumstances;
NOW, THEREFORE, the Shareholders and the Company agree as
follows:
ARTICLE I
DEFINITIONS
1.1.
Definitions.
Capitalized terms used in this Agreement shall have
the meanings set forth in Annex A.
1.2.
General Interpretation. For all purposes of this
Agreement,
unless otherwise expressly provided or unless the context requires
otherwise:
(a) the terms defined in Annex A to this Agreement may include
both
the plural and singular, as the context may require;
(b) the words "herein", "hereto" and "hereby", and other words
of
similar import, refer to this Agreement as a whole and not to any
particular
Article, Section or other subdivision of this Agreement;
(c) unless otherwise specified, references to Articles,
Sections,
clauses, subclauses, subparagraphs, Annexes and Schedules are
references to
Articles, Sections, clauses, subclauses, subparagraphs, Annexes and
Schedules of
this Agreement;
(d) the words "including" and "include" and other words of
similar
import shall be deemed to be followed by the phrase "without
limitation";
(e) any reference herein to a statute, rule or regulation of
any
governmental entity (or any provision thereof) shall include such
statute, rule
or regulation (or provision thereof), including any successor
thereto, as it may
be amended from time to time;
(f) the "holder" or "owner" of any Common Stock or other security
of
the Company shall mean the Person shown as the registered holder
thereof on the
securities record maintained by the Company or its agent, and the
terms "hold"
or "own" shall have meanings correlative thereto, except as
required by the
Ownership Limits and unless the context requires otherwise;
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(g) "outstanding" securities of the Company shall exclude those
securities held by it or any of its subsidiaries;
(h) any reference to Shareholders or Members electing Directors
or
voting upon any matters shall be interpreted as referring only to
Shareholders
or Members holding and entitled to vote Voting Common Stock, except
as provided
in Sections 3.1 and 3.4; and
(i) any reference to the "Company" shall mean the Company,
acting
through its authorized Officers or the Board of Directors and shall
not, unless
otherwise expressly indicated or as required by applicable law,
mean the Members
or imply any action or approval thereby.
ARTICLE II
CORPORATE GOVERNANCE
2.1.
Board of Directors. (a) The total number of authorized
directors
constituting the Board of Directors of the Company from time to
time (each, a
"Director" and collectively, the "Board of Directors" or the
"Board") shall at
all times equal eight. Initially, the Directors shall be those
individuals
determined pursuant to Section 2.5. Thereafter, the Directors shall
be elected
annually in accordance with clause (b) or (c) below, as applicable.
Any Director
elected pursuant to clause (b)(i) of this Section shall constitute
an A Director
for purposes of the Bye-laws. Any Director elected pursuant to
clause (b)(ii) of
this Section shall constitute a B Director for purposes of the
Bye-laws. Any
Director elected pursuant to clause (b)(iii) of this Section shall
constitute a
C Director for purposes of the Bye-laws. Any Director elected
pursuant to clause
(c) of this Section shall constitute a D Director for purposes of
the Bye-laws.
(b) The Shareholders shall, during the term of this Agreement
and
subject to Section 2.12, exercise their voting rights at the first
Annual
General Meeting held on or after the date of this Agreement, and at
each Annual
General Meeting held thereafter, to cause to be elected as
Directors:
(i) One Director nominated by an AIG Person, who shall be an A
Director and shall be the Chairman of the Board of Directors (such
Director from
time to time, the "AIG Director");
(ii) One Director nominated by a Chubb Person, who shall be a B
Director and shall be the Deputy Chairman of the Board of Directors
(such
Director, from time to time, the "Chubb Director" and, together
with the AIG
Director, the "Industry Founder Directors"); and
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(iii) One Director nominated by Swiss Re, who shall be a senior
officer of Swiss Re and shall be a C Director (such Director, from
time to time,
the "Swiss Re Director" and, together with the Industry Founder
Directors, the
"Designated Directors"). The right to nominate or appoint an
individual to serve
as the Swiss Re Director pursuant to this Section 2.1 or Section
2.4 or
otherwise hereunder shall be exercisable and enforceable solely by
Swiss Re.
References in this Agreement to an individual nominated or
appointed by a
Designating Shareholder shall, in the case of Securitas, be a
reference to an
individual nominated or appointed by Swiss Re. Such right shall not
be
assignable or transferable to any Person, including any Person that
succeeds to
the rights of Securitas pursuant to Section 4.7, and such right
shall terminate
as provided in Section 2.12(a)(i).
(c) In addition, during the term of this Agreement and subject
to
Section 2.12, at the first Annual General Meeting held on or after
the date of
this Agreement and each Annual General Meeting thereafter, the
Shareholders,
other than the Designating Shareholders and their respective
Affiliates (the
"Non-Designating Shareholders") holding Voting Common Stock, shall
cast their
votes to elect five individuals (subject to adjustment pursuant to
Section
2.12(a)(i) and to the limitations in Section 2.1(f)) to serve as
Directors in
addition to the Designated Directors (each such Director that is
not a
Designated Director, a "Non-Designated Director"). The initial
Non-Designated
Directors shall be D Directors. At each Annual General Meeting,
each
Non-Designated Director shall be elected upon the approval of
Members (including
any who are not Shareholders) holding a plurality of the votes cast
at such
meeting for the election of such Non-Designated Director in
accordance with the
Bye-laws, provided that, subject to Section 2.12, each of the
Designating
Shareholders hereby agrees to abstain, and to cause its Affiliates
to abstain,
from casting any vote at any such meeting in respect of the
election of the
Non-Designated Directors and that, if any Designating Shareholder
or any of its
Affiliates casts a vote in any such election of Non-Designated
Directors, such
vote shall be disregarded and not counted in such election (it
being understood
and agreed, however, that the Designating Shareholders and their
Affiliates need
not be disregarded for the purpose of determining whether any
quorum requirement
for a General Meeting is satisfied and need not abstain from
casting a vote in
respect of any election of a Designated Director or any matter
other than the
election of a Non-Designated Director). Prior to each Annual
General Meeting,
the Non-Designated Directors shall nominate five individuals
(subject to
adjustment pursuant to Section 2.12(a)(i)) to succeed them as
Non-Designated
Directors (which nominees may include one or more of the
Non-Designated
Directors then in office) and the Company and the Shareholders
agree that such
nominees shall be presented to the Members for election at such
meeting in
accordance with this Section 2.1. With respect to each Annual
General Meeting,
the Members, other than the Designating Shareholders and their
respective
Affiliates (the "Non-Designating Members"), may nominate, in
accordance with the
Bye-laws and applicable law (but subject to the limitations in
Section 2.1(f)),
such individuals as they wish to serve as Non-Designated Directors
in lieu of
one or more of the individuals nominated by the Non-Designated
Directors then in
office, or in the event of the latter's failure to make such
nominations.
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(d) The Financial Founder may designate one individual to serve
as
an observer to the Board of Directors, which observer may be
designated as a
special consultant (the "Representative"), on the terms and
conditions agreed to
by the Company and the Financial Founder. The Representative shall
be entitled
to receive notice of, and to be present at, all regular and special
meetings of
the Board of Directors, and any meeting of a committee thereof
(including the
Audit Committee), but shall not have any right to vote at such
meetings. The
Representative shall not be considered a "Director" of the Company
for any
purposes hereunder, under the Bye-laws or otherwise. The
Representative shall be
subject to the obligations concerning the use and disclosure of
Information set
forth in Sections 7.5 and 7.6 and shall be entitled to the benefit
of Section
7.4. In addition, the Company may, in its sole discretion, permit
one or more
other Shareholder(s) to designate, respectively, an individual to
serve as an
observer to the Board of Directors (and to the Operating Company
Board, pursuant
to Section 2.11(c)), on such terms and conditions as the Company
may agree with
such Shareholder and its observer, which terms and conditions shall
(i) except
as otherwise agreed between the Company and the appointing
Shareholder, be
identical to (but separate from) those applicable to the Financial
Founder's
Representative under this Agreement (including Section 7.4, Section
7.5, Section
7.6 and Section 7.11) (and the Financial Founder's representative
to the
Operating Company Board), such that each reference herein to the
Representative
(and the Financial Founder's representative to the Operating
Company Board)
shall be deemed also to apply to any such other Shareholder's
observer appointed
from time to time in accordance with this Section 2.1(d), and (ii)
in any event,
shall not afford such observer rights in respect of the Board of
Directors or
the Operating Company Board that are greater than those afforded
the
Representative under this Agreement. Accordingly, any such observer
shall not
have any right to vote at meetings of the Board of Directors or the
Operating
Company Board.
(e) Any election of any Director that takes place at a Special
General Meeting or pursuant to a written resolution of the Members
shall be
effected in accordance with this Section 2.1.
(f) Notwithstanding Section 2.1(c), if at any time in the future
the
Financial Founder and/or any of its Transferee Affiliates (but not
including any
other Affiliate of the Financial Founder) acquires or owns shares
of Voting
Common Stock which were owned at any time by the Financial Founder
without
violating the Ownership Limits and proposes to vote such shares in
any election
of Directors, such votes shall be cast for no more than one
Non-Designated
Director in such election and, if any such shares are voted for
more than one
Non-Designated Director, all votes relating to such shares shall be
disregarded
and not counted in such election. In addition, neither the
Financial Founder nor
any of its Transferee Affiliates shall nominate for election under
this Section
2.1 or under Section 2.4, at any General Meeting, any individual to
serve as a
Non-Designated Director, unless they are entitled to cast votes in
such election
as provided in the prior sentence, in which event they shall be
permitted (in
accordance with the Bye-laws) to nominate no more than one
individual for any
such election. The Financial Founder shall cause its Transferee
Affiliates to
comply with this Section 2.1(f).
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This Section 2.1(f) shall cease to apply at the first Termination
Time for the
Financial Founder.
2.2.
Alternate Directors. (a) Each Director may appoint an alternate
Director to act in his or her stead (an "Alternate Director") in
accordance with
the Bye-laws. An Alternate Director to a Designated Director shall
be deemed to
be such Designated Director (while serving as such in accordance
with this
Agreement) for all purposes of this Agreement. An Alternate
Director to a
Non-Designated Director shall be deemed to be such Non-Designated
Director
(while serving as such in accordance with this Agreement) for all
purposes of
this Agreement and references to any Director herein shall be
deemed to include
any such Director's Alternate Director appointed and acting in
accordance with
the Bye-laws. No Director shall appoint as his or her Alternate
Director another
Director.
(b) Any Alternate Director to a Non-Designated Director who
attends
more than one Board meeting in any year shall be subject to Bye-law
14(1) of the
Bye-laws.
2.3.
Removal of Directors.
(a) A Director may be removed from office
only in accordance with the Bye-laws or as specifically provided in
Section
2.3(b), 2.12(a)(i) or Section 5.1(d)(iii).
(b) Each individual nominated or appointed by Swiss Re to serve
as
the Swiss Re Director shall be a senior officer of Swiss Re at all
times while
serving as the Swiss Re Director. If an individual who is serving
as the Swiss
Re Director ceases to be a senior officer of Swiss Re, such
individual shall
promptly resign, or, if he or she does not promptly resign, shall
be promptly
removed by the Board (acting without such individual), from the
Board and all
committees of the Board.
2.4.
Replacement of Directors. Should the office of any Director
become
vacant through death, removal, resignation or otherwise, a
replacement Director
shall be appointed or nominated and elected as follows. In the case
of any
Designated Director whose office becomes vacant, any Person that
was entitled to
nominate such Designated Director pursuant to Section 2.1 shall be
entitled to
appoint the successor to such Designated Director. In the case of
any
Non-Designated Director whose office becomes vacant: (a) the
remaining
Non-Designated Directors then in office (if any) shall be entitled
to appoint
the successor to such Non-Designated Director; or (b) in the event
of the
failure of such remaining Non-Designated Directors to act for any
reason within
sixty (60) days after such vacancy occurs, or if no Non-Designated
Directors
remain on the Board of Directors, the Non-Designating Members shall
be entitled
to nominate and elect the successor to such Non-Designated
Director, in each
case pursuant to the Bye-laws and applicable law. Any Director
appointed (or
nominated and elected) to replace another Director shall serve for
the remainder
of the term of the Director being replaced, subject to earlier
death, removal,
resignation or other vacancy.
2.5.
Initial Directors and Bye-laws
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(a) The initial Directors of the Company shall consist of the
individuals named on Schedule II hereto, who will serve as the A
Director, the B
Director, the C Director and the D Directors, as set forth on such
Schedule.
Such individuals have been appointed by the initial shareholder of
the Company
prior to the Closing Date. Each Non-Specified Shareholder who
executes and
delivers to the Company a subscription agreement by which such
Shareholder
subscribes for Common Stock for purchase on the Closing Date (each
a
"Subscription Agreement") has been asked to ratify and approve, or
to
disapprove, the appointment of the initial Non-Designated Directors
or to
propose alternate candidates for election to such offices, all in
the manner
specified in the Subscription Agreements. Each Shareholder that is
a Designating
Shareholder or an Affiliate of a Designating Shareholder has been
asked to
ratify and approve, or to disapprove, the initial A Director , B
Director or C
Director whose successor such Designating Shareholder will be
entitled to
nominate or appoint pursuant to this Article II. Each
Non-Designated Director
whose appointment is ratified and approved in this manner by the
Non-Specified
Shareholders who own a majority of the Voting Common Stock
outstanding and owned
by all Non-Specified Shareholders on the Closing Date shall be
deemed to have
been ratified and approved as a Non-Designated Director by the
Shareholders and
shall serve in such office until the first Annual General Meeting
(or until his
or her earlier death, removal, resignation or other vacancy). Each
Designated
Director whose appointment has been ratified and approved in this
manner by the
relevant Designating Shareholder and its Affiliates who own shares
of Voting
Common Stock outstanding on the Closing Date will be deemed to have
been
ratified and approved as a Designated Director and shall serve in
such office
until the first Annual General Meeting (or until his or her earlier
death,
removal, resignation or other vacancy).
(b) In addition, prior to the Closing Date, the Bye-laws of the
Company shall be adopted by the initial shareholder of the Company
substantially
in the form appended as Annex B hereto. Each Shareholder shall
ratify the
adoption of the Bye-laws substantially in such form on the Closing
Date pursuant
to the applicable Subscription Agreement. On the Closing Date, the
Secretary
shall prepare and execute a certificate, substantially in the form
of Annex C
hereto, certifying that the appointment of the initial eight
Directors and the
adoption of the Bye-laws were ratified by the Shareholders in
accordance with
this Agreement.
2.6. Action by
Directors. (a) The Directors shall at all times have
weighted voting power, such that each A Director, B Director and C
Director
shall have one vote on all matters before the Board of Directors
and each of the
D Directors shall have one and six-tenths (1.6) votes on all
matters before the
Board of Directors. Except as otherwise required by paragraph (b)
of this
Section 2.6 or applicable law, any corporate action taken by the
Board of
Directors shall be taken by the affirmative vote of a majority of
the votes
represented by the Directors present and voting at a duly
constituted meeting at
which a Quorum of the Board is present and acting throughout (or by
written
consent of all Directors in the manner provided in the Bye-laws),
and in the
case of an equality of votes the resolution upon which such vote is
taken shall
fail. Any action required to be
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taken hereunder solely by the Non-Designated Directors shall be
taken at a duly
constituted meeting of the Board of Directors at which both a
Quorum of the
Board and a Quorum of Non-Designated Directors is present and
acting throughout,
by the affirmative vote of a majority of the votes cast by the
Non-Designated
Directors who are present and voting at such meeting of the Board,
and in the
case of an equality of votes the resolution upon which such vote is
taken shall
fail. No action required to be taken solely by the Non Designated
Directors may
be taken by written consent. The vote or votes allotted to any
particular
Director may be cast on any matter properly before such Director
only in their
entirety and may not be divided or cast in part. Any action to be
taken by a
committee of the Board shall be taken as provided in or pursuant to
the
Bye-laws.
(b) Notwithstanding paragraph (a) above, the affirmative vote of
the
Applicable Number of the votes entitled to be cast at a meeting of
the Board of
Directors from time to time (a "Supermajority Vote") shall be
required to carry
any resolution put to a vote at a meeting of the Board with respect
to the
following matters:
(i) a public offering of any securities of the Company (whether
made
for the account of the Company or any other person, whether or not
registered
under the securities laws of any jurisdiction and whether or not
effected in the
United States of America) or the granting of any registration
rights, other than
in accordance with this Agreement;
(ii) prior to the consummation of an Initial Public Offering,
the
authorization or issuance of additional common shares of the
Company or
securities convertible into or exchangeable or exercisable for such
common
shares;
(iii) the issuance of preferred shares, debt securities or any
other
class of securities;
(iv) the repurchase, redemption or retirement of any common
shares
of the Company or any Subsidiary of the Company or securities
convertible into
or exchangeable or exercisable for such shares;
(v) the merger, amalgamation, consolidation or sale of
substantially
all the assets of the Company or any Subsidiary of the Company, or
any sale of a
majority of the outstanding common shares of the Company or any
Subsidiary of
the Company by vote (calculated by reference to the total combined
voting rights
attached to the issued common shares) or by value (calculated by
reference to
the total combined value of such common shares determined by the
Board);
(vi) any sale or
purchase of assets of the Company or any Subsidiary
of the Company during a 12-month period with an aggregate value
exceeding 15% of
the consolidated shareholders' equity of the Company, other than
investment
activity in the ordinary course of business;
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(vii) the liquidation, dissolution or voluntary winding up of
the
Company or any Subsidiary of the Company;
(viii) the creation or modification of Board committees or the
appointment of committee members, other than pursuant to paragraph
(2) of
Bye-law 8 of the Bye-laws;
(ix) other than pursuant to Section 2.6(d), Section 4.10(b)(i)
or
(ii) or Section 5.2 or 5.3, the exchange of Voting Common Stock for
Non-Voting
Common Stock and vice versa;
(x) a change in the Auditor of the Company;
(xi) the approval or rejection of any Transfer of common shares
of
the Company or securities convertible into or exchangeable or
exercisable for
such shares requiring the Board of Directors' consent under Section
4.3(a)(i);
(xii) any amendment to the Memorandum of Association of the
Company
or the Bye-laws;
(xiii) material transactions with a Member that, together with
its
Affiliates, owns 10% or more of the outstanding common shares of
the Company, or
with any Affiliate of such a Member, other than transactions in the
ordinary
course of business and insurance or reinsurance transactions;
(xiv) the engagement in any line of business other than holding
the
shares of the Operating Company and the engagement in any line of
business by
the Operating Company other than insurance and reinsurance
business;
(xv) any delegation by the Operating Company of binding
underwriting
authority to a third party; and
(xvi) any other matter for which a Supermajority Vote is
specifically required by the provisions of this Agreement.
(c) For the purposes of any resolution put to the vote of the
Board
of Directors concerning any of the matters enumerated in clauses
(xii), (xiii),
(xiv) or (xv) of Section 2.6(b), the "Applicable Number" shall
equal at least
7.92 votes (which represents 72% of the total number of votes that
could be cast
by all eight Directors at a duly constituted meeting attended by
all such
Directors). For the purposes of any resolution put to the vote of
the Board of
Directors concerning any of the matters enumerated in the remaining
clauses of
Section 2.6(b), the "Applicable Number" shall equal (subject to
Section 4.13(f))
at least 7.37 votes (which represents 67% of the total number of
votes that
could be cast by all eight Directors at such a meeting).
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<PAGE>
(d) All application and administration of the provisions of
this
Agreement, as well as all determinations to be made, waivers to be
granted and
other decisions or actions to be taken by the Board of Directors
(or any
committee, Officer or other Person duly authorized to act under
authority of the
Board of Directors) pursuant to this Agreement (including pursuant
to Section
4.8 (b)) shall be made, granted or taken, or omitted to be made,
granted or
taken, as the case may be, in the sole discretion of the Board (or
such
authorized committee, Officer or other Person), as applicable, and
shall be
final and binding on all Shareholders. Notwithstanding anything to
the contrary
provided in this Agreement, however, the authority of the Board to
grant any
waiver shall be subject to the limitations in Section 7.7(a) and
the authority
of the Board to make any determination, grant any waiver or take
any other
decision or action that requires a resolution to be passed by a
Supermajority
Vote of the Directors may not be delegated to any committee,
Officer or other
Person acting under Board authority. In addition, notwithstanding
anything to
the contrary provided in this Agreement, the approval of the Board
of Directors,
acting by a simple majority, shall be required for any of the
following: (i) any
reduction in voting power pursuant to Bye-law 51 of the Bye-laws,
(ii) any
conversion of Common Stock pursuant to Section 5.2 or 5.3 or
paragraph (2) or
(3) of Bye-law 64 of the Bye-laws or (iii) any disposition of
Common Stock
pursuant to Section 5.2 or 5.3 or paragraph (2) or (3) of Bye-law
64 of the
Bye-laws. Upon request of any Director, the Board of Directors
shall consider
whether to retain and, if it determines to do so, shall retain
outside counsel
(after considering such factors relevant to the retention of
counsel as it deems
appropriate), with regard to the application of the Ownership
Limits, the
"related party insurance income" and "controlled foreign
corporation" provisions
of the Code, and/or the application of the voting right cutback of
Bye-law 51.
2.7 Quorum. (a)
Subject to clauses (i) through (iii) of this
Section 2.7(a), to Section 2.7(b)(iii) to Section 2.12(a)(i) and to
Section
5.1(d)(iii), five Directors, who shall include both Industry
Founder Directors
and three additional Directors, shall constitute a quorum at any
regular or
special meeting of the Board of Directors (a quorum constituted in
accordance
with this Section 2.7(a), a "Quorum of the Board"). Notwithstanding
the
preceding sentence, the requirements to constitute a Quorum of the
Board may be
adjusted as follows:
(i) if any Industry Founder Director (or his or her Alternate
Director) fails to attend a meeting of the Board of Directors for
which valid
and timely notice has been given in accordance with the Bye-laws
(such initially
called meeting, the "Initial Meeting"), then such meeting shall be
adjourned
until a later date to be determined by the Secretary, provided that
such later
date shall not be more than ten Business Days after the date of the
Initial
Meeting and provided, further that notice of such adjournment and
the agenda for
the adjourned meeting shall be delivered to all Directors at least
five Business
Days prior to the date on which the postponed meeting is scheduled
to reconvene
(the meeting scheduled for such later date, the "Postponed
Meeting");
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<PAGE>
(ii) if any Industry Founder Director (or his or her Alternate
Director) fails to attend the Postponed Meeting, then such meeting
shall be
further adjourned until a later date to be determined by the
Secretary, provided
that such later date shall not be more than ten Business Days after
the date of
the Postponed Meeting and provided, further that notice of such
adjournment and
the agenda for the adjourned meeting shall be delivered to all
Directors at
least five Business Days prior to the date on which such further
adjourned
meeting is scheduled to reconvene (the meeting scheduled for such
later date,
the "Second Postponed Meeting"); and
(iii) for purposes of a Second Postponed Meeting, four
Directors
shall constitute a Quorum of the Board and there shall be no
requirement that
any Industry Founder Director (or his or her Alternate Director) be
among those
Directors in attendance in order to constitute such Quorum of the
Board.
(b) Subject to clauses (i) through (iii) of this Section 2.7(b),
the
quorum necessary for the Non-Designated Directors to take action
required to be
taken solely by the Non-Designated Directors at any meeting of the
Board of
Directors (a "Quorum of Non-Designated Directors") shall be the
total number of
Non-Designated Directors then in office adjusted as follows:
(i) if such number of Non-Designated Directors (including any
of
their Alternate Directors) fails to attend a meeting of the Board
of Directors
for which valid and timely notice has been given in accordance with
the Bye-laws
and at which the Non-Designated Directors are to take action
required to be
taken solely by the Non-Designated Directors (such initially called
meeting, the
"First Meeting"), or if a Quorum of the Board is not present at
such meeting,
then such meeting shall be adjourned (with respect to such action
only) until a
later date to be determined by the Secretary, provided that such
later date
shall not be more than ten Business Days after the date of the
First Meeting and
provided, further that notice of such adjournment and the agenda
for the
adjourned meeting shall be delivered to all Directors at least five
Business
Days prior to the date on which the postponed meeting is scheduled
to reconvene
(the meeting scheduled for such later date, the "Second
Meeting");
(ii) if such number of Non-Designated Directors (including any
of
their Alternate Directors) fails to attend the Second Meeting, or
if a Quorum of
the Board is not present at such meeting, then such meeting shall
be further
adjourned (with respect to such action only) until a later date to
be determined
by the Secretary, provided that such later date shall not be more
than ten
Business Days after the date of the Second Meeting and provided,
further that
notice of such adjournment and the agenda for the adjourned meeting
shall be
delivered to all Directors at least five Business Days prior to the
date on
which the postponed meeting is scheduled to reconvene (the meeting
scheduled for
such later date, the "Third Meeting"); and
(iii) for purposes of a Third Meeting, Non-Designated Directors
holding a majority of the votes entitled to be cast at a meeting of
the Board of
Directors
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<PAGE>
by all Non-Designated Directors then in office shall constitute a
Quorum of
Non-Designated Directors for such action, provided that any four
Directors are
in attendance at the Third Meeting, which four Directors shall
constitute a
Quorum of the Board solely for purposes of any action required to
be taken
solely by the Non-Designated Directors at such Third Meeting.
The Non-Designated Directors shall not take any action required to
be taken
solely by the Non-Designated Directors other than at a duly
constituted meeting
of the Board of Directors at which both a Quorum of the Board of
Directors and a
Quorum of Non-Designated Directors (in each case, subject to
adjustment in
accordance with this Section 2.7) is present and acting throughout
to the extent
required by the foregoing. A Quorum of Non-Designated Directors
shall not be
necessary for any action to be taken by the Board of Directors
unless such
action is required to be taken solely by the Non-Designated
Directors. The only
action required under this Agreement to be taken solely by the
Non-Designated
Directors is such action as is necessary in order to nominate any
person for
election as a Non-Designated Director at any General Meeting (or
pursuant to a
written resolution of Members), or to appoint a person to fill a
vacancy among
the Non-Designated Directors pursuant to Section 2.4.
2.8. Audit Committee; Committees. (a) The Board of Directors
shall
annually, during the term of this Agreement, appoint an Audit
Committee which
shall nominate the independent auditors of the Company and, in
consultation with
such auditors, review and supervise the accounting policies and
procedures of
the Company. The Audit Committee shall be comprised of at least
four members,
the number of which, from time to time, shall be determined by the
Board by
majority vote, subject to the following:
(i) Subject to Section 2.12(a)(i), each Designated Director who
wishes to be a member of the Audit Committee shall be a member;
and
(ii) the AIG Director shall be the chairman of the Audit
Committee,
unless he or she declines to serve as chairman or declines to be a
member of
such committee, provided that, upon any loss by AIG of its rights
as a Founder
pursuant to Section 2.12(a)(i), the chairman of the Audit Committee
shall be
such Director as the Board of Directors may designate from time to
time;
provided that upon and after an Initial Public Offering, the right
of any
Director to be a member or Chairman of the Audit Committee shall
cease if the
Board of Directors determines that such membership would be
inconsistent with
compliance by the Company with applicable stock exchange or
quotation system
rules pertaining to listed/quoted companies' audit committees.
(b) Every committee of the Board of Directors shall include each
of
the Designated Directors should they each respectively elect to be
members of
any such committee. A Director, other than a Designated Director,
serving as a
member of any committee of the Board of Directors may be removed
from membership
in such
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<PAGE>
committee in the circumstances provided in, and in accordance with,
the
Bye-laws. Any successor to such Non-Designated Director on such a
committee
shall be appointed by the Board of Directors in accordance with the
Bye-laws. A
Designated Director serving as a member of any committee of the
Board of
Directors may be removed from membership in such committee (i) in
connection
with and pursuant to such Designated Director's removal from office
as a
Director in accordance with Section 2.3; and (ii) in the case of
the Audit
Committee, if the Designated Director ceases to have the right to
be a member of
the Audit Committee pursuant to the proviso of Section 2.8(a).
Subject to the
proviso of Section 2.8(a), the successor to such Designated
Director appointed
to the Board of Directors in accordance with Section 2.4 shall be
the successor
to such Designated Director on such committee and shall serve on
such committee
in a capacity identical to that of his or her predecessor
(including, in the
case of an AIG Director, as chairman of the Audit Committee).
2.9.
Executive Officers. The Board of Directors shall appoint such
officers of the Company ("Officers") as it may determine from time
to time
pursuant to the Bye-laws. Such Officers shall serve subject to the
pleasure of
the Board. Each of the Secretary and the principal representative
of the Company
shall be Bermuda residents for so long as the Bermuda residency of
two such
persons is required by Bermuda law, unless the Board determines
from time to
time that such requirement has otherwise been satisfied. The
initial Officers of
the Company shall be those individuals set forth on Schedule III
hereto, unless
and until the Board of Directors determines otherwise.
2.10. Shareholders Meeting Chairman. The Chairman of the Board
of
Directors shall have the right to act, or to designate an
individual to act, as
chairman of each General Meeting at which the Chairman is present.
If the
Chairman is absent, or shall fail to act as Chairman or to
designate an
individual so to act at any such meeting, the Deputy Chairman of
the Board of
Directors shall have the right to act as chairman of the General
Meeting, or to
designate an individual so to act.
2.11. Operating Company Board of Directors. The board of
directors
of the Operating Company (the "Operating Company Board") shall be
constituted of
eight directors who shall be at all times the same individuals who
are members
of, and be identical to, the Board of Directors. The Directors, in
their
capacity as directors of the Operating Company Board, shall have
weighted voting
power identical to the voting power exercised by each on the Board
of Directors.
The Company shall take such actions as may be necessary to cause
such
individuals to be elected or appointed to the Operating Company
Board as is
contemplated in this Section 2.11.
The bye-laws and governance mechanisms of the Operating Company
shall be implemented so as to cause the management and governance
of the
Operating Company to parallel, as closely as practicable, the
management,
governance and exculpation provisions set forth in this Article II
and Section
7.4. In furtherance of the foregoing, the bye-laws and governance
mechanisms of
the Operating Company shall, in substance, provide, without
limitation:
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<PAGE>
(a) The Operating Company Board (including the chairman and the
deputy chairman and any committees thereof) shall at all times be
identical to
the Board of Directors and the committees thereof, respectively;
provided that
the Operating Company Board may have such additional committees as
such board
may determine, and provided, further, that any director who is a
Designated
Director shall be entitled to sit on any such committee if he or
she so elects.
(b)
Directors of the Operating Company may appoint alternate
directors, provided that such alternates must be the same person
appointed as
such director's Alternate Director with respect to such Director's
seat on the
Board of the Company.
(c) The
Financial Founder shall have the right to appoint an
observer or special consultant to the Operating Company Board, who
shall be the
same person as the Representative and who shall have the rights
referred to in
Section 2.1(d) (as though references to the Board of Directors and
the Company
therein were references to the Operating Company Board and the
Operating
Company, respectively).
(d) Directors of the Operating Company may only be removed from
the
Operating Company Board or any committee thereof as a result of, or
in
connection with, their removal from the Board of the Company or
the
corresponding committee thereof in accordance with Section 2.3.
(e) The same requirements for a quorum (those set forth in
Section
2.7) shall be required for a meeting of the Operating Company
Board. Any
corporate action taken by the Operating Company Board shall be
taken by the
affirmative vote of the majority of the votes represented by the
directors
present at a duly constituted meeting at which a quorum is present
(or by
written consent of all Operating Company directors), except as
required by law
and except that any action on a matter to be undertaken by the
Operating Company
which, if taken by the Company's Board of Directors would require
a
Supermajority Vote, shall require a corresponding supermajority
vote of the
Operating Company Board.
(f) The Operating Company Board shall appoint such officers of
the
Operating Company as it may determine from time to time pursuant to
the bye-laws
of the Operating Company. Such officers shall serve subject to the
pleasure of
the Operating Company Board. Each of the secretary and the
principal
representative of the Operating Company shall be Bermuda residents
for so long
as the Bermuda residency of two such persons is required by Bermuda
law, unless
the Operating Company Board determines from time to time that such
requirement
has otherwise been satisfied.
(g) The chairman of the Operating Company Board shall have the
right
to act, or to designate an individual to act, as chairman of each
shareholders
meeting at which the chairman is present. If the chairman is
absent, or shall
fail to act as chairman or to designate an individual so to act at
any such
meeting, the deputy chairman
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<PAGE>
of the Operating Company Board shall have the right to act, or to
designate an
individual to act, as chairman of the shareholders meeting.
In addition, the Company and the Operating Company shall enter
into
an agreement whereby the Company shall waive any claim or right of
action it
might have against any director, alternate director or officer of,
or any
Financial Founder's representative to, the Operating Company, to at
least the
same extent as Shareholders are waiving claims and rights of action
against any
Director, Alternate Director, Officer or Representative under
Section 7.4. The
Operating Company shall obtain and maintain directors' and
officers' liability
insurance for the benefit of all the directors, alternate directors
and officers
and the Financial Founder's representative (and, if the Operating
Company Board
so determines in its sole discretion, any employees of the
Operating Company) on
such terms and conditions as the Operating Company Board shall
approve in its
sole discretion.
2.12. Depletion of Specified Shareholders' Positions. (a) Except
as otherwise provided below, the following shall apply at any
Termination Time
for a Specified Shareholder:
(i) At the
Termination Time for any Designating Shareholder: such
Designating Shareholder (including Swiss Re, in the case of
Securitas) shall
cease to be entitled to nominate or appoint a Director (annually or
to fill any
interim vacancy) pursuant to Section 2.1(b) or Section 2.4; the
Shareholders
shall no longer be obligated to exercise their voting rights to
elect a Director
nominated by such Designating Shareholder pursuant to Section
2.1(b); a Director
nominated or appointed by such Designating Shareholder shall no
longer be
required to be in attendance at any meeting of the Board of
Directors in order
to constitute a Quorum of the Board pursuant to Section 2.7 (if
applicable); the
individual nominated or appointed by such Designating Shareholder
to serve as
the A Director, B Director or C Director, as the case may be, shall
promptly
resign (or if such Director does not promptly resign, shall be
promptly removed
by the Board (acting without such individual)) from the Board,
including any
committee of the Board, unless reappointed by the Non-Designated
Directors
pursuant to Section 2.4 (acting without such individual and as if a
vacancy were
being filled), in which event such individual may continue to serve
as the A
Director, B Director or C Director, as the case may be, until his
or her
successor is elected or appointed pursuant to this Agreement and
the Bye-laws
(or until any earlier death, removal, resignation or other
vacancy); the A
Director, B Director or C Director, as the case may be, shall
become and at all
times thereafter be a Non-Designated Director for all purposes of
this Agreement
and shall be subject to the nomination and election provisions
governing
Non-Designated Directors set forth in Section 2.1(c), provided that
such A
Director, B Director or C Director shall at all times continue to
have one vote
on all matters before the Board of Directors; each of such
Designating
Shareholder and its Affiliates that are Shareholders shall be
entitled to vote
as a Non-Designating Shareholder in the election of Non-Designated
Directors
pursuant to Section 2.1(c) for as long as such Person remains a
Shareholder (to
the extent that such Shareholder holds Voting Common Stock); and
thereafter the
Non-Designating
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<PAGE>
Members shall be entitled to elect (A) in the case of the first
Termination Time
for a Designating Shareholder, 6 Directors, 5 of whom will be D
Directors, each
with 1.6 votes, and one of whom will be an A Director, a B Director
or a C
Director, as the case may be, with one vote, (B) in the case of the
second
Termination Time for a Designating Shareholder, 7 Directors, 5 of
whom will be D
Directors, each with 1.6 votes, and two of whom will be an A
Director, a B
Director or a C Director, as the case may be, each with one vote,
and (C) in the
case of the third Termination Time for a Designating Shareholder, 8
Directors, 5
of whom will be D Directors and three of whom will be an A
Director, a B
Director or a C Director, as the case may be, each with one
vote.
(ii) at the Termination Time for any Founder, such Founder shall
no
longer be entitled to acquire Common Stock in a Transfer pursuant
to Section
4.3(a)(ii)(B);
(iii) at the Termination Time for any Founder, such Founder shall
no
longer be entitled, in the capacity of a Founder, to demand
registration of
Common Stock for an Initial Public Offering pursuant to Section
6.2(a)(i);
(iv) at the Termination Time for any Specified Shareholder,
such
Specified Shareholder shall no longer be entitled, in the capacity
of a
Specified Shareholder, to demand registration of Common Stock for
any Subsequent
Registered Public Offering pursuant to Section 6.2(a)(ii);
(v) at the Termination Time for any Founder, such Founder shall
no
longer be required to permit other Shareholders to participate in a
Proposed
Private Sale pursuant to Section 4.13;
(vi) at the Termination Time for any Specified Shareholder, the
consent of such Specified Shareholder, in its capacity as a Founder
or as
Securitas, as the case may be, shall no longer be required with
respect to any
termination, amendment or waiver of this Agreement or any
rescission, alteration
or amendment of the Bye-laws to the extent required by Section
7.7(a)(i) or (ii)
or Section 7.7(b)(i) or (ii), as the case may be; and
(vii) at the Termination Time for any Founder, such Founder shall
no
longer be deemed to be a Founder for the purpose of triggering
preemptive rights
for each Shareholder with respect to a Subject Issuance involving
the issuance
of Common Stock (or rights to acquire Common Stock) at a price per
share equal
to or greater than $11.40 pursuant to the proviso of Section
4.11(a) (although
any right that such Founder may have in its capacity as a
Shareholder to
exercise any preemptive rights that otherwise may apply to each
Shareholder
pursuant to Section 4.11(a) shall not be affected).
For purposes of this Section 2.12, the "Termination Time" for any
Founder shall
be the first time after the Closing Date when such Founder and its
Affiliates,
taken together, own shares of Common Stock on a Fully Diluted Basis
in an amount
that is (i) less than 50% of such Founder's Original Number or (ii)
solely for
the purposes of
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<PAGE>
Section 2.12(a)(iv) and (v) above, less than 25% of such Founder's
Original
Number. For the purposes of this Section 2.12, the "Termination
Time" for
Securitas shall be the first time after the Closing Date when
Securitas and its
Eligible Affiliates, taken together, own shares of Common Stock on
a Fully
Diluted Basis in an amount that is (i) less than 75% of Securitas's
Original
Number or (ii) solely for the purposes of Section 2.12(a)(iv) and
(vi) above,
less than 50% of Securitas's Original Number; provided, however,
that the
Termination Time specified in clause (i) of this sentence (the
"First Securitas
Termination Time") may also be deemed to have occurred as provided
in Section
5.1(d).
(b) Except to the extent terminated pursuant to this Section 2.12
or
as may be specified elsewhere herein, a Specified Shareholder shall
continue to
have the rights and obligations specifically provided for such
Specified
Shareholder, as such Specified Shareholder, in this Agreement.
Without limiting
the foregoing, any individual serving as a Designated Director who
resigns at
the relevant Termination Time shall remain entitled to the benefits
of Section
7.4 with regard to all acts taken or omitted to be taken by such
individual in
his or her capacity as a Designated Director, as the case may be,
prior to such
Termination Time and shall remain subject to any obligation
regarding the use or
disclosure of Information obtained in his or her capacity as a
Designated
Director that may exist at such Termination Time. Nothing in this
Section 2.12
shall affect the rights or obligations of a Specified Shareholder
in its
capacity as a Shareholder hereunder.
2.13. Warrants. Each of the Shareholders hereby acknowledges
and
agrees that the Company shall have executed, or will execute, on or
prior to the
date of this Agreement, and shall issue in favor of each of the
Founders,
Warrants exercisable at the option of the holder thereof, upon the
terms and
conditions set forth therein, for the purchase of shares of Common
Stock, and
that a holder of Warrants shall be entitled to Transfer such
Warrants to the
extent permitted thereby and hereby. Transfers of the Warrants
shall be subject
to the same restrictions upon Transfer as apply to the Transfer of
shares of
Common Stock under Article IV (it being understood and agreed that,
for the
purpose of applying any Transfer restrictions in Article IV (other
than the
Ownership Limits except to the extent so required by such limits)
any Transfer
of a Warrant shall be deemed also to be a Transfer of the Warrant
Shares
issuable upon exercise of such Warrants). Any Common Stock issued
by the
Company, and any warrants, options or other rights to acquire
Common Stock
(other than Warrants) issued by the Company, in each case, to a
Person who is or
becomes a Shareholder after the Closing Date shall be subject to
the Transfer
restrictions set forth in Article IV and may also be subject to any
other
transfer restrictions approved or authorized by the Board of
Directors;
provided, however, that any such rights issued to such a Person
pursuant to an
employment agreement or employee benefit plan authorized or
approved by the
Board (but not the shares of Common Stock issuable upon exercise of
such rights)
may be subject to such transfer restrictions (if any) as the Board
may authorize
or approve and need not be subject to the Transfer restrictions in
Article IV
(other than Section 4.4(b)).
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<PAGE>
2.14. Waiver of Notice. Notwithstanding any other provision
hereof,
any requirement in this Agreement that notice of a meeting or any
other matter
be given to a Director, a Shareholder or any other Person may be
waived by such
Person in any matter permitted in the Bye-laws and applicable
law.
ARTICLE III
CERTAIN SHAREHOLDER UNDERTAKINGS
3.1. Grant of Proxy. Each Shareholder hereby grants a proxy to
the
Chairman and the Deputy Chairman of the Board of Directors from
time to time (or
either of them or any designee of either of them) for the purpose
of casting
such Shareholder's vote at any General Meeting or any other meeting
of holders
of capital stock of any class (and for the purpose of executing in
the name of
such Shareholder any written resolution of Members), in each case
for the sole
purpose of giving effect to the requirements set forth in Section
2.1(b) and
Section 3.4. The Person(s) exercising the foregoing proxy may do so
by
delivering to the Secretary a writing in any form stating the
number of shares
of Common Stock entitled to vote in respect of which the proxy is
being
exercised, the Shareholder(s) on the behalf of whom it is being
exercised, the
number of votes being cast and how they are being cast, which
writing shall be
signed by the Person(s) exercising such proxy but shall not be
required to be
signed or approved by any Shareholder(s) on whose behalf such proxy
is being
exercised. The foregoing proxy shall be irrevocable and shall be
deemed to be
coupled with an interest.
3.2. Restrictions on other Agreements. No Shareholder shall
grant
any proxy or enter into or agree to be bound by any voting trust
with respect to
the Common Stock other than those granted or established by this
Agreement, nor
shall any Shareholder enter into any stockholder agreement or
arrangements of
any kind with any Person with respect to the Common Stock or the
Warrants, in
either case, on terms that are inconsistent with the provisions of
this
Agreement, or that would interfere with the ability of any
Shareholder to comply
with the provisions of this Agreement (whether or not such
agreements and
arrangements are with other Shareholders or with holders of Common
Stock that
are not parties to this Agreement), including agreements or
arrangements with
respect to the acquisition, disposition or voting of shares of
Common Stock on
terms that are inconsistent with the provisions of this Agreement,
or that would
interfere with the ability of any Shareholder to comply with the
provisions of
this Agreement or that would result in a violation of the Ownership
Limits.
3.3. Further Action. Each Shareholder shall, so long as such
Shareholder owns any shares of Common Stock (other than Freely
Transferable
Shares), take any and all action (on a timely basis) necessary in
order to
ensure that such Shareholder performs its obligations under, and
otherwise
complies with, the provisions of this Agreement, including by
execution and
delivery of such instruments as may be requested. Notwithstanding
the foregoing
but subject to Section 3.4, with respect to any proposition
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to be voted upon by the Shareholders, any Shareholder with a
conflict of
interest may abstain from voting on such proposition, so long as
such abstention
does not prevent the taking of any action by the Company (unless
such
Shareholder's fiduciary duty under ERISA requires otherwise).
3.4. Exercise of Voting Rights Attributed by Law. In the event
that,
at any General Meeting or in respect of any written resolution of
Members,
Shareholders holding Non-Voting Common Stock are entitled under
Bermuda law to
vote on any matter (such as an amalgamation), notwithstanding the
fact that
their shares do not carry any voting rights under the Bye-laws,
each such
Shareholder shall cast the votes corresponding to its Non-Voting
Common Stock in
proportion to the votes cast by Members holding Voting Common Stock
at such
meeting (or by such written resolution) for, against or abstaining
from any
resolution on such matter. In such an event, the Chairman or Deputy
Chairman (or
any designee of either of them) shall exercise the proxy granted by
all
Shareholders pursuant to Section 3.1 to cause all Shareholders'
Non-Voting
Shares to be voted in the manner required by this Section 3.4.
ARTICLE IV
TRANSFER RESTRICTIONS
4.1. Restrictions on Transfers of Shares. During the term of
this
Agreement, no Shareholder may, directly or indirectly, sell,
assign, transfer or
otherwise dispose of, or pledge or otherwise encumber, any shares
of Common
Stock (any such transaction, a "Transfer" and any such Shareholder,
a
"Transferor") to or in favor of any other Person (including by
operation of law)
(a "Transferee"), except as provided in this Article IV and
subject, in all
cases, to Section 4.4. It is understood and agreed that any
issuance of Common
Stock or other securities by the Company shall not be subject to
the
restrictions of this Article IV. It is further understood and
agreed that a
change in the ownership or control of any Shareholder which is not
an
individual, directly or indirectly, will not be deemed to be a
Transfer of any
Common Stock (or rights to acquire Common Stock) held by such
Shareholder unless
and until a majority of the voting interests in, or the power to
direct the
policies, management and affairs of, such Shareholder, becomes
held, directly or
indirectly, by any Person or group of Affiliated Persons that did
not hold a
majority of such voting interests, or that did not hold such power,
as the case
may be, directly or indirectly, at the time such Shareholder most
recently
became a Shareholder (any such change, a "Change of Control" and
any such Person
or group of Affiliated Persons that so held such voting interests
or power
immediately prior to such Change of Control, the "Initial Control
Person"),
whereupon a Transfer of such Common Stock (and any such rights)
shall be deemed
to have occurred for the purposes of, and shall be required to
comply with, this
Article IV, provided that in all cases a Change of Control of the
Ultimate
Parent of such Shareholder shall not be such a Transfer, and
provided further,
that such Shareholder shall be deemed to be the Transferee of all
such Common
Stock (and rights) that it continues to own after such Transfer and
the Initial
Control Person
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with respect to such Change of Control shall be deemed to be the
Transferor
thereof. Any Transfer deemed to have occurred upon a Change of
Control as
described in the preceding sentence shall be deemed to have been
permitted if
such Transfer, had it occurred other than by virtue of such Change
of Control,
would have been permitted under this Article IV.
4.2. Transfers Under Certain Conditions. (a) Except as provided
in
Sections 4.3, 4.4 and 4.5, no Shareholder may Transfer any shares
of Common
Stock, in whole or in part, prior to the fifth anniversary of the
Closing Date
(the five-year period from (and including) the Closing Date to (but
excluding)
such fifth anniversary, the "Investment Period").
(b) After the Investment Period, a Shareholder may Transfer any
shares of Common Stock, in whole or in part, subject to Sections
4.4 and 4.6.
4.3. Transfers During Investment Period. (a) During the
Investment
Period, no Shareholder may Transfer any shares of Common Stock, in
whole or in
part, unless the Transfer meets the requirements of any one of
clauses (i)
through (vi) below (or is made pursuant to Section 4.12 or Section
4.13):
(i) the Transfer is effected with the prior approval of the Board
of
Directors acting by a Supermajority Vote (which approval may be
withheld in the
sole discretion of the Board for any reason); or
(ii) the Transfer is made by a Non-Specified Shareholder at any
time
(or by Securitas or any of its Affiliates after the consummation of
an IPO)
either (A) to a Transferee that, upon consummation of the Transfer
and together
with its Affiliates, would not Beneficially Own (other than
Beneficial Ownership
arising solely by virtue of being a party to this Agreement) a
number of shares
of Common Stock that would equal or exceed 5% of the total number
of shares of
Common Stock then outstanding on a Fully Diluted Basis or (B) to a
Founder or
its Affiliates; or
(iii) the Transfer occurs in connection with a transaction in
which
the Ultimate Parent of the Transferor consolidates, amalgamates or
merges with,
or sells or otherwise conveys all or substantially all of its
assets to, another
Person, such that all shares of Common Stock owned by the
Transferor become
owned, directly or indirectly through one or more Subsidiaries, by
the Person
surviving such consolidation, amalgamation or merger or acquiring
all or
substantially all of such assets; or
(iv) the Transfer is made to any Affiliate or Related Person of
the
Transferor; provided that, if the Transferee ceases to be an
Affiliate or a
Related Person of the Transferor at any time after the Transfer,
then (unless
the original Transfer would have been permitted under this Article
IV if
effected immediately after such time) the Transferee shall promptly
Transfer all
Common Stock (and any rights to acquire Common Stock) acquired in
the original
Transfer either back to the Transferor or an Affiliate or Related
Person of the
Transferor, which Transfer (for purposes of this
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clause (iv)) shall be treated as a Transfer to an Affiliate,
provided that such
subsequent Transfer would comply with this Article IV, or to
another Person in a
Transfer that complies with (x) Section 4.3(a)(i) (whether or not
during the
Investment Period) and (y) the other applicable provisions of this
Article IV,
and provided, further that, subject to Section 4.1, (A) no Transfer
by Securitas
or any Eligible Affiliate shall be permitted pursuant to this
clause (iv) unless
such Transfer is made to an Eligible Affiliate, (B) if any Common
Stock is
Transferred to an Eligible Affiliate that thereafter ceases to be
an Eligible
Affiliate, such Common Stock shall promptly be Transferred to an
Eligible
Affiliate (or in a Transfer that complies with Section 4.3(a)(i),
whether or not
during the Investment Period, and the other applicable provisions
of this
Article IV) and (C) any Transfer of Common Stock by Securitas to
Eligible
Affiliates shall in all cases be to Swiss Re and its Eligible
Affiliates, on the
one hand, and Credit Suisse and its Eligible Affiliates, on the
other hand, in
proportion to their respective ownership percentages of Securitas
on the date
hereof; or
(v) the Transfer is made in an Initial Public Offering or any
subsequent Registered Public Offering effected in accordance with
this
Agreement; or
(vi) the Transfer is made in an Open Market Sale after the
consummation of an Initial Public Offering, in accordance with
Section 4.5.
(b) Continuing Effect of Transfer Restrictions. Following any
Transfer of shares of Common Stock in accordance with this Section
4.3, the
restrictions provided for in Section 4.2 shall continue to apply to
the shares
of Common Stock so Transferred, other than shares of Common Stock
that become
Freely Transferable Shares.
4.4 General Conditions to Transfer. Every Transfer of shares of
Common Stock, whether made during or after the Investment Period
(other than a
Transfer of Freely Transferable Shares or a Transfer in an Open
Market Sale, to
the extent so provided in Section 4.5 and 4.6) must comply with the
following
requirements as applicable:
(a) unless the Transfer is made in a Registered Public
Offering,
each Transferee shall be an "accredited investor" as defined in
Regulation D
under the Securities Act;
(b) no Person shall be in violation of the applicable Ownership
Limits by reason of such Transfer, provided that, notwithstanding
any other
provision of this Article IV, any Transfer of Voting Common Stock
(other than
Freely Transferable Shares) to an investment partnership that is an
Affiliate of
the Transferor shall be deemed to violate the Ownership Limits
unless such
Transfer is by a Person that is not a natural person and a majority
of the
equity ownership interest in such Transferee partnership and a
majority of the
equity ownership interest in such Transferor are under common
ownership, either
directly or indirectly;
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<PAGE>
(c) unless
the Transfer is made in a Registered Public Offering, no
registration of any securities shall be required under the
Securities Act or the
Securities Exchange Act, or any other applicable securities or
"blue sky" laws,
by reason of such Transfer;
(d) unless the Transfer is made in a Registered Public
Offering,
each Transferee (other than the Company) shall expressly assume (in
an
assumption agreement substantially in the form attached hereto as
Annex E) the
rights and obligations of a Shareholder under this Agreement;
(e) the Transfer shall not violate any applicable Underwriters'
Lockup; and
(f) until such time as the Company shall become subject to
Section
13 or 15(d) of the Securities Exchange Act, the Transfer shall be
in accordance
with the requirements of Section 4.9 (Minimum Ownership
Amount).
4.5. Open Market Sales. After the consummation of an Initial
Public
Offering, a Shareholder may Transfer shares of Common Stock without
regard to
the restrictions imposed by Sections 4.3 and 4.4 (other than
Section 4.4(b)), if
the following conditions are satisfied:
(a) the shares of Common Stock Transferred shall be sold into
the
open market in accordance with the applicable requirements of Rule
144 under the
Securities Act;
(b) the Transferor shall have delivered to the Company in advance
of
the Transfer (i) a properly completed and signed certificate of the
Transferor,
substantially in the form attached hereto as Annex D-1, and (ii) if
required by
the terms of such Transferor's certificate, a properly completed
and signed
certificate of the Transferee substantially in the form of Annex
D-2, in the
case of any such Transfer during the Investment Period, or Annex
D-3, in the
case of any such Transfer after the Investment Period (the
certification(s)
required by clauses (i) and (ii), collectively, an "Open Market
Transfer
Certificate"); and
(c) the Transfer shall not violate any applicable Underwriters'
Lockup.
The Company need not accept any Open Market Transfer Certificate if
it has
reasonable grounds to believe that such certificate is false, in
which case the
Shareholder shall not Transfer the shares of Common Stock. Neither
the Company
nor the Transferor shall have any obligation to determine the
identity of any
Transferee or otherwise investigate the circumstances in which the
Transfer is
to occur.
4.6. Freely Transferable Shares. All shares of Common Stock
Transferred in compliance with Section 4.5 or in a Registered
Public Offering
conducted in compliance with this Agreement shall, immediately upon
consummation
of such Transfer, be "Freely
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<PAGE>
Transferable Shares". A Transfer involving only Freely Transferable
Shares shall
not be subject to the requirements of Sections 4.2 through 4.5
(other than
Section 4.4(b)).
4.7 Effect of Transfer. (a) The Company shall not register the
Transfer of any shares of Common Stock (other than shares of Common
Stock that,
immediately after such Transfer, would be Freely Transferable
Shares) unless the
Transferee is already a Shareholder (or the Company) or executes
and delivers to
the Company an assumption agreement substantially in the form of
Annex E. Upon
any such registration of a Transfer to a Transferee that was not
previously a
Shareholder, the Transferee (whether or not such Person has
executed and
delivered such assumption agreement for any reason) shall
automatically and
without any further action become and assume all of the applicable
rights and
obligations of a Shareholder under this Agreement. Notwithstanding
the
foregoing, a Transferee of shares of Common Stock Transferred by a
Founder or
Securitas shall not succeed to the rights of such Founder as a
Founder, or of
Securitas as a Specified Shareholder, as the case may be, under
this Agreement,
unless such Transfer involves all of the shares of Common Stock
held by such
Founder or Securitas, as the case may be, at the time of the
Transfer and is
made in compliance with Section 4.3(a)(iii) or (iv) (whether or not
the Transfer
occurs during the Investment Period) and Section 4.4.
(b) If, following any Transfer, the Transferor no longer holds
any
shares of Common Stock (other than Freely Transferable Shares) or
any Warrant
(or any other rights to acquire Common Stock that may be subject
hereto), such
Transferor (other than a Founder that has transferred Common Stock
to one of its
Affiliates that continues to hold such Common Stock) shall cease to
be a
Shareholder for all purposes of this Agreement, provided that any
rights,
obligations and liabilities of such Shareholder arising hereunder
prior to such
cessation shall be unaffected.
4.8. Compliance and Waiver. (a) In connection with any Transfer
of
shares of Common Stock subject to Section 4.3 or 4.4 (other than
Transfers in a
Registered Public Offering), the Company may require the Transferee
and/or the
Transferor to provide such documentary or other evidence, in such
form and
substance as the Company may reasonably request, in its sole
discretion, in
order to ensure compliance with this Article IV. Without limiting
the foregoing,
such evidence may include certificates as to ownership of shares of
Common
Stock, as contemplated by Section 5.1 or otherwise, and an opinion
of counsel
acceptable to the Company to the effect that registration of such
shares of
Common Stock will not be required under the Securities Act in
connection with
such Transfer (taking into account any other past or future
Transfers which, in
such counsel's view, are appropriately integrated therewith,
including, if
appropriate, sales pursuant to the Subscription Agreements).
(b) The Board of Directors, in a resolution passed by a
Supermajority Vote, in its sole discretion for any reason, may
waive any
requirement of this Article IV (as well as Section 5.1 relating to
the Ownership
Limits). The Board of Directors, in a resolution passed by a simple
majority (in
accordance with Section 2.6(a)), may also
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apply and administer the provisions of this Article IV (as well as
Section 5.1
relating to the Ownership Limits) in connection with any Transfer
or class of
Transfers or any ownership of shares of Common Stock. In addition,
the Board of
Directors may authorize any Officer to apply and administer the
provisions of
this Article IV (as well as Section 5.1 relating to the Ownership
Limits) in
connection with any Transfer or class of Transfers or any ownership
of shares of
Common Stock. Notwithstanding the foregoing, the Board may not
waive, apply or
administer any provision of this Article IV (or Section 5.1
relating to the
Ownership Limits) so as to permit a Transfer or any ownership of
shares of
Common Stock that the Board, in its reasonable judgment, determines
would be
reasonably likely to result in a violation of the Ownership Limits
in a manner
that would be prejudicial to the U.S. federal income tax treatment
of the
Members, or in violation of any applicable law. In addition, and
notwithstanding
the foregoing, no Officer may apply or administer any provision of
this Article
IV (or Section 5.1 relating to the Ownership Limits) so as to
permit a Transfer
or any ownership of shares of Common Stock that such Officer, in
his or her
reasonable judgment, determines would be reasonably likely to
result in a
violation of the Ownership Limits or any applicable law, and no
Officer shall be
authorized to grant or deny any approval of a Transfer pursuant to
Section
4.3(a)(i) or to take any other action or make any other
determination that
would, in the Board of Directors' reasonable judgment, require an
exercise of
discretion by such Officer that is beyond the scope of the
ministerial,
administrative and procedural authority appropriately delegated to
such Officer
hereunder.
4.9.
Minimum Ownership Amount. Until such time as the Company shall
become subject to Section 13 or 15(d) of the Securities Exchange
Act, any
Transfer that would result in the Transferor or the Transferee
owning less than
the Minimum Ownership Amount (except to the extent that, in such
Transfer, the
Transferor Transfers all of its shares of Common Stock to a single
Transferee
and, upon such Transfer, ceases to own any shares of Common Stock)
shall be
prohibited. The "Minimum Ownership Amount" shall mean an amount of
Common Stock
(subject to adjustment as indicated below) equal to the least of
(a) 175,000
shares of Common Stock, (b) the aggregate amount of shares of
Common Stock
purchased by the Transferor on the Closing Date (if any), and (c)
solely with
respect to a Shareholder that Transfers shares in a Private Sale
pursuant to
Section 4.13, the aggregate amount of shares of Common Stock owned
by such
Shareholder immediately after such Private Sale. The Minimum
Ownership Amount
shall be subject to adjustment by the Board of Directors as it may
determine, in
its sole discretion, is necessary due to the issuance of additional
shares of
Common Stock, to reflect any recapitalizations, stock splits,
combinations and
other similar events, or for any other reason to ensure that the
number of
holders of Common Stock does not exceed 455.
4.10.
Exchange of Non-Voting Common Stock for Voting Common Stock.
(a)
Except as provided in paragraph (b) of this Section 4.10 and
without limiting
Section 5.2(b), the Company shall not be obligated, in connection
with Transfers
of shares of Common Stock or otherwise, to exchange shares of
Non-Voting Common
Stock for shares of Voting Common Stock or vice versa.
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<PAGE>
(b) In the event of a Registered Public Offering involving a
secondary component or in the event of an Open Market Sale, each
Shareholder
participating therein shall dispose first of any shares of
Non-Voting Common
Stock held by it before disposing of any shares of Voting Common
Stock. The
requirement of this Section 4.10(b) shall not limit a Shareholder's
right to
participate in the secondary component of a Registered Public
Offering to the
extent provided in Article VI. Prior to any such Registered Public
Offering or
Open Market Sale, the Company: (i) shall establish or authorize
the
establishment of a reasonable mechanism whereby shares of
Non-Voting Common
Stock disposed of in such an offering or sale shall be exchanged
for shares of
Voting Common Stock prior to the delivery of such shares to the
intended
Transferees thereof; (ii) shall establish or authorize the
establishment of a
reasonable mechanism whereby any Shareholder continuing to hold
shares of
Non-Voting Common Stock after the consummation of a Registered
Public Offering
may exchange such shares for shares of Voting Common Stock; and
(iii) may, to
the extent that the Board of Directors deems advisable in its sole
discretion
(pursuant to a Supermajority Vote), establish or authorize the
establishment of
a reasonable mechanism whereby any Shareholder or other Person
acquiring shares
of Voting Common Stock may exchange such shares for shares of
Non-Voting Common
Stock and/or exchange shares of Non-Voting Common Stock for shares
of Voting
Common Stock, in each case (i), (ii) and (iii) subject to the
Ownership Limits
and applicable law and on such terms and conditions as the Company
(or, solely
in the case of clause (iii), the Board of Directors acting by a
Supermajority
Vote) may approve or authorize as necessary or advisable in order
to facilitate
Transfers or to ensure compliance with the Ownership Limits and
applicable law.
4.11 Preemptive Rights. (a) Upon the issuance by the Company of
any
Common Stock (or rights to acquire Common Stock) at any time prior
to the
consummation of an Initial Public Offering, each Shareholder shall
have
preemptive rights to purchase Common Stock (unless the Subject
Issuance (as
defined below) involves rights to acquire Common Stock, in which
case each
Shareholder shall have preemptive rights to purchase such rights)
from the
Company, all as provided in this Section 4.11; provided, however,
that in the
event of an issuance by the Company of any Common Stock (or rights
to acquire
Common Stock) at any time prior to the consummation of an Initial
Public
Offering, at a price per share equal to or greater than $11.40 (as
adjusted by
the Board of Directors to reflect any recapitalizations, stock
splits,
combinations and other similar events), Non-Founder Shareholders
shall have
preemptive rights only if one or more Founders (or any of their
Affiliates)
purchases (or irrevocably commits to the Company in writing to
purchase) Common
Stock (or rights to acquire Common Stock, as the case may be)
pursuant to an
exercise of preemptive rights arising in respect of the Subject
Issuance.
Notwithstanding the foregoing, preemptive rights shall not apply
with respect to
any of the following issuances (each an "Exempt Issuance"): (i) any
issuance of
Common Stock upon exercise of any then-previously issued Warrants,
options or
other similar rights, (ii) any issuance of Common Stock (or rights
to acquire
Common Stock) pursuant to any employee benefit plan or agreement
that has been
approved or authorized by the Board of Directors, (iii) any
issuance
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pursuant to Section 4.11(e) resulting from the prior exercise of
preemptive
rights, or (iv) any issuance in connection with a business
combination,
recapitalization or similar transaction. The Company may impose
such conditions
upon the purchase of Common Stock (or rights to acquire Common
Stock) pursuant
to this Section 4.11 as may be reasonably required to ensure
compliance with the
Ownership Limits and applicable law. All shares of Common Stock
purchased
pursuant to this Section 4.11 (including Common Stock purchased
pursuant to any
exercise of rights to acquire Common Stock so purchased, and, to
the extent
determined by the Board, any rights so purchased) shall be subject
to the
provisions of this Agreement.
(b) If the Company proposes to issue Common Stock (or rights to
acquire Common Stock) other than in an Exempt Issuance and if all
Shareholders
are entitled to exercise preemptive rights in respect of such
issuance as
specified in Section 4.11(a) (in any such case, a "Subject
Issuance"), the
Company shall give to the Shareholders, in advance of or promptly
after such
Subject Issuance, written notice of such Subject Issuance setting
forth the
price, amount and other terms on which such Common Stock (or rights
to acquire
Common Stock) are to be issued. Each Shareholder shall thereafter
have the
right, exercisable by written notice given to the Company no later
than ten (10)
Business Days after the Company's notice is given to Shareholders,
to purchase a
number of shares of Common Stock (or rights, as the case may be)
set forth in
such Shareholder's exercise notice (subject to Section 4.11(c)), at
the price
and on the other terms set forth in the Company's notice. Any such
exercise
notice given by a Shareholder pursuant to this Section 4.11 shall
constitute an
irrevocable commitment of such Shareholder to purchase from the
Company the
shares of Common Stock (or rights) specified in such exercise
notice, subject to
the conditions of this Section 4.11. The closing of the purchase of
such Common
Stock (or rights to acquire Common Stock) shall take place at a
location and on
a date selected by the Company, which date shall be a reasonable
period of time
before or after the consummation of the Subject Issuance.
(c) The number of shares of Common Stock (or rights to acquire
Common Stock) that a Shareholder may purchase pursuant to an
exercise of
preemptive rights under this Section 4.11 shall be no greater than
the lesser of
(i) such number as is necessary to ensure, as nearly as
practicable, that the
number of shares of Common Stock owned by such Shareholder on a
Fully Diluted
Basis, as a percentage of all Common Stock outstanding on a Fully
Diluted Basis,
immediately prior to the Subject Issuance (and any issuances
pursuant to this
Section 4.11 in connection therewith) would equal such percentage
immediately
thereafter, and (ii) the highest number that would be permitted
under the
Ownership Limits. The Company shall determine the maximum
allocation of shares
of Common Stock (or rights to acquire Common Stock) available to
each
Shareholder pursuant to this Section 4.11 after taking into account
the Subject
Issuance and the total number of shares of Common Stock (or rights
to acquire
Common Stock) likely to be issued to all Shareholders pursuant to
this Section
4.11 in connection therewith, in its sole discretion.
Notwithstanding the
foregoing, no holder of warrants or other rights to acquire Common
Stock issued
pursuant to an employee agreement or an employee benefit plan or
otherwise
(other than the Warrants or any such rights held by a
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Founder) shall be entitled to exercise preemptive rights except to
the extent
that it owns Common Stock prior to such exercise, or except to the
extent that
the Company approves such exercise, in its sole discretion (which
it shall not
do if such exercise would result in more than 455 holders of Common
Stock).
(d) If the Subject Issuance involves Voting Common Stock (or
rights
to acquire the same), the Company shall permit a Shareholder
exercising
preemptive rights to purchase Non-Voting Common Stock (or rights to
acquire the
same, as the case may be) in lieu of Voting Common Stock to the
extent necessary
to minimize any reduction in such Shareholder's allocation under
this Section
4.11 that would otherwise be required pursuant to the Ownership
Limits. In
addition, if the Shareholder so requests and the Company
determines, in its sole
discretion, that such request is practicable, the Company may offer
the
Shareholder, in lieu of securities of the kind being issued in the
Subject
Issuance, rights to acquire such securities that are structured so
as to
minimize the need to reduce such Shareholder's allocation in light
of the
Ownership Limits.
(e) At any time during a period of 120 days following the
expiration
of the 10 Business Day period referred to in Section 4.11(b), the
Company may,
if it has not already done so, issue to any Person(s) shares of
Common Stock (or
rights) in the Subject Issuance, in an amount no greater than that
set forth,
and at a price and on other terms no more favorable to the acquiror
than those
set forth in the notice of the Subject
