As filed with the Securities and Exchange Commission on October 17, 2005.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the SecuritiesExchange Act ofOF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]registrant
xFiled by a Partyparty other than the Registrant [ ]registrant ¨
Check the appropriate box:
| x | Preliminary |
| Confidential, for | ||
| ¨ | Definitive |
| ¨ | Definitive additional materials. |
| ¨ | Soliciting |
Filing By: PXRE
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee:filing fee (check the appropriate box):
| Fee paid previously with preliminary materials. | ||
Fellow Shareholders:
PRELIMINARY PROXY MATERIALS
SUBJECT TO COMPLETION, DATED OCTOBER 26, 2022
Wellesley House
90 Pitts Bay Road
Pembroke HM 08, Bermuda
[●], 2022
Dear Shareholder:
You are cordially invited to attend the 2022 Annual General Meeting of Shareholders (the “Annual General Meeting”) of Argo Group International Holdings, Ltd., a Bermuda exempted company limited by shares (the “Company”). The Annual General Meeting will be held on December 15, 2022 at 9:00 a.m. local Bermuda time (8:00 a.m. Eastern Time) at Wellesley House South, W Room (2nd Floor), 90 Pitts Bay Rd., Pembroke HM 08, Bermuda.
The proxy statement contains important information and you should read it carefully. Your vote is particularly important at the Annual General Meeting. As you may be aware, on February 28, 2022, Capital Returns Master, Ltd. (“CRM”) notified the Company that it intends to nominate a slate of two nominees to stand for election as directors at the Annual General Meeting in opposition to the nominees recommended by our Board of Directors. You may receive a proxy statement, white proxy card and other solicitation materials from CRM. Since CRM has the option to choose which of our shareholders will receive their proxy solicitation materials, you may or may not receive them. The Company is not responsible for the accuracy of any information provided by, or relating to, CRM or its nominees contained in any proxy solicitation materials filed or disseminated by, or on behalf of, CRM or any other statements that CRM may otherwise make.
Our Board of Directors has called a Special General Meeting (the “Meeting”)does NOT endorse either of Shareholders of PXRE Group Ltd. (“PXRE Group”) as described in the enclosed Notice of Special General Meeting of ShareholdersCRM’s nominees and proxy statement. The Meeting is being called sounanimously recommends that our shareholders may consider and act on certain matters that require their approval to enable PXRE Group to raise additional capital and to satisfy certain conditions precedent under the terms of PXRE Group’s recently issued Series D Perpetual Non-Voting Preferred Shares (the “Perpetual Preferred Shares”). At the Meeting, our Shareholders will be asked to approve (1) a proposed amendment to PXRE Group’s Bye-Laws to increase the authorized share capital from $60,000,000 to $360,000,000 and to increase the number of authorized Common Shares from 50,000,000 to 350,000,000 shares; (2) a proposed exchange of all Perpetual Preferred Shares issued in a private placement on October 7, 2005 into 34,090,909 Common Shares and the automatic cancellationyou vote “FOR” each of the Perpetual Preferred Shares upon receiptseven nominees proposed by the Board of the Common Shares; (3) a proposed amendment to PXRE Group’s Bye-Laws to increase the authorized share capital from $360,000,000 to $380,000,000 and to increase the number of authorized Preferred Shares from 10,000,000 to 30,000,000 shares; and (4) a proposed division of 30,000,000 of PXRE Group’s 300,000,000 newly authorized Common Shares into three pre-existing classes of Common Shares (collectively, “Convertible Common Shares”): 10,000,000 additional Class A Convertible Voting Common Shares (“Class A Convertible Common Shares”), 10,000,000 additional Class B Convertible Voting Common Shares (“Class B Convertible Common Shares”), and 10,000,000 additional Class C Convertible Voting Common Shares (“Class C Convertible Common Shares”), such Convertible Common Shares to be automatically redesignated as Common Shares upon, and to the extent of, the exercise of conversion rights attaching to such Convertible Common SharesDirectors on a one-for-one basis.
The principal reasons we are seeking your approval for the Proposals are:
BLUE proxy card. The Board of Directors has unanimously approved these proposals,strongly urges you NOT to sign or return any white proxy card sent to you by CRM. If you have previously submitted a white proxy card sent to you by CRM, you can revoke that proxy and recommends that our shareholders vote for these proposals.
Backour Board of Directors’ nominees and on the other matters to Contents
Thebe voted on at the Annual General Meeting by signing, dating and mailing the enclosed BLUE proxy card in the envelope provided. Only your latest dated proxy will be held atcounted. Even if you would like to elect one or both of CRM’s nominees, we strongly recommend you use the Company’s BLUE proxy card to do so.
Please note that under our Bye-Laws, all proxies must be received 48 hours prior to the time of the commencement of the Annual General Meeting. This means that your proxy must be received by 9:00 a.m., local Bermuda time (8:00 a.m. Eastern Time) on November 18, 2005 atDecember 13, 2022.
We strongly encourage you to read the offices of PXRE Group, 110 Pitts Bay Road, Pembroke HM 08, Bermuda. The formal notice andaccompanying proxy statement carefully and to use the enclosed BLUE proxy card to vote for this Meeting are attached to this letter.
If you ownthe Board of Directors’ nominees, and in accordance with the Board of Directors’ recommendations on the other proposals, as soon as possible. You may vote your shares through a brokerage account or in another nominee form, please follow the instructions provided onby signing and dating the enclosed vote instruction form. If you plan to attendBLUE proxy card and returning it in the Meeting and vote in person, you must obtain a proxy from your broker or nominee and bring that proxy to the Meeting.
Whetherpostage-paid envelope provided, whether or not you plan to attend the Annual General Meeting. For your convenience, you may also vote your shares via the Internet or by a toll-free telephone number by following the instructions on the enclosed BLUE proxy card. Please see the notice that follows for more information.
Thank you for your continued support. If you have any questions, please contact Innisfree M&A Incorporated, Inc., our proxy solicitor assisting us in connection with the Annual General Meeting. Shareholders in the U.S. and Canada may call toll-free at +1 (877) 750-9496. Banks and brokers may call collect at +1 (212) 750-5833.
| Sincerely, | |
| /s/ Thomas A. Bradley | |
| Thomas A. Bradley | |
| Executive Chairman and Chief Executive Officer |
| ii |
NOTICE OF THE ANNUAL GENERAL MEETING OF SHAREHOLDERS
The 2022 Annual General Meeting please takeof Argo Group International Holdings, Ltd. (“Argo” or the “Company”), a Bermuda exempted company limited by shares, will be held on December 15, 2022 at 9:00 am local Bermuda time (8:00 a.m. Eastern Time) at Wellesley House South, W Room (2nd Floor), 90 Pitts Bay Rd., Pembroke HM 08, Bermuda and at such other meeting upon any adjournments or postponements thereof (the “Annual General Meeting”).
The Annual General Meeting is called for the following purposes:
| 1. | Election of seven nominees for director for a term to end as of the 2023 annual general meeting and until their successors are duly elected and qualified; |
| 2. | To vote on a proposal to approve, on an advisory, non-binding basis, the compensation of our Named Executive Officers; |
| 3. | To vote on a proposal to approve the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors; and |
| 4. | To take action upon any other matter that may properly come before the meeting or any adjournments thereof. |
The Board of Directors of the Company has fixed the close of business on October 26, 2022 as the record date for determining those shareholders who will be entitled to vote by completingat the Annual General Meeting.
Your Board of Directors has the best mix of skills to lead your company forward as it is a diverse group of experienced director nominees with strong credentials and mailingrelevant industry expertise who will work together constructively to execute Argo’s strategic plan for delivering shareholder value. Your Board of Directors is pleased to nominate for election as directors the seven persons named in Proposal 1 in the attached proxy statement and identified as the Company nominees on the enclosedBLUE proxy card.
We have received notice from Capital Returns Master, Ltd. (which we refer to in this proxy statement as “CRM”) that it intends to nominate a slate of two nominees to stand for election as directors at the Annual General Meeting in opposition to the nominees recommended by our Board of Directors. After careful consideration, the Board does not endorse the election of either of the CRM nominees for director and recommend that you vote “FOR” each of Argo’s seven director nominees. You may receive proxy solicitation materials from CRM or other persons or entities affiliated with CRM, including an opposition proxy statement or white proxy card. The Board urges you to disregard such materials. We are not responsible for the accuracy of any information provided by or relating to CRM or its nominees contained in solicitation materials filed or disseminated by or on behalf of CRM or any other statements CRM may otherwise make. CRM chooses which of Argo’s shareholders will receive its proxy solicitation materials. Therefore, you may or may not receive those materials depending on what CRM decides.
Even if you have previously signed a white proxy card sent to you by or on behalf of CRM, you have the right to change your vote by following the instructions on the BLUE proxy card to us.vote via the Internet or by telephone or by completing, signing, dating and returning the enclosed BLUE proxy card in the postage-paid envelope provided. Only the latest-dated, properly executed proxy you submit will be counted.
We urge you to disregard any white proxy card sent by or on behalf of CRM or any person other than Argo. Voting to “WITHHOLD” your vote with respect to the nominees on any white proxy card that is circulated by or on behalf of CRM is not the same as voting for our director nominees, because a vote to “WITHHOLD” with respect to any of the nominees on a white proxy card will revoke any previous proxy submitted by you on the BLUE proxy card. Your vote is very important.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF ARGO’S SEVEN DIRECTOR NOMINEES NAMED ON THE ENCLOSED BLUE PROXY CARD, AND URGES YOU NOT TO SIGN OR RETURN ANY WHITE PROXY CARD SENT TO YOU BY OR ON BEHALF OF CRM.
If your shares are held in street name through a broker, bank or other nominee, you are considered the beneficial owner of those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares. Without your voting instructions, because of the contested nature of the proposals, to the extent your broker, bank or other nominee provides you with CRM’s proxy materials, your broker, bank or other nominee may not vote your shares with respect to the election of the Board of Directors’ nominees (Proposal 1) or on any of the other proposals on the agenda for the Annual General Meeting. Even if your broker, bank or other nominee does not provide you with CRM’s proxy materials, without your voting instructions, your broker, bank or other nominee may only vote your shares on proposals considered to be routine matters. The only routine matter being considered at the meeting is Proposal 3 (Approval of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors). Proposals 1 and 2 are considered non-routine matters. For non-routine matters, your shares will not be voted without your specific voting instructions. We encourage you to instruct your broker, bank or other nominee to vote your shares by filling out and returning the enclosed BLUE proxy card.
| iii |
On
If you have any questions regarding this information or the proxy materials, please contact Innisfree M&A Incorporated, Inc., our proxy solicitor. Shareholders in the U.S. and Canada may call toll-free at +1 (877) 750-9496. Banks and brokers may call collect at +1 (212) 750-5833. You can obtain directions to the Annual General Meeting by contacting Argo’s Investor Relations Department at +1 441-296-5858.
Whether you plan to be present at the Annual General Meeting or not, you are requested to promptly submit your proxy either electronically via the Internet or by telephone as described on the BLUE proxy card or by completing, signing and returning the proxy card to ensure that your shares will be represented. Under our Amended and Restated Bye-Laws, all proxies must be received not less than 48 hours prior to the time of the commencement of the Annual General Meeting.
| By Order of the Board of Directors | |
| /s/ Allison D. Kiene | |
| Allison D. Kiene | |
| General Counsel & Secretary |
[•], 2022
Important Notice Regarding the Availability of Proxy Materials
For the Annual General Meeting to be Held on December 15, 2022
We will send this notice, the accompanying proxy statement, the form of BLUE proxy card and our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2021 (the “2021 Annual Report”) beginning on or about [●], 2022 to shareholders of record as of October 26, 2022, the record date for the Annual General Meeting. This notice, the proxy statement and the 2021 Annual Report are also available free of charge at [●]. You may also obtain these materials at the Securities and Exchange Commission website at www.sec.gov.
Except to the extent specifically referenced herein, information contained or referenced on our website is not incorporated by reference into and does not form a part of this proxy statement.
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TABLE OF CONTENTS
| v |
Wellesley House
90 Pitts Bay Road
Pembroke HM 08, Bermuda
This proxy statement is furnished in connection with the solicitation on behalf of the Board of Directors I thank you for your participation and cooperation.
Sincerely,GERALD L. RADKE
(the “ChairmanBoard” or “Board of Directors”) of Argo Group International Holdings, Ltd. (the “Company,” “we,” “us,” or “our”) of the Board
YOUR VOTE IS VERY IMPORTANT.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR THE BERMUDA MONETARY AUTHORITY NOR THE BERMUDA REGISTRAR OF COMPANIES HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Thisenclosed proxy statement is dated October , 2005 and was first mailed toPXRE Group shareholders on October , 2005.
PRELIMINARY PROXY MATERIALS SUBJECT TO COMPLETION
Tovote common shares of the Shareholders ofPXRE Group Ltd.
A SpecialCompany (the “Common Shares” or “shares”) at the Annual General Meeting of Shareholders (the “Meeting”) of PXRE GROUP LTD., a Bermuda company (“PXRE Group”), willto be held on December 15, 2022, at the offices of PXRE Group, 1109:00 a.m. local Bermuda time (8:00 a.m. Eastern Time) (the “Annual General Meeting”) at Wellesley House South, W Room (2nd Floor), 90 Pitts Bay Road,Rd., Pembroke HM 08, Bermuda and at 9:00 a.m., local time,such other meeting upon any adjournments or postponements thereof.
Important Notice Regarding the Availability of Proxy Materials
For the Annual General Meeting to be Held on December 15, 2022
We will send the Notice of Annual General Meeting, this proxy statement, the form of BLUE proxy card and our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2021 (the “2021 Annual Report”) beginning on or about [●], 2022 to shareholders of record as of October 26, 2022, the record date for voting at the Annual General Meeting. This notice and proxy statement and our 2021 Annual Report are also available free of charge at [●]. You may also obtain these materials at the Securities and Exchange Commission website at www.sec.gov.
Note that references to the Company’s website herein do not incorporate by reference the information contained on the website and such information should not be considered a part of this proxy statement.
MEETING AGENDA
As described in further detail later in this proxy statement, the purpose of the Annual General Meeting is to consider and vote upon the following purposes:proposals and to consider such other matters as may properly come before the Annual General Meeting. The Board’s recommendation on each of the proposal is indicated below.
| PROPOSAL | BOARD RECOMMENDATION | PAGE REFERENCE | ||||
| PROPOSAL 1 | Election of seven nominees for director for a term to end as of the 2023 annual general meeting and until their successors are duly elected and qualified | FOR EACH OF THE ARGO DIRECTOR NOMINEES | 28 | |||
| PROPOSAL 2 | Approval, on an advisory, non-binding basis, the compensation of our Named Executive Officers | FOR | 38 | |||
| PROPOSAL 3 | Approval of the appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for the fiscal year ending December 31, 2022 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors | FOR | 68 | |||
The accompanying
QUESTIONS AND ANSWERS ABOUT THE ANNUAL GENERAL MEETING
What is a Proxy?
A proxy statement more fully describes the mattersis a written authorization that you give to be consideredsomeone else prior to a meeting of shareholders to vote shares on your behalf under your instructions at the Meeting.
Inmeeting. This way, you can vote your shares without attending the Annual General Meeting in person. For shareholders that complete a BLUE proxy card sent by the Company, the Company has selected Thomas A. Bradley and Allison D. Kiene, as persons designated as proxies, and each of them acting singly, to vote your shares in accordance with your instructions for the Bye-LawsAnnual General Meeting, for all proposals submitted to shareholders in connection with the Annual General Meeting with full power of PXRE Group, each of the proposals must be approved by a simple majority of the shares cast, in person or by proxy,substitution and entitledto authorize and direct proxyholders to vote at the Annual General Meeting provided a majorityand act on other business, all as recommended by the Board.
Why am I receiving this proxy statement?
The Board of Directors of the outstanding shares carryingCompany is soliciting your proxy for use at the rightCompany’s Annual General Meeting to vote are represented in personbe held on December 15, 2022, at 9:00 am local Bermuda time (8:00 a.m. Eastern Time) at Wellesley House South, W Room (2nd Floor), 90 Pitts Bay Rd., Pembroke HM 08, Bermuda and at such other meeting upon any postponements or by proxy.
adjournments thereof. Only shareholdersholders of record (other than holders of Perpetual Preferred Shares) of PXRE Groupshares at the close of business on October 14, 200526, 2022 (the “Record Date”“Record Date”), as shown by the transfer books of PXRE Group Ltd., are will be entitled to notice of and to vote at the Annual General Meeting andor such other meeting upon any adjournments or postponements thereof. As of the Record Date, there were 31,207,417[•] Common Shares, 7,037,166 Convertible Common Shares and 5,813 Convertible Voting Preferred Shares issued and outstanding.
All shareholders are cordially invitedoutstanding, and entitled to attendvote after adjustment, as further described in this Meeting in person. Those shareholders who are unable to attend in person are respectfully urged to execute and return the enclosed Proxy card at their earliest convenience. Any Proxy may be revoked by submitting, at least two (2) hours prior to the commencement of the Meeting, either a written notice of such revocation or a duly executed Proxy bearing a later date to PXRE Group Ltd. at its mailing address, P.O. Box HM 1282, Hamilton HM FX, Bermuda, Attn: Secretary. Attendance at the Meeting by a shareholder who has given a Proxy shall not in and of itself constitute a revocation of such Proxy. Delivery of a Proxy shall not preclude a shareholder from attending and voting in person at the Meeting and in such event, the Proxy shall be deemed to be revoked.
By Order of the Board of Directors,DAVID J. DOYLESecretaryStatement.
Pembroke, BermudaOctober , 2005
TABLE OF CONTENTS
APPENDICES
i
ii
PRELIMINARY PROXY MATERIALS SUBJECT TO COMPLETION
INFORMATION ABOUT THE SPECIAL GENERAL MEETING AND VOTING
We have sent you this proxy statement and the enclosed proxy card because the Board of Directors of PXRE Group Ltd., a Bermuda exempted company limited by shares (“PXRE Group”), is soliciting your proxy vote at a Special General Meeting of Shareholders (the “Meeting”). PXRE Group Ltd. expectsintend to mail itsthese proxy soliciting materials, forincluding the Meeting BLUE proxy card, on or about October 18, 2005.
This proxy statement summarizes the information you need[•], 2022, to know in orderall shareholders of record entitled to vote at the Meeting. However,Annual General Meeting
What proposals are to be presented at the Annual General Meeting and what are the Board’s voting recommendations?
As described in further detail later in this proxy statement, the purpose of the Annual General Meeting is to consider and vote upon the following proposals. The Board’s recommendation on each of the proposal is indicated below.
| PROPOSAL | BOARD RECOMMENDATION | PAGE REFERENCE | ||||
| PROPOSAL 1 | Election of seven nominees for director for a term to end as of the 2023 annual general meeting and until their successors are duly elected and qualified | FOR ALL ARGO DIRECTOR NOMINEES | 28 | |||
| PROPOSAL 2 | Approval, on an advisory, non-binding basis, the compensation of our Named Executive Officers | FOR | 38 | |||
| PROPOSAL 3 | Approval of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2022 and to refer the determination of its remuneration to the Audit Committee of our Board of Directors | FOR | 68 | |||
The Board strongly urges you NOT to sign or return
any white proxy card sent to you by CRM.
As of the date of the Notice of Annual General Meeting, we knew of no other matters to be presented at the Annual General Meeting.
What is the required vote to approve each proposal?
For the election of directors, each nominee must receive more “FOR” votes than “WITHHOLD” votes in order to be elected to the Board. Since there are more director nominees standing for election than Board seats to be filled, the seven nominees receiving the highest number of “FOR” votes will be elected, provided that they receive more “FOR” votes than “WITHHOLD” votes. Although the Company believes it is unlikely to occur, to the extent that there are less than seven nominees who receive more “FOR” votes than “WITHHOLD” votes, in accordance with the Company’s Amended and Restated Bye-Laws (the “Bye-Laws”), the current directors for those seats will remain in office as holdover directors until a successor for such holdover director is duly elected and qualified. Any holdover director seats will be filled by the current directors standing for election who do not needreceive more “FOR” votes than “WITHHOLD” votes, in order of the number of “FOR” votes they receive. For example, if there are two holdover director seats because only five director nominees standing for election receive more “FOR” votes than “WITHHOLD” votes, then the two current directors of the Company standing for election and receiving the highest number of “FOR” votes who are not re-elected to attend the Meeting to vote your shares. Instead, you may complete, signBoard because they receive more “WITHHOLD” votes than “FOR” votes will each serve as a holdover director until a successor for such holdover director is duly elected and return the enclosed proxy card.qualified.
You
The other proposals will be entitled to vote on the following proposals at the Meeting:
On October 7, 2005, PXRE Group completed a private placement of 375,000 Perpetual Preferred Shares, which shares are mandatorily exchangeable into Common Shares (or Convertible Common Shares) immediately upon the satisfaction of certain conditions precedent (the “Exchange Conditions Precedent”). The Exchange Conditions Precedent aredecided by the affirmative vote of existing shareholders (i) authorizing an additional 300,000,000 Common Shares (described under Proposal 1);a majority of votes cast. For all proposals being voted upon, abstentions and (ii) approvingbroker non-votes, if any, will not count as votes cast and, therefore, will have no effect on the exchangeoutcome of the Perpetual Preferred Sharesthese proposals.
How will my shares be voted?
Subject to Contents
into Common Shares (or Convertible Common Shares) (described under Proposal 2). If these proposals are approved, PXRE Group will deliver a number of Common Shares, based on an exchange ratio ascertain restrictions (as described below) set forth in the Description of Stock for Series D Perpetual Non-Voting Preferred Shares (the “Perpetual Preferred Share Description of Stock”), in return for the delivery of all outstanding Perpetual Preferred Shares byour Bye-Laws, each holder of its outstanding Perpetual Preferred Shares. The terms and provisions of the rights, preferences and privileges of the Perpetual Preferred Shares are set forth in the Perpetual Preferred Share Description of Stock incorporated by reference in this proxy statement as Appendix II. For a summary of these terms, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Description of the Perpetual Preferred Shares and the Common Shares—Series D Perpetual Non-Voting Preferred Shares.”
As of the Record Date, PXRE Group Ltd. had 31,207,417 Common Shares and 7,037,166 Convertible Common Shares outstanding, with 2,255,245 Common Shares and 4,510,140 Convertible Common Shares reserved for issuance. PXRE Group currently does not have a sufficient number of authorized Common Shares and Convertible Common Shares to effect the exchange of all outstanding Perpetual Preferred Shares into Common Shares and Convertible Common Shares.
The primary purposes of Proposals 1, 2 and 4 are to satisfy, in connection with PXRE Group’s issuance of the Perpetual Preferred Shares, the Exchange Conditions Precedent and to allow PXRE Group to complete its capital raising program and to restore common share capital to a level commensurate with PXRE Group’s counterparty credit ratings and its reinsurance subsidiaries’ financial strength ratings, which were recently downgraded by Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc. (“Standard & Poor’s”), and A.M. Best Company, an independent insurance industry rating organization (“A.M. Best”).
The primary purpose of the authorization of (i) any Common Shares authorized in excess of those issued in connection with the exchange of Perpetual Preferred Shares under Proposal 1, (ii) the Preferred Shares under Proposal 3, and (iii) the division of Common Shares into classes of Convertible Common Shares under Proposal 4 in excess of those issued in connection with the exchange of Perpetual Preferred Shares is to provide additional authorized shares for general corporate purposes, allowing PXRE Group to maintain financial flexibility in the event of reinsurance market opportunities or future catastrophic losses.
The proposed mandatory exchange of Perpetual Preferred Shares into Common Shares will complete PXRE Group’s current capital raising efforts. PXRE Group has no current intention to issue additional Preferred Shares, Convertible Common Shares or Common Shares in an offering if the proposed increases in authorized share capital are approved. Although it may offer such shares in the future, no determination as to the size of any such offering or use of proceeds has been made at this time.
No. PXRE Group’s current Bye-Laws do not give preemptive rights to any holder of any shares of any class of its capital stock.
The Meeting will take place at 9:00 am on November 18, 2005 at the offices of PXRE Group, 110 Pitts Bay Road, Pembroke HM 08, Bermuda.
If you are a shareholder of record to vote your shares at the Meeting you should bring the enclosed proxy card or proofas of identification. If you own your shares through a brokerage account or in another nominee form, to vote your shares at the Meeting you must obtain a proxy from your broker or nominee and bring that proxy to the Meeting.
Even if you plan to attend the Meeting, we encourage you to vote by proxy card so your vote will be counted in the event you do not attend the Meeting.
After carefully reading and considering the information contained in this proxy statement, please respond by completing, signing and dating your proxy card and returning it in the enclosed postage paid envelope. Please submit your proxy as soon as possible so that your shares may be represented at the Meeting.
The Board has set October 14, 2005 as the record date for the Meeting (the “Record Date”). If you were the owner of PXRE Group’s Common Shares, Convertible Common Shares or Series A Convertible Voting Preferred Shares (the “Series A Preferred Shares”), Series B Convertible Voting Preferred Shares (the “Series B Preferred Shares”) or Series C Convertible Voting Preferred Shares (the “Series C Preferred Shares”, and together with the Series A Preferred Shares and the Series B Preferred Shares, the “Convertible Preferred Shares”) at the close of business on the Record Date, you may vote at the Meeting. Each shareholder of record on the Record Date is entitled to notice of, and to vote at, the Meeting and at any adjournment or adjournments thereof.
As of the Record Date, (i) 31,207,417 Common Shares were issued and outstanding and held by approximately 4,600 shareholders; (ii) 7,037,166 Convertible Common Shares were issued and outstanding and held by approximately 6 shareholders and (iii) 5,813 Convertible Voting Preferred Shares were issued and outstanding and held by approximately 6 shareholders. The presence at the Meeting in person or by proxy of the holders representing a majority of the outstanding shares (giving effect to the limitations on voting referred to below) carrying the right to vote on a matter is necessary to constitute a quorum for the transaction of business at the Meeting.
Each Common Share entitles the holder thereof to one vote on each matter to be voted upon at the Meeting. As of the Record Date, holders of the Common Shares are entitled to exercise approximately 73% of the votes that may be cast at the Meeting.
Each Convertible Common Share entitles the holder thereof to vote on a fully converted basis with the Common Shares, together as a class,per share held on all matters which are submitted to a vote of shareholders. Your shares will be voted in accordance with your instructions as indicated on your proxy. If you are the shareholders at this Meeting. The Convertible Common Shares outstanding onshareholder of record and sign and return a BLUE proxy card without specifying voting instructions, your shares will be voted in accordance with the Record Date are ultimately convertible into 7,037,166 Common Shares. Asrecommendations of the Record Date, holdersBoard of the Convertible Common Shares are entitled to exercise 16.5%Directors. All votes will be counted by First Coast Results, Inc., an inspector of the votes that may be cast at the Meeting on all matters submitted.
Each Convertible Voting Preferred Share entitles the holder thereof to vote on a fully converted basis with the Common Shares, together as a class, on all matters which are submitted to a vote of the shareholders at this Meeting. The Convertible Voting Preferred Shares outstanding on the Record Date are ultimately convertible into 4,510,140 Common Shares based on the adjusted conversion price of $12.89, which reflects an anti-dilution adjustmentelection appointed for the issuance of Common Shares on October 7, 2005 to the adjusted conversion price of $13.26 as of June 30, 2005. As of the Record Date, holders of the Preferred Shares are entitled to exercise 10.5% of theAnnual General Meeting, who will separately tabulate affirmative and negative votes, that may be cast at the Meeting on all matters submitted.abstentions and broker non-votes.
| Page 2 of 71 |
Under our Bye-Laws absent a Board waiver,(Bye-law 20), no person“U.S. Person” (as that term is defined in our Bye-Laws) that owns our shares directly, or indirectly through foreign entities, is entitled to exercise voting power on a matter (either directly or through a person whose ownership of shares in excess of a maximum limitation of 9.9%us is attributed to such U.S. Person) to the extent such voting power equals or exceeds 9.5% of the votes conferred on all of our shares entitled to vote on such matter, after taking into consideration all votes held by such U.S. Person directly indirectly, beneficially or through attribution. The Board has determined to waive this requirement with respect to Capital Z Financial Services Fund II, L.P. (“Capital Z Fund”) and Capital Z Financial Services Private Fund II, L.P. (“Capital Z Private Fund” and, together with Capital Z Fund and their affiliates, “Capital Z”), but not with respect to any other holder of Convertible Voting Preferred Shares, Convertible Common Shares or Common Shares.
All matters referenced in this proxy statement upon which the shareholders will be asked to consider and vote upon will, in accordance with our Bye-Laws, be decided by an ordinary resolution; thatCompany is a resolution passed by a simple majority of votes cast in person or by proxy at the Meeting entitled to vote on such matter.
Holders of PXRE Group’s Convertible Voting Preferred Shares and Convertible Voting Common Shares have agreed with PXRE Group to vote in favor of Proposals 1 and 2 at the Meeting. The agreement to vote is
attached hereto as Appendix V to this proxy statement. Such holders do not have a sufficient number of shares to ensure approval of the Proposals.
In the case of Proposal 4, the terms of the Description of Stock for Series A Convertible Voting Preferred Shares, Series B Convertible Voting Preferred Shares, Series C Convertible Voting Preferred Shares, Class A Convertible Voting Common Shares, Class B Convertible Voting Common Shares and Class C Convertible Voting Common Shares adopted by our board of directors on December 9, 2001, which we refer to as the “Outstanding Convertible Voting Preferred Description of Stock,” require consent of at least 50% of the shares of PXRE Group’s Class A Convertible Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, each voting separately as a class, before PXRE Group may authorize additional shares of any such class. All such separate required consents have been obtained and are attached to this proxy statement as Appendix VII.
A resolution put to a vote at the Meeting will be decided on by a show of hands, unless a poll has been demanded pursuant to our Bye-Laws. Shares represented at the Meeting whose votes are withheld on any matter, shares that are represented by “broker non-votes” (that is, shares held by brokers or nominees that are represented at the Meeting but with respect to which the broker or nominee has not received voting instructions from the beneficial owner and is not empowered to vote on a particular proposal) and the shares that abstain from voting on any particular matter are not included in the tabulationprocess of the shares voting on such matter, but are counted for quorum purposes.
It means you hold shares registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card you receive.
If you properly sign your proxy card but do not include instructions on how to vote, your shares will be voted FOR approval of each of the Proposals.
In connection with the Proposals, not returning your proxy card will mean your vote will not count, unless you intend to be present in person to vote. This is why it is so important that you make your vote count by completing and returning your proxy card.
Yes. You can change your vote at any time before your proxy is voted at the Meeting. You can do this in one of three ways:
Your attendance at the Meeting alone will not revoke your proxy. Only your vote at the Meeting will revoke your proxy.
The Board of Directors has not proposed any action for which the laws of Bermuda entitle shareholders to appraisal rights.
The increase in the number of authorized shares and the subsequent issuance of Common Shares in exchange for the Perpetual Preferred Shares under Proposal 2 could have the effect of delaying or preventing a change of control of PXRE Group without further action by the shareholders. Authorized and unissued shares could (within the limits imposed by applicable law) be issued in one or more transactions that would make a change of control of PXRE Group more difficult, and therefore less likely. See “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Anti-Takeover Effects.”
The presence at the Meeting in person or by proxy of the holders of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Meeting.
Each of Proposals 1, 2, 3 and 4 will be voted on separately by the shareholders of PXRE Group.
Proposals 1, 2, 3 and 4 must each be approved by a simple majority of votes cast on the proposal. Abstentions will be treated as votes cast and will have the same effect as votes against the proposal and broker non-votes will have no effect on the vote (except in the determination ofdetermining whether, the total votes cast on a proposal represent over 50% in interest of all securities entitled to vote on the proposal).
Your broker will not be able to vote your shares without instructions from you. To instruct your broker to vote your shares, follow the directions provided by your broker.
If you should have more questions about this proposal, or would like additional copies of this proxy statement, you should contact:
Georgeson Shareholder Communications Inc.17 State StreetNew York, NY 10004Telephone: (877) 901-6134
We will bear the cost of preparing, assembling and mailing this proxy statement and the material enclosed herewith. We have retained Georgeson Shareholder Communications, Inc., a proxy soliciting firm, to assist in the solicitation of proxies, for an estimated fee of $9,000, plus reimbursement of certain out-of-pocket expenses. Our directors, officers and employees may solicit proxies orally or in writing, without additional compensation. Our regularly retained investor relations firm, Citigate Sard Verbinnen, may also be called upon to solicit proxies by telephone or other means, in which case we would anticipate paying hourly rates for time spent (ranging from $125 to $450 per hour) plus out-of-pocket expenses. We will reimburse brokers, fiduciaries and custodians for their reasonable costs in forwarding proxy materials to the beneficial owners of our shares.
PROPOSALS
BACKGROUND TO, AND REASONS FOR, THE PROPOSALS
On September 19, 2005, PXRE Group announced that, based on updated information, it had increased its earlier estimate of our potential losses due to the net impact of Hurricane Katrina to the range of $235 million to $300 million, after tax, reinsurance recoveries on our outwards reinsurance program and the impact of inwards and outwards reinstatements and additional premiums. Accordingly, losses from Hurricane Katrina will materially negatively impact third quarter financial results and shareholders’ equity and PXRE Group expects to have a net loss for calendar 2005. PXRE Group’s updated estimates were based on insured industry loss estimates in the range of $30 billion to $40 billion. These industry loss estimates may increase as the loss adjustment process continues.
PXRE Group has begun to receive loss notices with respect to Hurricane Katrina, but most of these notices are precautionary in nature with no supporting loss information. Accordingly, the estimates were based mainly on modeling, a review of exposed reinsurance contracts and discussions with certain clients. Actual losses may vary materially from these estimates.
In addition, the estimates are subject to a high level of uncertainty arising out of extremely complex and unique causation and coverage issues, including the appropriate attribution of losses to wind or flood damage as opposed to other perils such as fire, business interruption or civil commotion. The underlying policies generally contain exclusions for flood damage; however, water damage caused by wind may be covered. PXRE Group expects that causation and coverage issues may not be resolved for a considerable period of time and may be influenced by evolving legal and regulatory developments.
PXRE Group’s actual losses from Hurricane Katrina may exceed its estimates as a result of, among other things, the receipt of additional information from clients, the attribution of losses to coverages that for the purpose of the estimates it assumed would not be exposed, and inflation in repair costs due to the limited availability of labor and materials, in which case PXRE Group’s financial results could be further materially adversely affected. On September 24, 2005, Hurricane Rita struck Texas and Louisiana, causing significant destruction in portions of those states. PXRE Group’s preliminary estimate of the net impact from Hurricane Rita is currently between $30 million and $40 million, after tax, reinsurance recoveries on its outwards reinsurance program and the impact of inwards reinstatement premiums. This preliminary estimate is primarily based on early industry loss predictions ranging from $2.5 billion to $6.0 billion, a combination of the output of industry models, market share analyses and a preliminary review of in-force contracts. PXRE Group’s actual losses from Hurricane Rita may ultimately differ materially from its preliminary assessment of losses.
Based on the preliminary estimate of loss from Hurricane Rita and the preliminary range of loss from Hurricane Katrina, PXRE Group now expects to report a net loss of $125 million to $220 million for 2005, assuming no additional material catastrophes occur during the rest of 2005. For the quarter ending September 30, 2005, PXRE Group expects to report a net loss of between $230 million to $320 million.
On September 29, 2005, Standard & Poor’s downgraded the counterparty credit and financial strength ratings of PXRE Group’s reinsurance subsidiaries from “A” (Strong) to “A-” (Strong) and announced that these remain on Credit Watch with negative implications. A.M. Best also downgraded the financial strength rating of PXRE Group’s reinsurance subsidiaries from “A” (Excellent) to “A-” (Excellent) on September 30, 2005 and announced that this rating remains under review with negative implications pending successful completion of PXRE Group’s capital plan.
On October 3, 2005, Standard & Poor’s announced that its “A-” counterparty credit and financial strength ratings on PXRE Reinsurance Ltd. and PXRE Reinsurance Co. as well as its “BBB-” counterparty credit ratings on PXRE Group Ltd. and PXRE Corp. are remaining on CreditWatch with negative implications, where they were placed on September 9, 2005, because of the uncertainty that conditions necessary to effect the mandatory conversion to common shares will be met.
Standard & Poor’s stated that upon the successful conversion to common equity and after evaluating management’s progress in reducing prospective earnings and capital volatility, Standard & Poor’s will most likely affirm the current ratings and assign a stable outlook. Standard & Poor’s noted that if there is a lack of
material progress in reducing prospective earnings and capital volatility, Standard & Poor’s will probably assign a negative outlook, but that material delays in the conversion of Perpetual Preferred Shares to common equity will likely result in the ratings being lowered, reflecting the largely unmitigated capital impact from Katrina losses and the materially reduced financial flexibility resulting from the provisions of the Perpetual Preferred Shares.
On October 7, 2005, PXRE Group issued and sold 375,000 of Perpetual Preferred Shares in a private placement exempt from registration under the Securities Act of 1933. The Share Purchase Agreement is incorporated by reference in this proxy statement as Appendix III. The Perpetual Preferred Shares have an initial liquidation preference of $1,000 and an $11.00 per Common Share exchange price. PXRE Group raised $375 million (approximately $360.5 million of proceeds net of agents’ fees) in the private placement and, at the exchange price of $11.00 per Common Share, the Perpetual Preferred Shares will be mandatorily exchangeable for 34,090,909 of PXRE Group’s Common Shares immediately upon an affirmative vote of its shareholders (i) authorizing an additional 300 million Common Shares; and (ii) approving the exchange of the Perpetual Preferred Shares into Common Shares (or Convertible Common Shares) (the “Exchange Conditions Precedent”). For a detailed discussion of the features of the Perpetual Preferred Shares, including adjustments to the purchase price, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Description of the Perpetual Preferred Shares and the Common Shares—Series D Perpetual Non-Voting Preferred Shares” below and the Perpetual Preferred Share Description of Stock attached as Exhibit B to the share purchase agreement filed with the Securities and Exchange Commission on October 3, 2005 under cover of a Form 8-K and incorporated by reference in this proxy statement as Appendix II. The Perpetual Preferred Shares issued and sold in the private placement were issued from existing authorized share capital and the shareholders are not being asked to vote upon the private placement.
In addition, on October 7, 2005, as part of the Company’s recent capital raising efforts PXRE Group issued and sold 8,843,500 of its Common Shares (inclusive of Common Shares sold upon exercise of the underwriters’ overallotment option) in an underwritten public offering at a price of $13.01 per share, after the underwriting discount. The Common Shares issued and sold in the public offering were issued from existing authorized share capital and the shareholders are not being asked to vote upon the public offering.
The proposed mandatory exchange of Perpetual Preferred Shares into Common Shares will complete PXRE Group’s current capital raising efforts. PXRE Group has no current intention to issue additional Preferred Shares, Convertible Common Shares or Common Shares in an offering if the proposed increases in authorized share capital are approved. Although it may offer such shares in the future, no determination as to the size of any such offering or use of proceeds has been made at this time.
PROPOSAL 1:
On October 2, 2005, the Board of Directors adopted a resolution declaring it advisable and in the best interests of the shareholders to amend PXRE Group’s Bye-Laws to increase the authorized share capital from $60,000,000 to $360,000,000 and to increase the number of authorized Common Shares, par value $1.00 per share, from 50,000,000 to 350,000,000 shares;
The Board of Directors further directed that the proposed action be submitted for consideration of PXRE Group’s shareholders at a Meeting to be called for that purpose.
If the shareholders approve the amendment, PXRE Group will amend Bye-Law 2 of the Bye-Laws to increase the number of Common Shares as described above. If adopted by the Shareholders, the increase will become effective from the date the shareholder resolution is adopted. The only changes in PXRE Group’s existing Bye-Laws would be those numeric changes required to reflect the increase and division of share capital as proposed in this proxy statement. The text of Bye-Law 2(1) of the Bye-Laws, as it is proposed to be amended is set forth as Appendix I to this proxy statement.
The primary purpose of Proposal 1 is to satisfy, in connection with PXRE Group’s issuance of the Perpetual Preferred Shares, the Exchange Conditions Precedent and to allow PXRE Group to complete its capital raising program and to restore common share capital to a level commensurate with PXRE Group’s counterparty credit ratings and its reinsurance subsidiaries’ financial strength ratings, which were recently downgraded by Standard & Poor’s and A.M. Best. The primary purpose of the authorization of any Common Shares authorized in excess of those issued in connection with the exchange of Perpetual Preferred Shares under Proposal 1 is to provide additional authorized shares for general corporate purposes, allowing PXRE Group to maintain financial flexibility in the event of reinsurance market opportunities or future catastrophic losses.
Approval of Proposal 1 is essential to the completion of PXRE Group’s capital raising program. As of the Record Date, PXRE Group Ltd. had 31,207,417 Common Shares and 7,037,166 Convertible Common Shares outstanding, with 2,255,245 Common Shares and 4,510,140 Convertible Common Shares reserved for issuance. PXRE Group currently does not have a sufficient number of authorized Common Shares and Convertible Common Shares to effect the exchange of all outstanding Perpetual Preferred Shares into Common Shares and Convertible Common Shares. A.M. Best and Standard & Poor’s have made clear to us that in the absence of additional capital, PXRE Group can expect a downgrade in our ratings. Standard & Poor’s and A.M. Best have stated that material delays in the conversion of Perpetual Preferred Shares to common equity will likely result in the ratings being lowered, reflecting the largely unmitigated capital impact from Katrina losses and the materially reduced financial flexibility resulting from the provisions of the Perpetual Preferred Shares. Therefore, if Proposal 1 is not approved, PXRE Group expects that a downgrade will occur in its ratings.
In the event that Proposal 1 is not approved, the mandatory exchange of the Perpetual Preferred Shares into Common Shares will not be completed.
Approval of Proposal 1 is one of the Exchange Conditions Precedent to the mandatory exchange of the Perpetual Preferred Shares into Common Shares. If the mandatory exchange is not approved by our shareholders by April 1, 2006, we will be required to pay additional dividends on the Perpetual Preferred Shares. These additional dividends on the Perpetual Preferred Shares would begin to accrue retroactively from the date of issuance at a rate of 15% per annum, increasing to 17% per annum on April 1, 2007 and 19% per annum on April 1, 2008. These additional dividends would be paid in the form of additional Perpetual Preferred Shares on a quarterly basis, with all retroactive dividends from the date of issuance being made on June 30, 2006. The increasing percentage of shareholders’ equity represented by the Perpetual Preferred Shares would progressively and increasingly reduce the portion attributable to our common shares. In addition, to the extent our board of directors declares dividends on our common shares, the holders of Perpetual Preferred Shares (which will be entitled to participate in such dividends on an as-exchanged basis) would be entitled to a progressively greater portion of the funds available to pay those dividends. The combined effect of these provisions would have a material adverse effect on the value of our common shares. In addition, if the mandatory exchange of the
Perpetual Preferred Shares for our common shares has not been effected prior to December 31, 2006, we may be required by the terms of the Perpetual Preferred Shares to use our reasonable best efforts to publicly offer and sell our common shares in each calendar year, beginning in 2007, and use the proceeds thereof to repurchase Perpetual Preferred Shares at their then-existing liquidation preference. Accordingly, if the Perpetual Preferred Shares are not mandatorily exchanged for our common shares by April 1, 2006 or prior to December 31, 2006, our common shareholders may be materially adversely affected. For a detailed discussion of these features of the Perpetual Preferred Shares, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Description of the Perpetual Preferred Shares and the Common Shares— Series D Perpetual Non-Voting Preferred Shares—Offer to Repurchase” and “—Dividends” and the Perpetual Preferred Description of Stock incorporated by reference into this proxy statement.
If Proposal 1 is approved and the Perpetual Preferred Shares are exchanged for Common Shares, there will be immediate and substantial dilution to holders of Common Shares as a result of both the mandatory exchange and the adjustments resulting from the anti-dilution provisions of the outstanding Convertible Voting Preferred Shares triggered by the exchange. For important information regarding the terms of the Convertible Voting Preferred Shares, you should read the Outstanding Convertible Voting Preferred Description of Stock, which is incorporated by reference in this proxy statement as Appendix VI.
The anti-dilution protections afforded to the holders of Convertible Preferred Shares will have a dilutive effect on the holders of outstanding Common Shares. Each Convertible Preferred Share, in whole or in part, is convertible at any time at the option of the holder into Convertible Common Shares for that series according to a formula set forth in the description of stock included as Appendix VI hereto. The Convertible Common Shares are, in turn, convertible into Common Shares on a one-for-one basis. The number of Convertible Common Shares per Convertible Preferred Shares issuable upon any conversion will be determined by dividing a liquidation preference for the series equal to the aggregate original purchase price of the Convertible Preferred Shares plus accrued but unpaid dividends thereon, by the conversion price then in effect. The conversion price is subject to adjustment to avoid dilution in the event of recapitalization, reclassification, stock split, consolidation, merger, amalgamation or other similar event or an issuance of additional Common Shares in a private placement below the fair market value or in a registered public offering below 95% of fair market value or without consideration. In addition, the conversion price is subject to adjustment for certain loss and loss expense development on reserves for losses incurred on or before September 30, 2001 and for any liability or loss arising out of pending material litigation on December 10, 2001.
The recent issuance of Common Shares in a public offering on October 7, 2005 occurred at a price below 95% of the fair market value (as defined in Appendix VI) of PXRE Group’s Common Shares, resulting in an increase of approximately 126,127 Common Shares to be received by the holders of the Convertible Preferred Shares upon ultimate conversion of Convertible Preferred Shares. The proposed issuance of Common Shares upon exchange of the outstanding Perpetual Preferred Shares into Common Shares is also expected to occur at a price below the fair market value (as defined in Appendix VI) of PXRE Group’s Common Shares as of the date that the Perpetual Preferred Shares become exchangeable and therefore is also expected to result in an increase in the number of Common Shares to be received by the holders of the Convertible Preferred Shares upon ultimate conversion. The fair value of the PXRE Group’s Common Shares in connection with the exchange cannot be determined until such time as the Perpetual Preferred Shares are exchangeable. For illustrative purposes, however, based upon the current fair market value of PXRE Group’s Common Shares, $12.72, the adjustment of the conversion price of the Convertible Preferred Shares would, upon the ultimate conversion of Convertible Preferred Shares into Common Shares, result in the issuance of approximately 412,524 additional Common Shares to holders of Convertible Preferred Shares, or approximately 1% of the outstanding Common Shares as of the Record Date, onthere existed any U.S. Person which had voting power which equaled or exceeded 9.5% of such shares and so could be considered a fully converted basis.
In addition, it“9.5% U.S. Member” (as that term is contemplated that the remaining authorized Common Shares may be issued by PXRE Groupdefined in one or more offerings. Asour Bye-Laws). Pursuant to our Bye-Laws, if there is any 9.5% U.S. Member as of the dateRecord Date, the voting power of this proxy statement, however, PXRE Group has no current intention to issue additional Preferred Shares, Convertible Common Shares or Common Shares in an offering if the proposed increases in authorized share capital are approved. Although it may offer suchall shares will be adjusted (and shall be automatically adjusted in the future, no determination asfuture) to the size of anyextent necessary so that there will be no such offering or use of proceeds has been made at this time. Subject to the terms of the Outstanding Convertible Voting Description of Stock, once Proposal 1 is approved, no further
Back to Contents9.5% U.S. Member.
authorization by the holders of Common Shares is expected to be required prior to an offering of authorized Common Shares.
For a discussion of the terms of the outstanding Common Shares, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Description of the Perpetual Preferred Shares and the Common Shares—Common Shares.” For a discussion of possible anti-takeover effects of the increase in authorized share capital, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Anti-Takeover Effects.”
VOTE REQUIRED FOR APPROVAL OF PROPOSAL 1
Proposal 1How many shares must be approved by a simple majority ofpresent to conduct the votes cast on the proposal, providedAnnual General Meeting?
Pursuant to our Bye-Laws, a majority of the outstanding shares carrying the right to vote, are representedpresent in person or represented by proxy.
Proposal 2proxy, will constitute a quorum for the transaction of business at the Annual General Meeting. Abstentions and “broker non-votes” are counted as present in determining whether the quorum requirement is conditionedsatisfied. A broker non-vote, as further explained below, occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
What is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?
If your shares are registered in your name on the Record Date, you are a shareholder of record. When you properly vote in accordance with the instructions provided on the proxy card, you are instructing the named proxies to vote your shares in the manner you indicate on your proxy.
If your shares are held in the name of your bank, broker or other nominee (herein referred to generally as a “Broker”), which is usually the case if you hold your shares in a brokerage or similar account, your shares are held in “street name.” Your Broker is the shareholder of record for your shares. As the holder of record, only your Broker is authorized to vote or grant a proxy for your shares. If your shares are held in “street name,” you should follow the instructions on your voting instruction form and provide specific instructions to your Broker on how to vote the shares they hold for you.
What is a “Broker Non-Vote”?
A broker non-vote occurs when a Broker submits a proxy on behalf of a beneficial owner for the Annual General Meeting but does not vote on a particular proposal because such Broker does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner. Broker non-votes (like abstentions) will be counted as present for purposes of determining a quorum. Without your voting instructions, because of the contested nature of the proposals, to the extent your broker, bank or other nominee provides you with CRM’s proxy materials, your Broker may not vote your shares with respect to the election of the Board of Directors’ nominees (Proposal 1) or on any of the other proposals on the agenda for the Annual General Meeting. Even if your Broker does not provide you with CRM’s proxy materials, without your voting instructions, such Broker has the discretion to vote your shares on “routine” matters, but not on non-routine matters. Routine matters include only Proposal 3 (Approval of the appointment of KPMG as our independent auditors for the fiscal year ending December 31, 2022 and to refer the determination of its remuneration to the Audit Committee of the Board). All other proposals to be presented at the Annual General Meeting are considered “non-routine” and therefore Brokers will not have discretionary authority to vote your shares with respect to the other proposals to be presented at the Annual General Meeting. Therefore, it is important that you instruct your Broker how to vote your shares. We encourage you to instruct your Broker to vote your shares by following the instructions shown on the enclosed BLUE voting instruction form.
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If you are a shareholder of record with respect to shares on the Record Date, you may vote by one of the following four options:
If you submit a BLUE proxy CARD to us without indicating instructions with respect to specific proposals, we will vote your shares consistent with the recommendations of our Board stated in this Proxy Statement. If any other matters are properly presented at the 2022 Annual General Meeting for consideration, then the persons named as the Company’s designated proxies will have discretion to vote for you on those matters.
Even if you plan to attend the Annual General Meeting in person, we encourage you to vote your shares in advance via the Internet, by telephone or by signing, dating and returning your BLUE proxy card.
If your shares are held by a Broker in “street name,” please follow the instructions you receive from your Broker to vote your shares. You may need to contact your Broker to determine whether you will be able to vote electronically via the Internet or by telephone. If you wish to vote in person at the Annual General Meeting you must provide an executed proxy from your Broker indicating that you were the beneficial owner of your shares on the Record Date, and that such Broker is giving you its proxy to vote such shares.
Please note that under our Bye-Laws, all proxies must be received 48 hours prior to the time of the commencement of the Annual General Meeting. This means that your proxy must be received by 9:00 a.m. local Bermuda time (8:00 a.m. Eastern Time) on December 13, 2022.
If you return your proxy by mail, please ensure you leave enough time for your proxy to be mailed and received by the inspector of election. Also note that if your shares are held through a Broker, such entity may have even earlier deadlines by which to submit your vote. Please follow their instructions accordingly.
Whether or not you plan to attend the Annual General Meeting, please vote promptly by Internet or telephone by following the instructions set forth on the enclosed BLUE proxy card or by completing, signing, dating and returning the enclosed BLUE proxy card in the postage-paid envelope provided. Your promptness in voting using the BLUE proxy card will assist in the expeditious and orderly processing of the proxy and will assure that you are represented at the Annual General Meeting even if you cannot attend the meeting.
We are encouraging shareholders to submit their proxies electronically (by Internet or by telephone) if possible. If you return your BLUE proxy card by mail or vote by telephone or Internet, you may nevertheless attend the Annual General Meeting and vote your shares in person.
Will other candidates be nominated for election as directors at the Annual General Meeting in opposition to the Board’s nominees?
Yes. CRM, has notified us that it intends to nominate two directors for election to the Board at the Annual General Meeting in opposition to the nominees recommended by the Board. The Board unanimously recommends you vote on your BLUE proxy card “FOR” each of the seven nominees proposed by the Company’s Board and strongly urges you not to sign or return any white proxy card sent to you by CRM or vote for any of the CRM nominees listed on the enclosed BLUE proxy card. The Board does not endorse any nominee of CRM. If you have previously submitted a white proxy card sent to you by CRM, you can revoke that proxy and vote in accordance with the Board’s recommendation by using the enclosed BLUE proxy card to vote “FOR” each of the Board’s nominees and “FOR” the other proposals set forth therein.
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How many candidates can be elected as directors at the Annual General Meeting?
On February 18, 2022, Anthony P. Latham, one of the Company’s current directors, advised the Company that he did not intend to stand for re-election to the Board at the Annual General Meeting due to personal commitments. Additionally, on October 24, 2022, Fred R. Donner, one of the Company’s current directors, advised the Company that he also did not intend to stand for re-election to the Board at the Annual General Meeting in light of his other professional and personal commitments. Accordingly, the Board has determined to reduce the size of the Board to seven directors, effective immediately upon the commencement of the Annual General Meeting, and only seven candidates can be elected to the Board at the Annual General Meeting. For the election of directors, each nominee must receive more “FOR” votes than “WITHHOLD” votes in order to be elected to the Board. Since there are more director nominees standing for election than Board seats to be filled, the seven nominees receiving the highest number of “FOR” votes will be elected, provided that they receive more “FOR” votes than “WITHHOLD” votes. As such, the Board does not endorse any nominee of CRM and unanimously recommends that you vote “FOR” each of the nominees proposed by the Board using the BLUE proxy card accompanying this proxy statement. The Board strongly urges you not to sign or return the white proxy card sent to you by CRM. If you have previously submitted a white proxy card sent to you by CRM, you can revoke that proxy and vote in accordance with the Board’s recommendation by using the enclosed BLUE proxy card to vote “FOR” each of the Board’s nominees and “FOR” the other proposals set forth therein.
What do I need for admission to attend the Annual General Meeting?
All shareholders attending the Annual General Meeting in person will be required to show valid picture identification. If your Common Shares are in the name of your Broker, you will also need to bring evidence of your share ownership as of the Record Date, such as a brokerage account statement which shows your holdings as of the Record Date or a copy of your voting instruction form. If you do not have valid picture identification or proof of your share ownership, you may not be admitted to the meeting. For security purposes, packages and bags will be inspected and you may be required to check these items. Please arrive early enough to allow yourself adequate time to clear security.
Shareholders whose shares are held in the name of a broker or other nominee and who desire to vote in person at the meeting must obtain a legal proxy.
What should I do if I receive a white proxy card from CRM?
CRM has notified us of its intention to nominate two individuals for election as directors to the Company Board at the Annual General Meeting in opposition to two director nominees recommended by the Board. If CRM proceeds with its director nominations, you may receive proxy solicitation materials from CRM, including an opposition proxy statement and a white proxy card. We urge you to disregard such materials. The Company is not responsible for the accuracy of any information contained in any proxy solicitation materials used by CRM or any other statements that it may otherwise make.
The Company’s Board does not endorse any CRM nominee and unanimously recommends that you disregard any white proxy card or solicitation materials that may be sent to you by CRM. Voting to “WITHHOLD” with respect to any of CRM’s nominees on its white proxy card is NOT the same as voting for the Board’s nominees, because a vote to “WITHHOLD” with respect to any of CRM’s nominees on its white proxy card will revoke any proxy you previously submitted. If you have already voted using the white proxy card, you have the right to change your vote by voting via the Internet or by telephone by following the instructions on the BLUE proxy card, or by completing, signing, dating and mailing the enclosed BLUE proxy card in the postage-paid envelope provided. Only the latest-dated, validly executed proxy that you submit will be counted—any proxy may be revoked at any time prior to its exercise at the Annual General Meeting by following the instructions under “Can I change my vote?” below. If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor, Innisfree M&A Incorporated, Inc. toll-free at (877) 750-9496, or banks and brokers may call collect at (212) 750-5833.
What if I return a BLUE proxy card but do not make specific choices?
If you return a signed and dated BLUE proxy card without marking any voting selections, your shares will be voted “FOR” each of the Board’s seven nominees for director, “FOR” ratification of the appointment of KPMG as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2022, and “FOR” the advisory approval of Proposal 1executive compensation. If any other matter is properly presented at the Annual General Meeting, your proxyholder (one of the individuals named on your BLUE proxy card) will vote your shares using his or her best judgment.
Can I change my vote?
If your shares are registered in your name, you may revoke your proxy and Proposal 4.change your vote prior to the completion of voting at the Annual General Meeting by:
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RECOMMENDATION OF THE BOARD OF DIRECTORS
If your shares are held by a Broker in “street name” and you wish to revoke a proxy, you should contact your Broker and follow its procedures for changing your voting instructions. You also may vote in person at the Annual General Meeting to revoke an earlier proxy if you provide an executed proxy from your Broker indicating that you were the beneficial owner of the shares on the Record Date, and that such Broker is giving you its proxy to vote the shares.
If you submit more than one proxy, only the latest dated validly executed proxy that you submit will count.
Please note that under our Bye-Laws, all proxies must be received 48 hours prior to the time of the commencement of the Annual General Meeting. This means that your proxy must be received by 9:00 a.m. local Bermuda time (8:00 a.m. Eastern Time) on December 13, 2022.
Is the Company using a universal proxy card in connection with voting at the Annual Meeting?
Yes. The SEC has adopted new rules requiring the use of a universal proxy card in contested director elections that take place after August 31, 2022 (the “New Rules”). As the Annual General Meeting will be held on December 15, 2022, the New Rules are applicable to the Annual General Meeting. Nominees from both the Company and CRM will be included in the universal proxy card, however, your Board of Directors unanimously recommends using the BLUE universal proxy card and voting “FOR” each of the seven nominees proposed by the Board of Directors.
What is an under vote and over vote and how does it impact the universal proxy card?
Under votes means instances in which a shareholder returns a universal proxy card in a director election contest but does not exercise a vote with respect to all seven seats up for election at the Annual General Meeting. Over votes means instances in which a shareholder returns a universal proxy card in a director election but marks votes “FOR” more than the seven seats up for election at the Annual General Meeting.
What happens if I return a BLUE proxy card but give voting instructions for less than seven candidates?
An “undervote” occurs when a shareholder submits less votes “FOR” director nominees than there are Board of Director seats up for election.
To the extent an undervote (e.g., voting “FOR” with respect to fewer than seven nominees on Proposal 1) occurs on a record holder’s BLUE proxy card, your shares will only be voted “FOR” those nominees you have so marked and any remaining votes on Proposal 1 shall not be voted.
What happens if I return a BLUE proxy card but give voting instructions for more than seven candidates?
An “overvote” occurs when a shareholder submits more votes “FOR” director nominees than there are Board of Director seats up for election.
To the extent an overvote (e.g., voting “FOR” with respect to more than seven nominees on Proposal 1) occurs on a record holder’s BLUE proxy card, all of such record holder’s votes on Item 1 regarding nominees will be invalid and will not be counted.
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If I want to vote for one or both of CRM’s nominees, can I use the BLUE proxy card?
Yes, if you would like to elect one or both of CRM’s nominees, we strongly recommend that you use the Company’s BLUE proxy card to do so.
What happens if CRM withdraws or abandons its solicitation or fails to comply with the New Rules and I already granted proxy authority in favor of CRM?
Shareholders are encouraged to submit their votes on the BLUE proxy card. If CRM withdraws or abandons its solicitation or fails to comply with the New Rules after a shareholder has unanimouslyalready granted proxy authority, shareholders can still sign and date a later submitted BLUE proxy card.
If CRM withdraws or abandons its solicitation or fails to comply with the New Rules, any votes cast in favor of CRM’s nominees will be disregarded and not be counted, whether such vote is provided on the Company’s BLUE proxy card or the CRM white proxy card.
Who will count the votes?
All votes will be counted by First Coast Results, Inc., an independent inspector of election appointed for the Annual General Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes (if any).
How can I find out the results of the voting at the Annual General Meeting?
We expect to report the preliminary voting results of the Annual General Meeting within four business days following the Annual General Meeting in a Current Report on Form 8-K. Once the independent inspector of election has determined the final voting results of the Annual General Meeting, we will file an amendment to the Current Report on Form 8-K reporting the final voting results within four business days following such determination.
Who will pay the costs of solicitation?
The Company will pay all expenses in connection with the solicitation of proxies for the Annual General Meeting. To aid in the solicitation of proxies, we have retained Innisfree M&A Incorporated, Inc. for a fee of up to $[•], plus reimbursement of expenses. We may incur additional fees if we request additional services. Innisfree M&A Incorporated, Inc. estimates that approximately [•] of its employees will assist in the Company’s proxy solicitation. In addition, officers, directors, certain employees or other agents of the Company may solicit proxies in person, by telephone, videoconference, e-mail, text message, facsimile, personal calls or other electronic means. The Company will request Brokers in whose names shares are registered to furnish to the beneficial owners of Common Shares this proxy statement and the BLUE proxy card, and any other materials related to the Annual General Meeting, including, copies of our 2021 Annual Report, and, upon request, the Company will reimburse such Brokers for their out-of-pocket and reasonable expenses in connection therewith. Our aggregate expenses in connection with our solicitation of proxies, excluding normal expenses related to a non-contested solicitation of proxies and excluding salaries and wages of our officers and regular employees, are expected to aggregate to approximately $[•], of which approximately $[•] has been spent to date.
Certain additional information about the participants in the solicitation is set forth in Annex A to this proxy statement, Supplemental Information Regarding Participants.
Why did I receive multiple copies of the BLUE proxy card and proxy materials?
If you receive more than one package of our proxy materials including the BLUE proxy card, it may mean that you have multiple accounts holding your Common Shares. These may include: accounts with our transfer agent, American Stock Transfer & Trust Company, and accounts with a Broker. In order to vote all of the shares held by you in multiple accounts, you will need to vote the shares held in each account separately. Please follow the voting instructions provided on the BLUE proxy card and any voting instruction card from your Broker that you received to ensure that all of your shares are voted.
How can I get assistance with questions relating to the proxy or voting?
If you have any questions regarding this information or the proxy materials, please contact Innisfree M&A Incorporated, Inc., our proxy solicitor. Shareholders in the U.S. and Canada may call toll-free at +1 (877) 750-9496. Banks and brokers may call collect at +1 (212) 750-5833.
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Since September 2021, Ronald Bobman of CRM has sent letters to the Company criticizing the Company’s performance and requesting that the Company initiate a strategic review process. The Company has engaged with CRM regarding these topics during this period.
On February 18, 2022, Anthony P. Latham, a current director of the Company, informed the Company that he did not intend to stand for re-election to the Board at the Annual General Meeting.
On February 28, 2022, CRM privately notified the Company of its intent to nominate two individuals, Ronald Bobman, President of CRM, and David Michelson (together, the “CRM Nominees”), to stand for election to the Board at the Annual General Meeting. This nomination followed a request to the Company from CRM for the Company to initiate a strategic review process.
On March 2, 2022, the Company was notified that Kevin J. Rehnberg, the Company’s then-Chief Executive Officer, would be temporarily unable to perform his duties for health reasons. Effective March 3, 2022, Thomas A. Bradley assumed the role of interim Chief Executive Officer for the period while Mr. Rehnberg was unable to serve. The Company announced these matters in a Form 8-K that was filed with the SEC on March 7, 2022.
On March 4, 2022, CRM’s Bermuda counsel, BeesMont Law Limited (“BeesMont”), submitted a request to the Company for a copy of the register of members, together with any nominee or proxy information, to allow CRM to communicate with the Company’s shareholders.
On March 6, 2022, the Nominating and Corporate Governance Committee of the Board interviewed both of the CRM Nominees.
On March 7, 2022, ASW Law Limited, Bermuda counsel for the Company, informed BeesMont that it would provide a copy of the register of members of the Company as soon as reasonably practicable, but noted that neither the Bermuda Companies Act nor the Bye-Laws require disclosure of any additional nominee or proxy information.
On March 8, 2022, the Board held a meeting at which, among other things, the Board determined to appoint Bernard C. Bailey as Lead Independent Director in light of the appointment of Mr. Bradley (who served as the Non-Executive Chairman of the Board) as interim Chief Executive Officer.
On March 10, 2022, Samuel Liss, one of the Company’s directors and the Chairman of the Nominating and Corporate Governance Committee of the Board, and Mr. Bobman of CRM discussed the potential date of the Annual General Meeting, the nominations submitted by CRM, as well as the prospective timeline for the Annual General Meeting.
On March 11, 2022, CRM filed a preliminary proxy statement for the Annual General Meeting.
On March 14, 2022, the Company issued a press release acknowledging receipt of CRM’s director nominations and the Chairman of the Board sent an email to the Company’s employees regarding this matter.
On March 15, 2022, the Board met to discuss, among other things, the preliminary proxy statement filed by CRM and other matters relating to the Annual General Meeting. At that meeting, the Board approved the proposed amendment and has determinedengagement of Goldman Sachs & Co. LLC (“Goldman”) as financial advisor to the Company.
On March 15, 2022, CRM issued a press release calling for the Company to hold the Annual General Meeting in early May, consistent with its historical practice.
On March 23, 2022, an institutional shareholder of the Company sent a letter to the Board requesting, among other things, that the proposed increaseBoard initiate a strategic review process to consider potential strategic alternatives, including a sale of the Company. This followed similar requests from other shareholders, including CRM, for the Board to initiate a strategic review process for the Company.
On March 28, 2022, the Board met to discuss, among other things, a potential strategic review process.
Between March 28, 2022 and April 26, 2022, the Board, together with the Company’s senior management team and the Company’s independent financial and legal advisors, continued to discuss and evaluate the possibility of initiating a strategic review process for the Company. Management continued to solicit input from shareholders during this time period, and this feedback was shared with the Board to inform its decision with respect to commencing a review of strategic alternatives.
On April 26, 2022, the Board held a meeting at which, among other things, it determined to initiate a strategic review process for the Company.
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On April 28, 2022, the Company announced that it was initiating a strategic review process to explore potential strategic alternatives in authorized share capital isorder to maximize shareholder value, including, among other things, a potential sale, merger or other strategic transaction. The Company also announced that it was postponing the Annual General Meeting until the second half of the year based on the Board’s belief that it was in the best interests of PXREall shareholders for the Company to conduct a strategic review process prior to holding the Annual General Meeting.
On June 23, 2022, the Company issued a press release announcing the appointment of Thomas A. Bradley as Chief Executive Officer and Kevin J. Rehnberg’s resignation from his positions as Chief Executive Officer and a member of the Board, effective immediately. Mr. Bradley served as the Company’s Chairman since 2020 and as interim Chief Executive Officer since March 2022 while Mr. Rehnberg was on medical leave.
On August 4, 2022, the Board appointed J. Daniel Plants, the Chief Investment Officer of Voce Capital Management LLC (one of the Company’s largest shareholders), as an independent member of the Board. The Company issued a press release announcing the appointment of Mr. Plants on August 8, 2022.
On August 8, 2022, the Company issued a press release announcing that the Company entered into a loss portfolio transfer agreement with a wholly owned subsidiary of Enstar Group Limited covering a majority of the Company’s U.S. casualty insurance reserves, including construction, for accident years 2011 to 2019 (the “LPT”).
On August 11, 2022, Thomas A. Bradley, the Company’s Chairman and Chief Executive Officer, and Scott Kirk, the Company’s Chief Financial Officer, met via videoconference with Ronald Bobman to discuss the LPT and other matters.
On September 8, 2022, the Company issued a press release announcing that the Company had entered into a definitive agreement for the sale of Argo Underwriting Agency Limited and its shareholders.Lloyd’s Syndicate 1200 to an affiliate of the Westfield Group for total cash proceeds of approximately $125 million (1.16x price to tangible book value or 0.81x price to book value as of first quarter 2022), subject to closing-related adjustments. The press release also noted that as part of the Company’s previously announced and ongoing review of strategic alternatives, the Board continues to actively consider a wide range of options for the Company. The Company believes that sale of the Lloyd’s business, together with the LPT transaction announced on August 8, 2022, advances the Company’s objective to operate as a more streamlined and less volatile U.S.-centric, commercial specialty insurer and thereby better positions the Company to drive its business strategies and evaluate further strategic alternatives to create shareholder value.
On September 22, 2022, the Board met to discuss, among other things, matters relating to the Annual General Meeting, including the possibility of engaging with CRM in an attempt to resolve the proxy contest initiated by CRM.
On September 29, 2022, Thomas A. Bradley, the Company’s Executive Chairman and Chief Executive Officer, and Scott Kirk, the Company’s Chief Financial Officer, met via videoconference with Ronald Bobman to discuss, among other things, a potential resolution to the proxy contest initiated by CRM. During this meeting, the Company’s representatives reinforced that the Company was in the process of pursuing a review of strategic alternatives, as previously requested by CRM. However, CRM was unwilling to agree to a resolution and indicated that it intended to proceed with its proxy contest.
On September 30, 2022, the Board met to discuss, among other things, the discussion with CRM on September 29, 2022 and other matters relating to the proxy contest and the Annual General Meeting.
On October 10, 2022, the Board determined to reduce the size of the Board to eight directors, effective immediately upon the commencement of the Annual General Meeting, which the Board believes reflects confidence in the oversight and strategic direction provided by the current directors, including in light of the Company’s recent Board refreshment by appointing J. Daniel Plants as a director. The Board also nominated the following director nominees for election at the Annual General Meeting: (i) Bernard C. Bailey, (ii) Thomas A. Bradley, (iii) Fred R. Donner, (iv) Dymphna A. Lehane, (v) Samuel G. Liss, (vi) Carol A. McFate, (vii) J. Daniel Plants and (viii) Al-Noor Ramji, and approved the filing of this preliminary proxy statement and the voting recommendations set forth herein.
On October 11, 2022, the Company filed its preliminary proxy statement with the SEC.
On October 18, 2022, CRM filed a revised opposition preliminary proxy statement with the SEC in connection with the Annual General Meeting.
On October 24, 2022, Fred R. Donner, a current director of the Company, informed the Company that he did not intend to stand for re-election to the Board at the Annual General Meeting in light of his other professional and personal commitments. Mr. Donner’s decision is not due to any disagreement with the Company or the Board on any matter relating to the Company’s operations, policies or practices.
On October 26, 2022, the Board determined to reduce the size of the Board to seven directors, effective immediately upon the commencement of the Annual General Meeting, which the Board believes reflects confidence in the oversight and strategic direction provided by the current directors, including in light of the Company’s recent Board refreshment by appointing J. Daniel Plants as a director. The Board also nominated the following director nominees for election at the Annual General Meeting: (i) Bernard C. Bailey, (ii) Thomas A. Bradley, (iii) Dymphna A. Lehane, (iv) Samuel G. Liss, (v) Carol A. McFate, (vi) J. Daniel Plants and (vii) Al-Noor Ramji.
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THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSED AMENDMENT.
Back to ContentsOur Strong Corporate Governance Practices
PROPOSAL 2:
On October 2, 2005,Our corporate governance structure is designed to promote the Boardhighest standards of Directors adopted a resolution declaring it advisableintegrity, ethics and in the best interests of the shareholders to approve the exchange of all Perpetual Preferred Shares issued in a private placement on October 7, 2005 into 34,090,909 Common Shares and the automatic cancellation of the Perpetual Preferred Shares upon receipt of the Common Shares.
transparency. The Board of Directors further directedmaintains robust Corporate Governance Guidelines that the proposed action be submitted for consideration of PXRE Group’s shareholders at a Meeting to be called for that purpose.
Asreflect local and international developments. The Risk & Capital Committee and Audit Committee of the Record Date, PXRE Group Ltd. had 31,207,417 Common Shares and 7,037,166 Convertible Common Shares outstanding, with 2,255,245 Common Shares and 4,510,140 Convertible Common Shares reserved for issuance. PXRE Group currently does not have a sufficient number of authorized Common Shares and Convertible Common SharesBoard are regularly briefed on emerging governance issues relevant to effect the exchange of all outstanding Perpetual Preferred Shares into Common Shares and Convertible Common Shares.
The primary purpose of Proposal 2 is to satisfy,our business as well as evolving regulatory developments, especially in connection with PXRE Group’s issuance of the Perpetual Preferred Shares, the Exchange Conditions Precedent and to allow PXRE Group to complete its capital raising program and to restore common share capital to a level commensurate with PXRE Group’s counterparty credit ratings and its reinsurance subsidiaries’ financial strength ratings, which were recently downgraded by Standard & Poor’s and A.M. Best.
Approval of Proposal 2 is essential to the completion of PXRE Group’s capital raising program. A.M. Best and Standard & Poor’s have made clear to us that in the absence of additional capital PXRE Group can expect a downgrade in our ratings. Standard & Poor’s and A.M. Best have stated that material delays in the conversion of Perpetual Preferred Shares to common equity will likely result in the ratings being lowered, reflecting the largely unmitigated capital impact from Katrina lossesBermuda and the materially reduced financial flexibility resulting from the provisions of the Perpetual Preferred Shares. Therefore, if Proposal 2 is not approved, PXRE Group expects that a downgrade will occur in its ratings.U.S.
The approval of Proposal 2 is conditioned upon the approval of Proposal 1 and Proposal 4. If any of Proposal 1, Proposal 2 or Proposal 4 is not approved, the mandatory exchange of the Perpetual Preferred Shares into Common Shares (or Convertible Common Shares) will not be completed. For a discussion of the consequences of the mandatory exchange and, alternately, the failure to complete the mandatory exchange, see “Proposal 1—Approval of Amendments to the Bye-Laws to Increase the Authorized Number of Common Shares.”
Capital Z and Reservoir Capital Partners, L.P. and its affiliates (collectively, “Reservoir”), which are holdersHighlights of our outstanding Convertible Voting Preferred Shares and Convertible Common Shares, are amonggovernance practices include the purchasers of the Perpetual Preferred Shares and will receive Common Shares (or Convertible Common Shares in the case of Reservoir as a holder of Series B Preferred Shares and Class B Convertible Common Shares) upon approval of the mandatory exchange. The Share Purchase Agreement relating to such purchase is incorporated by reference in this proxy statement as Appendix III. Holders of PXRE Group’s Convertible Voting Preferred Shares and Convertible Voting Common Shares, including Capital Z and Reservoir, have agreed with PXRE Group to vote in favor of Proposals 1 and 2 at the Meeting. The agreement to vote is attached hereto as Appendix V to this proxy statement. Such holders do not have a sufficient number of shares to ensure approval of the Proposals.
As a result of the mandatory exchange of the Perpetual Preferred Shares, PXRE Group will issue an additional 34,090,909 Common Shares and Convertible Common Shares, which represents approximately 79.7% of the currently outstanding Common Shares, Convertible Common Shares and Convertible Preferred Shares, on a fully converted basis. Prior to the issuance of the Common Shares and Convertible Common Shares upon exchange of the Perpetual Preferred Shares, holders of Common Shares, Convertible Common Shares and Convertible Preferred Shares have the right to cast approximately 100% of the vote on matters submitted to a vote at a meeting of shareholders. Upon issuance of the Common Shares and Convertible Common Shares upon exchange of the Perpetual Preferred Shares, holders of the currently outstanding Common Shares, Convertible Common Shares and Convertible Preferred Shares will have the right to cast approximately 55.9% of such vote,
Back to Contentsfollowing:
assuming expected anti-dilution adjustments for holders of Convertible Preferred Shares as discussed under Proposal 1.
USE OF PROCEEDS
There will be no proceeds to PXRE Group as a result of the exchange of Perpetual Preferred Shares into Common Shares. PXRE Group intends to use the net proceeds from the private placement of the Perpetual Preferred Shares and the public offering of the Common Shares for general corporate purposes, including, primarily, contributions to the capital of its Bermuda reinsurance subsidiary, PXRE Reinsurance Ltd. Pending use of the net proceeds as set forth above, PXRE Group intends to invest the proceeds in short-term, interest bearing securities.
| ✓ | Lead Independent Director |
| ✓ | Fully independent Board (except CEO) |
| ✓ | Annual review of director independence |
| ✓ | Annual election of directors |
| ✓ | Shareholders holding 10% of shares have right to call a special meeting |
| ✓ | Shareholder right to remove any director without cause |
| ✓ | Majority vote standard for director elections |
| ✓ | No poison pill |
| ✓ | Regular executive sessions of independent directors |
| ✓ | Annual management succession planning |
| ✓ | Annual “say-on-pay” vote |
| ✓ | Compensation Clawback policy |
| ✓ | Prohibition on pledging and hedging of shares |
| ✓ | Annual Board and Committee evaluations |
| ✓ | Annual review of Board Committee charters |
| ✓ | Equity ownership guidelines and share retention requirements |
| No cumulative voting |
| ✓ | Diverse Board in terms of gender, race and ethnicity, experiences, and specific skills and qualifications |
| ✓ | Enhanced alignment of governance with shareholder interest by the recent addition of a director on the board from a shareholder with a significant holding |
| ✓ | Director “overboarding” policy that limits the number of other public company boards that a director may serve on |
| ✓ | Board and committees may engage outside advisors independently of management |
| ✓ | Active shareholder engagement |
| ✓ | Executive compensation philosophy that aligns executive compensation with the interests of shareholders |
| ✓ | Establishment of an ad-hoc committee of the Board to focus on a review of strategic alternatives for the Company |
Our corporate governance, compliance, risk management, and internal controls policies are reviewed at least annually.
Board Refreshment
The followingdiverse skillset of our Board is a summaryenhanced by both the fresh perspectives brought by our newer directors, as well as the industry and Company-specific expertise of our longer-tenured directors, who have the experience of guiding our Company through the extended business cycles faced by the insurance industry.
Since 2019, the Board has undergone significant refreshment with four of the material terms and provisions of the rights, preferences and privileges of the Perpetual Preferred Sharesseven director nominees having served as contained in the Perpetual Preferred Share Description of Stock, the form of which is incorporated by reference herein as Appendix II. However, this summary of the Description of Stock does not purport to be complete and Shareholders are urged to read the Perpetual Preferred Share Description of Stock in its entirety.
The following terms used in this description of the Perpetual Preferred Shares are as follows:
“Adjusted Net Income (Loss)” means, as of any Adjustment Date, the Net Income (or Net Loss)directors for the quarter ending on the Adjustment Date adjusted downwards by the sum of any Capital Distributions on the Common Shares and Perpetual Capital Distributions declared during the quarter ending on the Adjustment Date.
“Adjustment Date” means, commencing with December 31, 2005, the last day of each calendar quarter.
“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, that Person. For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by”, and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise.
“Assets” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, investment assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory and goods.
“Board of Directors” meansless than three years. Most recently, the Board added J. Daniel Plants, the Chief Investment Officer of Directors of the Company.
“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York or Bermuda are authorized or obligated by law or executive order to close.
“Class B Convertible Common Shares” means the Class B Convertible Voting Common Shares, $1.00 par value per share, of the Company.
“Class C Convertible Common Shares” means the Class C Convertible Voting Common Shares, $1.00 par value per share, of the Company.
“Closing” has the meaning ascribed to such term in the Purchase Agreement.
“Closing Date” has the meaning ascribed to such term in the Purchase Agreement.
“Common Shares” means the Common Shares of the Company, par value $1.00, and shall also include any common shares of the Company hereafter issued and outstanding and any shares of the Company of any other class hereafter issued and outstanding that is not preferred as to dividends or distribution of assets in liquidation over any other class of shares of the Company and which has ordinary voting power for the election of directors of the Company.
“Company” means PXRE Group Ltd.
“Company Securities” has the meaning ascribed to such term in the Purchase Agreement.
“Date of Issuance” means the day upon which the Perpetual Preferred Shares are issued by the Company and sold to the Purchasers pursuant to the Purchase Agreement.
“Dividend Allocation Ratio” means, as of any Adjustment Date (or as of the Date of Issuance, if applicable)Voce Capital Management LLC (“Voce”), the quotient of: (i) the Aggregate Liquidation Preference on such Adjustment Date (or the Date of Issuance, if applicable); divided by (ii) the difference of (a) Shareholders’ Equity on such Adjustment Date (or the Date of Issuance, if applicable) minus (b) the Aggregate Liquidation Preference of such Adjustment Date.
“Earnings Allocation Ratio” means, as of any Adjustment Date, the quotient of: (x) the Aggregate Liquidation Preference on the immediately preceding Adjustment Date; divided by (y) Shareholders’ Equity on the immediately preceding Adjustment Date.
“Exchange Conditions Precedent” means the affirmative voteone of the Company’s existinglargest shareholders, (a) authorizing an additional 300,000,000 Common Shares; and (b) approving the exchange of the Perpetual Preferred Shares into Common Shares.
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Indebtedness” means (a) all indebtedness of the Company and its subsidiaries, including the principal of, and premium, if any, and interest (including interest accruing after the filing of a petition initiating any proceeding under any state, federal or foreign bankruptcy laws, whether or not allowable as a claim in such proceeding) on, all indebtedness, whether outstanding currently or hereafter created (i) for borrowed money, (ii) for money borrowed by one or more other Personsdirector effective August 4, 2022. This followed the addition of three new independent directors (Carol McFate, Bernard Bailey and guaranteed, directly or indirectly, by the Company or any subsidiary thereof, (iii) for money borrowed by one or more other Persons for which the Company or any subsidiary thereof provides security, (iv) constituting purchase money indebtedness the payment of which the Company or any subsidiary thereof is directly or contingently liable, (v) under any lease of any real or personal property, which obligations are capitalized on the consolidated books of the Company and its subsidiaries in accordance with GAAP or (vi) under any other arrangement under which obligations are recorded as indebtedness on the consolidated books of the Company and its subsidiaries in accordance with GAAP and (b) any and all modifications, refundings, deferrals, renewals or extensions of any such indebtedness, or securities, notes or other evidences of indebtedness issued in exchange for such indebtedness. Without limiting the generality of the foregoing, the term “Indebtedness” shall include the Trust Preferred and any comparable securities of the Company or any subsidiary thereof at any time outstanding; provided that Indebtedness shall not include intercompany indebtedness outstanding or hereafter created between the Company and any of its direct or indirect wholly-owned Subsidiaries (as defined in the Purchase Agreement, but limited in this paragraph to direct and indirect wholly owned subsidiaries) or between any two or more such direct or indirect wholly owned Subsidiaries of the Company.
“Market Price” with respect to Common Shares, on any date, shall be deemed to be the reported closing price on the last trading day ending on the trading day before such date of determination. The reported closing price for each day shall be the reported closing price on the principal United States securities exchange or automated quotation system on which the Common Shares are then listed or admitted to trading. If the Common Shares are not then listed or admitted to trading on any national securities exchange or automated quotation system or if the closing price cannot be so determined, the Market Price shall be determined (x) by the written agreement of the Company and the respective holder and (y) in the event that no such agreement is reached within twenty (20) days after the date of the event giving riseFred Donner) to the need to determine the Market Price, (A) by an independent appraiser of nationally recognized standing selected by the respective holder and the Company or (B) if the respective holder and the Company cannot agree on an appraiser within twenty (20) days after the date of the event giving rise to the need to determine the Market Price, each shall select an independent appraiser of nationally recognized standing and the two appraisers shall designate a third independent appraiser of nationally recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be borne by the Company. The Company shall cooperate, and shall provide all necessary information and assistance, to permit any determination under the preceding clauses (x) and (y).
“Net Income (Net Loss)” means the net income (loss) reported on the consolidated statements of income and comprehensive income of the Company (after Capital Distributions on the Senior Stock but before Perpetual Capital Distributions or any PIK Dividends), preparedBoard in accordance with GAAP, filed periodically with the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
“Perpetual Preferred Shares” means the Series D Perpetual Non-Voting Preferred Shares.
“Person” or “person” means an individual, corporation, partnership, firm, association, joint venture, trust, unincorporated organization, limited liability company, government, governmental body, agency, political subdivision or other entity.
“PIK Dividend Value” means an amount equal to the product of: (x) the number of Perpetual Preferred Shares issued during the immediately preceding calendar quarter; and (y) the Perpetual Preferred Liquidation Preference as of the immediately preceding Adjustment Date.
“Public Offering” means the offer for sale to the public in an underwritten offering of Common Shares2020, pursuant to an effective registration statement filed under the Securities Act of 1933.
“Public Offering Price” means the price per share at which Common Shares were offered to the public and will be sold in the underwritten Public Offering.
“Purchase Agreement” means the Share Purchasea Cooperation Agreement, dated as of September 29, 2005December 31, 2019, by and among the Company, Voce and certain of Voce’s affiliates.
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The Company benefits from a highly qualified, experienced and refreshed Board that provides independent oversight and guidance on the Purchasers,execution of the Company’s strategy. The Board is currently comprised of nine accomplished directors, eight of whom are independent and all of whom bring significant relevant expertise to the Company.
The Board and management has benefitted from both the fresh perspectives brought by our newer directors, as well as the same may be amended from time to time.industry and Company specific expertise of our longer-tenured directors.
The Board and its committees exercise leadership over governance functions in a variety of ways, including by :
“Purchasers” hasOverseeing the meaning ascribed to such term in the Purchase Agreement.
“Quarterly Allocation” means, as of any Adjustment Date, an amount equal to the product of: (x) the Adjusted Net Income (Loss) during the preceding calendar quarter; and (y) the Earnings Allocation Ratio.
“Senior Stock” means only the Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares.
“Series A Preferred Shares” means the Series A Convertible Voting Preferred Shares, par value $1.00 per share,management of the Company, including shares allocatedoversight of significant transactions, investments and risk management;
| • | Evaluating the performance of the Chief Executive Officer (“CEO”); |
“Series B Preferred Shares” means
The Company’s Corporate Governance Guidelines provide that the Series B Convertible Voting Preferred Shares, par value $1.00 per share,Board is free to make the selection of the Company, including shares allocated as sub-series B1 Preferred Shares and B2 Preferred Shares.
“Series C Preferred Shares” means the Series C Convertible Voting Preferred Shares, par value $1.00 per share,Chairperson of the Company, including shares allocated as sub-series C1 Preferred Shares and C2 Preferred Shares.
“Shareholders’ Equity” means total shareholders’ equity reported on the consolidated balance sheets of the Company, prepared in accordance with GAAP, and filed periodically with the Company’s Annual Reports on Form 10 K and Quarterly Reports on Form 10-Q.
“Trust Preferred” shall mean, collectively, (A) (i) the Junior Subordinated Deferrable Interest Debentures due 2027 of PXRE Corporation, (ii) the 8.85% Capital Trust Pass-through Securities of PXRE Capital Trust I, (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities; (B) (i) the Junior Subordinated Deferrable Interest Debentures due May 15, 2033 of PXRE Corporation, (ii) the 7.35% Fixed/Floating Capital Trust Pass-through Securities of PXRE Capital Statutory Trust II, (iii) the PXRE Corporation Guarantee with respect to such Capital Statutory Trust Pass-through Securities; (C) (i) the Junior Subordinated Deferrable Interest Debentures due May 23, 2033 of PXRE Corporation, (ii) the 9.75% Capital Trust Pass-through Securities of PXRE Capital Trust III, (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities; (D) (i) the Junior Subordinated Deferrable Interest Debentures due October 29, 2033 of PXRE Corporation, (ii) the 7.70% Fixed/Floating Capital Trust Pass-through Securities of PXRE Capital Statutory Trust IV, (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities; and (E) (i) the Junior Subordinated Deferrable Interest Debentures due September 30, 2033 of PXRE Corporation, (ii) the 7.58% Fixed/Floating Capital Trust Pass-through Securities of PXRE Capital Statutory Trust V, and (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities.
The Perpetual Preferred Shares rank senior to the Common Shares and all other capital shares of the Company (now or hereafter authorized or issued) other than the Series A Preferred Shares, the Series B Preferred SharesBoard and the Series C Preferred Shares (the “Senior Stock”), in each case as to dividends and as to the surplus
assets of the Company available for distribution upon liquidation, dissolution and winding-up as provided under the Perpetual Preferred Share Description of Stock.
Except as set forth below, the Perpetual Preferred Shares shall have no right to vote on any matter submitted to shareholders at an Annual or Special General Meeting of the Company’s shareholders.
So long as any Perpetual Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required by law overriding the provisions herein, the affirmative vote or consent of the holders of greater than 50% of all of the Perpetual Preferred Shares at the time issued and outstanding, voting as a class, given in person or by proxy either in writing (as may be permitted by law and the Bye-Laws) or at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company:
(i) in any manner authorize, create, designate, issue or sell any class or series of capital shares or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital shares or any debt security which by its terms is convertible into or exchangeable for any equity security or has any other equity feature or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, is pari passu with or is senior to the Perpetual Preferred Shares (including without limitation, any shares of Perpetual Preferred Shares (whether or not junior as to dividends or liquidation preference) having earlier mandatory redemption dates than the mandatory exchange date of the Perpetual Preferred Shares) or which in any manner adversely affects the holders of the Perpetual Preferred Shares, or amend the terms of any existing class or series of capital shares if the effect of such amendment would be to rank such class or series senior to or pari passu with the Perpetual Preferred Shares as to dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company;
(ii) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions, of the Perpetual Preferred Shares;
(iii) reclassify the shares of any class or series of capital shares into shares of any class or series of capital shares (A) ranking, either as to payment of dividends, distributions of Assets or redemptions, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, senior to or pari passu with the Perpetual Preferred Shares (including without limitation, any shares of Perpetual Preferred Shares (whether or not junior as to dividends or liquidation preference) having earlier mandatory redemption dates than the mandatory exchange date of the Perpetual Preferred Shares) or (B) which in any manner adversely affects the rights of the holders of the Perpetual Preferred Shares or any powers, rights, privileges or preference appertaining to the Common Shares, which such holders would have after mandatory exchange of the Perpetual Preferred Shares into Common Shares;
(iv) take any action to cause any amendment, alteration or repeal of any of the provisions of the Memorandum of Association or Bye-Laws, if such amendment, alteration or repeal would have an adverse effect on the rights, preferences or privileges of the holders of the Perpetual Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares which such holders would have after mandatory exchange of the Perpetual Preferred Shares into Common Shares (including, without limitation, by granting voting rights to holders of bonds, debentures or other obligations);
(v) any increase or decrease to the authorized number of Perpetual Preferred Shares or issue additional Perpetual Preferred Shares, except as required by the terms of the Perpetual Preferred Share Description of Stock;
(vi) any amalgamation, merger or sale of the Company unless the aggregate purchase price paid to the Perpetual Preferred Shareholders equals the greater of (A) the Aggregate Liquidation Preference and (B) the product of (x) the aggregate purchase price paid to the Common Shareholders and (y) the Dividend Allocation Ratio;
(vii) the sale or transfer of 25% or more of the Company’s Assets (other than the payment of reinsurance claimsCEO in the ordinary course of business);
(viii) in any acquisition bymanner and based upon the Company involving aggregate consideration in excess of $100,000,000;
(ix)criteria that the voluntary delisting of the Common Shares or the Perpetual Preferred Shares from the New York Stock Exchange or other nationally recognized securities exchange, as applicable;
(x) effect or attempt to effect a voluntary liquidation, dissolution or winding up of the Company; or
(xi) an expansion by the Company into lines of business other than continuing lines of business in which the Company is currently involved.
For so long as the Perpetual Preferred Shares remain outstanding, the Company may not make, declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment (collectively, “Capital Distributions”), with respect to the Common Shares of the Company, unless, subject to the Companies Act 1981 of Bermuda (“Companies Act”), the Company simultaneously declares and pays a cash dividend or distribution (the “Perpetual Capital Distributions”) on the Perpetual Preferred Shares in an amount equal to such Capital Distribution multiplied by the Dividend Allocation Ratio as of the Adjustment Date immediately preceding the date of such Capital Distribution (or if an Adjustment Date shall have not occurred prior to the date of such Capital Distribution, then as of the Date of Issuance).
If the Exchange Conditions Precedent are not met by April 1, 2006, then, retroactively commencing on the Date of Issuance, additional dividends on the Perpetual Preferred Shares shall begin to accrue at a rate of 15% per annum, increasing to a rate of 17% per annum on April 1, 2007 and further increasing to a rate of 19% per annum on April 1, 2008, which rate shall be calculated on the basis of a year of 360 days consisting of twelve 30-day months. Such additional dividends shall be paid on a quarterly basis on each Adjustment Date in additional Perpetual Preferred Shares in the amount equal to the Perpetual Preferred Liquidation Preference as of the immediately preceding Adjustment Date (“PIK Dividends”); provided, however, that with respect to any retroactive payment of PIK Dividends made pursuant to the Perpetual Preferred Share Description of Stock, such retroactive payment shall be made on June 30, 2006.
Any such dividend that is to be paid in PIK Dividends shall be payable by delivery to such holders, at their respective addresses as they appear in the stock register, of certificates representing theBoard deems appropriate number of duly authorized, validly issued, fully paid and nonassessable shares of Perpetual Preferred Shares to holders of Perpetual Preferred Shares. Any such dividend that is to be paid in Perpetual Capital Distributions shall be payable by delivery of such amounts to such holders at their respective addresses as they appear in the stock register.
Notwithstanding anything to the contrary set forth in the Perpetual Preferred Share Description of Stock, if at any time during which any Perpetual Preferred Share remains outstanding the dividend rate payable thereon exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the “Maximum Lawful Rate”), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the dividend rate in respect of Perpetual Preferred Shares shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the dividend rate payable thereon is less than the Maximum Lawful Rate, dividends shall continue to accrue thereon at the Maximum Lawful Rate until such time as the total dividends earned are equal to the total dividends which would have been earned had the dividend rate on such Perpetual Preferred Share been (but for the operation of this paragraph) the dividend rate payable since the Closing.
The rights of the Perpetual Preferred Shares shall rank senior in all respects to the Common Shares and all other classes and series of capital shares of the Company, including without limitation other classes and series of Preferred Shares other than the Trust Preferred and Senior Stock (collectively, “Junior Stock”).
There are currently no dividend arrearages with respect to the Perpetual Preferred Shares.
In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary:
(i) before any payment or distribution of the Assets of the Company (whether from paid in share capital, share premium or surplus) shall be made to or set apart for the holders of Junior Stock or any other shares of the Company other than the Trust Preferred and the Senior Stock, the holders of the shares of Perpetual Preferred Shares shall be entitled to receive from the Assets of the Company, payment in cash of an initial amount equal to the Purchase Price (the “Perpetual Preferred Liquidation Preference”). Commencing as of December 31, 2005 and on each Adjustment Date thereafter, the Perpetual Preferred Liquidation Preference shall be adjusted upward or downwards by an amount equal to the quotient of: (v) the change in the Aggregate Liquidation Preference as of such Adjustment Date; divided by (w) the number of Perpetual Preferred Shares outstanding. The “Aggregate Liquidation Preference” shall initially be an amount equal to the product of the Purchase Price multiplied by the number of Perpetual Preferred Shares issued upon Closing. Commencing as of December 31, 2005 and on each Adjustment Date thereafter, the Aggregate Liquidation Preference shall be adjusted upward or downwards by an amount equal to the sum of: (x) the Quarterly Allocation, plus (y) the PIK Dividend Value; provided that; the Aggregate Liquidation Preference shall never be less than the product of the Purchase Price multiplied by the number of Perpetual Preferred Shares issued upon Closing, plus the aggregate PIK Dividends less the aggregate Perpetual Capital Distributions. If the Assets distributable upon such liquidation, dissolution or winding-up of the Company shall be insufficient to permit payment to the respective holders of the shares of Perpetual Preferred Shares of the full preferential amounts as set forth in the Perpetual Preferred Share Description of Stock, then such Assets shall be distributed ratably among the shares of Perpetual Preferred Shares; and
(ii) any proceeds remaining after payment of the Perpetual Preferred Liquidation Preference shall be distributed ratably among the Common Shares and other classes of shares of the Company in accordance with the relevant rights and restrictions thereof, if any.
Subject to any other requirement under law, written notice of any liquidation, dissolution or winding up of the Company, stating the payment date or dates when and the place or places where the amounts distributable in such circumstances shall be payable, shall be given (not less than thirty (30) days prior to any payment date stated therein), to the holders of record of the Perpetual Preferred Shares at their respective addresses as the same shall appear on the register of shareholders of the Company.
Each Perpetual Preferred Share outstanding shall be mandatorily exchanged into approximately 90.9 Common Shares (the “Exchange Ratio”) immediately upon satisfaction of the Exchange Conditions Precedent, provided, however, that if (i) at the time of such exchange, eitherselection. The Board has no policy requiring the separation of the role of Chairperson and CEO. However, if the positions of Chairperson and CEO are combined, then the independent directors of the Board shall elect a record holderLead Director.
Currently, the Board believes the interests of Perpetual Preferred Shares or an Affiliate thereof is alsoall shareholders are best served through a record holder of Series B Preferred Shares or Class B Convertible Common Shares, then such holder’s Perpetual Preferred Shares shall be mandatorily exchanged into approximately 90.9 Class B Convertible Common Shares (instead of approximately 90.9 Common Shares)leadership model with a combined Chair/CEO position and (ii) at the time of such exchange, either a record holder of Perpetual Preferred Shares or an Affiliate thereof is also a record holder of Series C Preferred Shares or Class C Convertible Common Shares, then such holder’s Perpetual Preferred Shares shall be mandatorily exchanged into approximately 90.9 Class C Convertible Common Shares (instead of approximately 90.9 Common Shares). The Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares,Lead Independent Director. Thomas A. Bradley currently serves as the case may be, issuable upon mandatory exchangeCompany’s CEO and Executive Chairman of the Perpetual Preferred Shares,Board. Mr. Bradley became a director in 2018 and was appointed as Board Chair in 2020. He also previously served as interim chief executive officer between March 2022 to June 2022, when such Common Shares, Class Convertible B Common Shares or Class C Convertible Common Shares,he was appointed CEO. The Board believes that these experiences and other insights put the CEO in the best position to provide broad leadership for the Board as it considers strategic alternatives and as it maximizes shareholder value. Mr. Bradley has the case may be, shall be issuedexperience necessary to work closely with the Board while also effectively leading the management team. This structure is supported by also providing for and maintaining strong, independent oversight of the Board. In support of that independent oversight – the Board and Company have instituted a number of steps – including the appointment of Bernard Bailey as Lead Independent Director pursuant to our Corporate Governance Guidelines, regularly reviewing Board leadership structure, including during the Board’s annual evaluation process and implementing several corporate governance policies and practices that promote a strong, effective and independent Board. On April 26, 2022, the Board approved a monthly salary for Mr. Bradley of $100,000, effective as of March 3, 2022, and payable in accordance with the termsCompany’s normal payroll practices, for his services as the Company’s interim CEO and provisionsin connection with his appointment from interim CEO to permanent CEO, he was granted an award of this description(i) 78,760 shares of restricted stock that vest ratably on a monthly basis over a twelve month period beginning as of March 3, 2022, subject to his continued employment as the CEO and (ii) 135,000 stock appreciation rights with an exercise price of $43.80, which is equal to 115% of the Perpetual Preferred Shares, shall be duly authorized, validly issued, fully paid and nonassessable Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, respectively.
Each Perpetual Preferred Share will be exchanged by the holder once the Exchange Conditions Precedent have been met by surrenderclosing price of such Perpetual Preferred Share, to the Company at its office designated pursuant to the Bye-Lawsa share of the Company. Such holder shall thereupon be entitled to receiveCompany’s common stock on the number of Common Shares, Class Convertible B Common Shares or Class C Convertible Common Shares, as the case may be, specified in the exchange in this description of the Perpetual Preferred Shares. The Perpetual Preferred Shares shall be cancelled upon surrender.
The exchange of Perpetual Preferred Shares pursuant to this description of the Perpetual Preferred Shares shall be deemed to have been effected immediatelydate prior to the close of businessgrant (the “SAR Award”). The SAR Award will vest ratably in one-third equal installments on the Business Day on which the Exchange Conditions Precedent have been met and the Perpetual Preferred Shares shall have been surrendered to the Company as provided in this descriptioneach of the Perpetual Preference Shares. On such day thatfirst three anniversaries of the exchange of Perpetual Preferred Shares is deemed effected, the person or persons in whose name or names any certificate or certificates for Common Shares, Class Convertible B Common Shares or Class C Convertible Common Shares,grant date, subject to Mr. Bradley’s continued employment as the case may be, are issuable upon such exchange shall be deemed to have become the holder or holdersCEO.
The Board has determined that each of record of such Common Shares, Class Convertible B Common Shares or Class C Convertible Common Shares, as the case may be.
If the Perpetual Preferred Shares shall not have been exchangedits current directors and director nominees, except for Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may, beThomas A. Bradley, is “independent” in accordance with the Perpetual Preferred Share Descriptionapplicable corporate governance requirements of Stockthe listing rules of the NYSE as currently in effect. Due to his current management position with the Company, Mr. Bradley, is not deemed independent. Like Mr. Bradley, while serving as CEO and a director prior to December 31, 2006,his resignation from the Company shall use its reasonable best efforts, subjectBoard on June 23, 2022, Mr. Rehnberg was not deemed independent due to his management role with the conditions set forth below,Company. In addition, Kathleen A. Nealon and John H. Tonelli, who each retired from the Board immediately following the 2021 Annual General Meeting, were determined to be independent under the applicable NYSE listing rules as currently in effect. The Board also determined that each calendar year beginning with 2007 so long as no such mandatory exchange has occurred and the Perpetual Preferred Shares remain outstanding, to issue and sell in a Public Offering a number of Common Shares sufficient to produce net proceeds in an amount at least equal to $100,000,000, shall make an offer to holders of outstanding Perpetual Preferred Shares to purchase, on a pro rata basis, Perpetual Preferred Shares having up to $100,000,000 in Perpetual Preferred Liquidation Preference and shall purchase such Perpetual Preferred Shares from holders responding to such offer to purchase at a price equal to the greater of (i) the Perpetual Preferred Liquidation Preference, and (ii) the productcurrent member of the Exchange Ratio multipliedAudit Committee is “independent” and meets the other requirements for audit committee membership, including financial literacy, as defined by the price per Common Share realized by the Company in such Public Offering. However, the Company will not be required to sell any Common Sharesapplicable NYSE listing rules and SEC rules for such purpose if (i) such use of proceeds from the saleaudit committee members. Each member of the Common Shares would haveHR Committee is “independent” in accordance with the applicable corporate governance requirements of the listing rules of NYSE as currently in effect. Each member of the HR Committee also qualifies as a negative impact“non-employee director” under Section 16 of the Securities Exchange Act of 1934.
| Page 11 of 71 |
Executive Sessions of Independent Directors
In order to promote open discussion among the independent directors, the Board schedules regular executive sessions in which those directors meet without management participation. During 2021, the independent directors met in executive session four times. During 2021, Mr. Bradley presided over executive sessions as Chairman of the Board. Since Mr. Bradley’s appointment as Interim CEO and now CEO, Bernard Bailey presides over executive sessions in his capacity as Lead Independent Director. In addition, each Committee of the Board meets in executive session without management participation following regularly scheduled committee meetings.
Code of Conduct and Business Ethics
The Board has adopted Corporate Governance Guidelines and a Code of Conduct and Business Ethics (the “Code of Conduct”) that applies to all its directors, officers and employees, including the principal executive officer, the principal financial officer, and principal accounting officer, copies of which are available on the Company’s website at www.argolimited.com under the “Investors” tab and then current credit ratings or (ii) the price per share of any“Governance” tab. In addition, copies of the Common Shares wouldCode of Conduct can be less than 75%obtained, free of charge, upon written request to our principal executive offices as follows: Investor Relations, Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda. Any amendments to or waivers of the then existing Market Price per shareCode of Conduct that apply to the Board or its executive officers will be disclosed on our website.
PXRE Group has agreed to afford the purchasers
The standing committees of the Perpetual Preferred Shares certain registration rightsBoard are the Audit Committee, the Human Resources Committee, the Investment Committee, the Nominating and Corporate Governance Committee and the Risk & Capital Committee. The Board has adopted written charters for each of its committees that specifies the scope of such committee’s responsibilities. Each committee charter is available on our website at www.argolimited.com under the “Investors” tab and then the “Governance” tab. Additionally, the Board established a registration rights agreement, dated October 5, 2005,Strategic Review Committee to review strategic alternatives for the formCompany.
The Company expects its directors to attend meetings of the Board and meetings of the committees of the Board of which is incorporated by reference herein as Appendix IV. This summarythey are members. During 2021, all directors attended 75% or more of the registration rights agreement does not purport to be complete and Shareholders are urged to read the registration rights agreement in its entirety. PXRE Group has agreed that the holdersaggregate meetings of the Common Shares or Convertible Common Shares issuable upon the exchangeBoard and of the Perpetual Preferred Shares will have certain rightscommittees of the Board on which they served. In addition to demand that PXRE Group file a shelf registration statementregularly scheduled board and committee meetings, the Board holds informational calls with management throughout the year to receive information on Form S-3, and use its reasonable best efforts to cause such shelf registration statement to be declared effective under the Securities Act of 1933; provided that each underwritten offering of shares under such a registration shall be for not less than $50 million. PXRE Group also granted the purchasers of Perpetual Preferred Shares certain additional registration rights, including piggyback rights. Subjectmatters pertaining to the transfer restrictions onCompany. The Company encourages directors to attend shareholder meetings and all of the Perpetual Preferred Shares, rights underdirectors attended the registration rights agreement are transferable withCompany’s 2021 Annual General Meeting held in May 2021.
The table below lists 2021 Board and committee membership and the Perpetual Preferred Shares.number of meetings held for each committee of the Board for the fiscal year 2021. The full Board held 4 regular meetings during 2021, a planning meeting and several informational calls throughout the year.
| Committee Composition and Number of Committee Meetings Held in 2021 | |||||
| Director | Audit | Human Resources | Investment | Nominating and Corporate Governance | Risk & Capital |
| Bernard C. Bailey | ✓ | ✓ | ✓ | ||
| Thomas A. Bradley | ✓(FE) | ✓ | |||
| Fred R. Donner | ✓(C)(FE) | ✓ | |||
| Anthony P. Latham | ✓ | ✓ | |||
| Dymphna A. Lehane | ✓(C) | ✓ | |||
| Samuel G. Liss | ✓ | ✓ | ✓(C) | ||
| Carol A. McFate | ✓ | ✓(C)* | |||
| Kathleen Nealon ** | ✓** | ✓** | |||
| Al-Noor Ramji | ✓ | ✓(C) | |||
| Kevin J. Rehnberg | |||||
| John Tonelli ** | ✓ (C)** | ✓** | |||
| Number of Meetings in 2021 | 5 | 4 | 4 | 4 | 4 |
(C) – Committee Chair
(FE) – Audit Committee Financial Expert
* After May 2021
** Terms ended as of May 2021
| Page 12 of 71 |
The table below lists Board and committee membership as of the Record Date.
| 2022 Committee Composition | ||||||
| Director | Audit | Human Resources | Investment | Nominating and Corporate Governance | Risk & Capital | Strategic Review |
| Bernard C. Bailey | ✓ | ✓ | ✓ | ✓ | ||
| Thomas A. Bradley (EC) | ✓ | |||||
| Fred R. Donner | ✓(C)(FE) | ✓ | ✓ | |||
| Anthony P. Latham* | ✓ | ✓ | ||||
| Dymphna A. Lehane | ✓(C) | ✓ | ✓ | |||
| Samuel G. Liss | ✓ | ✓ | ✓(C) | |||
| Carol A. McFate | ✓ | |||||
As of October 14, 2005 there were issued and outstanding:
| J. Daniel Plants |
| ✓(C) | ||||||
| Al-Noor Ramji | ✓(C) |
Back to Contents(EC) – Executive Chair
Our outstanding Convertible Voting Preferred Shares are convertible into Convertible Common Shares and(C) – Committee Chair
(FE) – Audit Committee Financial Expert
* Will not be standing for re-election at the Convertible Common Shares are automatically convertible upon sale into Common Shares under the termsAnnual General Meeting
Audit Committee
Each member of the Outstanding Convertible Voting Preferred Shares Description of Stock incorporatedAudit Committee is “independent” and meets the other requirements for audit committee membership, including financial literacy, as defined by reference in this proxy statement as Appendix VI. In addition, we may offerapplicable NYSE listing rules and sell, Convertible Common Shares automatically convertible upon sale into Common Shares. All of the outstanding Common Shares are fully paid and nonassessable and the Common Shares when issued upon conversion of the Preferred Shares and the Convertible Common Shares, orSEC rules for audit committee members. Prior to Mr. Bradley taking on the automatic conversionrole of Convertible Common Shares sold directly by us, will be fully paidInterim CEO, Messrs. Bradley and nonassessable. Our Common Shares are traded on the New York Stock Exchange under the symbol “PXT.”
Our board of directors may issue, grant options exercisable for or otherwise dispose of our authorized Common Shares to any persons and on any terms they deem appropriate, provided the issuance does not violate Bermuda law or our Bye-Laws and we obtain Bermuda Monetary Authority approval in applicable circumstances.
The Common Shares will be, when issued against payment therefor, fully paid and nonassessable. Holders of our Common Shares have no preemptive, redemption, conversion or sinking fund rights. The rights of holders of Common Shares will be subject to, and may be adversely affected by, the rights of holders of any Preferred Shares that have been issued and may be issued in the future and any Convertible Common Shares that have been issued and may be issued in the future. See the Outstanding Convertible Voting Preferred Shares Description of Stock incorporated by reference in this proxy statementDonner were qualified as Appendix VI and “Proposal 4—Approval of Division of Common Shares into Three Classes—Description of the Convertible Common Shares” for a description of those Preferred Shares and Convertible Common Shares, respectively. The board of directors of PXRE may issue additional Preferred Shares to obtain additional financing, in connection with acquisitions, to officers, directors and employees of PXRE and its subsidiaries pursuant to benefit plans or otherwise and for other proper corporate purposes.
In the event of our liquidation, dissolution or winding-up, the holders of Common Shares are entitled to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation preference of any outstanding Convertible Voting Preferred Shares. Additional authorized but unissued Common Shares may be issued by our board of directors without the approval of the shareholders.
Because we are a holding company, our rights, and the rights of holders of our securities, including the holders of Common Shares, to participate in the distribution of assets of any of our subsidiaries upon that subsidiary’s liquidation or recapitalization will be subject to the prior claims of that subsidiary’s creditors and Preferred Shareholders, except to the extent we may be a creditor with recognized claims against the subsidiary or a holder of Preferred Shares, as the case may be, of the subsidiary.
Each Common Share has one vote, except that if, and so long as, the shares controlled (as described below) by any person constitute more than 9.9% of the voting power of our outstanding shares, including Common Shares, the voting rights with respect to the “controlled shares” owned by that person will be limited, in the aggregate, to a voting power of 9.9%. Our board of directors may in its discretion waive the 9.9% limitation on a case by case basis. Our board of directors has waived the 9.9% limitation with respect to Capital Z, and certain of their affiliates.
Under our Bye-Laws, “controlled shares” include, among other things, (i) all shares of PXRE that a person owns“audit committee financial experts” within the meaning of Section 958(a)applicable SEC rules and regulations governing the composition of the Internal Revenue Code of 1986,Audit Committee. Currently, Mr. Donner is qualified as amended, which we call the “Code,” or is considered as owning by applying the rules of Section 958(b) of the Code, (ii) all shares of PXRE that a person owns by applying the rules of Sections 544 or 554 of the Code, and (iii) all shares of PXRE that a person owns directly, indirectly or beneficially as a result of the possession of sole or shared voting poweran “audit committee financial expert” within the meaning of Section 13(d)(3) of the Exchange Act and theapplicable SEC rules and regulations promulgated thereunder. These voting reallocation provisions could make it difficult or impossible for any person or group of persons acting in concert to acquire control of us without agreement by our board of directors.
Our Bye-Laws provide thatgoverning the quorum required for a general meeting of shareholders is a majoritycomposition of the outstanding shares entitled to vote atAudit Committee.
The Audit Committee assists the meeting presentBoard in person or by proxy. In general, matters are determined by a simple majorityits oversight of votes cast by our Common Shareholders, except as otherwise required by law and our Bye-Laws.
Under our Bye-Laws,(i) the vote of 66 2/3%integrity of the outstanding shares entitled to voteCompany’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the approval of a majorityqualifications and independence of the board is required to amend our Bye-Laws regarding the appointmentindependent registered public accounting firm, and removal of directors, remuneration, powers and duties of the board, indemnification of directors and officers, director’s interests and the procedures for amending Bye-Laws. Any share entitled to vote may be voted by written proxy and proxies may be valid for all general meetings. There are no limitations under Bermuda law on the voting rights of non-resident or foreign shareholders.
Under Bermuda law, a company is required to convene at least one general shareholders’ meeting per calendar year. Under Bermuda law and our Bye-Laws, general meetings of shareholders may either be annual or special. Under Bermuda law, special general meetings must be called upon the request of shareholders holding not less than 10% of the paid up share capital of the company carrying the right to vote at general meetings. Directors may also convene special general meetings as they deem necessary.
Bermuda law requires that shareholders be given at least five days’ advance notice of a general meeting, although the accidental omission of notice to any person does not invalidate the proceedings at a meeting. Under our Bye-Laws, notice of annual general meetings and special general meetings must be made in writing at least 21 days before the meeting.
Under Bermuda law and our Bye-Laws, directors are elected at the annual general meeting to serve until their successors are elected or appointed, unless they are earlier removed or resign.
The election of our Class I, II and III directors is determined by a simple majority of votes cast by our Common Shareholders, except as otherwise required by law. Our shareholders do not have cumulative voting rights. Accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all Class I, II and III directors. Our Class IV directors are designated and elected solely by holders of our Preferred Shares and Convertible Common Shares.
Under Bermuda law and our Bye-Laws, a director may be removed at a special general meeting of shareholders specifically called for that purpose, provided that the director was served with at least 14 days’ notice. The director has a right to be heard at the meeting. Any vacancy created by the removal of a director at a special general meeting may be filled at that meeting by the election of another director in his or her place or, in the absence of any election, by the board of directors.
Under the Companies Act 1981 of Bermuda, the duties of directors and officers are to act honestly and in good faith with a view to the best interests of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Every director and officer of a Bermuda company is also required to comply with the provisions of the Companies Act 1981 of Bermuda, all related regulations and the relevant company’s bye-laws. In addition, the directors are subject to common law fiduciary duties. These duties include the duty to act bona fide in the best interests of the company, and not for any collateral purpose.
Under Bermuda law, the directors’ duties are owed to the company itself, not to its shareholders or members, creditors, or any class of either shareholders, members or creditors. In discharging his or her duties, a director is required to exercise the care and skill which may be reasonably expected of a person with the director’s skills and experience.
Bermuda law renders void any provision in the bye-laws or in any contract between a company and any director exempting him or her from or indemnifying him or her against any liability in respect of any fraud or dishonesty of which he or she may be guilty in relation to the company. In addition, the Companies Act 1981
provides that where a director, officer or auditor of a company is found liable to any person for damages arising out of(iv) the performance of anythe Company’s internal auditing function (“Internal Audit”) and the independent registered public accounting firm. Its primary responsibilities, among other items, include (a) the appointment, compensation, retention, oversight of his or her duties, he will onlythe work and termination of the Company’s independent registered public accounting firm, (b) reviewing and discussing the annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm, (c) reviewing the effectiveness of the Company’s financial reporting processes and internal controls in consultation with management, the independent registered public accounting firm and Internal Audit, including data privacy, information technology security and control, (d) pre-approving all audit and permitted non-audit and tax services to be held jointly and severally liable if it is proved that he or she knowingly engaged in fraud or dishonesty. In any other case, the court will determine the percentage of responsibility of all parties it determines have contributedprovided to the loss or liability of the plaintiff, and the liability of any one director, officer or auditor shall be equal to the total loss sufferedCompany by the plaintiff multiplied by the director’s, officer’s or auditor’s percentage of responsibility as determined by the court.
Our board of directors is currently divided into four classes and comprised of 11 directors. The specific number of directors constituting the board of directors is determined from time to time by resolution of our shareholders at a general meeting. The directors of the class elected at each annual general meeting hold office for a term of three years, with the term of each class expiring at successive annual general meetings of shareholders. A total of four Class IV directors are elected solely by the holders of our Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Sharesindependent registered public accounting firm, in accordance with our Bye-Lawsa pre-approval policy, (e) overseeing Internal Audit’s structure, objectivity, responsibilities and budget, (f) overseeing the implementation and maintenance of the Related Person Transaction Policy, (g) periodically reviewing the Company’s compliance with legal and regulatory requirements, (h) reviewing, approving or ratifying all related party transactions, and (i) monitoring compliance with the Code of Conduct, including review of conflicts of interest. The Audit Committee establishes procedures for complaints relating to accounting, internal accounting controls or auditing matters as well as procedures for confidential, anonymous submission by Company employees of any concerns regarding questionable accounting or auditing matters. In collaboration with the Risk & Capital Committee, the Audit Committee reviews and discusses with management and Internal Audit the risks faced by the Company and the termspolicies, guidelines and process by which management assesses and manages the Company’s risks, including the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
In recommending an independent registered public accounting firm for the Company, the Audit Committee annually considers such auditor’s performance and integrity, the experience and qualifications of the Outstanding Convertible Voting Preferred Descriptionlead audit partner, the geographic scope of Stock.
The holderstheir practice as compared to the Company’s geographic scope, their insurance industry expertise, the appropriateness of Common Shares will receive such dividends, if any, as may be declared by our board of directors out of funds legally available for that purpose. Under Bermuda law, we may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) we are, or aftertheir fees, the payment would be, unable to pay our liabilities as they fall due, or (ii) the realizable value of our assets after the payment or distribution would be less than the aggregate amount of our liabilities and our issued share capital and share premium accounts. All dividends unclaimed for a period of six years after having been declared will be forfeited and revert to us. Except as noted in this paragraph, there are no limitations under Bermuda lawPublic Company Accounting Oversight Board (“PCAOB”) reports on the rights of non-resident or foreign shareholders to receive dividends.firm and its peers, and other factors that it deems appropriate.
Under the terms
Human Resources Committee
Each member of the Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares, so long as the Preferred Shareholders maintain certain ownership thresholds during certain time periods, we may not increase dividends paid upon our Common Shares above a permitted amount or make distributions upon our Common Shares above a permitted amount without approval of certain of our shareholders.
As of October 14, 2005 our subsidiaries have issued approximately $167.1 million of subordinated debt securities. Of this amount, approximately $5.2 million have been purchased by certain subsidiaries of ours for investment purposes. From time to time, our affiliates may issue, in private placements, additional subordinated debt securities. In connection with the issuance of subordinated debt securities, we have agreed, among other things, that if full distributions on the subordinated debt securities have not been paid or set apart for payment or we are in default of its related guarantee obligations, PXRE, with certain exceptions, will not declare or pay dividends, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its share capital, including the Common Shares.
We may from time to time by shareholder resolution passed by a simple majority of our Common Shares, Convertible Common Shares (on a fully converted basis) and Preferred Shares (on a fully converted basis):
Transfer of shares must be in writing. The instrument of transfer of a share may be in any form which our board of directors approves.
Our Bye-Laws provide that, subject to Bermuda law and the limitation on controlled shares, the rights attached to any class of Common Shares may be modified by a resolution passed at a separate general meeting of the holders representing at least 66 2/3% of the votes cast of that class. For purposes of this meeting, one or more shareholders present in person or by proxy representing at least a majority of the issued and outstanding shares of that class and entitled to vote will be a quorum.
Neither Bermuda law nor our Memorandum of Association nor our Bye-Laws restrict in any way our power to borrow and raise funds. The decision to borrow fundsHuman Resources Committee (“HR Committee’) is passed by or under direction of our board of directors, with no shareholders’ resolution being required.
ANTI-TAKEOVER EFFECTS“
The increase in the number of authorized shares and the subsequent issuance of Common Shares in exchange for the Perpetual Preferred Shares under Proposal 2 could have the effect of delaying or preventing a change of control of PXRE Group without further action by the shareholders. Authorized and unissued shares could (within the limits imposed by applicable law) be issued in one or more transactions that would make a change of control of PXRE Group more difficult, and therefore less likely. The additional authorized shares could be used to discourage persons from attempting to gain control of PXRE Group by diluting the voting power of shares then outstanding or increasing the voting power of persons who would support the Board of Directors in a potential takeover scenario.
In addition, the increased shares authorized by the proposed amendments could permit the Board of Directors to issue shares to persons supportive of management’s position. Such persons might then be in a position to vote to prevent or delay a proposed business combination that is deemed unacceptable to the Board of Directors, although perceived to be desirable by some stockholders. Any such issuance could provide management with a means to block any vote that might be used to effect a business combinationindependent” in accordance with the Bye-Laws.
If Proposal 1 is approved andapplicable corporate governance requirements of the Perpetual Preferred Shares are exchanged for Common Shares, there will be additional Common Shares issued to current holderslisting rules of our Convertible Voting Preferred Shares and Convertible Common SharesNYSE as currently in effect. Each member of the HR Committee also qualifies as a result of both the mandatory exchange and the adjustments resulting from the anti-dilution provisions of the outstanding Convertible Voting Preferred Shares triggered by the exchange. For important information regarding the terms of the Perpetual Preferred Shares and the Convertible Voting Preferred Shares, you should read the Perpetual Preferred Share Description of Stock and the Outstanding Convertible Voting Preferred Description of Stock, which are incorporated by reference in this proxy statement as Appendix II and Appendix VI, respectively. Increased ownership of our Common Shares by our long-term investors could be viewed by persons seeking a proposed business combination as a disincentive.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL 2
Proposal 2 must be approved by a simple majority of the votes cast on the proposal, provided a majority of the outstanding shares carrying the right to vote are represented in person or by proxy.
Proposal 2 is conditioned upon the approval of Proposal 1 and Proposal 4.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously approved the proposed action and has determined that the proposed increase in authorized number of Common Shares and the subsequent issuance of such shares in exchange for the Perpetual Preferred Shares is in the best interests of PXRE Group and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSED AMENDMENT.
PROPOSAL 3:
APPROVAL OF AMENDMENTS TO THE BYE-LAWS ANDMEMORANDUM OF ASSOCIATION TO INCREASETHE AUTHORIZED NUMBER OF PREFERRED SHARES
On October 2, 2005, the Board of Directors adopted a resolution declaring it advisable and in the best interests of the shareholders to amend PXRE Group’s Bye-Laws to increase the authorized share capital from $360,000,000 to $380,000,000 and to increase the number of authorized Preferred Shares, par value $1.00 per share, from 10,000,000 to 30,000,000 shares.
The Board of Directors further directed that these amendments be submitted for consideration of PXRE Group’s shareholders at a Meeting to be called for that purpose.
If the shareholders approve the amendment, PXRE Group will amend Bye-Law 2 of the Bye-Laws to increase the number of Preferred Shares as described above. If adopted by the Shareholders, the increase will become effective from the date the shareholder resolution is adopted. The only changes in PXRE Group’s existing Bye-Laws would be those numeric changes required to reflect the increase and division of share capital as proposed in this proxy statement. The text of Bye-Law 2(1) of the Bye-Laws, as proposed to be amended, is set forth as Appendix I to this proxy statement.
The primary purpose of the increase in the number of authorized Preferred Shares is to provide additional authorized Preferred Shares for general corporate purposes, allowing PXRE Group to maintain financial flexibility in the event of reinsurance market opportunities or future catastrophic losses.
If Proposal 3 is approved, it is contemplated that the remaining authorized Preferred Shares may be issued by PXRE Group in one or more offerings. As of the date of this proxy statement, however, PXRE Group has no current intention to issue additional Preferred Shares, Convertible Common Shares or Common Shares in an offering if the proposed increases in authorized share capital are approved. Although it may offer such shares in the future, no determination as to the size of any such offering or use of proceeds has been made at this time. The terms of any such Preferred Shares, including dividend rates, conversion prices, voting rights, redemption prices, maturity dates, and similar matters will be determined by the Board of Directors at such time as the Board of Directors authorizes their issuance. Subject to the terms of the Outstanding Convertible Voting Description of Stock, once Proposal 3 is approved, no further authorization by the Common Shareholders is expected to be required prior to an offering of authorized Preferred Shares.
For a discussion of possible anti-takeover effects associated with an increase in authorized share capital, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Anti-Takeover Effects.”
In the event that Proposal 1 is not approved, the amendments to the Bye-Laws to increase authorized share capital will reflect an increase of $60,000,000 million to $80,000,000 million instead of an increase of $360,000,000 to $380,000,000.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL 3
Proposal 3 must be approved by a simple majority of the votes cast on the proposal, provided a majority of the outstanding shares carrying the right to vote are represented in person or by proxy.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously approved the proposed amendment and has determined that the proposed increase in authorized share capital is in the best interests of PXRE Group and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSED AMENDMENT.
PROPOSAL 4:
APPROVAL OF DIVISION OF AUTHORIZED COMMON SHARESINTO THREE CLASSES
On October 2, 2005, the Board of Directors adopted a resolution declaring it advisable and in the best interests of the shareholders to effect the division of 30,000,000 of PXRE Group’s 300,000,000 newly authorized Common Shares into three pre-existing classes of Convertible Common Shares: 10,000,000 additional Class A Convertible Common Shares, 10,000,000 additional Class B Convertible Common Shares, and 10,000,000 additional Class C Convertible Common Shares, such Convertible Common Shares to be automatically redesignated as Common Shares upon, and to the extent of, the exercise of conversion rights attaching to such Convertible Common Shares on a one-for-one basis.
The Board of Directors further directed that this action be submitted for consideration of PXRE Group’s shareholders at a Meeting to be called for that purpose.
The primary purpose of Proposal 4 is to satisfy, in connection with PXRE Group’s issuance of the Perpetual Preferred Shares, the Exchange Conditions Precedent and to allow PXRE Group to complete its capital raising program and to restore common share capital to a level commensurate with PXRE Group’s counterparty credit ratings and its reinsurance subsidiaries’ financial strength ratings, which were recently downgraded by Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and A.M. Best Company, an independent insurance industry rating organization. The primary purpose of the authorization of the division of Common Shares into classes of Convertible Common Shares“non-employee director” under Proposal 4 in excess of those issued in connection with the exchange of Perpetual Preferred Shares under Proposal 2 is to provide additional authorized shares for general corporate purposes, allowing PXRE Group to maintain financial flexibility in the event of reinsurance market opportunities or future catastrophic losses.
Approval of Proposal 4 is essential to the completion of PXRE Group’s capital raising program. A.M. Best and Standard & Poor’s have made clear to us that in the absence of additional capital PXRE Group can expect a downgrade in our ratings. Standard & Poor’s and A.M. Best have stated that material delays in the conversion of Perpetual Preferred Shares to common equity will likely result in the ratings being lowered, reflecting the largely unmitigated capital impact from Katrina losses and the materially reduced financial flexibility resulting from the provisions of the Perpetual Preferred Shares. Therefore, if Proposal 4 is not approved, PXRE Group expects that a downgrade will occur in its ratings.
Proposal 4 is conditioned on the approval of Proposal 1. The approval of Proposal 2 is conditioned upon the approval of Proposal 1 and Proposal 4. If any of Proposal 1, Proposal 2 or Proposal 4 is not approved, the mandatory exchange of the Perpetual Preferred Shares into Common Shares (or Convertible Common Shares) will not be completed. For a discussion of the consequences of the mandatory exchange and, alternately, the failure to complete the mandatory exchange, see “Proposal 1—Approval of Amendments to the Bye-Laws to Increase the Authorized Number of Common Shares.”
If Proposal 4 is approved, it is contemplated that the remaining authorized Convertible Common Shares may be issued by PXRE Group in connection with one or more offerings. As of the date of this proxy statement, however, PXRE Group has no current intention to issue additional Preferred Shares, Convertible Common Shares or Common Shares in an offering if the proposed increases in authorized share capital are approved. Although it may offer such shares in the future, no determination as to the size of any such offering or use of proceeds has been made at this time. Subject to the terms of the Outstanding Convertible Voting Description of Stock, once Proposal 4 is approved, no further authorization by the holders of Common Shares is expected to be required prior to an issuance of authorized Convertible Common Shares.
DESCRIPTION OF THE CONVERTIBLE COMMON SHARES
The following is a summary of the material terms and provisions of the rights, preferences and privileges of the Convertible Common Shares as contained in the Outstanding Convertible Voting Description of Stock, the form of which is attached hereto as Appendix VI. However, this summary of the Convertible Common Shares
does not purport to be complete and shareholders are urged to read the Outstanding Convertible Voting Description of Stock in its entirety.
As of October 14, 2005 there were 7,037,166 Convertible Common Shares outstanding.
Except as otherwise provided, each class of Convertible Common Shares (which includes the Class A Common Shares, Class B Common Shares and Class C Common Shares) has, and any class of Convertible Common Shares offered and sold directly by us will have, the same voting rights as Common Shares. Each class of Convertible Common Shares has the same rights, preferences and privileges as each other class of Convertible Common Shares, except as described in the outstanding description of preferred stock which has been filed with the SEC. The Convertible Common Shares that are currently outstanding or that are issuable by us, automatically convert into Common Shares on a one-for-one basis upon a transfer of record ownership to any person other than the original purchasers, or any of their respective affiliates or limited partners (including, without limitation, in connection with a public offering of the shares), or a person approved by our board of directors in its sole discretion. Convertible Common Shares may be converted at the option of the holder into Common Shares on a one-for-one basis at any time that the holder would be entitled to vote Preferred Shares generally in the election of directors in accordance with the Outstanding Convertible Voting Preferred Description of Stock. Our Class IV directors are designated solely by holders of our Convertible Common Shares and Preferred Shares. The holders of Convertible Common Shares do not vote for any other directors. Any shares of Convertible Common Shares issued and sold directly by us, and not as a result of the conversion of outstanding Convertible Voting Preferred Shares, will automatically convert into Common Shares on a one-for-one basis upon sale to investors.
For a discussion of possible anti-takeover effects of the increase in authorized share capital, see “Proposal 2—Approval of the Exchange of Perpetual Preferred Shares into Common Shares—Anti-Takeover Effects.”
VOTE REQUIRED FOR APPROVAL OF PROPOSAL 4
Proposal 4 must be approved by a simple majority of the votes cast on the proposal, provided a majority of the outstanding shares carrying the right to vote are represented in person or by proxy.
In addition, under Sections 3(c)(i), 3(d)(i) and 3(e)(i) of the Outstanding Convertible Voting Preferred Description of Stock, when PXRE Group authorizes any capital shares ranking pari passu with, or senior to, the outstanding Convertible Voting Preferred Shares or which in any manner adversely affects the holders of the outstanding Convertible Voting Preferred Shares or the Class A Convertible Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, any such action requires the consent of holders of more than 50% of each affected series of outstanding Convertible Voting Preferred Shares, voting separately as a single class. Because Proposal 4 will increase the authorized number of Class A Convertible Common Shares, Class B Convertible Common Shares and Class C Convertible Common Shares, the consent of the Series A Convertible Voting Preferred Shares, voting together as a single class, the Series B Convertible Voting Preferred Shares, voting together as a single class, and the Series C Convertible Voting Preferred Shares, voting together as a single class is required. All such separate required consents have been obtained and are attached to this proxy statement as Appendix VII.
Proposal 4 is conditioned on the approval of Proposal 1.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously approved the proposed amendment and has determined that the proposed division of authorized share capital is in the best interests of PXRE Group and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE PROPOSED AMENDMENT.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table indicates those persons known to us (including any “group” as that term is used in Section 13(d)(3)16 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”“Exchange Act”)), who own beneficially more than 5%.
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The HR Committee assists the Board in its oversight of (i) the performance and compensation of the Common Shares, Convertible Common Shares or Preferred Shares outstanding, as applicable, as of October 14, 2005 (including holders of Perpetual Preferred Shares that, upon exchange, will own beneficially more than 5%Company’s executive officers and directors, (ii) the Company’s succession plans, and (iii) the review of the Common Shares outstanding after such exchange):
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class Outstanding | Percent of Voting Rights on Proposals (1) | Percent of Voting Rights After Completion of Perpetual Preferred Share Exchange | ||||||
| Common Shares | Royce & Associates, LLC and Affiliates | 1,649,039 shares(2) | 5.3 | % | 3.9 | % | 2.1 | % | |||
| 1414 Avenue of the Americas New York, NY 10019 | |||||||||||
| Class A Convertible | Capital Z Partners, Ltd. & Affiliates | 4,405,238 shares(3) | 100 | % | 10.3 | % | 5.7 | % | |||
| Common Shares | 54 Thompson Street New York, NY 10012 | ||||||||||
| Class B Convertible Common Shares | Reservoir Capital Management L.L.C. Affiliates | 1,580,839 shares(4) | 100 | % | 3.7 | % | 2.0 | % | |||
| 650 Madison Avenue, 26th Floor New York, NY 10022 | |||||||||||
| Class C Convertible | RER Reinsurance Holdings, L.P. | 1,009,046 shares(5) | 96 | % | 2.4 | % | 1.3 | % | |||
| Common Shares | 777 Main Street Suite 2250 Fort Worth, TX 76102 | ||||||||||
| Series A Preferred | Capital Z Partners, Ltd. & Affiliates | 3,168.532 shares(3) | 100 | % | 5.7 | %(6) | 3.5 | % | |||
| Shares | 54 Thompson Street New York, NY 10012 | ||||||||||
| Series B Preferred Shares | Reservoir Capital Management L.L.C. Affiliates | 1,588.49 shares(4) | 100 | % | 2.9 | %(6) | 2.0 | % | |||
| 650 Madison Avenue, 26th Floor New York, NY 10022 | |||||||||||
| Series C Preferred | RER Reinsurance Holdings, L.P. | 1,013.93 shares(5) | 96 | % | 1.8 | %(6) | 1.1 | % | |||
| Shares | 777 Main Street Suite 2250 Fort Worth, TX 76102 | ||||||||||
| Series D Perpetual | D.E. Shaw Investment Group, L.P.(8) | ||||||||||
| Preferred Shares (7) | D.E. Shaw & Co., L.P. | 65,000 shares | 17.33 | % | — | 7.8 | % | ||||
| 120 West 45th Street, 39th Floor New York, NY 10036 | |||||||||||
| SAB Capital Advisors, L.L.C. | |||||||||||
| and Affiliates(9) | 60,000 shares | 16.00 | % | — | 7.6 | % | |||||
| 712 Fifth Avenue, 42nd Floor New York, NY 10019 | |||||||||||
| Eton Park Capital Management L.P.(10) | 60,000 shares | 16.00 | % | — | 7.1 | % | |||||
| 825 Third Avenue New York, NY 10022 | |||||||||||
| OZ Master Fund, Ltd.(11) | 60,000 shares | 16.00 | % | — | 7.1 | % | |||||
| 9 West 57th Street, 39th Floor New York, NY 10019 | |||||||||||
| Capital Z Partners, Ltd. & Affiliates(3) | 20,000 shares | 5.33 | % | — | 2.4 | % | |||||
| 54 Thompson Street New York, NY 10012 | |||||||||||
| Reservoir Capital Management | |||||||||||
| L.L.C. & Affiliates(4) | 20,000 shares | 5.33 | % | — | 2.4 | % | |||||
| 650 Madison Avenue, 26th Floor New York, NY 10022 |
The following table sets forth the beneficial ownership of Common Shares of PXRE Group as of October 14, 2005, by (i) each director, (ii) the Chief Executive Officer, (c) reviewing and eachadvising the Board on the adoption, termination or material modification of the other four most highly compensated executive officers duringCompany’s material compensation plans, (d) reviewing and discussing with the fiscal year ending December 31, 2004,Company’s management the Compensation Discussion and (iii) all directors and executive officers as a group.
Name or Number of Persons in Group | Number of Common Shares Beneficially Owned | Percent of Class Outstanding | Percent of Voting Rights on Proposal | |||||||
| Gerald L. Radke | 65,580 | * | * | |||||||
| F. Sedgwick Browne | 57,824 | (1)(2) | * | * | ||||||
| Susan Cabrera | 14,333 | (1)(2) | * | * | ||||||
| Bradley E. Cooper | 6,000 | (2) | * | * | ||||||
| Robert W. Fiondella | 67,648 | (2) | * | * | ||||||
| Franklin D. Haftl | 40,553 | (1)(2) | * | * | ||||||
| Craig A. Huff | 166,451 | (3) | * | * | ||||||
| Mural R. Josephson | 6,666 | * | * | |||||||
| Jonathan Kelly | 0 | (1)(2) | * | * | ||||||
| Wendy Luscombe | 33,233 | (1)(2) | * | * | ||||||
| Philip R. McLoughlin | 47,481 | (2) | * | * | ||||||
| Robert Stavis | 21,722 | (1)(4) | * | * | ||||||
| Jeffrey L. Radke | 285,846 | (5) | * | * | ||||||
| Bruce J. Byrnes | 67,514 | (5) | * | * | ||||||
| John Daly | 64,256 | (5) | * | * | ||||||
| Guy D. Hengesbaugh | 79,486 | (5) | * | * | ||||||
| John M. Modin | 79,703 | (5) | * | * | ||||||
| All directors and executive officers as a group (17 persons) | 1,104,296 | 3.5 | % | 2.6 | % | |||||
DEADLINES FOR SHAREHOLDER PROPOSALS
If a shareholder desires to present a proposal for inclusionAnalysis contained in next year’sthis proxy statement, such shareholder must submit such proposal in writing to us for receipt not later than December 1, 2005. Proposals must comply with the proxy rules relating to shareholder proposals, in particular Rule 14a-8 under the Exchange Act, to be included in our 2005 proxy materials.
For any proposal that is not intended(e) producing an annual report on executive compensation for inclusion in the 2006Company’s proxy statement, (as described(f) reviewing the results of any advisory shareholder votes on executive compensation, (g) evaluating and recommending to the Board appropriate compensation for the Company’s directors, (h) annually reviewing management’s succession plans for the Company’s Chief Executive Officer and other executive officers, (i) determining and monitoring share ownership guidelines, and (j) periodically reviewing the Company’s strategies and policies related to human capital management, including matters such as diversity and inclusion, employee engagement, and health and safety.
Human Resources Committee Interlocks and Insider Participation
With respect to interlocks and insider participation involving member of the HR Committee during last fiscal year:
Investment Committee
Each member of the Investment Committee is “independent” in accordance with the applicable director independence rules of NYSE as currently in effect. The Investment Committee assists the Board in (i) overseeing the Company’s key investment objectives, strategies and policies, (ii) approving the Company’s investment policies, strategies, and transactions, and (iii) overseeing the performance of the Company’s investment portfolios. The Investment Committee’s responsibilities include, among other items, (a) approving the Company’s Investment Policy including the investment guidelines and asset allocation ranges set forth therein, (b) overseeing the Company’s investment transactions and its outside investment managers to determine whether such investment transactions are in accordance with the Company’s Investment Policy, (c) ensuring that appropriate selection criteria are developed to identify and select the Company’s outside investment managers and periodically reviewing the performance of the Company’s outside investment managers, (d) overseeing management’s administration of the Company’s investment portfolio, including recommended strategic asset allocations and the performance of the portfolio under anticipated and stress test scenarios, (e) approving any Company derivative policy, and (f) review of management’s analysis and reports on potential hedging programs and derivative transactions.
Nominating and Corporate Governance Committee
Each member of the Nominating and Corporate Governance Committee is “independent” in accordance with the applicable director independence rules of NYSE as currently in effect. The purpose of the Nominating and Corporate Governance Committee is to (i) identify, evaluate and recommend individuals qualified to become members of the Board, (ii) recommend to the Board director nominees to stand for election at each annual meeting of shareholders of the Company or to fill vacancies on the Board, (iii) develop and recommend to the Board a set of corporate governance guidelines applicable to the Company, (iv) oversee the Company’s environmental, social and governance initiatives, and (v) recommend directors for appointments to one or more of the Board’s standing committees. This committee is also charged with establishing evaluation criteria and an evaluation process for the Board and each of its committee in its self-evaluation process.
Risk & Capital Committee
While the Board has the ultimate responsibility for overseeing and approving the Company’s risk strategy, risk appetite and risk tolerance levels, the Risk & Capital Committee (i) assists the Board in overseeing and reviewing the Company’s enterprise risk management, including the significant policies, procedures, and practices employed to identify, assess and manage insurance risk, credit risk, market risk, operational risk, liquidity risk and reputational risk, and (ii) provides strategic guidance to management as to the Company’s capital structure and other related strategic initiatives. The Risk & Capital Committee also oversees the elements of the Company’s sustainability program specifically related to environmental and climate change risks, and, in coordination with the Nominating and Corporate Governance Committee of the Board, provides input to management on the Company’s environmental, social and governance risks, strategies, policies, programs and practices. Risk management is a collaborative effort of management, the Board, the Risk & Capital Committee, the Audit Committee and several functions within the Company that are focused on risk. Please see the section entitled “Enterprise Risk Management and Governance Frameworks” below for further details.
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Strategic Review Committee
The Strategic Review Committee is an ad-hoc committee formed in April 2022 and is comprised of five out of nine Board members. Mr. Plants serves as the chair of the Strategic Review Committee. The Strategic Review Committee was formed to review, evaluate and make recommendations to the Board regarding potential strategic alternatives with respect to the Company. As part of this process, the Board will consider a wide range of options for the Company including, among other things, a potential sale or other disposition of, or a potential business combination transaction involving, some or all of the Company’s assets or equity. The Company has retained Goldman Sachs & Co. LLC as its financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as its legal counsel to assist in the preceding paragraph) butreview process undertaken through the Strategic Review Committee. The Committee is instead soughtresponsible for (i) exploring, considering and examining all potential transactions with respect to the Company that the Committee determines to be presented directly at next year’s annual general meeting, SEC rules permitadvisable to consider in the proxy holderscourse of the strategic review; (ii) reporting regularly to vote proxiesthe Board; and (iii) making recommendations to the Board concerning potential transactions that the Committee deems appropriate, including a recommendation as to whether the final terms of any such potential transaction are in their discretionthe best interests of the Company and should be approved by the Board and, if PXRE Groupapplicable, by the Company’s shareholders.
There can be no assurance that this process will result in the Company pursuing a particular transaction or other strategic outcome. The Company has not set a timetable for completion of this process, and does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.
Process for Nominating Directors
The Nominating and Corporate Governance Committee may receive noticerecommendations for director nominees from various sources such as officers, directors and shareholders, and it may also engage third party consultants such as search firms to assist in identifying and evaluating potential nominees. The Nominating and Corporate Governance Committee assesses several factors when evaluating director nominees including, but not limited to, the current needs of the proposalBoard and, with regard to a nominee, their: (i) integrity, honesty and accountability; (ii) successful leadership experience and strong business acumen; (iii) forward-looking strategic focus; (iv) collegiality; (v) independence and absence of conflicts of interests; and (vi) ability to devote necessary time to meet director responsibilities. In the case of incumbent directors considered for re-nomination, the Nominating and Corporate Governance Committee may consider such nominee’s prior Company Board experience, attendance and participation at Board meetings throughout such nominee’s tenure on the Board, and the candidate’s ability to continue to contribute to the closeBoard and the Company’s needs as well as the composition of business on November 15, 2005. Notices of intention to present proposalsthe Board at the 2006 annual general meetingtime.
In evaluating director nominees, the Nominating and Corporate Governance Committee will also actively consider gender identity, age, race, nationality, national origin, ethnicity, disability status, sexual orientation and other diversity factors in Board composition. In addition, the Nominating and Corporate Governance Committee looks for nominees exhibiting specific skills and expertise in the following areas: (i) accounting and finance; (ii) business operations; (iii) business strategy; (iv) corporate governance; (v) technology/digital strategies, including cybersecurity; (vi) executive leadership; (vii) industry knowledge; (viii) international operations/global markets; (ix) investment management; (x) sustainability; (xi) legal/regulatory; and (xii) risk management. The Nominating and Corporate Governance Committee will ultimately recommend nominees who it believes will enhance the Board’s ability to oversee, in an effective manner, the management of the affairs and business of the Company.
The Nominating and Corporate Governance Committee seeks a diverse and appropriate balance of members who have the experience, qualifications, attributes and skills that are necessary to oversee a publicly traded, growth-oriented insurance organization that operates in multiple jurisdictions. In addition, the Nominating and Corporate Governance Committee seeks directors with experience in a variety of professional disciplines and business ventures that can provide diverse perspectives on the Company’s operations. The Committee evaluates the types of backgrounds that are needed to strengthen and balance the Board based on the foregoing factors and will nominate candidates to fill vacancies accordingly. For a discussion of the specific experiences, qualifications, attributes or skills that led the Nominating and Corporate Governance Committee to conclude that each director should be addressedserve on the Board, see the skills chart and biographical information section beginning on page 29.
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Shareholders wishing to recommend a director candidate to serve on the Board may do so by providing a written recommendation to the PXRE Group’s Secretary, PXRE Group Ltd., P.O. Box 1282, Hamilton HM FX, Bermuda, Attention: Secretary.Company. Shareholders who wish to submit a proposal or director nomination for consideration at our 2006 annual general meeting of shareholders,2023 Annual General Meeting, but who do not wish to submit a proposal for inclusion in our proxy materials pursuant to Rule 14a-8 under the Exchange Act, should deliver a copy of their proposal or nomination to us for receipt not later than 60 days prior to the date of our 2023 Annual General Meeting (such deadline currently expected to be on or about March 6, 2023, assuming that the 2023 Annual General Meeting is held on May 5, 2023). Any such notice must also meet certain other requirements specified in our Bye-Laws. In addition to satisfying the requirements under our Bye-Laws with respect to advance notice of any nomination, any shareholder that intends to solicit proxies in support of director nominees other than the Company’s director nominees in accordance with Rule 14a-19 must provide notice to the Company at the address below no later than 60 calendar days prior to the anniversary of the previous year’s annual meeting or 60 calendar days prior to the date of the 2023 Annual General Meeting if the meeting date has changed more than 30 days from the date of this year’s Annual General Meeting (such deadline currently expected to be on or about March 1, 20066, 2023, assuming that the 2023 Annual General Meeting is held on May 5, 2023). If the Company determines to hold the 2023 Annual General Meeting on a date other than May 5, 2023, the Company will publicly announce the new date and otherwiserelevant deadlines above to its shareholders Any such notice of intent to solicit proxies must comply with all the requirements of Rule 14a-19. Any notices described above should be sent to Argo Group International Holdings, Ltd. c/o Allison D. Kiene, General Counsel and Secretary, Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda. The Company will apply the same standards in considering director candidates recommended by shareholders as it applies to other candidates. Once the Nominating and Corporate Governance Committee receives a recommendation from a shareholder, it may request additional information from the candidate about the candidate’s independence, qualifications and other information that would assist the Nominating and Corporate Governance Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in the Company’s proxy statement, if nominated. Shareholders may also directly nominate a candidate for director pursuant to the advance notice provisions of the Company’s Bye-Laws. If
Enterprise Risk Management and Governance Frameworks
Overview
The Company believes that its enterprise risk management framework and oversight activities are structured in a way that enables it to take an active approach to risk management in a dynamic legal, regulatory and business environment. Through the efforts of management, our internal risk management function and the Board and its relevant committees, we seek to manage our risk exposures within agreed risk tolerances, while recognizing that taking appropriate risks provides us with opportunities that are beneficial to the Company and its shareholders. We oversee risks from a likelihood and consequential perspective and are able to prioritize the risks most important for senior management and Board oversight by embedding risk management into our decision-making and creating risk champions at the senior management level. Our Chief Risk & Sustainability Officer (the “CR&SO”) regularly provides executive management and the Risk & Capital Committee with a Risk Dashboard that summarizes the status of our risks across the organization.
Risk Management Policy
The Company is committed to establishing and maintaining a sustainable risk management framework as an integral part of its business model supporting business planning and capital management. Enterprise Risk Management (“ERM”) is a company-wide process with oversight from the Board that identifies, assesses, monitors, manages and reports risks that could materially influence our ability to deliver on our strategic objectives. We consider the implementation of our ERM framework as a strategic imperative to enhance shareholder failsvalue, not only to meet legal and regulatory requirements but also to gain a competitive edge by improving our understanding of risks and capital requirements for solvency on a per risk and an aggregated basis. We have designed our framework for managing enterprise risks to be aligned with international standards, such as ISO 31000 and to take into consideration the interests of our shareholders, policyholders and other counterparties.
The objectives of our ERM framework are designed to ensure that:
| 1. | All reasonably foreseeable material risks, including financial and non-financial and current and contingent risks are identified; |
| 2. | The potential impact of such material risks, including material risks affecting capital requirements and capital management, short-term and long-term liquidity requirements, policyholder obligations and operational strategies and objectives are assessed; and |
| 3. | Policies and strategies are developed and maintained to effectively manage, mitigate and report material risks. |
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Risk Management Strategy
Our risk management strategy encompasses our Three Lines of Defense Model and Risk Appetite Framework, as further explained below, to address and manage material business risks. Our strategy is based on and implemented through the respective policies, targets, guidelines, requirements and budgets approved by the Risk & Capital Committee on a periodic basis. Our ERM strategy and objectives are reviewed and approved by the Risk & Capital Committee each year. The Risk & Capital Committee oversees elements of the Company’s sustainability program specifically related to environmental and climate change risks, and, in coordination with the Nominating and Corporate Governance Committee, provides input to management on our environmental, social and governance risks, strategies, policies, programs and practices.
The ERM framework continues to be developed and enhanced over time in response to market developments and tested against external Risk Maturity Model standards. The CR&SO annually presents to the Risk & Capital Committee a review of the effectiveness of our risk management across the organization. These annual reviews inform our ongoing improvement plans and ERM objectives.
Three Lines of Defense Model
Our internal control framework consists of three lines of defense:
| 1. | Business Leadership: Risk owners within each business function are charged with the task of identifying, assessing, measuring, monitoring, reporting and mitigating risks associated with a department’s respective functions and responsibilities. The CR&SO, who reports to the Risk & Capital Committee, plays a key role in risk management by coordinating, facilitating and overseeing the effectiveness and integrity of our risk management activities at a business function level. Risk owners within each business function are also charged with establishing, maintaining and enhancing the methodology and tools used to identify and evaluate risks and, where risks are outside our risk appetite, ensuring an appropriate response applied by the respective risk owner. |
| 2. | Compliance Function: The compliance function headed by our General Counsel and Secretary supports the executive management and the Board in ensuring it remains compliant with relevant regulations in the territories in which it operates. Compliance achieves this by monitoring regulatory developments, advising management on maintaining compliance, monitoring and reporting on compliance performance and the provision of compliance training to staff. |
| 3. | Internal Audit: Internal Audit provides the third line of defense by assessing the effectiveness of our risk management processes, practices and internal controls and providing timely feedback and assurance to the Board on the adherence to our risk management framework. The Head of Internal Audit reports to the Audit Committee of the Board on issues related to the internal control framework. |
Risk Management Framework
Our risk management framework focuses on “reasonably foreseeable material risks,” meaning those exposures (financial and non-financial, on and off-balance sheet, current and contingent exposures) that we can identify in advance as having the potential, should they occur, to change the way relevant stakeholders would assess our solvency and/or liquidity position, reputation or risk profile. Relevant stakeholders include the Board, senior management, policyholders, investors and the various types of entities that regularly monitor and regulate our business activities and securities.
Key elements of our risk-management framework are summarized below:
| 1. | Framework Purpose: Our risk management framework is designed to enable us to achieve an accurate and timely understanding of (1) the nature, caliber, and sensitivity of the material foreseeable risks to which we are exposed, (2) our ability to mitigate or avoid such risks and (3) to the extent that an identified risk falls outside of our risk appetite, what course of action is necessary to address such risk consistent with our business plans and risk tolerances for continual improvements. We have established policies to identify and address existing, as well as evolving and emerging, risks that have the potential to materially impact our strategy, capital and solvency adequacy, volatility of our results, expected shareholder returns or our ability to meet our commercial, legal and regulatory obligations. |
| 2. | ORSA: Our risk management function implements our enterprise wide ERM framework. We utilize our Own Risk & Solvency Assessment (“ORSA”) process to identify the key threats and opportunities facing the business, which we report on a quarterly basis to the Risk & Capital Committee. The ORSA process enables us to evaluate our capital and solvency risks and our performance in meeting our capital and solvency objectives against our risk appetite. This, in turn, feeds into an annual ORSA report which we present to our regulators. |
| 3. | Strategic Risk Landscape: Throughout the year, we review and evaluate risks related to our business at all levels. We communicate to both the Executive Risk Committee and the Risk & Capital Committee the principal threats and opportunities that could impact the organization’s strategy and how these are being addressed over time. Based on these assessments, risk owners strive to ensure that appropriate risk management actions have been taken to address and mitigate risks where necessary. The objective remains that underwriting, and investment activities remain consistent with management’s strategic and business plans, as approved by the Board. |
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| 4. | Risk Models: We employ various data sources and risk models and continue to evaluate and fortify our processes and protocols to assure the integrity of such tools. The internal capital model is actively used to manage risk / reward decisions, including optimizing reinsurance protections and accordingly is subject to ongoing review through independent model validation reviews. This enables us to improve our quantitative and qualitative views of risk over time. |
| 5. | Capital Allocation: The risk management techniques, especially with regard to our internal capital model, are actively used to inform the allocation capital to underwriting and investment operations and report on Return on Allocated Capital as part of our business portfolio performance framework. |
| 6. | Risk Governance: The monitoring and reporting of risk is cascaded up and down the organization, from the Risk & Capital Committee to the Executive Risk Committee, where executive management discuss actions required to address any materials risks. Our ERM Steering Committee oversees the ERM framework, including its implementation across the Company. |
| 7. | Monitoring and Reporting: We monitor, review and report to the Risk & Capital Committee on these activities regularly. Protocols are in place for the reporting of operational risk events and the escalation of risk tolerance breaches. |
Risk Appetite Framework
The Risk Appetite Framework brings together the overall approach for identifying and managing risk appetite, risk preferences, risk tolerances, and risk limits, including Key Risk Indicators (“KRIs”). Our framework is intended to provide such 45-day notice, the respective proposal need not be addressedclarity regarding acceptable amounts of risk to assist our decision makers in the proxy materialsCompany. Our Risk Appetite Framework achieves this by defining our ability to take risk through a series of qualitative risk appetite statements that are communicated across the organization, supported by quantitative risk appetite measures and risk tolerances and KRIs. The risk appetite is based on our available capital and liquidity and is reflected in Board-approved business plans. Risk tolerances define acceptable boundaries in terms of volatility and provide a frame of reference to align behaviors in the Company.
The CR&SO advises on periodic changes to risk appetite and risk tolerances, which are formally approved annually by the Board. During 2021, the Risk & Capital Committee of the Board commissioned a full review of the Risk Appetite Framework, led by the CR&SO. The framework was challenged and reviewed by risk owners across the organization and a number of changes were made to the risk factors being measured and the proxies may exercise their discretionary voting authority whenthresholds applied. These changes better reflect our ongoing strategy, in particular, the proposalobjective of reducing overall business volatility. The Board formally adopted and approved this updated Risk Appetite Framework for fiscal year 2022 in November 2021.
Our Risk Appetite Framework is raised atreflected in our strategic and business planning. We actively use our internal capital model to track risk tolerance limits and allocate capital to the 2006 annual general meeting. In either case, proposals should be delivered to PXRE Group Ltd., P.O. Box 1282, Hamilton HM FX, Bermuda, Attention: Secretary.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other informationbusinesses with the SEC. You may readgreatest potential to exceed ROAC targets, while staying within agreed risk limits. In the event of risk tolerances being exceeded, internal guidelines ensure appropriate escalation and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. In addition, the SEC maintains a website that contains reports, proxy statements andmanagement actions. If necessary, risks are ceded or hedged through reinsurance, derivatives, or other information that we electronically file. The addressforms of the SEC’s website is http://www.sec.gov.
This proxy statement has been filed with the SEC. This proxy statement omits some information contained in other documents filedrisk transfer in accordance with SEC rulesour policies.
Risk tolerances and regulations. Youlimits encompassed in our Risk Appetite Framework include:
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All significant policies and procedures associated with our Risk Appetite Framework are documented in writing and available to the Board, management and employees.
Cybersecurity and Data Protection
Our information security program and approach are based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST Framework”). The NIST Framework establishes core requirements for continuous protection of our information, process, and technologies in response to emerging and changing cyber threats and vulnerabilities. In 2021 we engaged a third-party auditor to perform an independent maturity assessment of our information security program against the NIST Framework. The result of the third-party assessment found the maturity of our current cybersecurity program to be above the insurance industry average. However, as part of continuous improvement, we strive to continue to mature and build a robust and resilient environment to protect and defend against bad actors.
The Company maintains a Data Protection Framework and various policies, including Information Security Policy, Privacy Policy, and Records & Information Management Policy, to appropriately manage personal information we require to operate our business and comply with all regulations in the jurisdictions in which we operate, including specifically addressing the rights of individuals regarding control of data we may hold related to them. We also maintain a Third-Party Risk Management Program, including a Vendor Management Policy, which allows us to monitor and control our risks related to the processing of personal information and customer information by our authorized third parties. These policies and programs are derived from internationally recognized regulations, frameworks, and principles.
We share personal information with affiliates, business partners, third-party service providers, or vendors when we have a legitimate business purpose for doing so and when permissible by law. We require third parties to maintain similar standards to ours to protect personal information. We have implemented a risk mitigation process to identify and assess the cyber posture of third parties providing commodities or services to any of the Company’s legal entities.
We have implemented multiple layers of data protection to minimize the risks to systems, personal information, and the privacy of individuals. Such protection includes perimeter security controls, network security controls, endpoint security controls, application security controls, data security controls, logical and physical access controls, maintaining up-to-date inventories (authorized hardware and software), system hardening and monitoring, usage of modern protection software and third-party risk assessments, 24/7 monitoring and response, testing of incident response procedures (table-top exercises), annual information security awareness training, and monthly phishing tests of all the Company’s employees. We are not aware of any material data privacy breaches during 2021 involving personal information or customer information.
Our Audit Committee is responsible for overseeing our internal controls including, cybersecurity and data protection programs. It reviews the effectiveness of the Company’s financial reporting processes and internal controls, including data privacy, information technology security and control. Our Chief Security Officer reports on data protection and information security matters to the internal Security Governance Committee on a quarterly basis, and reports to the Audit Committee at least annually on these matters.
Our Board believes that shareholder engagement is essential to understanding our investors’ interests and is a key part of our commitment to strong corporate governance, and accordingly, our Board members have direct engagement with shareholders and share feedback with the Company’s management and with the full Board. Our shareholder engagement efforts allow us to better understand and address our shareholders’ priorities, perspectives and concerns on a variety of issues, including strategic opportunities, governance, performance and ESG and diversity and inclusion efforts. and respond to inquiries and consider feedback received from shareholders throughout the course of the year. The Board, its committees and management review corporate governance trends, regulatory developments, the Company’s corporate governance documents, policies, and procedures to determine if any changes should be considered. The Company regularly meets with its investors throughout the year. These meetings are conducted at major financial services industry conferences and at events sponsored by the Company and are attended by various members of our senior management. We also make ourselves available to communicate and/or meet with shareholders via means such as earnings calls. All of these engagements cover a variety of matters that are important to our shareholders, including recent developments at the Company, our financial and operational performance, our long-term strategic and financial goals and industry-wide trends, and other topics that may be raised by our shareholders. The Company also welcomes opportunities to meet with its significant shareholders to discuss and receive feedback on matters related to its environmental, social and governance (“ESG”) initiatives. Our Board receives regular briefings on these shareholder meetings and incorporates the resulting input as appropriate.
The Company also intends to develop and continue its shareholder engagement activities after the Annual General Meeting. In addition to continuing the types of outreach described above, the Company will review the results of the advisory vote on compensation for Named Executive Officers (“Named Executive Officer” or “NEO”) and determine what, if any, follow-up actions are appropriate.
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We also provide our shareholders means by which they can communicate with our Board. Shareholders and other interested parties who wish to communicate with the Board, a specific director or the independent directors as a group may send written communications to Argo Group International Holdings, Ltd. c/o Allison D. Kiene, General Counsel and Secretary, Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda. The Secretary will forward such communication to the individual director or directors to whom the communication is directed, if any. If the communication does not specify a recipient, the Secretary will forward it to the full Board or to the directors the Secretary believes are most appropriate based on the subject matter and facts and circumstances described in the communication. Communications that are not related to the duties and responsibilities of the Board, or are otherwise considered to be improper for submission to the intended recipient(s), will not be forwarded to the directors.
For more information regarding our engagement efforts and exhibitsour response – particularly with respect to executive compensation, please refer to the section entitled “Compensation Discussion and Analysis — Shareholder Engagement and Responsiveness to 2021 Advisory Vote on Executive Compensation” on page 42.
We recognize that our stakeholders are increasingly focused on our approach to corporate responsibility, including environmental and social matters. In response, we have taken a structured approach to account for sustainability matters to be incorporated into our business operations. We have also enhanced our ESG disclosures included in our annual ESG Report made available on our website. For our latest ESG report, refer to our website, www.argolimited.com, under the heading “Investors.”
We established a Sustainability Working Group (“SWG”) in 2016, which oversees our sustainability and ESG policies, processes and issues facing the organization. The SWG reviews reports on various internal and external developments related to ESG matters. The SWG considers both upside (opportunity) and downside (threats) risks related to sustainability that could impact the Company. The SWG receives a detailed threat and opportunity assessment prepared by the internal risk management function of the major sustainability risks facing the organization every six months and escalates key issues to the ERM Steering Committee.
In 2021, the Board delegated oversight of the Company’s ESG efforts, progress and disclosures to the Nominating and Corporate Governance Committee. The Risk & Capital Committee oversees elements of the Company’s sustainability program specifically related to environmental and climate change risks, and, in coordination with the Nominating and Corporate Governance Committee, provides input to management on the Company’s environmental, social and governance risks, strategies, policies, programs and practices. The CR&SO reports on material sustainability-related issues, including topics related to climate change, to the Board’s Risk & Capital Committee on a quarterly basis or more often as necessary.
Environment
We recognize that climate-related risks are among the biggest threats to our planet today. We have an Environmental Management Policy that describes our commitment to establishing a long-term sustainable approach to caring for and safeguarding the environment as it relates to our business operations. We demonstrate our commitment to addressing climate change risks through our active membership in ClimateWise, a global insurance industry leadership group facilitated by the University of Cambridge Institute for Sustainability Leadership. As part of this membership, in 2021 we published our first ClimateWise Report, which aligned with the principles of the Task Force on Climate-related Financial Disclosures, covering, among other things, our strategy, governance, risk appetite, and risk assessment of our climate risk management.
In 2021, we established a new program for recycling and repurposing digital waste for our U.S. operations, keeping nearly 1,000 pieces of equipment out of landfills. Donated equipment included computer monitors, docking stations, keyboards, mice, phones, stands, speakers and headsets. Donations went to local nonprofits such as InspiredU in Alpharetta, Georgia; Goodwill in San Antonio, Texas; and Electronic Access Foundation in Springfield, Massachusetts.
For our latest report, refer to our website, www.argolimited.com, under the heading “About” and then “Corporate Responsibility – Climate Change Vulnerability.” As of the date of this Proxy Statement, we have published our 2022 ESG and ClimateWise reports at https://www.argolimited.com/about/corporate-responsibility/.
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During 2021, we continued our policy of disclosing our greenhouse gas (“GHG”) emissions for scope 1, 2, and 3 inventories against ISO 14064-1. We have achieved our GHG reduction targets for 2021 and have set new targets for GHG reduction in 2022 and 2023, based on a 2019 baseline year, as follows:
| GHG Reduction Targets1 | |
| 2021 Results | |
Target: 20% Actual: 27% Reduction in Scope 2 emissions | Target: 33% Actual: 81% Reduction in Scope 3 emissions |
| 2022 Targets | |
| 32.5% reduction in Scope 2 emissions | 35% reduction in Scope 3 emissions |
| 2023 Targets | |
| 37.5% reduction in Scope 2 emissions | 38% reduction in Scope 3 emissions |
1Targets are quoted as emission rates measured in metric tons of carbon dioxide per dollar of gross written premium.
Focus on Climate Change Risk: We recognize climate change as a material emerging risk on our business operations, insurance products and clients. We maintain our own view of natural catastrophe risk informed by proprietary models, which is used to make underwriting and management decisions. Our proprietary models are based on a combination of third-party vendor models, plus our in-house adjustments specifically recognizing factors such as climate volatility. We regularly consider potential climate change scenarios within our stress and scenario testing framework and in validating our catastrophe and capital models. As such, we have updated our risk management framework to include climate risk, taking into account physical risk, transition risk and litigation risk related to climate change.
We continue to monitor and evaluate scientific, regulatory and political developments with ESG through our emerging risk management processes. We recognize the growing demands from state and national governments, investors, insurance regulators, credit rating agencies and ESG rating agencies for public and private disclosures and continue to monitor these documentsdevelopments.
Social
Diversity and Inclusion: We seek to foster and preserve an inclusive and diverse culture. Our diversity and inclusion program is a Board-led business strategy, with our HR Committee periodically reviewing strategies and policies related to human capital management, including matters such as diversity and inclusion, employee engagement, and health and safety. Our commitment to diversity and inclusion is demonstrated by our Board of Directors, two of which identify as female, one of which identify as a disabled navy veteran, and one of which identify as racially/ethnically diverse. Ethnic and/or racial minorities are defined as: Asian, Black/African American, Hispanic/Latinx, Alaskan Native/Native American or multiracial background. In evaluating new director candidates, the Nominating and Corporate Governance Committee will actively consider gender identity, age, race, nationality, ethnicity, disability status and sexual orientation diversity in board composition.
Philanthropy: We are dedicated to improving the communities in which we live and work. We give back in a variety of ways through employee volunteering; corporate contributions; local, employee-led community relations committees; and a generous matching-gifts program. Our employees guide the vast majority of our contributions in our local communities around the world. Examples of our significant partnerships and philanthropy include: Spencer Foundation, American Red Cross, Buttle U.K., and Bermuda Foundation for Insurance Studies.
During 2021, our employees volunteered more than 1,300 hours in voluntary service as compared to 700 hours in 2020. The Company’s Corporate Contributions Policy sets forth the governance of our corporate giving and is overseen by our communications team and the HR Committee. The policy is reviewed on an annual basis, and any recommended revisions are provided to the HR Committee for review and approval. Additionally, our communications team provides quarterly reports to the HR Committee, summarizing budget updates and contributions made across the Company’s philanthropic programs.
When employees contribute to an eligible non-profit organization of their choice, the Company matches 100% of their donations (up to $5,000 per employee per year). In 2021, the Company matched 253 employee donations, which accumulated to $136,090 in total matched contributions and benefitted more than 185 non-profits across the U.S., U.K., and Bermuda.
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Responsible Investment: ESG factors are an integral part of the Company’s strategy to ensure the long-term viability of its investment portfolios. Responsible investing is an important part of our overall sustainability strategy, and reinforces our commitment to helping businesses stay in business. We have a Responsible Investment Policy that sets forth our commitment to investing responsibly and integrating ESG factors into our investment decision making. The policy sets forth our framework governing the Company’s approach to responsible investments and our pledge to engage in proactive and collaborative communication for continued improvements on ESG-related business practices for positive financial returns. In 2021, we released our Stewardship and Engagement Statement which recognizes that, as asset owners, we are responsible for exercising our rights to protect and enhance long-term investment value to generate the best yield on our returns by supporting sustainable value creation in our investments. The Company also updated and reissued in 2021 its “Responsible Investment Policy” adopted by the Investment Committee of the Board. Our investment team monitors for threats and opportunities to enhance our portfolios. This includes a focus on the ESG factors that could have material impact on our investments – a process that has been a cornerstone to the Company’s investment approach. Integrating these factors into our investment strategy is essential to creating value for our internal and external stakeholders. As active asset owners, we also engage with our major investment managers on ESG performance, including on how our investment managers are addressing ESG issues.
Our Investment Committee oversees our Responsible Investment Policy, with the Chief Investment Officer (“CIO”) responsible for the execution of our investment strategy. The Investment Risk Review Group supports CIO’s oversight of investment risks, including associated ESG risks, and oversees the investment manager selection and performance process, as well as portfolio asset allocation and investment risk management. The Investment Risk Review Group reviews our investment ESG performance on a quarterly basis and escalates issues, as appropriate, to the Investment Committee.
Vendor Management: Our Vendor Management Policy, ERM framework and other associated policies and practices are designed to comply with the requirements of the regulatory jurisdictions in which we operate and require that our due diligence and on-boarding procedures consider a range of risk factors prior to a vendor’s appointment. These considerations include, but are not limited to, each vendor’s financial stability; anti-money laundering, bribery and corruption compliance; economic sanctions compliance; business continuity arrangements; and assessment of the vendor’s operation against international best-practice standards for health and safety, environmental management, labor relations, human rights performance, and governance and accountability.
Policy for Evaluating Related Person Transactions
The Board has adopted a written policy relating to the Audit Committee’s review and approval of transactions with related persons that are required to be disclosed by SEC regulations (“related person transactions”). A “related person” is defined under the applicable SEC regulation and includes our directors, executive officers and 5% or more beneficial owners of our Common Shares. Management administers procedures adopted by the Board with respect to related person transactions and the Audit Committee reviews and approves all such transactions. In determining whether or not to approve a related person transaction, the Audit Committee considers all relevant facts and circumstances, including the commercial reasonableness of the terms, the benefit to the Company, opportunity costs of alternate transactions, and the actual or apparent conflict of interest of the related person, among other factors. Approval of a related person transaction requires the vote of the majority of disinterested directors on the Audit Committee and the Audit Committee must determine that the transaction is in, or not inconsistent with, the best interest of the Company and its shareholders for a related person transaction to be approved. The Board annually reviews this policy. The written policy relating to the Audit Committee’s review and approval of related person transactions is available on our website at www.argolimited.com under the “Investor” tab and then “Governance” tab.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Equity Based Compensation Plans
In May 2019, our shareholders approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides equity-based and cash-based performance-related incentives to key employees, non-employee directors and other service providers. The intent of the 2019 Plan is to encourage and provide for the acquisition of an ownership interest in Argo Group, enabling us to attract and retain qualified and competent persons to serve as members of our management team and the Board. The 2019 Plan authorizes 1,885,000 shares of common stock to be granted as equity-based awards. No further grants will be made under any prior plan; however, any awards under a prior plan that are outstanding as of the effective date shall remain subject to the terms and conditions of, and be governed by, such prior plan. Any awards issued under the 2019 Plan or any prior plan that are unexercised or unvested which expire, terminate, cash-settle, or are canceled, the number of shares underlying such awards will again be available for issuance under the 2019 Plan.
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The following table sets forth information as of December 31, 2021 concerning our equity compensation plans:
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding, Options, Warrants and Rights | Weighted-Average Per Share Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | |||||||||
| Equity compensation plans approved by shareholders: | ||||||||||||
| Argo Group International Holdings, Ltd. 2019 Omnibus Incentive Plan | 482,543 | $ | — | 1,477,601 | ||||||||
| Argo Group International Holdings, Ltd. Employee Share Purchase Plan | — | — | 401,102 | |||||||||
| Equity compensation plans not approved by shareholders | — | — | — | |||||||||
| Total | 482,543 | $ | — | 1,878,703 | ||||||||
As of December 31, 2021, equity compensation awards issued consist predominately of non-vested share awards, which do not have an exercise price.
Under the terms of the 2019 Plan, only awards that are to be settled in shares are included in the totals above. Additional information relating to our equity compensation plans is included in Note 14, “Share-based Compensation” in the Notes to Consolidated Financial Statements in the Original Filing.
| Page 24 of 71 |
Security Ownership of Certain Beneficial Owners
The table below sets forth certain information regarding the beneficial ownership of our shareholders known to us to beneficially hold more than 5% of our Common Shares as of the Record Date. Unless otherwise noted in the footnotes following the table, the information for each shareholder is based solely on us, our consolidatedinformation reported on a Schedule 13G or Schedule 13D, as applicable, filed by such holder with the SEC, with percentages determined as of the Record Date. As of the Record Date, there were [•] Common Shares issued and outstanding.
| Common Shares | ||||||||
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class | ||||||
| The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | [·] | (1) | [•] | % | ||||
| Voce Capital Management LLC 600 Montgomery Street, Suite 4400 San Francisco, CA 94111 | 3,317,697 | (2) | [•] | % | ||||
| BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 2,256,440 | (3) | [•] | % | ||||
| Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, TX 78746 | 2,173,618 | (4) | [•] | % | ||||
| Champlain Investment Partners, LLC 180 Battery St. Burlington, Vermont 05401 | 2,167,260 | (5) | [•] | % | ||||
| (1) | The Vanguard Group, Inc. notified the Company on October 27, 2022, that it beneficially owned [·] Common Shares as of the Record Date. The Vanguard Group, Inc. does not have voting power over all of the Common Shares that it beneficially owns. |
| (2) | Voce Capital Management LLC filed Schedule 13D/A with the SEC on August 8, 2022, which disclosed that Voce Capital Management LLC and certain of its affiliates have shared voting power over 3,317,697 Common Shares and shared dispositive power with respect to 3,317,697 Common Shares. |
| (3) | BlackRock, Inc. filed a Schedule 13G/A with the SEC on February 3, 2022, which disclosed that BlackRock, Inc. has sole voting power over 2,179,661 Common Shares and sole dispositive power with respect to 2,256,440 Common Shares. |
| (4) | Dimensional Fund Advisors LP filed a Schedule 13G/A with the SEC on February 8, 2022, which disclosed that Dimensional Fund Advisors, LP have sole voting power with respect to 2,131,286 Common Shares and sole dispositive power with respect to 2,173,618 Common Shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds. However, all securities reported in the Schedule 13G/A are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. |
| (5) | Champlain Investment Partners, LLC filed a Schedule 13G/A with the SEC on February 11, 2022, which disclosed that Champlain Investment Partners, LLC has sole voting power over 1,682,985 Common Shares and sole dispositive power with respect to 2,167,260 Common Shares. |
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Security Ownership of Management
The table below sets forth certain information regarding the beneficial ownership of the Common Shares as of the Record Date, unless otherwise indicated, of (i) each director or director nominee of the Company, (ii) each individual who has been identified as an NEO of the Company or its subsidiaries, and (iii) all directors and individuals who have been identified as executive officers of the Company as a group:
| Name of Beneficial Owner | Number of Common Shares Beneficially Owned(1)(2) | Percent of Class(1) | ||||||
| Directors | ||||||||
| Bernard C. Bailey | 6,895 | * | ||||||
| Thomas A. Bradley(3) | 63,376 | * | ||||||
| Fred R. Donner | 5,220 | * | ||||||
| Anthony P. Latham | 5,687 | * | ||||||
| Dymphna A. Lehane | 8,297 | * | ||||||
| Samuel G. Liss | 13,092 | * | ||||||
| Carol A. McFate | 6,813 | * | ||||||
| Al-Noor Ramji | 7,921 | * | ||||||
| J. Daniel Plants | 3,317,697 | (6) | [·] | |||||
| Named Executive Officers | ||||||||
| Kevin J. Rehnberg(3) | 44,452 | * | ||||||
| Scott Kirk(4) | 3,786 | * | ||||||
| Jay S. Bullock(4) | 12,353 | * | ||||||
| Allison D. Kiene | 1,257 | * | ||||||
| Andrew M. Borst(5) | 20,470 | * | ||||||
| Susan B. Comparato(5) | 3,103 | * | ||||||
| Matthew J. Harris(5) | — | * | ||||||
| Timothy D. Carter(5) | 4,704 | * | ||||||
| Total (a) | 3,525,123 | (6) | * | |||||
| (a) | All directors and individuals identified as executive officers of the Company and its subsidiaries as a group – 17 persons |
| * | Less than 1% of the outstanding Common Shares |
| (1) | The information in this table is based on information supplied directly to the Company Group by executive officers and directors. Shares beneficially owned by a person include shares to which the person has the right to acquire beneficial ownership within 60 days of the Record Date. Unless otherwise indicated in the footnotes below, the persons and entities named in this table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable. |
| (2) | Includes the following restricted shares that will vest within 60 days after October 26, 2022: Mr. Bradley - 13,126 and Mr. Kirk 2,876. |
| (3) | Mr. Bradley is also an executive officer. |
| (4) | On July 2, 2020, the Company announced the anticipated departure of Mr. Bullock as Executive Vice President and Chief Financial Officer of the Company. Mr. Bullock continued to serve as Executive Vice President and Chief Financial Officer through March 15, 2021. On March 16, 2021, Mr. Kirk succeeded Mr. Bullock as the Company’s Chief Financial Officer and Mr. Bullock remained employed in an advisory capacity through March 31, 2021. |
| (5) | On August 6, 2021, Mr. Harris resigned as Group Head of International Operations of the Company, and on August 11, 2021 Mr. Carter’s employment as Chief Underwriting Officer with the Company was terminated without cause. The Company appointed Mr. Borst as Interim President of International Operations and Ms. Comparato as Chief Administrative Officer, replacing Mr. Borst’s previous role. |
| (6) | By virtue of his affiliation with Voce Capital Management LLC and its affiliates, J. Daniel Plants may be deemed to have beneficial ownership of 3,317,697 Common Shares owned by Voce Capital Management LLC and its affiliates, which are included in this total. Mr. Plants disclaims beneficial ownership of the Company’s securities held by Voce Capital Management LLC and its affiliates except to the extent of his pecuniary interest therein. |
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Section 16(a) of the Exchange Act requires directors, executive officers and holders of more than 10% of Common Shares to file with the SEC reports regarding their ownership and changes in ownership of the Company’s securities. Based on our securities. Statementsreview of these reports, we believe that during 2021 all reports for the registrant’s executive officers, directors and 10% shareholders that were required to be filed under Section 16(a) of the Exchange Act were timely filed, except that (1) Scott Kirk subsequently amended his Form 3 on May 13, 2021 to correct the number of securities he beneficially owned on March 16, 2021, the date he was appointed as Chief Financial Officer and (2) Lehane Dymphna filed a Form 4 on September 29, 2022 to report the acquisition of certain shares pursuant to a dividend reinvestment plan administered by her Broker on December 7, 2020, March 15, 2021, June 7, 2021, September 16, 2021 and December 16, 2021.
| Page 27 of 71 |
PROPOSAL 1: ELECTION OF DIRECTORS
Board of Director Nominees
| Name | Age | Director Since | Position |
| Bernard C. Bailey | 69 | 2020 | President of Paraquis Solutions |
| Thomas A. Bradley | 65 | 2018 | Chief Executive Officer of Argo |
| Dymphna A. Lehane | 59 | 2017 | Former Global Managing Partner of Accenture |
| Samuel G. Liss | 66 | 2019 | Managing Principal of Whitegate Partners LLC |
| Carol A. McFate | 69 | 2020 | Former Chief Investment Officer of Xerox Corporation |
| J. Daniel Plants | 55 | 2022 | Chief Investment Officer of Voce Capital Management LLC |
| Al-Noor Ramji | 67 | 2017 | Former Group Chief Digital Officer of Prudential plc |
| ✓ 6 of 7 Are Independent (86%) | ✓ 2 of 7 Are Female (29%) | ✓ Average Age: ✓ Average Tenure: |
Our Bye-Laws provide for the election of directors by our shareholders. In accordance with our Bye-Laws, each director serves for an annual term ending on the date of the next Annual General Meeting following the Annual General Meeting at which such director was elected, and until his or her successor shall have been duly elected and qualified.
Currently our Board consists of nine directors. Anthony P. Latham and Fred R. Donner, each a current director, informed the Board that they will not stand for re-election to the Board at the Annual General Meeting. The Board is grateful to Messrs. Latham and Donner for their dedication, service, and contributions as directors of the Company. Following the Annual General Meeting, our Board will consist of seven directors. Our Bye-Laws provide that the Board will consist of not less than three nor more than 11 directors to be fixed from time to time by the Board.
Each person nominated for election has consented to be named in this proxy statement concerningand to serve, if elected, and the Board has no reason to believe that any documentnominee will be unable to serve. However, if, before the Annual General Meeting, one or more nominees are unable to serve or for good cause will not serve (a situation that we do not anticipate), the proxy holders will vote the proxies for the remaining nominees and for substitute nominees chosen by the Board (unless the Board reduces the number of directors to be elected). If any substitute nominees are designated, we will file an amended proxy statement that, as applicable, identifies the substitute nominees, discloses that such nominees have consented to being named in the revised proxy statement and to serve as directors of the Company if elected, and includes certain biographical and other information about such nominees required by the rules of the SEC.
Although the Company is required to include all nominees for election on its universal proxy card, for additional information regarding CRM’s nominees and any other related information please refer to CRM’s proxy statement. Even if you would like to elect one or both of CRM’s nominees, we strongly recommend you use the Company’s BLUE proxy card to do so. Shareholders will be able to obtain, free of charge, copies of all proxy statements, any amendments or supplements thereto and any other documents (including the BLUE proxy card) when filed by the applicable party with the SEC in connection with the 2022 Annual Meeting at the SEC’s website (http://www.sec.gov).
Required Vote and Board Recommendation
Each director nominee must receive more “FOR” votes than “WITHHOLD” votes in order to be elected to the Board. Since there are summariesmore director nominees standing for election than Board seats to be filled, the seven nominees receiving the highest number of “FOR” votes will be elected, provided that they receive more “FOR” votes than “WITHHOLD” votes. Shareholders may vote “FOR” or “WITHHOLD” for each nominee, or a shareholder may abstain from voting. Abstentions and dobroker non-votes, if any, will not containcount as votes cast and, therefore, will have no effect on the outcome of the election of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE BOARD’S NOMINEES AS DIRECTORS.
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Our Board of Directors reflects a diverse array of experiences, skills and backgrounds. Each director is individually qualified to make unique and substantial contributions. This diverse skillset is enhanced by both the fresh perspectives brought by our newer directors, as well as the industry and Company-specific expertise of our longer-tenured directors, who have the experience of guiding our Company through the extended business cycles faced by the insurance industry.
The following chart provides an overview of certain types of knowledge, skills and experiences possessed by one or more of our director nominees and which our Board of Directors believes are relevant to our Company, business and industry, both today and as we execute our long-term business strategy. The chart also provides certain demographic information. The chart does not encompass all of the knowledge, skills and experience of our directors, but rather indicates specific areas of focus or expertise relied on by the Board of Directors. The absence of a particular knowledge, skill and experience or attribute with respect to any of our directors does not mean that the director in question is unable to contribute to the decision-making process in that area.
| Director Nominees | |||||||
| Bailey | Bradley | Lehane | Liss | McFate | Plants | Ramji | |
| Knowledge, Skills & Experience | |||||||
Executive Leadership | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Accounting and Finance | ✓ | ✓ | - | ✓ | ✓ | ✓ | - |
Business Operations | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Business Strategy | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Corporate Governance | ✓ | - | ✓ | ✓ | ✓ | ✓ | - |
Technology / Cybersecurity | ✓ | - | ✓ | - | - | - | ✓ |
Industry Knowledge | - | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
International Operations / Global Markets | ✓ | ✓ | ✓ | ✓ | ✓ | - | ✓ |
Investment Management | - | - | - | - | ✓ | ✓ | ✓ |
Legal / Regulatory | ✓ | - | - | - | - | ✓ | - |
Risk Management | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| Demographics | |||||||
| Race/Ethnicity | |||||||
| Asian | ✓ | ||||||
| White/Caucasian | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |
| Gender Identity | |||||||
| Female | ✓ | ✓ | |||||
| Male | ✓ | ✓ | ✓ | ✓ | ✓ | ||
| Page 29 of 71 |
Director Nominee Biographical Information
We provide a summary of biographical and committee information for each of our director nominees as of October 26, 2022.
| Bernard C. Bailey | |
Age: 69 Director Since: 2020 Lead Independent Director Since: March 2022 Committees: Audit Human Resources Nominating and Corporate Governance Other Current Public Directorships: Other Previous Public Directorships During Last Five Years: Analogic Corp Telos Corporation | Experience: · President of Paraquis Solutions, a private consulting company focused on corporate governance and strategy (January 2020 – present). · Adjunct Professor at Case Western Reserve University for strategy and management. · During the period September 2018 to December 2019, he served as President of the Committee for Economic Development, a business-led, nonpartisan economic think tank. · Served as Chairman and CEO of Authentix, a private equity-backed global enterprise focused on anti-counterfeiting and brand protection practices, from 2012 to 2018. Since its sale by the Carlyle Group to Blue Water Energy, he has continued to serve as Chairman of the Board of Authentix since September 2018. · Prior to that, he ran his own consulting company, Paraquis Solutions, LLC. Mr. Bailey also served as President and CEO of Viisage Technology, Inc. · Ph.D. in Management from Case Western Reserve University where his dissertation focused on corporate governance; MBA from The George Washington University School of Business as well as degrees in engineering and systems management from the University of California, Berkeley, University of Southern California, and the United States Naval Academy. |
Key Qualifications: Mr. Bernard C. Bailey’s career spans over three decades of business and management experience, including experience as a public-company Chief Executive Officer, as well as extensive board experience. He has expertise in the security and technology industries, serving both public and private sector customers. | |
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| Thomas A. Bradley | |
Age: 65 Director Since: 2018 Committees: None Other Current Public Directorships: Horace Mann Educators Corporation Other Previous Public Directorships During Last Five Years: None | Experience: · Chief Executive Officer since June 23, 2022. · Retired from Allied World Assurance Company Holdings, AG, a global provider of insurance and reinsurance solutions, in July 2017. He had served there as the Chief Financial Officer and Executive Vice President since 2012. · Prior to that, Mr. Bradley had served as the Executive Vice President & Chief Financial Officer for two other public companies, Fair Isaac Corporation and the St. Paul Companies. · Also held senior financial and operational positions at Zurich Insurance Group, including Chief Financial Officer for North America and Chief Executive Officer of the Universal Underwriters Group (now Zurich Direct Markets). · Formerly a director of Nuveen Investments, Inc. · Received a Bachelor of Science degree in accounting from the University of Maryland and a Masters in Business Administration from Loyola University of Maryland and is a Certified Public Accountant (inactive). |
Key Qualifications: Our Board considered Mr. Bradley’s critical understanding of Argo’s operations based on his role as Chief Executive Officer, his extensive experience in the insurance industry, as well as his leadership and accounting, internal control, and audit experience. Mr. Bradley also possesses financial reporting expertise and a level of financial sophistication that would qualify him as a financial expert of the Audit Committee (although as noted above, Mr. Bradley ceased to serve as a member of the Audit Committee upon his appointment as Chief Executive Officer). | |
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| Dymphna A. Lehane | |
Age: 59 Director Since: 2017 Committees: Human Resources (Chair) Risk & Capital Other Current Public Directorships: None Other Previous Public Directorships During Last Five Years: None | Experience: · Portfolio of insurance related board roles including former Independent Chair of the Debt Market Integrator, a United Kingdom Government (Cabinet Office) venture serving a number of government departments (2016-2020), Chairman of ORIC International, the Insurance Industry Risk Consortium (2015-2020), and non-executive director of Aviva Ireland Life and Pensions and Aviva Ireland Health. · Ms. Lehane serves as Chair of Argo Managing Agency (subject to regulatory approval) and on the board of Xchanging Ins-Sure Services (Lloyds/DXC/IUA JV) which will digitize the Lloyds market processing under Blueprint2. She is also Chair of the RemCo for Ins-Sure Services. · Ms. Lehane also serves as a director of the Company’s two Irish subsidiaries, Argo Financial Holding (Braxil) DAC and Argo Financial Holding (Ireland) UC. · From 1988 to 2007, Ms. Lehane was a Senior Partner at Accenture, including serving as Global Managing Partner, Insurance Industry. · Holds a BSc Computer Science from the University of Witwatersrand, MBA from the International Institute for Management Development in Lausanne, Switzerland and University of Oxford’s Leading Sustainable Corporations (2021). |
Key Qualifications: Our Board considered Ms. Lehane’s specialized expertise in the global insurance industry and experience in the areas of corporate governance, risk management and digital transformation specific to the financial services industry. Ms. Lehane’s 30-year international career includes significant experience dealing with strategic issues and technology-led business change at global insurance companies. She has a special interest in corporate sustainability. | |
| Samuel G. Liss | |
Age: 66 Director Since: 2019 Committees: Nominating and Corporate Governance (Chair) Human Resources Investment Other Current Public Directorships: Verisk Analytics, Inc. Other Previous Public Directorships During Last Five Years: DST Systems, Inc. | Experience: · Managing principal of Whitegate Partners LLC, an advisory firm to operating companies and private equity firms specializing in the financial services and business services sectors, since 2011. · Adjunct Professor at both New York University Stern School of Business and Columbia Law School. · From an operational perspective, Mr. Liss served as Executive Vice President and member of the Management Committee at Travelers, where he was responsible for corporate development, as well as group business head of one of Travelers’ three operating divisions - Financial, Professional and International Insurance. · Prior to Travelers and an Executive Vice President role at the St Paul Companies, Mr. Liss was a Managing Director in the investment banking and equity divisions at Credit Suisse. He began his career at Salomon Brothers. · Previously served on the board of directors of Ironshore Insurance, Inc. and Nuveen Investments, Inc. · Mr. Liss received a Bachelor of Arts degree from Wesleyan University, pursued graduate studies at the London School of Economics and received a Masters of Business Administration from New York University. |
Key Qualifications: Our Board considered Mr. Liss’ management and operational experience gained as a senior executive of a global insurance business, expertise in investment banking and capital markets, and a broad range of public company governance experience. | |
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| Carol A. McFate | |
Age: 69 Director Since: 2020 Committees: Investment (Chair) Audit Other Current Public Directorships: Rent-A-Center, Inc. Other Previous Public Directorships During Last Five Years: None | Experience: · Former Chief Investment Officer of Xerox Corporation, a global corporation that sells print and digital document products and services, from late 2006 until she retired in October 2017. She was responsible for the insourcing, oversight and management of retirement investments for the US, Canada and the UK. · Prior to that, Ms. McFate served in a number of senior executive finance and investment management roles in the insurance industry over nearly two decades, including Executive Vice President and Global Treasurer of XL Global Services (the shared services subsidiary of XL Capital Ltd); Vice President & Treasurer of American International Group, Inc.; and Senior Vice President, Prudential Investment Corp. (investment subsidiary of The Prudential Insurance Company). · Ms. McFate was elected to the Board of Directors of Rent-A-Center, Inc. in June 2019, where she serves on the Audit and Risk Committee and chairs the Nomination and Corporate Governance Committee. · In July 2019, Ms. McFate joined the Board of Verger Capital Management, LLC, a registered investment manager, and serves as and as a member of the Audit & Compliance, Investment and Nominating and Governance Committees. · Previously, she served on the Board of Directors of CIEBA, Inc. and the Board of Trustees of The Katharine Hepburn Cultural Arts Center and the Parsons Dance Foundation. · Ms. McFate earned an MBA from the Harvard University Graduate School of Business (Harvard Business School) and a B.S. in Economics from Juniata College. She is also a Chartered Financial Analyst (CFA). |
Key Qualifications: Our Board considered Ms. McFate’s extensive experience in senior positions over her 40-year career in executive roles in the insurance and financial services industries. Her experience in finance and investment management brings expertise in global capital and investment markets, multi-discipline risk management, capital and liquidity management, and insurance company financial management. | |
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| J. Daniel Plants | |
Age: 55 Director Since: 2022 Committees: Human Resources Strategic Review (Chair) Other Current Public Directorships: Cutera, Inc. Other Previous Public Directorships During Last Five Years: Calix, Inc. | Experience: · Current Founder & Chief Investment Officer of Voce Capital Management LLC, a value-oriented, employee-owned investment advisor. · Mr. Plants was elected to the Board of Directors of Cutera Inc., a leading provider of laser and energy-based aesthetic systems, in January 2015 and became Board Chair in October 2016 and Executive Chair in July 2021. · From March 2018 to March 2022, Mr. Plants was a director of the Board of Calix, Inc., a leading global provider of cloud and software platforms, systems and services. · Previously, Mr. Plants held executive positions in the mergers and acquisitions groups at Goldman, Sachs & Co. and JPMorgan and was a securities attorney at Sullivan & Cromwell. · Mr. Plants co-founded The Bay Area Urban Debate League and served as its Vice Chairman from 2008 to 2012. · Mr. Plants received a Juris Doctor from the University of Michigan Law School and a BA in economics from Baylor University. |
Key Qualifications: Our Board considered Mr. Plants’ substantial experience as a strategic advisor and corporate attorney, as well as his role as the founder of a successful investment management firm and status as a significant Company shareholder, all of which bring valuable skills and perspective to the Company in the areas of finance, capital markets, investment management, strategy and corporate governance. | |
| Al-Noor Ramji | |
Age: 67 Director Since: 2017 Committees: Risk & Capital (Chair) Investment Other Current Public Directorships: None Other Previous Public Directorships During Last Five Years: None | Experience: · Former Group Chief Digital Officer at Prudential plc, an international financial services group, since January of 2016 and is responsible for developing and executing an integrated, long-term digital strategy for the group. · Before joining Prudential, he worked at Northgate Capital, a venture firm in Silicon Valley, from November 2014 to December 2015 where he ran technology-focused funds. · Prior to working at Northgate Capital, Mr. Ramji served as Chief Strategy Officer of Calypso Technology, Inc. from March 2014 until July 2015. Prior to this, he was a director of Misys plc, a financial services group, and also served as an executive vice president of Misys Plc. · Previously held leading technology and innovation roles at BT Group, Qwest Communications, Dresdner Kleinwort Benson and Swiss Bank Corporation. |
Key Qualifications: Our Board considered Mr. Ramji’s extensive background in information technology services and digital strategies which play an integral role in the Company’s operations. | |
Information About Our Executive Officers
Below are the name, age, offices held and business experience for each of the Company’s executive officers as of October 26, 2022.
Thomas A. Bradley (65) has been our Chief Executive Officer since June 23, 2022 having previously served as Interim Chief Executive Officer since March 3, 2022. Mr. Bradley served as the Chief Financial Officer and Executive Vice President of Allied World Assurance Company Holdings, AG, a global provider of insurance and reinsurance solutions, from 2012 until his retirement in 2017. Prior to that, may be importantMr. Bradley had served as the Executive Vice President and Chief Financial Officer for two other public companies, Fair Isaac Corporation and the St. Paul Companies. He also held senior financial and operational positions at Zurich Insurance Group, including Chief Financial Officer for North America and Chief Executive Officer of the Universal Underwriters Group (now Zurich Direct Markets). Mr. Bradley received a Bachelor of Science degree in accounting from the University of Maryland and a Masters in Business Administration from Loyola University of Maryland and is a Certified Public Accountant (inactive).
| Page 34 of 71 |
Scott Kirk (49) became the Chief Financial Officer of the Company in March 2021. He was previously employed by Aspen Insurance Holdings Limited (“Aspen”), a global property and casualty insurance and reinsurance company, holding various roles beginning in 2007 and most recently served as Aspen’s Group Chief Financial Officer from 2014 until April 2020. Prior to you. You should reviewjoining Aspen, Mr. Kirk worked at Endurance Specialty Holdings Ltd. between 2002 and 2007, holding several senior finance roles. Previously, Mr. Kirk was at Trenwick International Ltd. in London working in finance and treasury. Mr. Kirk began his career as an auditor at KPMG, Brisbane and is a member of the complete documentsInstitutes of Chartered Accountants in both England and Wales and Australia.
Susan B. Comparato (53) became the Chief Administrative Officer of the Company in August 2021. She previously served as Argo Group’s U.S. General Counsel and most recently as SVP, U.S. Insurance, managing a portfolio of the Company’s U.S. business lines. Prior to joining the Company in August 2018, Ms. Comparato spent 16 years at Syncora Holdings where she held a number of senior positions, including as their CEO, General Counsel and Board member. Ms. Comparato started her career as a securitization attorney with Sidley Austin LLP. Ms. Comparato received a Bachelor of Science degree in finance from Georgetown University and her Juris Doctor degree from William & Mary Law School.
Allison D. Kiene (55) has served as the Company’s General Counsel since October 2020 and Secretary of the Company since August 2021. She came to the Company from Sompo International Holdings Ltd., a wholly-owned subsidiary of Sompo Holdings, Inc. established in 2017 as the result of the acquisition of Endurance Specialty Holdings Ltd. (“ENH”), where she served as Assistant General Counsel and Chief Compliance Officer. Ms. Kiene joined ENH following ENH’s acquisition of Montpelier Re Holdings Ltd. (“MRH”) in July 2015. From 2007 to 2015, Ms. Kiene served as Assistant General Counsel, Assistant Group Secretary and Head of Group Compliance for MRH. While at MRH, Ms. Kiene also served as General Counsel and Chief Compliance Officer for MRH’s investment management company, Blue Capital Management Ltd. Since October 2019, Ms. Kiene has served as a board member and chair of the Governance and Nomination Committee, and as Treasurer, of Team Telomere, a non-for-profit organization dedicated to providing information and support services to families worldwide affected by Dyskeratosis Congenita and Telomere Biology Disorder. Ms. Kiene received her Bachelor of Science degree in Pharmacy from the University of Connecticut School of Pharmacy and her Juris Doctor degree from the University of Connecticut School of Law. Ms. Kiene is admitted to the Bar in Connecticut, Massachusetts, and New York.
Jessica Snyder (51) was appointed as President, U.S. insurance, effective August 15, 2022. She joined the Company from GuideOne Insurance where she served as its President and Chief Executive Officer from 2017 through 2022. Prior to GuideOne, Ms. Snyder served as Senior Vice President of commercial and specialty lines at State Auto Insurance from 2015 to 2017. She also served As Senior Vice President, Chief Operating Officer and Chief Financial Officer at Rockhill Insurance Group, a member of the State Auto Group from 2005-2009. She also was the Chief Financial Officer at Citizens Property Insurance from 1998 to 2005. Ms. Snyder also has served on the Board of Directors of Open Lending Corporation, a NASDAQ company, since August 2020, where she serves as Vice Chair, Chair of the Audit Committee and a member of the Nominating and Corporate Governance Committee. Ms. Snyder received a Bachelor of Science in accounting from the University of Wisconsin and a Master of Business Administration degree in finance from the University of Florida.
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NON-EMPLOYEE DIRECTOR COMPENSATION
As of October 26, 2022, our non-employee directors receive a combination of cash retainers and special meeting fees as described in the following table. In addition, our non-employee directors receive annual grants of equity compensation. We also reimburse our directors for travel, lodging and related expenses incurred in attending our Board or committee meetings or for travel related to the Company’s business.
Working with FW Cook, the independent compensation consultant to the HR Committee, our Board reviews compensation on a regular basis to evaluate these statements.
Our common shares, par value $1.00 per share, are listedwhether our non-employee director compensation program is market competitive with our peers. Following the 2021 market review of director compensation and based on the New York Stock Exchange underrecommendation of FW Cook in May 2021, our Board determined to extend the symbol “PXT.” You may inspect reports, proxy statements and other information concerning us and our consolidated subsidiaries at the offices$1,000 fee previously provided for special meetings of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The SEC allows usAudit Committee to incorporate by reference muchalso include attendance for special meetings of any of the information we fileBoard committees. Prior approval from the HR Committee is required to pay a fee to attend informational calls of the Board or its committees. In April 2022, after consultation with it, which means that we can disclose important informationFW Cook, the Board approved an annual retainer of $30,000 for the lead independent director. Mr. Bradley stopped receiving any compensation related to youhis service as a director or Chairman of the Board upon his appointment as Interim Chief Executive Officer in March 2022. In addition, upon Mr. Plants appointment to the Board, he was granted a pro-rated 2022 restricted stock award of 1,700 shares on September 9, 2022. The director compensation program did not otherwise change as compared to 2020.
| Cash Compensation | |
| Annual Retainer (paid in quarterly installments) | $85,000, of which $40,000 ($10,000 per quarter) is paid subject to attendance at Board meetings |
Board and Committee Meeting Fees | Special Meetings of the Board = $2,000 per meeting Special Meetings of the Committees = $1,000 per meeting Informational Calls of the Board or Committees with prior HR Committee Approval = $1,000 per meeting |
Board and Committee Retainers (paid in quarterly installments) | • Chairman of the Board = $125,000 annual retainer |
| • Lead Independent Director = $30,000 annual retainer | |
| • Chair, Audit Committee = $25,000 annual retainer | |
| • Member, Audit Committee = $10,000 annual retainer | |
| • Chair, Human Resources Committee = $15,000 annual retainer | |
| • Member, Human Resources Committee = $8,000 annual retainer | |
| • Chair, Investment Committee = $15,000 annual retainer | |
| • Member, Investment Committee = $8,000 annual retainer | |
| • Chair, Nominating and Corporate Governance Committee = $15,000 annual retainer | |
| • Member, Nominating and Corporate Governance Committee = $8,000 annual retainer | |
| • Chair, Risk & Capital Committee = $15,000 annual retainer | |
| • Member, Risk & Capital Committee = $8,000 annual retainer | |
| Equity Compensation | |
| Annual Equity Awards | Annual grant of $95,000 awarded in restricted stock subject to the terms of the award agreements |
| Page 36 of 71 |
2021 Non-Employee Director Compensation
The following table sets forth our non-employee directors’ 2021 cash and equity compensation.
| Name(1) | Fees Earned or Paid in Cash(2) | Stock Awards(3) | Total | |||||||||
| Thomas A. Bradley | $ | 232,000 | $ | 94,988 | $ | 326,988 | ||||||
| Bernard C. Bailey | 111,000 | 94,988 | 205,988 | |||||||||
| Fred R. Donner | 132,000 | 94,988 | 226,988 | |||||||||
| Anthony P. Latham | 265,976 | (4) | 94,988 | 360,964 | ||||||||
| Dymphna A. Lehane | 121,000 | 94,988 | 215,988 | |||||||||
| Samuel G. Liss | 123,000 | 94,988 | 217,988 | |||||||||
| Carol A. McFate | 110,500 | 94,988 | 205,488 | |||||||||
| Kathleen A. Nealon (5) | 143,237 | (6) | — | 142,237 | ||||||||
| Al-Noor Ramji | 119,000 | 94,988 | 213,988 | |||||||||
| John H. Tonelli(5) | 60,000 | — | 60,000 | |||||||||
| (1) | Current Committee and chairperson appointments can be found in the table starting on page 13. |
| (2) | Includes all retainers, committee and/or chairmanship fees, and fees related to attending special or informational meetings of the Board and its Committees. |
| (3) | Represents the grant date fair value of restricted stock granted by the Company during 2021, calculated in accordance with U.S. GAAP ASC Topic 718, based on the closing stock price of a share of Company common stock on the date of grant. Ms. Nealon and Mr. Tonelli retired from the Board immediately following the 2021 Annual General Meeting of the Shareholders, and therefore did not receive the annual grant of restricted stock in 2021. |
| (4) | $161,976 of this amount represents payments to Mr. Latham for service on the board of directors of the Company’s subsidiary, Argo Managing Agency Ltd. Mr. Latham receives 120,000 in British Pounds for his service as Chairman of the Board of this subsidiary. The payment was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2021 exchange rate of 1.3498 US$/GBP. |
| (5) | Ms. Nealon and Mr. Tonelli retired from the Board immediately following the 2021 Annual General Meeting of Shareholders. |
| (6) | $87,737 of this amount represents payments to Ms. Nealon for service on the board of directors of the Company’s subsidiary, Argo Managing Agency Ltd. until her retirement immediately following the 2021 Annual General Meeting of the Shareholders. Ms. Nealon was paid 65,000 in British Pounds for her service as a board member and Chair of the Remuneration Committee of this subsidiary. The payment was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2021 exchange rate of 1.3498 US$/GBP. |
The following table sets forth the aggregate number of shares of restricted stock held as of December 31, 2021 by referring youeach individual who served as a non-employee director of the Company during 2021:
| Name | Shares of Restricted Stock | |||
| Thomas A. Bradley | 1,665 | |||
| Bernard C. Bailey | 1,665 | |||
| Fred R. Donner | 1,665 | |||
| Anthony P. Latham | 1,665 | |||
| Dymphna A. Lehane | 1,665 | |||
| Samuel G. Liss | 1,665 | |||
| Carol A. McFate | 1,665 | |||
| Kathleen A. Nealon | 0 | |||
| Al-Noor Ramji | 1,665 | |||
| John H. Tonelli | 0 | |||
All of our non-employee directors are expected to those publicly available documents. The information that we incorporate by reference in this proxy statement is considered to be part of this proxy statement. Because we are incorporating by reference future filingscomply with the SEC, this proxy statementCompany’s Equity Ownership Guidelines, which requires each non-employee director to hold equity having a value equal to or greater than five times the annual retainer they received for service on the Board in the preceding year. Non-employee directors must hold all after-tax vested shares earned through service on the Board until they meet the guideline ownership level. Compliance is continually updated and those future filings may modify or supersede sometested as of the information includedfirst business day of the second quarter each year. As of October 26, 2022, all of our non-employee directors either held the requisite number of shares or incorporated by referencewere subject to the 100% retention requirement.
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PROPOSAL 2 : ADVISORY VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT
Section 14A of the Exchange Act requires that companies provide shareholders with an opportunity to vote on an advisory, non-binding basis on the compensation of the Company’s NEOs, as disclosed in the Compensation Discussion and Analysis and related tables in this proxy statement. This meansvote is on the compensation reported for the NEOs in the proxy for the prior year and is commonly referred to as “say on pay.” Consistent with the preference expressed by our shareholders at our 2017 annual general meeting, our Board of Directors has determined that you must look at allwe will include a vote to approve, on an advisory, non-binding basis, our executive compensation in our proxy materials every year until the next required advisory vote to approve the frequency of an advisory vote on executive compensation, which will occur no later than our 2023 annual general meeting.
As discussed more fully in the Executive Summary of the SEC filingsCompensation Discussion and Analysis section which begins on page 39 and the discussion that we incorporate by referencefollows it, the Company’s compensation program is designed to determine if anylink pay to both business and individual performance and is intended both to retain superior, productive employees and to attract new talent necessary to continue the Company’s profitable growth. The program is designed to align the interests and motivations of our executives with the creation and protection of shareholder value. The program includes three main components – base salary, annual incentive awards and long-term incentive awards.
Accordingly, the Company requests shareholder approval of the statements in this proxy statement or in any document previously incorporated by reference have been modified or superseded. This proxy statement incorporates by referencefollowing resolution:
RESOLVED, that the documents listed below and any future filings we make withCompany’s shareholders approve, on an advisory, non-binding basis, the SEC under Section 13(a), 13(c), 14 or 15(d)compensation of the Exchange Act (other than informationNamed Executive Officers as disclosed in the documentsCompensation Discussion and Analysis, compensation tables and narrative discussion included herein.
An advisory vote is not binding upon the Company. However, the HR Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders and will consider the outcome of the vote when making recommendations to the Board regarding future compensation decisions related to the Company’s NEOs.
Required Vote and Board Recommendation
The approval, on an advisory, non-binding basis, of the compensation of our NEOs will be decided by an ordinary resolution: that is deemeda resolution duly adopted by the Board of Directors, which has already occurred, and then approved by shareholders with a simple majority of votes cast in person or by proxy. Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions and broker non-votes will not to be filed) aftercount as votes cast and, therefore, will have no effect on the dateoutcome of this proxy statement:proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE THIS PROPOSAL. IT IS THE INTENTION OF THE PROXIES NAMED
IN THE FORM OF THE PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR
THE APPROVAL OF SUCH PROPOSAL.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis discusses our compensation policies and determinations that applied to the following NEOs for the 2021 fiscal year:
| Name | Title | |
| Kevin J. Rehnberg(1) | President and Chief Executive Officer | |
| Scott Kirk(2) | Chief Financial Officer | |
| Andrew M. Borst(3) | Interim President of International Operations | |
| Susan B. Comparato(3) | Chief Administrative Officer | |
| Allison D. Kiene | General Counsel and Secretary | |
| Former Executive Officers | ||
| Jay S. Bullock(2) | Former Executive Vice President and Chief Financial Officer | |
| Timothy D. Carter(3) | Former Chief Underwriting Officer | |
| Matthew J. Harris(3) | Former Group Head of International Operations |
(1) On June 23, 2022, the Company and Mr. Rehnberg agreed that Mr. Rehnberg’s employment relationship with the Company would cease with immediate effect. In connection with Mr. Rehnberg’s separation, the Company announced the appointment of Thomas A. Bradley as Chief Executive Officer. Mr. Bradley had been serving as the Interim Chief Executive Officer since March 3, 2022, when Mr. Rehnberg took a leave of absence.
(2) On July 2, 2020, the Company announced the departure of Mr. Bullock as Executive Vice President and Chief Financial Officer of the Company. Mr. Bullock continued to serve as Executive Vice President and Chief Financial Officer through March 15, 2021. Mr. Kirk joined the Company on February 8, 2021, and succeeded Mr. Bullock as the Company’s Chief Financial Officer on March 16, 2021. Mr. Bullock remained employed in an advisory capacity through March 31, 2021.
(3) On August 6, 2021, Mr. Harris resigned as Group Head of International Operations of the Company, and on August 11, 2021 Mr. Carter’s employment as Chief Underwriting Officer with the Company was terminated without cause. On August 12, 2021, the Company appointed Mr. Borst as Interim President of International Operations and Ms. Comparato as Chief Administrative Officer, replacing Mr. Borst’s previous role. Mr. Borst voluntarily resigned from the Company effective April 1, 2022.
Business Overview
The Company is a distinctive U.S. focused specialty insurer with well-established businesses operating in key specialty markets. We operate in the specialty insurance market where we focus on discrete niche products or businesses that require specialized or hard-to-place coverage. We believe the specialized nature of the products we offer provides our underwriters the flexibility over rates, terms and forms to produce superior loss ratios over the long-term. Our fundamental operating principles are designed to create an efficient organization that is focused on delivering results and improved shareholder value creation. The Company operates primarily in two segments, U.S. Operations and International Operations. In addition to these main business segments, we have a Run-off Lines segment for certain products we no longer underwrite.
2021 Company Performance and Strategy
During 2021, the Company made significant progress in a number of strategic priorities and enhancing our business profile as a U.S. focused specialty insurer, while realigning, simplifying and ultimately positioning the business for future profitability. Key achievements included:
Repositioned Business Units for profitability
| Page 39 of 71 |
Continued Expense Reduction Efforts
Made Progress on ESG Initiatives
2021 Financial Results
Our 2021 underwriting results were adversely impacted by $138 million of net adverse prior year development. Total catastrophe losses in 2021 were $93 million, or 4.8 points on the loss ratio, as compared to $179 million or 10.1 points on the loss ratio in 2020. Natural catastrophes accounted for $80 million of losses with $13 million of losses relating to the COVID-19 pandemic. The 2020 full year included $73 million of losses related to the COVID-19 pandemic. The reduction in 2021 catastrophe losses reflects our strategic focus on reducing volatility in our underwriting results, despite elevated insured industry losses. A 60-basis point improvement in the current accident year, excluding catastrophes, loss ratio and a 70-basis point improvement in the expense ratio partially offset the deteriorated underwriting results compared to 2020.
Investment results in 2021 benefited from higher returns from alternative investments and net realized gains, partially offset by a decline in our fixed maturities portfolio, which was impacted by lower reinvestment rates and portfolio de-risking actions. In total, investment income increased 66.5% in 2021, which reflects these factors.
Our net loss attributable to common shareholders was $4 million in 2021 compared to $59 million in 2020. Additional factors driving the smaller net loss in 2021 included a lower level of catastrophe losses, expense ratio improvement, a higher contribution from net investment income and net realized investment gains, partially offset by an increase in adverse prior year development, a higher level of non-operating expenses and an impairment of goodwill and intangible assets. Our operating income was $42 million in 2021 compared to an operating loss of $10 million in 2020.
| Page 40 of 71 |
| For the Year Ended December 31, | ||||||||
| (in millions) | 2021 | 2020 | ||||||
| Gross written premiums | $ | 3,181.2 | $ | 3,233.3 | ||||
| Earned premiums | $ | 1,910.1 | $ | 1,780.5 | ||||
| Net investment income | $ | 187.6 | $ | 112.7 | ||||
| Total revenue | $ | 2,130.3 | $ | 1,889.6 | ||||
| Net loss attributable to common shareholders | $ | (3.8 | ) | $ | (58.7 | ) | ||
| Operating income (loss)1 | $ | 41.5 | $ | (10.0 | ) | |||
| GAAP ratios: | ||||||||
| Loss ratio | 68.8 | % | 67.9 | % | ||||
| Expense ratio | 36.8 | % | 37.5 | % | ||||
| Combined ratio | 105.6 | % | 105.4 | % | ||||
| Book value per common share | $ | 45.62 | $ | 49.40 | ||||
| Cash dividends paid per common share during the year | $ | 1.24 | $ | 1.24 | ||||
| Book value per common share including dividends | $ | 46.86 | $ | 50.64 | ||||
| Percentage change in book value per common share including cash dividends paid | (7.5 | )% | (3.6 | )% | ||||
1Excludes net realized investment gains of $32.6 million, foreign currency exchange losses of $1.6 million, non-operating expenses of $43.7 million and an impairment of intangibles of $43.2 million for the |
Remaining well capitalized is one of our key financial objectives. This objective is balanced against our efforts to return excess capital to our shareholders through the payment of cash dividends and, at times, share repurchases. In 2021, we returned a portion of what we deemed to be excess capital to our shareholders. To this end, we paid in the aggregate cash dividends of $44 million during 2021. We did not repurchase any of our Common Shares during 2021.
The HR Committee reviews on an ongoing basis the Company’s executive compensation program to evaluate whether it supports the Company’s executive compensation philosophies and objectives and whether the program is aligned with shareholder interests. Our executive compensation practices include the following, each of which the HR Committee believes reinforces our executive compensation objectives:
| What We Do | What We Don’t Do | ||
| ☑ | Pay for performance by structuring a significant percentage of target annual compensation in the form of variable, at-risk compensation | x | No guaranteed annual salary increases or bonuses |
| ☑ | Pre-established performance goals that are designed to be aligned with the creation of shareholder value | x | No excise tax gross-ups |
| ☑ | Use of a compensation peer group to evaluate market competitiveness of our executive compensation program | x | No repricing of stock options permitted |
| ☑ | Maximum payout caps for incentive compensation | x | No hedging or pledging of Company stock |
| ☑ | Double-trigger vesting for equity awards in the event of a change in control | x | No dividends or dividend equivalents paid on unvested equity awards |
| ☑ | Require meaningful equity ownership by executive officers | x | No multi-year compensation guarantees |
| ☑ | Maintain a clawback policy that applies to any cash, equity-based annual or long-term incentive and other performance-based compensation awards and includes a trigger for egregious conduct substantially detrimental to the Company absent a financial restatement | x | No single-trigger change in control provisions |
| ☑ | Perform a thorough compensation risk assessment | ||
| ☑ | Retain an independent compensation consultant | ||
| ☑ | Engage in regular shareholder outreach | ||
| ☑ | Limited and customary perquisites and other personal benefits |
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Shareholder Engagement and Responsiveness to 2021 Advisory Vote on Executive Compensation
During shareholder outreach conducted in 2021 and 2020, we received positive shareholder feedback around the compensation and governance changes that had been implemented in 2021 and 2020, including the change to the long-term incentive (“LTI”) design for NEOs to place a higher weighting on performance-based awards with metrics based on three-year book value per share (“BVPS”) and return on equity (“ROE”) and the introduction of the Company’s Executive Severance Plan, as described below. In designing our executive compensation program, our executive management team and the Board carefully considered shareholder feedback as well as insights gathered through our prior engagement efforts to structure a program in a manner that we believe fits well within our overall compensation philosophy and the objectives of our executive compensation and governance programs, and is aligned with the interests of our shareholders.
Following our 2021 Annual General Meeting of Shareholders, the HR Committee reviewed the results of the shareholder advisory vote on executive compensation in which approximately 97.7% of the votes were cast in favor of the proposal. The HR Committee did not make any changes to the Company’s executive compensation program in response to the 2021 shareholder advisory vote.
Compensation Philosophy
The main objective of our executive compensation philosophy is to focus executives on the achievement of financial and operational performance over the short- and long-term in order to maximize shareholder value and support business objectives. Our compensation program is designed to increase shareholder value by:
| Page 42 of 71 |
Compensation Elements and Pay Mix
Our goal is to retain and attract experienced and talented executive officers and to motivate them to achieve our short- and long-term financial, operational and strategic objectives that produce and promote shareholder value. To achieve this goal, we strongly emphasize a culture of pay for performance in order to provide incentives and accountability for our executive officers in working toward the achievement of our objectives. Accordingly, we have designed our incentive compensation program with the goal of ensuring that actual realized pay varies based on achievement of challenging performance goals and demonstration of meaningful individual commitment and contribution.
The table below summarizes the key components of our executive compensation program (described in more detail beginning on page 44) and highlights significant compensation decisions of the HR Committee in fiscal year 2021 with respect to such program.
| Compensation Component | Link to Business Strategy and Shareholder Value | 2021 Compensation Decisions |
| Base Salary (Page 45) | • Provide a competitive level of fixed compensation that allows us to attract and retain executive talent • Base salaries reflect the experience, skills and responsibilities of each NEO, the pay practices of companies with whom we compete for talent, economic conditions, and the HR Committee’s assessment of the Company and individual performance | • Two of our NEOs received base salary adjustments and, in the case of Mr. Kirk, his base salary was established when he joined the Company after considering market data. No other changes to NEO salaries were approved for 2021 |
| Annual Incentive Compensation (Page 45) | • Incentivize executives to achieve pre-established annual corporate/business unit financial goals and individual performance achievements aligned with the Company’s financial, operational and strategic objectives • Financial goals based on achieving adjusted underwriting income and combined ratio targets, with payout ranging from 0% to 200% of target opportunity • Payouts are capped at 200% of target opportunity regardless of individual performance • The HR Committee views non-financial individual performance as an important contributor to the Company’s future operational and financial performance | • In 2021, the HR Committee redesigned the Annual Incentive Plan (“AIP”) as follows – 80% was based on – 20% was based on • For 2021, the HR Committee approved a funded financial result of 82.7%, inclusive of the individual 20% component. |
| Long-Term Incentive Compensation (Page 48) | • Encourage stock ownership and • Reward and retain executives who contribute to the Company’s success through achieving pre-established corporate financial performance objectives that are designed to be aligned with building shareholder value • Performance-based awards vesting 50% based on achievement of tangible BVPS (“TBVPS”) growth and 50% based on ROE, each measured over a three-year cumulative performance period, with payouts ranging from 25% to 150% of target opportunity | • LTI awards were granted as a mix of 25% time-based and 75% performance-based awards. For the 2021 LTI grant, the HR Committee changed from the BVPS metric used in prior years to TBVPS in order to exclude the impact of intangible asset accounting and better align with shareholder value creation |
| Page 43 of 71 |
When determining the appropriate level of compensation for an NEO, the HR Committee looks not only at the separate components of the compensation package and the incentive provided by each but also at the NEO’s aggregate level of compensation. This philosophy allows the HR Committee to provide a mix of components to incentivize and reward the desired performance from each NEO. The following graphs illustrate the pay mix and the fixed versus variable portion of Mr. Rehnberg’s and, on average, the other continuing NEOs’ total target direct compensation as of December 31, 2021.
Elements of the Compensation Program
Our goal is to attract and retain experienced and talented executive officers and to motivate them to achieve our short- and long-term financial, operational and strategic objectives that produce and promote shareholder value. To achieve this goal, we strongly emphasize a culture of pay for performance in order to provide incentives and accountability for our executive officers in working toward the achievement of our objectives.
We are not, however, incorporating by reference any documents
2021 Base Salary
Consistent with our desire to provide compensation that will attract and retain superior executives, when establishing base salary for our NEOs, the HR Committee considers both (i) the experience, skills and responsibilities of the NEO and (ii) the pay practices of companies with whom we compete for executives. In addition, when establishing base salaries for new hires or portions thereof that are not deemed “filed” withinternal promotions, the SEC, including any information furnished pursuantHR Committee considers compensation paid to Items 2.02 or 7.01the executive’s predecessor, internal pay equity as well as the level of Form 8-K. You can requestcompensation required to induce an executive to join the Company. When adjusting base salaries, the HR Committee also considers Company performance and an NEO’s individual performance. The HR Committee increased Mr. Borst’s base salary, effective January 1, 2021, based on a copyreview of these documents, excluding exhibits, at no cost, by writing or telephoning usmarket data for his role as Chief Administrative Officer. Mr. Borst subsequently replaced Mr. Harris in August 2021 as Interim President of International Operations. The HR Committee increased Ms. Comparato’s 2021 base salary when she assumed her new role as Chief Administrative Officer in August 2021 based on an assessment of market data for her role. Mr. Kirk’s initial base salary was established at the following address:
PXRE House110 Pitts Bay RoadPembroke HM 08BermudaAttention: Treasurer(441) 296-5858time he joined the Company based on a review of the competitive market as well as the Company’s historical pay practices.
BackThe 2021 base salaries for our NEOs were as follows:
| Executive | 2020 Base Salary | (%) Change | 2021 Base Salary | |||||||||
| Kevin J. Rehnberg | $ | 975,000 | 0 | % | $ | 975,000 | ||||||
| Scott Kirk(1) | N/A | N/A | 630,087 | (1) | ||||||||
| Andrew M. Borst(3) | 400,000 | 25 | % | 500,000 | ||||||||
| Susan B. Comparato(3) | 400,000 | 13 | % | 450,000 | ||||||||
| Allison D. Kiene | 500,000 | 0 | % | 500,000 | ||||||||
| Former Executive Officers | ||||||||||||
| Jay S. Bullock | 600,000 | 0 | % | 600,000 | ||||||||
| Timothy D. Carter | 500,000 | 0 | % | 500,000 | ||||||||
| Matthew J. Harris | 539,920 | (2) | 0 | % | 539,920 | (2) | ||||||
(1) Mr. Kirk joined the Company on February 8, 2021, and succeeded Mr. Bullock as the Company’s Chief Financial Officer on March 16, 2021. The amount represents his annualized base salary level at the time he joined the Company.
(2) Base salary was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2021 exchange rate of 1.3498 US$/GBP
(3) Mr. Borst received a base salary increase in January 2021 and Ms. Comparato received a base salary increase in August 2021 in connection with her appointment as Chief Administrative Officer.
2021 Annual Incentive Awards
Performance Goal and Target Establishment
Our AIP is structured to Contentsmotivate and reward achievement of short-term financial goals and individual performance objectives and to provide a strong linkage between pay and performance. For our NEOs, AIP awards are based on an individual’s target award, 80% of which is tied to the achievement of pre-established financial objectives and 20% of which is based on the achievement of pre-established annual objectives for each individual. Payouts are capped at 200% of target opportunity.
| Page 45 of 71 |
OTHER MATTERS
At the datebeginning of this proxy statement, management has no knowledgethe year or, if later, upon hire or promotion, each NEO’s individual target award is established as a percentage of any matters other than those set forthhis or her base salary, after considering market data provided by the HR Committee’s independent compensation consultant, individual performance and the Company’s historical compensation programs. The 2021 target cash incentive for our participating NEOs were as follows:
| Executive (1) | 2021 Target Annual Incentive as Percent of Base Salary (%) | 2021 Target Annual Incentive ($) | ||||||
| Kevin J. Rehnberg | 125 | % | $ | 1,218,750 | ||||
| Scott Kirk | 100 | % | 630,087 | (2) | ||||
| Andrew M. Borst | 100 | % | 500,000 | |||||
| Susan B. Comparato | 75 | % | 315,000 | (3) | ||||
| Allison D. Kiene | 75 | % | 375,000 | |||||
| Former Executive Officers | ||||||||
| Timothy D. Carter | 100 | % | 500,000 | |||||
| Matthew J. Harris | 75 | % | 404,940 | (2) | ||||
(1) Pursuant to the Bullock Separation Agreement, Mr. Bullock was not eligible to participate in this proxy statement which will be presentedthe Company’s 2021 AIP.
(2) Target annual incentive was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2021 exchange rate of 1.3498 US$/GBP.
(3) Target annual incentive annualized based on mid-year 2021 salary increase.
2021 Performance Results
| Page 46 of 71 |
2021 Financial Goals
The AIP awards are based 80% on the achievement of pre-established financial metrics. For fiscal year 2021, a pool was determined based on underwriting income and normalized combined ratio targets established at the Meeting. However, if any other matters should properly come beforebeginning of the Meeting ityear. Following a comprehensive review of market and peer incentive plan practices, the AIP financial metrics were changed in 2021 from operating income and underwriting income to underwriting income and normalized combined ratio. The HR Committee believes that these metrics are sustainable over time and enhance management’s line of sight to controllable performance. Normalized combined ratio is intended that Proxies shall be voted thereondefined as current accident year combined ratio, normalized to the planned catastrophe load. When determining actual results for incentive compensation purposes, the HR Committee retained authority to adjust the results for the impact of certain material non-recurring items outside the control of management in order to reflect the actual operating performance of the Company. Accordingly, in determining the funded payout for 2021 and in accordance with the best judgmentapproved AIP, the HR Committee adjusted the underwriting income for: (i) unanticipated prior year development resulting from the fourth quarter reserve review and (ii) catastrophe losses above plan. The HR Committee selected underwriting income, as adjusted, and normalized combined ratio as strong indicators of the personCompany’s short-term financial and operational performance.
The Company’s 2021 target and actual metrics are summarized below. The minimum levels of payout shown for the underwriting income and normalized combined ratio financial metrics represent the outcome under which the individual performance metric would fund, but there is no funding of the financial metrics at this level. If actual financial metrics are below the minimum payout metrics, there will be no funded payout under any performance metrics, including the individual performance metric.
| Performance Metric | Metric Weighting | Minimum Payout (0%) | Target Payout (100%) | Maximum Payout (200%) | 2021 Adjusted Result | Metric Payout | Weighted Payout | |||||||||||||||||||||
| Adjusted Underwriting Income | 60.0 | % | $ | (16.2 | )(1) | $ | 99.8 | (1) | $ | 132.6 | (1) | $ | 76.2 | (1) | 78.3 | % | 47.0 | % | ||||||||||
| Normalized Combined Ratio | 20.0 | % | 100.7 | % | 94.5 | % | 92.7 | % | 95.8 | % | 78.3 | % | 15.7 | % | ||||||||||||||
| Individual Performance | 20.0 | % | N/A | N/A | N/A | 100.0 | % | 100.0 | % | 20.0 | % | |||||||||||||||||
| Total | 100.0 | % | 82.7 | % | ||||||||||||||||||||||||
(1) In millions
2021 Individual Goals
The AIP awards are based 20% on the achievement of individual performance goals in order to allow the HR Committee to appropriately reflect performance that is reasonably within management’s control and to reward individual performance when appropriate. At the beginning of 2021, the HR Committee established the performance goals that would be used to determine the individual component for the NEOs. As part of the Company’s annual performance evaluation process each year, the CEO, after having received input from the HR Committee and after consultation with each NEO, establishes that NEO’s performance objectives for the coming year. These performance objectives are not intended to be rigid or persons votingformulaic, but rather to serve as the framework upon which the NEO’s overall performance is assessed. These annual performance goals varied by NEO and generally fell within the performance categories of financial, organizational goals and development, leadership, Board interface, improvement in working relationships with key clients, partners, regulators, rating agencies, shareholders and/or the banking community, strategy execution, and diversity and inclusion related goals. Under each performance goal category, each NEO had a number of underlying performance measures against which the NEO’s performance was assessed to determine whether the NEO had achieved the overall performance goal. In order to determine payouts relative to the individual component, the HR Committee carefully assessed the performance of each NEO relative to pre-established individual objectives and determined that each NEO achieved their individual goals for 2021.
| Page 47 of 71 |
The table below sets forth the AIP targets and payouts to each of our participating NEOs based upon 2021 performance, as described above:
| Executive | 2021 Target Annual Incentive ($) | Annual Incentive Payouts ($) | ||||||
| Kevin J. Rehnberg | $ | 1,218,750 | $ | 1,007,906 | ||||
| Scott Kirk (1) | 630,087 | 521,082 | ||||||
| Andrew M. Borst | 500,000 | 413,500 | ||||||
| Susan B. Comparato | 315,000 | (2) | 260,505 | |||||
| Allison D. Kiene | 375,000 | 310,125 | ||||||
| Former Executive Officers | ||||||||
| Timothy D. Carter | 500,000 | 251,499 | (3) | |||||
| Matthew J. Harris (1) | 404,940 | N/A | (4) | |||||
(1) Target annual incentive and actual incentive payout was converted into U.S. dollars for purposes of the foregoing table using a December 31, 2021 exchange rate of 1.3498 US$/GBP.
(2) 2021 target AIP award is based upon annualized mid-year 2021 salary increase for Ms. Comparato.
(3) Pursuant to the terms of the ESP, Mr. Carter was entitled to receive a prorated AIP payment, based on actual performance, payable at the same time as awards to other participants.
(4) Mr. Harris was not eligible to receive any 2021AIP awards due to his voluntary resignation from the Company on August 6, 2021.
2021 Long-Term Incentive Awards
Our LTI compensation is designed to provide a strong linkage between pay and the Company’s strategic goals, and to align the interests of our executives with those of our shareholders by awarding compensation in the form of equity, which may be restricted stock, restricted stock units, performance-based restricted stock, stock options or stock appreciation rights.
Individual target LTI awards for our NEOs are established at the beginning of the year or, if later, upon hire or promotion. As noted above, the 2021 LTI grants were delivered in the form of time-based and performance-based restricted stock awards, weighted 25% and 75%, respectively. The time-based restricted stock awards vest ratably over a four-year period based on the executive’s continued employment through the applicable vesting date.
The performance-based restricted stock awards vest based on the achievement of pre-established performance goals relating to TBVPS growth and ROE, each weighted 50% and measured over a cumulative three-year performance period. For the 2021 LTI grant, the HR Committee changed from the BVPS metric used in prior years to TBVPS in order to exclude the impact of intangible asset accounting and better align with shareholder value creation. The TBVPS and ROE performance goals were established taking into account the challenging global economic conditions and market conditions facing our industry at the time the goals were set. The growth in TBVPS and ROE targets under the Company’s LTI program were also established based on an assessment of the current operating environment, evidenced by continued and heightened competition relative to prior periods, a modestly improving economic environment at the time, and an improving interest rate environment, which at times has had the effect of increasing investment income. The target goals were designed to be challenging but achievable with strong management performance. Depending on the outcome, the performance-based restricted share awards may vest up to 150% of the target award opportunity, with no vesting if threshold level goals are not met. The TBVPS and ROE performance targets, along with actual results against targets, will be disclosed following the conclusion of the three-year performance period.
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The following table sets forth the target award value of the 2021 LTI awards granted to each participating NEO.
| Executive (1) | 2021 Target LTI ($) | |||
| Kevin J. Rehnberg | $ | 2,000,000 | ||
| Scott Kirk (2) | 707,273 | |||
| Andrew M. Borst | 500,000 | |||
| Susan B. Comparato | 250,000 | |||
| Allison D. Kiene | 300,000 | |||
| Former Executive Officers | ||||
| Timothy D. Carter (3) | 500,000 | |||
| Matthew J. Harris (2)(4) | 298,701 | |||
(1) Pursuant to the Bullock Separation Agreement, Mr. Bullock was not eligible to participate in the Company’s 2021 LTI plan.
(2) LTI Target was converted into U.S. dollars for purposes of the foregoing table using a March 2020 through February 2021 monthly average exchange rate of 1.299 US$/GBP.
(3) Pursuant to the terms of his 2021 Separation Agreement and General Release, Mr. Carter’s unvested LTI awards were forfeited.
(4) Due to his voluntary resignation from the Company on August 6, 2021, Mr. Harris’ unvested LTI awards were forfeited.
In March 2022, the HR Committee recognized the shift from single-year performance to three-year performance awards which resulted in the executive officers vesting in a limited number of LTI awards during the initial three-year performance period. As a result, the 2022 LTI performance awards were divided to provide both a single-year performance award and a three-year performance award.
One-time Performance Award to Certain NEOs
In November 2018, the HR Committee approved performance-based restricted stock awards on a selective basis to certain executives, including Messrs. Rehnberg and Bullock (the “2018 Performance Awards”). The 2018 Performance Awards could be earned based on the achievement of specific stock price and expense ratio reduction hurdles by the end of a three-year performance period from January 1, 2019 to December 31, 2021. At the conclusion of the performance period it was determined that these hurdles were not met and, based on performance against these pre-established performance goals, the 2018 Performance Awards were forfeited.
Other Compensation and Benefit Programs
Savings Plans
Substantially all of our United States based employees, including our NEOs who are U.S. citizens, are eligible to participate in our tax-qualified savings plan (the “Qualified Savings Plan” or “401(k) Plan”). This plan provides an opportunity for employees to save for retirement on both a tax-deferred and after-tax basis. Participants may contribute up to 75% of their base salary through tax-deferred and after-tax contributions up to the Internal Revenue Code (“IRC”) limit on employee contributions. We match 100% of the first 5% of each employee’s bi-weekly contributions. Participants are vested on a five-year graded vesting schedule for employer matching contributions. In addition, we contribute 1% of base salary up to the IRC compensation limit. This contribution vests upon completing three years of service.
Our NEOs who are U.S. citizens are also eligible for a tax-deferred non-qualified defined contribution plan (the “Non-Qualified Savings Plan”). The Non-Qualified Savings Plan provides retirement benefits which would be payable under the Qualified Savings Plan but for the limits imposed by the IRC. Our NEOs who are U.S. citizens may contribute up to 5% of their pay to the Non-Qualified Savings Plan after reaching the maximum allowable IRS contribution to the Qualified Savings Plan. The participant’s investment return is calculated as though the account was invested as designated by the individual from substantially the same funds that are available under the Qualified Savings Plan.
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Our NEOs who are non-U.S. citizens are eligible to participate in defined contribution pension plans pursuant to the laws of the jurisdictions where they work and reside. The Company generally contributes 15% of a participant’s base salary to these plans up to the limits permitted by applicable legislation.
Welfare Benefits and Perquisites
We provide limited perquisites to our NEOs, consisting principally of our corporate-wide benefit programs and, where applicable, relocation assistance. Our NEOs are offered welfare benefits that generally are commensurate with the benefits provided to all of our full-time employees. Welfare benefits consist of company-paid portions of life, disability, medical and dental insurance premiums. The Company also provides our executives with a group umbrella casualty insurance policy and executive long-term disability insurance.
The Board has adopted a policy permitting the use of chartered, private aircraft for business travel only when there is no commercial alternative and then only with prior written approval from either the Chief Executive Officer or the Chief Financial Officer for officers or the Chairman of the HR Committee for directors. During 2021, none of the executive officers or directors used chartered, private aircraft for business travel.
Executive Severance Plan
We believe that reasonable severance arrangements are essential to attracting and retaining highly qualified executives. Our employment arrangements are designed to provide reasonable compensation to departing executives under certain circumstances to facilitate their transition to new employment. As part of these arrangements, we also mitigate potential Company liability by requiring executives to sign a separation and release agreement acceptable to us as a condition to receiving severance benefits. While we do not believe that the provisions of a severance benefit would be the determinative factor in an executive’s decision to join or remain with the Company, we believe that the absence of such Proxies.a provision in an executive’s employment arrangement would present a distinct competitive disadvantage in the market for highly skilled and experienced executives. Furthermore, we believe that it is important to set forth the benefits payable in triggering circumstances in advance in an attempt to avoid future disputes or litigation, and to provide consistency among executives with respect to benefits payable upon a termination from the Company under certain scenarios. In determining severance arrangements, the HR Committee has drawn a distinction between a termination initiated by the Company other than for cause versus a termination initiated by the Company for cause or one initiated by the executive (for example, a voluntary resignation). We believe severance arrangements for a termination without cause that is initiated by the Company are appropriate since the executive’s departure is due to circumstances not within his or her control.
As such, beginning on January 1, 2021, our NEOs, other than Mr. Rehnberg, were eligible to receive severance benefits pursuant to the terms of the Company’s Executive Severance Plan, which was adopted on November 6, 2020 (the “ESP”), in the event of a termination initiated by the Company other than for cause, as discussed in detail beginning on page 64. The post-termination benefits provided in Mr. Rehnberg’s 2020 employment agreement and the ESP were determined based on market data, input from the HR Committee’s independent compensation consultant and the Company’s historical pay practices.
On April 26, 2022, the Board approved the Company’s Executive Severance Plan, as amended and restated with immediate effect (the “Amended Plan”). Subject to the execution of a participation agreement to the Amended Plan, the Company’s Chief Financial Officer (Mr. Scott Kirk), the Company’s General Counsel and Secretary (Ms. Allison D. Kiene), the Company’s Chief Administrative Officer (Ms. Susan B. Comparato), and the Company’s President, U.S. Insurance (Ms. Jessica Snyder) are “Tier I Participants” of the Amended Plan. Under the Amended Plan, upon a participant’s termination of employment without cause (as defined in the Amended Plan) or a participant’s resignation for good reason (as defined in the Amended Plan), in each case, within 24 months following a change in control (as defined in the Amended Plan), subject to the execution of a release of claims, the participant will be entitled to the following severance payments and benefits:
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firmAmended Plan also provides for: (i) the reimbursement of KPMG LLP,a participant’s legal fees in the event of a dispute arising under the Amended Plan on or following a change in control; and (ii) for Tier I Participants, extending the applicable restrictive covenants to 18 months following an employment termination. The terms of the Amended Plan, except as described above, are substantially the same as the terms of the Executive Severance Plan effective as of January 1, 2021.
Employment Arrangements with Named Executive Officers
The Company generally executes an offer of employment before an executive joins the Company. This offer describes the basic terms of the executive’s employment, including his or her start date, starting salary, annual incentive target and LTI award target. The terms of the executive’s employment are based thereafter on sustained good performance rather than contractual terms, and the Company’s policies, such as the Amended Plan, will apply as warranted. Under certain circumstances, the HR Committee recognizes that special arrangements with respect to a NEO’s employment may be necessary or desirable and, in such cases, may enter into employment agreements or other employment agreements as it deems appropriate.
Kevin J. Rehnberg
On March 11, 2020, the Company entered into an Executive Employment Agreement (“Executive Employment Agreement”) with Mr. Rehnberg in connection with his continued appointment as President and Chief Executive Officer. Pursuant to this Executive Employment Agreement, Mr. Rehnberg was to serve as the Company’s President and Chief Executive Officer through February 18, 2023, subject to earlier termination pursuant to the terms of the Executive Employment Agreement. If Mr. Rehnberg voluntarily resigned from the Company, he was required to provide the Company with thirty days’ prior notice.
Under this Executive Employment Agreement, Mr. Rehnberg’s annual base salary was set at $975,000, which was reviewed annually by the HR Committee for possible increases (but not decreases) in its sole discretion. Mr. Rehnberg was eligible to earn annual cash incentive and/or LTI awards in the sole discretion of the HR Committee from time to time, subject to his continued employment through any payment date, except as provided in the Executive Employment Agreement. The terms of the Executive Employment Agreement were determined by the HR Committee after considering market practices, the Company’s historical pay practices and the input of its independent compensation consultant. Mr. Rehnberg was also eligible to receive severance payments and benefits pursuant to the terms of the Executive Employment Agreement, as described on page 63.
On June 23, 2022, the Company and Mr. Rehnberg agreed that Mr. Rehnberg’s employment relationship would cease with immediate effect (the “Separation Date”). In addition, as of the Separation Date, Mr. Rehnberg would cease serving on the Company’s Board of Directors. The Company and Mr. Rehnberg entered into a Separation and Release Agreement, dated June 23, 2022 (the “Separation Agreement”) in full satisfaction of the Company’s obligations to Mr. Rehnberg under the Executive Employment Agreement. Under the Separation Agreement, in exchange for his release of claims against the Argo Group, Mr. Rehnberg received (i) an amount equal to $6 million and (ii) Company-paid coverage for 18 months under our medical or dental program or policy in which Mr. Rehnberg was eligible to participate as of the Separation Date. In addition, all unvested equity awards held by Mr. Rehnberg were immediately terminated and forfeited as of the Separation Date. Under the Separation Agreement, Mr. Rehnberg remains subject to certain restrictive covenants, including a non-compete, customer non-solicitation and employee non-hire/non-solicitation, in each case, for one (1) year after the Separation Date.
Scott Kirk
On February 8, 2021, we announced the appointment of Scott Kirk as Chief Financial Officer, succeeding Mr. Bullock, effective March 16, 2021. In connection with his employment, Mr. Kirk entered into a Service Agreement, dated February 5, 2021, with Argo Management Services Limited, a subsidiary of the Company incorporated and registered public accounting firm,in England and Wales. The term of the Service Agreement will continue until the earlier of Mr. Kirk’s relocation to the United States or August 7, 2022, subject to either party providing a one month’s prior written notice to the other party of an earlier termination.
The Company may, in its discretion, terminate Mr. Kirk’s employment at any time and with immediate effect by notifying him and making a payment in lieu of notice (“PILON”), which is subject to and paid in accordance with the terms of the ESP. Mr. Kirk shall not be entitled to any PILON if the Company would otherwise have been entitled to terminate his employment under his Service Agreement without having to provide such notice. In that case the Company is entitled to recover any PILON already made from Mr. Kirk.
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Under the terms of the Service Agreement, Mr. Kirk receives a base salary of $600,000 and is eligible for a target annual cash incentive compensation opportunity of up to 100% of his base salary and a LTI target opportunity of $700,000. He is eligible to participate in the Company’s retirement and other benefit plans and programs as set forth in the Service Agreement. In order to be eligible to receive an annual incentive compensation payment, Mr. Kirk must be employed through any payment date and not under notice to receive (or have received) a PILON on the date that the annual incentive compensation is paid.
Mr. Kirk received a one-time cash sign-on bonus of $300,000, subject to Mr. Kirk’s obligation to reimburse the Company if he were to voluntarily leave the Company within 24 months of receipt of such payment, and a one-time LTI award equal to $200,000, granted in the form of restricted stock that vests ratably over a four-year period, measured from the award grant date. These awards were made to Mr. Kirk as an inducement to join the Company. The terms of the Service Agreement were determined by the HR Committee after considering market practices, the Company’s historical pay practices and the input of its independent compensation consultant. Mr. Kirk is eligible for severance benefits under the Amended Plan, as described on page 50, and under the terms of the Service Agreement may be placed on garden leave.
In December 2021, Mr. Kirk received a one-time retention award with a grant date fair value equal to $500,000, delivered in the form of restricted stock that vests ratably over a three-year period, subject to Mr. Kirk’s continued service through the applicable vesting date. This award was granted to recognize the critical need to retain Mr. Kirk during the turnaround period and in consideration of unprecedented levels of turnover both in the organization and the external market.
On April 26, 2022, the Board granted a retention award to Mr. Kirk pursuant to a retention letter agreement, which provides for a cash retention bonus in an amount equal to two (2) times Mr. Kirk’s current annual base salary. The cash retention bonus will vest in 25% increments on June 15, 2022, September 15, 2022, December 15, 2022, and March 15, 2023, subject to Mr. Kirk’s continued employment with the Company through each vesting date. However, upon a termination of employment without cause (as defined in the Amended Plan) or Mr. Kirk’s resignation for good reason (as defined in the Amended Plan), the cash retention bonus will vest in full, subject to the Mr. Kirk’s execution of a release of claims.
On May 5, 2022, Argo Management Services Limited entered into a Retention Letter and Extension of Service Agreement with Mr. Kirk (the “Retention and Service Letter”). Pursuant to the Retention and Service Letter, the parties agreed to amend Mr. Kirk’s Service Agreement with Argo Management Services Limited, dated February 5, 2021 described above (the “Service Agreement”), to extend the term of the Service Agreement until such time it is terminated by either party by providing the other with a one month’s prior written notice of such termination (unless terminated earlier in accordance with the remaining terms of the Service Agreement). All the other terms of the Service Agreement remain in full force and effect. The cash retention bonus described above was reflected in the Retention and Service Letter.
On August 4, 2022, Mr. Kirk’s base salary was increased to $700,000.
Susan B. Comparato
On August 9, 2021, Ms. Comparato became Chief Administrative Officer. Her base salary was set at $450,000. Ms. Comparato is eligible for severance benefits under the Amended Plan, as described on page 50. On March 25, 2022, Ms. Comparato’s base salary was increased to $500,000. On April 26, 2022, the Board granted a retention award to Ms. Comparato pursuant to a retention letter agreement, which provides for a cash retention bonus in an amount equal to one (1) times Ms. Comparato’s current annual base salary. The cash retention bonus will vest in 25% increments on June 15, 2022, September 15, 2022, December 15, 2022, and March 15, 2023, subject to Ms. Comparato’s continued employment with the Company through each vesting date. However, upon a termination of employment without cause (as defined in the Amended Plan) or Ms. Comparato’s resignation for good reason (as defined in the Amended Plan), the cash retention bonus will vest in full, subject to the Ms. Comparato’s execution of a release of claims.
Allison D. Kiene
Ms. Kiene currently serves as our General Counsel and Secretary. The terms of Ms. Kiene’s offer letter provide for a base salary of $500,000, a target annual cash incentive compensation opportunity of 75% of her base salary, and LTI target opportunity of $300,000. Ms. Kiene is eligible to participate in the Company’s retirement and other benefit plans and programs offered to the Company’s other NEOs. Under the terms of her offer letter, Ms. Kiene received a one-time cash sign-on bonus equal to $200,000 in consideration of compensation forfeited from her prior employer, payable in two installments, one in March 2021 ($160,000) and the other in March 2022 ($40,000), subject to Ms. Kiene’s obligation to reimburse the Company if she were to voluntarily leave the Company within 24 months of receipt of such payment. Ms. Kiene is eligible for severance benefits under the Amended Plan, as described on page 50. On March 25, 2022, Ms. Kiene’s base salary was increased to $600,000.
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On April 26, 2022, the Board granted a retention award to Ms. Kiene pursuant to a retention letter agreement, which provides for a cash retention bonus in an amount equal to two (2) times Ms. Kiene’s current annual base salary. The cash retention bonus will vest in 25% increments on June 15, 2022, September 15, 2022, December 15, 2022, and March 15, 2023, subject to Ms. Kiene’s continued employment with the Company through each vesting date. However, upon a termination of employment without cause (as defined in the Amended Plan) or Ms. Kiene’s resignation for good reason (as defined in the Amended Plan), the cash retention bonus will vest in full, subject to the Ms. Kiene’s execution of a release of claims.
On August 4, 2022, Ms. Kiene’s salary was increased to $700, 000.
Jay S. Bullock
On July 2, 2020, the Company announced the departure of Mr. Bullock as Executive Vice President and Chief Financial Officer of the Company. Mr. Bullock continued to serve as Executive Vice President and Chief Financial Officer through March 15, 2021 and the Company and Mr. Bullock entered into a Separation and Transition Agreement and General Release on March 23, 2021 (the “Bullock Separation Agreement”). Pursuant to the terms of this agreement, Mr. Bullock served as an employee adviser to the Company until March 31, 2021 (the “Termination Date”) and continued to receive his base salary of $600,000 until the Termination Date. Mr. Bullock was not eligible to participate in the Company’s incentive plans in 2021 including, but not limited to the 2021 AIP and LTI plan. Mr. Bullock was entitled to continued vesting of all his prior unvested equity awards.
Under the Bullock Separation Agreement, from April 1, 2021 until June 30, 2021, Mr. Bullock was available to provide consulting services relating to the transition of his duties to his successor, at an hourly rate based on his base salary divided by 2,080 ($288 per hour). Mr. Bullock did not provide any consulting services during his transition period. Upon Mr. Bullock’s execution and non-revocation of the Bullock Separation Agreement, and pursuant to the circumstances of his departure, Mr. Bullock became entitled to the severance benefits for a termination without cause under his 2019 employment agreement, as described on page 64. In addition, Mr. Bullock received $5,000 in attorneys’ fees incurred in connection with the negotiation of the Bullock Separation Agreement. The Bullock Separation Agreement also provides that Mr. Bullock will remain subject to the restrictive covenants set forth in his 2019 employment agreement and provides for a general release of claims.
Timothy D. Carter
On August 11, 2021, as part of the Company’s efforts to continue to streamline management and reduce expenses, Mr. Carter’s employment with the Company was terminated without cause. On August 27, 2021, Argonaut Management Services, Inc. and Mr. Carter entered into a Separation Agreement and General Release. Upon Mr. Carter’s execution and non-revocation of the Separation Agreement and General Release, and pursuant to the circumstances of his departure, Mr. Carter became entitled to the severance benefits for a termination without cause under the ESP, as described on page 50. Mr. Carter forfeited his unvested LTI awards or shares as a result of his termination.
Matthew J. Harris
Mr. Harris joined the Company on August 1, 2017 and entered into an employment contract (“Employment Contract”), which among other things, required either the Company or Mr. Harris to provide at least six-months’ notice of termination of employment. On August 6, 2021, Mr. Harris provided notice of resignation and the Board agreed to waive the contractual notice period under his Employment Contract and make the resignation effective immediately. In connection with Mr. Harris’s resignation, Mr. Harris and Argo Management Services Limited entered into a Separation Agreement, dated August 9, 2021 (the “Harris Separation Agreement”), whereby Mr. Harris was entitled to payment in lieu of notice as described on page 64. Due to Mr. Harris voluntary resignation from the Company, his unvested LTI awards or shares were forfeited, and he was not eligible to receive any 2021 annual incentive awards.
Compensation Setting Process and Governance Elements
Process for Compensation Decisions
In making decisions with respect to the compensation of our executive officers, the HR Committee considers both Company performance and peer group practices to evaluate whether our executive compensation program remains competitive and consistent with best practices and our compensation philosophy. In determining the amount and form of compensation for our CEO, the HR Committee reviews our CEO’s performance and makes recommendations regarding his pay to the Board for approval. In determining the amount and form of compensation for our other NEOs, the HR Committee considers our CEO’s assessment of their performance and his recommendations regarding their compensation.
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When setting compensation levels and awarding compensation for 2021, the HR Committee took into account the Company’s strategic and financial goals as well as individual short- and long-term performance objectives for each NEO and other members of the executive management team. The HR Committee also considered the compensation levels of the Company’s peers as discussed in the Compensation Peer Group section below.
Compensation Peer Group
To evaluate whether our executive compensation program is competitive, the HR Committee compares compensation for its executives with the compensation received by the executives of our competitors. Although the HR Committee considers compensation data for a designated peer group when establishing compensation, the HR Committee does not target a specific percentage of compensation reported by such group. Instead the HR Committee uses the data as a guide in determining the level of compensation necessary to successfully compete for executives. Because the Company seeks to hire and retain experienced and talented executives, the HR Committee has auditedselected a designated peer group that incorporates the companies with whom we compete.
In deciding whether a company should be included in the peer group, the HR Committee considered the following criteria: (i) global operations; (ii) revenue; (iii) market capitalization; and (iv) peers that the Company competes with in the marketplace and for talent. Companies reviewed for peer group consideration typically have revenues between one-third to three times the Company’s revenue and market capitalization ranging from one fifth to five times the Company’s market capitalization. Each year the HR Committee, with assistance from its independent compensation consultant, conducts a thorough review of the peer group. Based on this review, in 2021, the HR Committee approved the removal of Sirius International Insurance which merged with Third Point Reinsurance Ltd., and the addition of SiriusPoint, which reflects the new company formed from this merger. The 2021 peer group used for the purpose of executive compensation decisions is as follows:
| 2021 Peer Group | ||
| Arch Capital Group | Hiscox | RLI Corporation |
| Axis Capital Holdings | James River Group | Selective Insurance Group |
| Beazley | ProAssurance | SiriusPoint(2) |
| Enstar Group | ProSight Global(1) | |
| Hanover Insurance Group | Renaissance Re Holdings | |
| (1) | ProSight Global was acquired by TowerBrook Capital Partners LP and Further Global Capital Management in 2021 and was removed from the peer group used to evaluate 2022 compensation decisions. |
| (2) | Sirius International Insurance merged with Third Point Reinsurance Ltd. in 2021. SiriusPoint represents the combined company. |
Equity Ownership Guidelines
The Company requires a designated group of senior executives, including the NEOs, to adhere to its Equity Ownership Guidelines. The guidelines are considered an integral part of the Company’s executive compensation program as they align the economic interests of the Company’s executives with those of its shareholders. We believe that the guidelines encourage behavior that will foster long-term, sustainable value creation because the value of the stock being held by the participants is influenced by the Company’s long-term performance.
Pursuant to the guidelines, designated executives must hold at least 50% of earned or acquired shares until the guideline ownership level is attained. Compliance is tested annually as of the first business day of the second quarter each year. Compliance with the guidelines is a factor that the HR Committee takes into consideration when determining whether to grant future equity awards to our executives under the Company’s LTI plan. As of October 26, 2022, each of our continuing NEOs either held the requisite number of shares or was subject to the 50% retention requirement.
The following table shows the ownership levels applicable to our continuing NEOs, which are expressed as a multiple of salary:
| CEO | 6x Base Salary | |
| Other NEOs | 3x Base Salary |
For purposes of the ownership guidelines, only Common Shares owned by or on behalf of an individual or an immediate family member residing in the same household, including stock held in trusts or tax-qualified retirement plans, are counted. The value of each common share is assumed to be the greater of the market value or the book value per common share of the Company’s stock on the measurement date. Unvested performance-based restricted shares and unexercised stock options/stock settled stock appreciations rights do not count towards meeting the guideline.
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Compensation Clawback Policy
To provide the Company with the ability to recoup performance-based compensation following misconduct on the part of management that is detrimental to the Company, performance-based compensation may be recovered at the discretion of the Board if an executive officer, during the three-year period preceding the following events, (i) has engaged in fraud or other misconduct that resulted in the need for a restatement of the Company’s financial statements since June 2001.that affect such executive officer’s compensation or (ii) the executive officer has engaged in certain other egregious conduct that is substantially detrimental to the Company. The Board also has the discretion to recoup performance-based compensation if the payment, grant or vesting of the award was based on the achievement of a performance metric that was calculated by the Company has selected KPMG LLPin a substantially inaccurate manner. Our Compensation Clawback Policy is available on our website at www.argolimited.com under the “Investors” tab and then the “Governance” tab.
Prohibition of Hedging and Pledging of Equity Securities
Our Insider Trading Policy prohibits our employees, officers and directors from selling any Company securities that they do not own. It also prohibits transactions in exchange-traded options such as puts, calls and other derivative securities of the Company’s Common Shares. We prohibit all hedging transactions involving our securities that would insulate our employees, officers and directors from the effects of our stock price performance. The Insider Trading Policy prohibits any pledging of Company securities.
Compensation Risk Assessment
In line with the Company’s application of its ERM framework to compensation risk, the HR Committee seeks to ensure that our executive compensation program does not encourage executives to take risks that are inconsistent with the long-term success of the Company. More broadly, we believe that the Company’s compensation philosophy is a core part of our risk culture and ensures that underwriters are motivated to produce profitable business and executives are compensated to operate within our Board approved risk appetite.
The HR Committee believes the Company’s executive compensation program does not encourage inappropriate risk-taking. During 2021, our ERM function, led by our Chief Risk & Sustainability Officer (“CR&SO”), undertook a risk assessment of our current compensation programs, taking into consideration the anticipated reaction of key stakeholders to a number of potential downside or upside risk scenarios. The assessment considered a number of factors including risk-based measures, program calibration, clawback and ‘malus’ provisions, deferral features and multi-year structures. The risk analysis also considered potential threats and opportunities introduced by the changes to our compensation programs for 2021. Other factors considered when determining that the compensation program does not encourage excessive risk-taking include:
| · | The HR Committee retains negative discretion in determining compensation payouts, such that meaningful reductions in compensation are possible to adjust for the quality of our financial results and other factors that the HR Committee deems relevant; |
| · | Our executive compensation clawback policy helps ensure that our executives are not inappropriately rewarded in the event that we are required to restate our financial results or in the event of executive misconduct that is detrimental to the Company; |
| · | Equity Ownership Guidelines are designed to ensure that the long-term interests of our executives are aligned with those of our shareholders; |
| · | The Chair of the HR Committee regularly attends our Risk & Capital Committee meetings and has the opportunity to review the outcomes of Compensation Risk Assessment presented by the CR&SO; |
| · | The HR Committee also receives a summary of the Compensation Risk Assessment work as part of its review of proposed changes to the compensation programs; and |
| · | The HR Committee retains an independent consultant, apart from any consultant retained by management. |
The independent consultant reviewed the findings of the Compensation Risk Assessment and found them to be both comprehensive and appropriate to the risk exposures and concurred with the conclusions.
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Compensation Consultant
During 2021, the HR Committee continued to engage FW Cook as its independent accountantcompensation consultant to assist in the evaluation of the Company’s executive compensation program. The scope of FW Cook’s engagement was to provide assistance with: (i) conducting a review of our compensation peer group, (ii) conducting competitive reviews of executive and non-employee director compensation, (iii) conducting competitive reviews of incentive design and performance measurement, (iv) conducting pay-for-performance modeling, (v) conducting an analysis of aggregate long-term incentive grant practices, and (vi) updating the HR Committee on executive compensation trends and regulatory and governance developments. FW Cook performed these services solely on behalf of the HR Committee. The HR Committee has assessed the independence of FW Cook, as required by the Company’s governance framework and NYSE and SEC rules, and has concluded that no conflict of interest exists with respect to its services to the HR Committee.
Human Resources Committee Interlocks and Insider Participation
With respect to interlocks and insider participation involving a member of the HR Committee during the 2021 fiscal year:
| · | None of the HR Committee members were an officer or employee of the Company or its subsidiaries. |
| · | None of the HR Committee members had any relationship with the Company pursuant to which disclosure would be required under applicable rules of the SEC pertaining to the disclosure of transactions with related persons. |
| · | None of the executive officers of the Company served on the board of directors or compensation committee of any other entity that has or had one or more executive officers who served as a member of the Board or the HR Committee. |
HUMAN RESOURCES COMMITTEE REPORT
The HR Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on their review and discussions, the HR Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
HR COMMITTEE
Dymphna A. Lehane (Chair)
Bernard C. Bailey
Samuel G. Liss
J. Daniel Plants
This HR Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates the HR Committee Report by reference therein.
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EXECUTIVE COMPENSATION
2021 Summary Compensation Table
The following table contains compensation information for our NEOs for the fiscal year ended December 31, 2005. A representative2021 and, to the extent required under the SEC executive compensation disclosure rules, the fiscal years ended December 31, 2020 and December 31, 2019.
| Name & Principal Position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Non-Equity Incentive Plan Comp ($) (4) | All Other Compensation ($) (5) | Total ($) | |||||||||||||||||||||
| Kevin J Rehnberg | 2021 | $ | 975,000 | $ | — | $ | 1,999,945 | $ | 1,007,906 | $ | 65,979 | $ | 4,048,830 | |||||||||||||||
| President and CEO | 2020 | 993,750 | — | 2,499,980 | 365,625 | 67,735 | 3,927,090 | |||||||||||||||||||||
| 2019 | 785,137 | — | 999,951 | 283,815 | 48,580 | 2,117,483 | ||||||||||||||||||||||
| Scott Kirk (6) Chief Financial Officer | 2021 | 561,423 | 315,043 | 1,407,177 | 521,082 | 26,289 | 2,831,014 | |||||||||||||||||||||
| Andrew M Borst (7) Interim President of International Operations | 2021 | 498,462 | — | 499,959 | 479,763 | 35,261 | 1,513,445 | |||||||||||||||||||||
| Susan B. Comparato (7) Chief Administrative Officer | 2021 | 419,231 | — | 199,928 | 285,068 | 30,021 | 934,248 | |||||||||||||||||||||
| Allison D. Kiene | 2021 | 500,000 | 160,000 | 349,999 | 310,125 | 36,624 | 1,356,748 | |||||||||||||||||||||
| General Counsel and Secretary | 2020 | 119,231 | — | — | 112,500 | 7,466 | 239,197 | |||||||||||||||||||||
| Former Executive Officers | ||||||||||||||||||||||||||||
| Jay S. Bullock (6) | 2021 | 156,923 | — | — | — | 1,488,738 | 1,645,661 | |||||||||||||||||||||
| Executive Vice President and | 2020 | 611,538 | — | 599,991 | 210,000 | 43,228 | 1,464,757 | |||||||||||||||||||||
| Chief Financial Officer | 2019 | 570,205 | — | 419,997 | — | 36,049 | 1,026,251 | |||||||||||||||||||||
| Timothy D. Carter (7) | 2021 | 313,462 | — | 499,959 | 251,499 | 405,244 | 1,470,164 | |||||||||||||||||||||
| Chief Underwriting Officer | 2020 | 485,577 | — | 499,977 | 143,238 | 34,068 | 1,162,860 | |||||||||||||||||||||
| Matthew J. Harris (7) | 2021 | 325,336 | — | 298,606 | — | 313,583 | 937,525 | |||||||||||||||||||||
| Group Heard of International | 2020 | 545,960 | — | 293,066 | 122,841 | 73,556 | 1,035,423 | |||||||||||||||||||||
| Operations | 2019 | 527,384 | — | 302,777 | — | 126,501 | 956,662 | |||||||||||||||||||||
| (1) | Messrs. Kirk and Harris were paid in British Pounds. Their salaries were converted into U.S. dollars for purposes of this table using a December 31, 2021 exchange rate of 1.3498 US$/GBP. For Mr. Rehnberg, this table includes an extra week of pay in 2020 due to an additional pay cycle in the U.S. attributable to the 2020 calendar. |
| (2) | Mr. Kirk received a cash sign-on bonus of USD $315,043 upon hire, paid in GBP and converted into U.S. dollars for purposes of this table using a December 31, 2021 exchange rate of 1.3498 US$/GBP. Ms. Kiene received a cash sign-on bonus of $160,000 in consideration of compensation forfeited from her prior employer. Sign-on bonuses to Mr. Kirk and Ms. Kiene are subject to clawback if they voluntarily leave the Company within 24 months of receipt of such payment. |
| (3) | Represents the grant date fair value of all LTI equity awards granted in 2021. For Mr. Kirk the total includes his sign-on equity grant of 3,650 shares of restricted stock granted at the time of his hire, and his one-time retention grant of 8,629 shares of restricted stock made in December 2021. The calculation of grant date fair value for the annual performance awards assumes target level performance against the specified financial goals set forth in the award and is calculated in accordance with FASB ASC Topic 718. The receipt of annual performance awards is conditioned upon the achievement of financial performance goals during the applicable performance period, as discussed in the 2021 Long-Term Incentive Awards section that begins on page 48. Assuming the highest level of performance is achieved for the 2021 LTI awards, the maximum grant date fair value of the 2021 performance-based LTI awards would be as follows: Mr. Rehnberg - $2,249,951; Mr. Kirk - $795,606; Mr. Borst - $562,474; Ms. Comparato - $224,913; Ms. Kiene $393,721; Mr. Carter - $562,474; and Mr. Harris - $335,972. Mr. Bullock was not eligible to participate in the Company’s 2021 LTI award, and Messrs. Harris and Carter forfeited their 2021 LTI awards as a result of their respective departure from the Company. Mr. Borst forfeited his LTI on April 1, 2022 in connection with his resignation from the Company. Similarly, Mr. Rehnberg forfeited his LTI on June 23, 2022, in connection with his departure from the Company. |
| (4) | Non-Equity Incentive Plan Compensation consists of cash awards made under the Company’s AIP. Please refer to the 2021 Annual Incentive Awards section on page 45 for a discussion of the decisions made related to these awards. The amounts for Mr. Borst and Ms. Comparato also include vested long-term incentive cash awards of $66,263 and $24,563, respectively, that were granted to them prior to becoming NEOs and that vested and were paid in 2021. Mr. Bullock was not eligible to participate in the Company’s AIP, and Mr. Harris forfeited his 2021 AIP awards as a result of his departure from the Company. Mr. Carter received a prorated 2021 AIP payment in accordance with the terms of his separation under the ESP. |
| (5) | Please see the All Other Compensation Table below and related tables and footnotes for information regarding the amounts reported in this column. |
| (6) | Mr. Kirk joined the Company on February 8, 2021, and succeeded Mr. Bullock as Chief Financial Officer on March 16, 2021. Mr. Bullock remained employed in an advisory capacity through March 31, 2021. |
| (7) | On August 6, 2021, Mr. Harris resigned as Group Head of International Operations of the Company, and on August 11, 2021 Mr. Carter’s employment as Chief Underwriting Officer with the Company was terminated without cause. On August 12, 2021, the Company appointed Mr. Borst as Interim President of International Operations and Ms. Comparato as Chief Administrative Officer, replacing Mr. Borst’s previous role. |
| Page 57 of 71 |
2021 All Other Compensation Table
| Name | 401(k) and Retirement Contributions | Imputed Value of Company Provided Insurance Coverage (1) | Supplemental Executive Retirement Plan Benefits | Separation Benefits (2) | Perquisites (3) | Total | ||||||||||||||||||
| Kevin J Rehnberg | $ | 17,400 | $ | 8,329 | $ | 40,250 | $ | — | $ | — | $ | 65,979 | ||||||||||||
| Scott Kirk (4) | 16,254 | — | — | — | 10,035 | 26,289 | ||||||||||||||||||
| Andrew M. Borst | 17,400 | 4,687 | — | — | 13,174 | 35,261 | ||||||||||||||||||
| Susan B. Comparato | 5,208 | 4,948 | 19,865 | — | — | 30,021 | ||||||||||||||||||
| Allison D. Kiene | 12,554 | 7,724 | 16,346 | — | — | 36,624 | ||||||||||||||||||
| Former Executive Officers | ||||||||||||||||||||||||
| Jay S. Bullock | 3,877 | 1,012 | 5,538 | 1,478,311 | — | 1,488,738 | ||||||||||||||||||
| Timothy D. Carter | 8,669 | 5,300 | 9,962 | 381,313 | — | 405,244 | ||||||||||||||||||
| Mathew J. Harris (4) | 43,623 | — | — | 269,960 | — | 313,583 | ||||||||||||||||||
| (1) | Imputed Value of Company Provided Insurance Coverage includes the following: term life insurance coverage which is provided to all employees, and umbrella insurance and executive long-term disability coverage provided to all senior executives. |
| (2) | These amounts represent cash payments made to Messrs. Bullock, Carter, and Harris pursuant to the applicable terms of their respective separations, as described in Employment Arrangements with Named Executive Officers and Potential Payments upon Termination or a Termination Following a Change in Control sections on pages 51 and 62, respectively. For Mr. Bullock, separation payments include $758,333 cash severance, $700,000 incentive payment, $5,000 in attorney fees and $14,978 in medical coverage that were paid in 2021 in accordance with the terms of his 2019 employment agreement. |
| (3) | Amounts for Mr. Kirk represents attorneys’ fees paid in relation to his immigration process. Amounts for Mr. Borst represent fees relating to tax assistance paid in 2021 in connection with his interim assignment in the UK. |
| (4) | Values converted into U.S. dollars for purposes of the foregoing table using a December 31, 2021 exchange rate of 1.3498 US$/GBP. |
| Page 58 of 71 |
2021 Grants of Plan-Based Awards
| Committee | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Possible Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair Value of Stock | ||||||||||||||||||||||||||||||||
| Name | Approval Date | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#)(3) | Awards ($)(4) | ||||||||||||||||||||||||||
| Kevin J Rehnberg | 2/11/2021 | $ | 243,750 | $ | 1,218,750 | $ | 2,437,500 | |||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 13,688 | 27,377 | 41,065 | $ | 1,499,986 | ||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 9,125 | 499,959 | |||||||||||||||||||||||||||||||||
| Scott Kirk | 2/11/2021 | 126,017 | 630,087 | 1,260,174 | ||||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 4,840 | 9,681 | 14,521 | 530,422 | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 3,227 | 176,807 | |||||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 3,650 | (5) | 199,984 | ||||||||||||||||||||||||||||||||
| 12/23/2021 | 12/28/2021 | 8,629 | (6) | 499,964 | ||||||||||||||||||||||||||||||||
| Andrew M. Borst | 2/11/2021 | 100,000 | 500,000 | 1,000,000 | ||||||||||||||||||||||||||||||||
| 2/11/2021 | 3,422 | 6,844 | 10,266 | 374,983 | ||||||||||||||||||||||||||||||||
| 2/11/2021 | 2,281 | 124,976 | ||||||||||||||||||||||||||||||||||
| Susan B. Comparato | 2/11/2021 | 3/15/2021 | 63,000 | 315,000 | 630,000 | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 1,368 | 2,737 | 4,105 | 149,960 | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 912 | 49,968 | |||||||||||||||||||||||||||||||||
| Allison D. Kiene | 2/11/2021 | 75,000 | 375,000 | 750,000 | ||||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 2,395 | 4,791 | 7,186 | 262,499 | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 1,597 | 87,500 | |||||||||||||||||||||||||||||||||
| Former Executive Officers | ||||||||||||||||||||||||||||||||||||
| Jay S. Bullock (7) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Timothy D. Carter | 2/11/2021 | 100,000 | 500,000 | 1,000,000 | — | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 3,422 | 6,844 | 10,266 | 374,983 | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 2,281 | 124,976 | |||||||||||||||||||||||||||||||||
| Matt Harris | 2/11/2021 | 80,988 | 404,940 | 809,880 | — | — | — | — | — | |||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 2,044 | 4,088 | 6,132 | 223,982 | |||||||||||||||||||||||||||||||
| 2/11/2021 | 3/15/2021 | 1,362 | 74,624 | |||||||||||||||||||||||||||||||||
| (1) | These amounts represent threshold, target and maximum cash award levels set in 2021 under the AIP. |
| (2) | These amounts represent the threshold, target and maximum shares of performance-based restricted stock granted under the Company 2019 Omnibus Incentive Plan. For actively employed executives, shares of performance-based restricted stock are earned at the end of a three-year performance period, subject to the achievement of certain pre-established goals relating to TBVPS and ROE and the executive’s continued service through the applicable vesting date. |
| (3) | Represents the restricted stock awards granted under the Company’s 2019 Omnibus Incentive Plan as a component of the annual LTI awards, which vest in four equal installments beginning on the first anniversary of the date of the grant, subject to the executive’s continued employment through the applicable vesting date. |
| (4) | The amounts in this column represent the aggregate grant date fair value of equity awards granted to our NEOs during the fiscal year ended December 31, 2021. The Grant Date Fair Value in this column was calculated in accordance with FASB ASC Topic 718, with performance-based restricted stock awards valued based on the probable outcome of such criteria. |
| (5) | Represents Mr. Kirk’s sign-on grant of restricted shares that vests in four equal installments beginning on the first anniversary of the date of the grant, subject to the executive’s continued employment through the applicable vesting date. |
| (6) | Represents Mr. Kirk’s one-time retention grant restricted shares that vest in three equal installments beginning on the first anniversary of the date of the grant, subject to the executive’s continued employment through the applicable vesting date. |
| (7) | Pursuant to the Bullock Separation Agreement, Mr. Bullock was not eligible to participate in the Company’s 2021 AIP or LTI Plan. |
| Page 59 of 71 |
Outstanding Equity Awards at 2021 Fiscal Year-End
Our NEOs did not have any stock options outstanding as at December 31, 2021, and therefore the “Option Awards” column has been omitted from the table below. In addition, in connection with their departures during 2021, Messrs. Carter and Harris forfeited their outstanding equity awards with the Company.
| Stock Awards | ||||||||||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||
| Kevin J Rehnberg | 1,004 | (2) | $ | 58,342 | ||||||||||||
| 3,663 | (3) | 212,857 | — | $ | — | |||||||||||
| 14,373 | (4) | 835,215 | 57,498 | (5) | 3,341,209 | |||||||||||
| 9,125 | (6) | 530,254 | 27,377 | (7) | 1,590,877 | |||||||||||
| Scott Kirk | 3,277 | (6) | 187,521 | 9,681 | (7) | 562,563 | ||||||||||
| 3,650 | (8) | 212,102 | ||||||||||||||
| 8,629 | (9) | 501,431 | ||||||||||||||
| Andrew M. Borst | 934 | (2) | 54,275 | — | — | |||||||||||
| 1,533 | (3) | 89,083 | — | — | ||||||||||||
| 4,812 | (4) | 279,625 | — | — | ||||||||||||
| 2,281 | (6) | 132,549 | 6,844 | (7) | 397,705 | |||||||||||
| Susan B. Comparato | 1,080 | (3) | 62,759 | — | — | |||||||||||
| 3,389 | (4) | 196,935 | — | — | ||||||||||||
| 912 | (6) | 52,996 | 2,737 | (7) | 159,047 | |||||||||||
| Allison D. Kiene | 1,597 | (6) | 92,802 | 4,791 | (7) | 278,405 | ||||||||||
| Former Executive Officers | ||||||||||||||||
| Jay S. Bullock (10) | 568 | (2) | 33,006 | |||||||||||||
| 932 | (3) | 54,159 | — | — | ||||||||||||
| 2,091 | (4) | 121,508 | 13,800 | (5) | 801,918 | |||||||||||
| (1) | The stock price used to calculate the value of equity awards was $58.11, the price at which the Company’s common stock closed on December 31, 2021. |
| (2) | This award was granted on March 27, 2018 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
| (3) | This award was granted on March 15, 2019 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
| (4) | This award was granted on March 16, 2020 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
| (5) | This award was granted on March 16, 2020 and vests at the end of the three-year performance period based on the achievement of performance goals relating to TBVPS and ROE and the executive’s continued employment through the applicable vesting date. The amount reported is based on achievement of target performance goals. |
| (6) | This award was granted on March 15, 2021 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
| (7) | This award was granted on March 15, 2021 and vests at the end of the three-year performance period based on the achievement of performance goals relating to TBVPS and ROE and the executive’s continued employment through the applicable vesting date. The amount reported is based on achievement of target performance goals. |
| (8) | This award was granted on March 15, 2021 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
| (9) | This award was granted on December 28, 2021 and vests in four annual installments on the anniversary of the grant date, subject to the executive’s continued employment through such date. |
| (10) | Pursuant to the Bullock Separation Agreement, Mr. Bullock was not eligible to participate in the Company’s 2021 LTI awards, but was entitled to continued vesting of his 2018, 2019 and 2020 LTI awards. |
| Page 60 of 71 |
2021 Option Exercises and Stock Vested
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
| Kevin J. Rehnberg | — | $ | — | 9,615 | $ | 511,736 | ||||||||||
| Scott Kirk | — | — | — | — | ||||||||||||
| Andrew M. Borst | — | — | 4,035 | 213,308 | ||||||||||||
| Susan B. Comparato | — | — | 1,669 | 91,230 | ||||||||||||
| Allison D. Kiene | — | — | — | — | ||||||||||||
| Former Executive Officers | ||||||||||||||||
| Jay S. Bullock | 66,233 | 1,160,124 | 4,620 | 240,167 | ||||||||||||
| Timothy D. Carter | — | — | 3,833 | 209,282 | ||||||||||||
| Matthew J. Harris | — | — | 1,914 | 101,569 | ||||||||||||
2021 Non-Qualified Deferred Compensation
| Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings in Last Fiscal Year ($)(1) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($)(2) | |||||||||||||||
| Kevin J. Rehnberg | $ | 22,500 | $ | 40,250 | $ | 20,673 | $ | — | $ | 391,032 | ||||||||||
| Andrew M. Borst(3) | — | — | 1,664 | — | 12,779 | |||||||||||||||
| Susan B. Comparato | 18,654 | 19,865 | 10,737 | — | 136,953 | |||||||||||||||
| Allison D. Kiene | 14,423 | 16,346 | 2,011 | — | 44,884 | |||||||||||||||
| Former Executive Officers | ||||||||||||||||||||
| Jay S. Bullock | 5,538 | 5,538 | 117,417 | 832,126 | — | |||||||||||||||
| Timothy D. Carter | 9,904 | 9,962 | 15,193 | — | 82,680 | |||||||||||||||
| (1) | All of the Company’s contributions in the last fiscal year are included in the 2021 Summary Compensation Table. None of the aggregate earnings in the last fiscal year are included in the 2021 Summary Compensation Table. |
| (2) | The amounts included in the Summary Compensation Table for this year and all prior years were: $280,751 for Mr. Rehnberg, $23,422 for Ms. Kiene, $514,139 for Mr. Bullock and $42,801 for Mr. Carter. |
| (3) | Mr. Borst did not participate in the Non-Qualified Deferred Compensation program in 2021. Our non-U.S.-based NEOs, Messrs. Kirk and Harris were not eligible to participate in the Non-Qualified Deferred Compensation program. |
| Page 61 of 71 |
Under the Company’s 401(k) Plan, a defined contribution plan, the contribution made by the Company on behalf of eligible U.S. employees is equal to the sum of:
| a. | 100% of the first 5% of eligible pay that the employee contributes per pay period to the plan; and |
| b. | 1% of the employee’s eligible pay. |
During 2021, the Internal Revenue Code limited the maximum amount of compensation used to calculate benefits under a defined contribution plan to $290,000 and the maximum dollar amount of the 401(k) contribution that could be made to $19,500 plus an additional $6,500 for employees over the age of 50. The Company’s Supplemental Executive Retirement Plan (“SERP”) provides retirement benefits to its U.S. employees which would be payable under the 401(k) Plan but for the limits imposed by the Internal Revenue Code. The investment return on an individual’s SERP balance is calculated as though the funds in the account were invested, as directed by the individual, from among substantially the same funds available under the Company’s 401(k) Plan.
During 2021, the Company credited the account maintained for each participating U.S. NEO for the following.
| · | The difference between the Company matching contribution which would have been made to the individual’s account under the Company’s 401(k) Plan based upon the individual’s 401(k) election had his or her contributions under that plan not been limited by reason of the Code and the amount that was actually credited to the individual’s account under the Company’s 401(k) Plan; |
| · | A supplemental Company contribution equal to 1% of the excess of the NEO’s eligible compensation for the 2021 fiscal year less the maximum amount of compensation permitted to be taken into account under the Code; and |
| · | Investment income calculated as though the funds in the account were invested, as designated by the individual, from substantially the same funds that are available under the Company’s 401(k) Plan. |
In addition, executives under the age of 50 who elect to contribute more than the $19,500 allowed under the Code and executives 50 years old or older who elect to contribute more than the $26,000 allowed under the Code can contribute up to 5% of the pay earned after the limit is reached to the SERP. Executives may elect to receive payments in lump sum or in annual cash installments between one and 10 years. Distributions may occur, in accordance with the executive’s election, as follows: (i) seventh month following separation from the Company, (ii) on a specified date, or (iii) upon the earlier of either (i) or (ii) or within 90 days following a change of control, as defined in the SERP. In the event of death, the executive’s account shall be distributed to the executive’s beneficiary in a single lump sum payment within 90 days following the executive’s death.
Potential Payments upon Termination by the Company or a Termination Following a Change in Control
As of December 31, 2021, the Company had entered into employment agreements with certain of our NEOs. Please refer to the Employment Arrangements with Named Executive Officers section on page 51 for a general discussion of the terms and conditions of these employment agreements. The employment agreements for some of our NEOs provide for certain severance benefits upon the occurrence of certain events as described further below. In addition, as described further below, certain of our NEOs have been designated to participate in our Executive Severance Plan, that became effective January 1, 2021, which provides certain severance benefits and payments. Please refer to “2021 Non-Qualified Deferred Compensation” section above for discussion on the distributions pursuant to our SERP. As required under the SEC rules, the information set forth below is as of December 31, 2021 and does not reflect current employment arrangements. Updated summaries on such arrangements is provided above in the “Compensation Discussion and Analysis” section starting on page 39.
| Page 62 of 71 |
Mr. Rehnberg
Under the terms of Mr. Rehnberg’s Executive Employment Agreement, if Mr. Rehnberg’s employment is terminated by the Company without “cause” (as that term is defined in his Executive Employment Agreement), or, by Mr. Rehnberg within two years following a “change in control” (as that term is defined in the Company’s 2019 Omnibus Incentive Plan or any successor Omnibus Incentive Plan), for “good reason” (as that term is defined in his Executive Employment Agreement), Mr. Rehnberg will be entitled to the following severance benefits: (i) accrued benefits (as defined in the Executive Employment Agreement) and any earned but unpaid annual cash incentive award for the year preceding the year of termination, (ii) an amount equal to one times (or, if a change in control has occurred or is reasonably expected to occur, two times) the sum of (A) his base salary and (B) his target annual cash incentive award for the year of termination (or, if a target annual cash incentive award has not yet been established for such year, his target annual cash incentive award for the year prior to the year of termination), such amounts to be paid in installments over a period of 12 months, (iii) any target annual cash incentive award for the year of termination, pro-rated to reflect his time of service for such year through his date of termination, (iv) continuation of health benefits at the active employee rate until Mr. Rehnberg obtains reasonably equivalent coverage or for eighteen months from the date of termination, whichever is earlier; provided that Mr. Rehnberg timely elects benefit continuation coverage under COBRA, and (v) continued vesting of all unvested equity awards, to be paid or settled in accordance with the terms of the applicable award agreements as if no termination had occurred and Mr. Rehnberg had remained employed by the Company through the applicable vesting date, with the vesting of any outstanding performance-based equity awards to be determined based on actual performance through the end of the applicable performance period. All outstanding, unvested stock options will remain exercisable for a period of 90 days following the last vesting date of the stock option, but not beyond the original term of the stock option. In the event of Mr. Rehnberg’s involuntary termination of employment by the Company without cause or by Mr. Rehnberg for good reason, in each case within two years following a Change in Control, all outstanding unvested equity awards will immediately vest upon the date of such termination of employment.
All severance payments and benefits are conditioned upon Mr. Rehnberg’s execution and non-revocation within 60 days following his termination date of a full and complete release of claims in favor of the Company and its subsidiaries and affiliates, and his compliance with the confidential information obligations and restrictive covenants to which he is bound under his Executive Employment Agreement.
In the event Mr. Rehnberg’s employment is terminated due to his death or “disability” (as that term is defined in his Executive Employment Agreement), Mr. Rehnberg (or his estate in the case of his death) will be entitled to: (i) accrued benefits, (ii) any incentive bonus that is “fully-earned” (as that term is defined in his Executive Employment Agreement) through date of his termination of employment, and (iii) continued participation for 18 months by Mr. Rehnberg or, in the case of his death, his eligible dependents in all health and medical plans or programs in which Mr. Rehnberg or such eligible dependents, as applicable, were participating on his termination date, with the Company continuing to pay the same portion of the premiums for such coverage as it paid for Mr. Rehnberg or his eligible dependents immediately prior to his termination date. In the event Mr. Rehnberg’s employment is terminated by the Company for Cause, Mr. Rehnberg will only be entitled to his accrued benefits, and will not be entitled to any other benefits, unless otherwise required by applicable law.
If any portion of the payments and benefits that Mr. Rehnberg is entitled to receive under the Executive Employment Agreement upon a termination of employment, either alone or together with other payments and benefits that he is entitled to receive from the Company or its affiliates, would be subject to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended, then such payments and benefits will be reduced such that no portion of such payments and benefits will be subject to the excise tax under Section 4999, but only to the extent doing so would not reduce Mr. Rehnberg’s aggregate (after tax) payments and benefits.
| Page 63 of 71 |
Mr. Rehnberg’s Executive Employment Agreement contains certain non-disclosure, intellectual property and non-disparagement covenants and prohibits Mr. Rehnberg from competing with the Company or its affiliates, or soliciting their respective customers or employees during his employment and for the 12-month period following his termination of employment.
Mr. Bullock
As noted above, in March 2021, Mr. Bullock entered into a Bullock Separation Agreement specifying the terms of his separation. Upon execution and non-revocation of the Bullock Separation Agreement, and pursuant to the circumstances of his departure, Mr. Bullock became entitled to the severance benefits for a termination without cause under his 2019 employment agreement as follows: (i) one times the sum of (A) his base salary and (B) his target annual cash incentive award for the year prior to the year of termination ($1,300,000), payable in installments over 12-months; (ii) a cash incentive payment equal to his target annual incentive at time of termination ($700,000); (iii) continuation of health benefits at the active rate of executives for up to 18 months ($29,157 estimated value); and (iv) continued vesting of all unvested equity awards ($1,203,755, based on the March 2021 stock price, the date of his separation and assuming target performance). In addition, Mr. Bullock received $5,000 in attorneys’ fees incurred in connection with the negotiation of the Bullock Separation Agreement. The Bullock Separation Agreement also provides that Mr. Bullock will remain subject to the restrictive covenants set forth in his employment agreement.
Mr. Harris
Mr. Harris’ Employment Contract provided that his employment would continue for an indefinite term unless and until terminated by either the Company or Mr. Harris upon six-months’ notice of termination of employment. On August 6, 2021, Mr. Harris resigned from the Company and the Board of Directors agreed to waive the contractual notice period under his Employment Contract and make the resignation effective immediately. In connection with Mr. Harris’s resignation, Mr. Harris and the Company entered into a Harris Separation Agreement, whereby Mr. Harris received $269,960 equal to the six months’ pay that he would have been eligible to receive during his notice period pursuant to his Employment Contract in a lump sum payment, less applicable deductions and withholdings.
Executive Severance Plan
All of our current NEOs, with the exception of Mr. Rehnberg who has a separate employment agreement, are eligible to participate in the ESP. Under the ESP, participants are entitled to certain severance benefits if their employment is terminated by the Company and its affiliates other than for “cause” (as that term is defined in the ESP). If the Company terminates a participant’s employment without cause, subject to his or her timely execution and non-revocation of a release of claims and continued compliance with restrictive covenants (including confidentiality, non-disparagement, non-competition, and non-solicitation covenants), he or she will receive the following severance benefits: (i) an amount equal to 0.75 times (or, if the termination occurs within 24 months following a “change in control” (as that term is defined in the ESP), 1.00 times) the participant’s base salary in effect as of the date of the termination, to be paid within 60 days of such termination; (ii) if the termination occurs after the end of the first quarter of the calendar year, an amount equal to the participant’s annual cash incentive payment for the year of termination, based on actual performance, prorated based on the number of days participant remained an employee, to be paid on the later of (x) the date the annual cash incentive payment is paid to participants generally and (y) 60 days following such termination; (iii) any accrued, but unpaid as of the date of the termination, annual cash incentive payment for any completed performance period ending prior to the date of such termination, to be paid on the later of (x) the date the annual cash incentive payment is paid to participants generally and (y) 60 days following such termination; and (iv) if the participant timely elects COBRA continuation coverage, payment by the Company or its subsidiaries equal to the difference between the cost of such COBRA continuation coverage and the amount active employees pay for health coverage through the earlier of the end of the nine-month period (or, if the termination occurs within 24 months following a change in control, twelve-month period) following the termination and the participant becoming eligible for health insurance coverage under another employer’s plan. In the event a participant holds any equity or cash awards granted under the Company’s 2019 Omnibus Incentive Plan, the treatment of such equity and cash awards in the event of a termination without cause will continue to be governed by the terms of such plan and any applicable award agreements.
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If any payments and benefits to be paid or provided to a participant, whether pursuant to the terms of the ESP or otherwise, would be subject to “golden parachute” excise taxes under the Internal Revenue Code of 1986, as amended, the payments and benefits will be reduced to the extent necessary to avoid such excise taxes, but only if such a reduction of pay or benefits would result in a greater after-tax benefit to the eligible employee.
On August 11, 2021, as part of the Company’s efforts to continue to streamline management and reduce expenses, Mr. Carter’s employment with the Company was terminated without cause. Pursuant to his Separation Agreement and General Release, Mr. Carter received the following severance benefits under the ESP: (i) an amount equal to 0.75 times his base salary ($375,000); and (ii) an amount equal to the annual cash incentive payment for the year of termination, based on actual performance, prorated based on the number of days he remained an employee ($252,632), paid on the date the annual cash incentive payment was paid to participants generally. Mr. Carter also receives an amount equal to the difference between the cost of his COBRA continuation coverage and the amount active employees pay for health coverage through the earlier of the end of the nine-month period following the date of termination and Mr. Carter becoming eligible for health insurance coverage under another employer’s plan ($14,587 assuming nine months of COBRA coverage, of which $6,313 was paid in 2021).
Equity and Cash Awards
In addition to the foregoing employment arrangements, the Company’s 2019 Omnibus Incentive Plan, which was approved by our shareholders in 2019, gives the HR Committee the discretion, among other methods, to provide for the accelerated vesting of our NEOs’ equity and cash grants by the Company upon the occurrence of termination of employment by the Company following a change in control (as defined in the plan). Further, the NEO equity and cash grant agreements provide for accelerated vesting upon termination of employment due to death or disability. Other than in the case of a good reason termination following a change in control in the case of Mr. Rehnberg or a termination of employment due to death or disability for all NEOs, if an NEO voluntarily terminates his or her employment with the Company or is terminated for cause, he or she forfeits all unvested equity and cash awards.
The amounts shown in the table below are calculated based on the assumption that a termination or change of control occurred on December 31, 2021 with the severance benefits then in effect as of that date. The values shown are calculated using the Company’s closing stock price on that date. The actual amounts that would be paid out if such a termination were to occur can only be determined at the time of such executive officer’s actual termination and would be subject to the achievement of financial and individual performance goals and thresholds and their current salaries and benefits at such time. As noted above, Mr. Rehnberg’s termination benefits are governed by his Executive Employment Agreement, while the other NEOs are covered under the terms of the ESP.
| Name | Benefit | Death or Disability | Termination Without Cause | Termination Without Cause/Resignation for Good Reason with a CIC | ||||||||||
| Kevin J. Rehnberg | Cash Severance (1) | $ | — | $ | 2,193,759 | $ | 4,387,500 | |||||||
| Annual Incentive Award (2) | 1,007,906 | 1,218,750 | 1,218,750 | |||||||||||
| Unvested Restricted Stock Awards (3) | 7,707,420 | 6,568,754 | 7,707,420 | |||||||||||
| Health, Medical, Dental Benefits (4) | 27,717 | 27,717 | 27,717 | |||||||||||
| Total | 8,743,043 | 10,008,980 | 13,341,387 | |||||||||||
| Scott Kirk | Cash Severance (1) | — | 472,565 | 630,087 | ||||||||||
| Annual Incentive Award (2) | — | 630,087 | 630,087 | |||||||||||
| Unvested Restricted Stock Awards (3) | 1,463,617 | — | 1,463,617 | |||||||||||
| Health, Medical, Dental Benefits (4) | — | — | — | |||||||||||
| Total | 1,463,617 | 1,102,652 | 2,723,791 | |||||||||||
| Andrew M. Borst | Cash Severance (1) | — | 375,000 | 500,000 | ||||||||||
| Annual Incentive Award (2) | — | 500,000 | 500,000 | |||||||||||
| Unvested Restricted Stock Awards (3) | 1,061,861 | — | 1,061,861 | |||||||||||
| Health, Medical, Dental Benefits (4) | — | 14,845 | 19,794 | |||||||||||
| Total | 1,061,861 | 889,845 | 2,081,655 | |||||||||||
| Susan B. Comparato | Cash Severance (1) | — | 337,500 | 450,000 | ||||||||||
| Annual Incentive Award (2) | — | 337,500 | 337,500 | |||||||||||
| Unvested Restricted Stock Awards (3) | 533,142 | — | 533,142 | |||||||||||
| Health, Medical, Dental Benefits (4) | — | 14,678 | 19,438 | |||||||||||
| Total | 533,142 | 689,678 | 1,340,080 | |||||||||||
| Allison D. Kiene | Cash Severance (1) | — | 375,000 | 500,000 | ||||||||||
| Annual Incentive Award (2) | — | 375,000 | 375,000 | |||||||||||
| Unvested Restricted Stock Awards (3) | 371,207 | — | 371,207 | |||||||||||
| Health, Medical, Dental Benefits (4) | — | 4,442 | 5,922 | |||||||||||
| Total | 371,207 | 754,442 | 1,252,129 | |||||||||||
| (1) | Mr. Rehnberg is entitled to severance benefits in the event of termination by the Company without cause or by Mr. Rehnberg for good reason within two years following a change of control, while the Company’s other NEOs are eligible for severance benefits only in the event of termination by the Company without cause. For Mr. Rehnberg, cash severance is equal to one times base salary plus target bonus in the event of termination without cause, or two times base salary plus target bonus in the event of a termination by Mr. Rehnberg for good reason within two years following a change in control of the Company. For all others, cash severance is equal to nine months’ salary in the event of termination by the Company without cause or one times base salary in the event of termination by the Company without cause within 24 months following a change in control of the Company. |
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| (2) | In the case of Mr. Rehnberg, amounts represent earned annual incentive award for death and disability and target annual incentive for termination without cause and termination by Mr. Rehnberg for good reason within two years following a change of control. For all others, the annual incentive award is calculated assuming target performance pursuant to the terms of the ESP. |
| (3) | Amounts represent the intrinsic pre-tax value of each NEO’s unvested restricted stock awards using the closing market price of the Company’s Common Shares on December 31, 2021 of $58.11 that would continue to vest upon termination of employment in accordance with terms of Mr. Rehnberg’s employment agreement or that would accelerate and vest upon termination of employment due to death or disability or that may accelerate and vest upon termination of employment in connection with a change in control of the Company. Amounts for Mr. Borst and Ms. Comparato also represent unvested long-term incentive cash awards in the amount of $104,624 and $61,405, respectively, which vest immediately upon termination without cause within 12 months following a change of control and upon termination due to death or disability. |
| (4) | Amounts represent continued participation in the Company’s health and medical plans on the same terms and conditions available to active employees of the Company for nine months in case of termination without cause, or 12 months in case of termination without cause following a change in control of the Company, based on the rates in effect for coverage as of December 31, 2021. In the case of Mr. Rehnberg, amounts represent continued participation in the Company’s health and medical plans for 18 months following termination. |
CEO Pay Ratio
We are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO:
For 2021, our last completed fiscal year:
Based on this information for fiscal year 2021, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 38:1. Our pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions summarized below. Given the leverage of our executive compensation program towards performance-based elements, we expect that our pay ratio disclosure will fluctuate year-to-year based on the Company’s performance. In the case of 2021, our pay ratio decreased as compared to the 2020 pay ratio as a result of higher compensation to our median employee than last year.
The total compensation of the median employee, including any perquisites and other benefits, is determined in the same manner that we determine the total compensation of our NEOs for purposes of the 2021 Summary Compensation Table disclosed above. For 2021, the total compensation of our median employee was $106,192. This total compensation amount for our median employee was then compared to the 2021 total compensation of our CEO as reported in the 2021 Summary Compensation Table to determine the pay ratio.
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Given the different methodologies that various public companies will use to determine their pay ratio, the pay ratio disclosed above should not be used as a basis for comparison between or among companies.
To identify our median employee, we first determined our employee population as of December 31, 2021 (the “Determination Date”). We had 1,295 employees, representing all full-time, part-time, seasonal and temporary employees as of the Determination Date. This number does not include any independent contractors or “leased” workers, as permitted by the applicable SEC rules. We then measured the employee population’s total target cash compensation for the period beginning on January 1, 2021 and ending on December 31, 2021. This compensation measurement was calculated by totaling, for each employee, his or her base salary and target annual cash incentive award for 2021. We annualized compensation for any employees who were employed for less than the full fiscal year, but we did not annualize the compensation for employees in temporary or seasonal positions.
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PROPOSAL 3: APPROVE KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND TO REFER DETERMINATION OF ITS REMUNERATION
TO THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
On the recommendation of the Board’s Audit Committee, the Board recommends that the firm of KPMG LLP (“KPMG”) be appointed as our independent registered public accounting firm for the fiscal year ending December 31, 2022. This recommendation is being presented to the shareholders for their approval at the Annual General Meeting. If the shareholders do not approve the appointment of KPMG, the Board’s Audit Committee will reconsider whether or not to retain KPMG as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, but will not be obligated to terminate the appointment. Even if the shareholders approve the appointment of KPMG, the Board’s Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Board’s Audit Committee determines that such a change would be in the best interests of the Company and its shareholders.
With respect to the year ended December 31, 2021, Ernst & Young LLP (“EY”) served as our independent registered public accounting firm. On June 1, 2022, the Company’s Board of Directors, upon the recommendation of the Audit Committee of the Board of Directors, appointed KPMG to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. On June 1, 2022 EY tendered its resignation as the Company’s independent registered public accounting firm.
The audit reports of EY on the Company’s consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principle.
During the two most recent fiscal years ended December 31, 2021 and 2020 and during the subsequent interim period through the date of KPMG’s appointment, neither the Company nor anyone acting on its behalf has consulted with KPMG regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
Representatives from EY and KPMG are expected to attend the Annual General Meeting, and will have anwith the opportunity to make a statement if he or she so desires and to respond to questions.
Shareholders at the Annual General Meeting will also be asked to vote to refer the determination of the auditors’ remuneration to the Audit Committee of the Board of Directors. Required Vote and Board Recommendation
|
The SECapproval of the appointment of KPMG as our independent auditors and to refer determination of the auditors’ remuneration to the Audit Committee of the Board of Directors will be decided by an ordinary resolution: that is a resolution duly adopted by the Board of Directors, which has adopted rules that allow companies to sendalready occurred, and then approved by shareholders with a single copysimple majority of annual reports, proxy statements, prospectuses and other disclosure documents to twovotes cast in person or more shareholders sharing the same address, subject to certain conditions. These “householding” rules are intended to provide greater convenience for shareholders, as well as cost savings for companies by reducing the numberproxy. Votes may be cast in favor of duplicate documents that shareholders receive.or against this proposal or a shareholder may abstain from voting. If your shares are held by a Broker and you do not give the Broker specific instructions on how to vote your shares, your Broker may vote your shares at its discretion on this proposal only to the extent that your broker has not provided you with CRM’s proxy materials. Abstentions will have no effect on the outcome of the vote on this proposal.
THE BOARD OF DIRECTORS AND THE AUDIT COMMITTEE RECOMMEND THAT SHAREHOLDERS VOTE TO APPROVE KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND TO REFER DETERMINATION OF ITS REMUNERATION TO THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS.
Change of Independent Registered Public Accounting Firm
During the fiscal years ended December 31, 2021 and 2020 and during the subsequent interim period through the date of KPMG’s appointment,
(i) there were no disagreements (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K) between the Company and EY on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of EY, would have caused EY to make reference to the subject matter of the disagreements in EY’s reports for such fiscal years; and
(ii) there was one “reportable event” within the meaning of Item 304(a)(1)(v) of Regulation S-K, whereby EY issued an intermediary broker, dealeradverse opinion on our internal control over financial reporting as of December 31, 2020 as a result of the material weakness in the Company’s internal control over financial reporting as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 relating to the timeliness and completeness of internal communication of certain relevant financial information within the Company as well as in controls that used such information.
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The Company provided EY with a copy of the foregoing disclosure and EY has stated in response that it agrees with such disclosure in all respects.
Fees Paid to Ernst & Young LLP by the Company in 2021 and 2020
Prior to June 1, 2022, EY served as the Company’s independent registered public accounting firm. The fees incurred in 2021 and 2020 for services provided by EY to the Company were as follows:
| Category | 2021 | 2020 | ||||||
| Audit Fees (1) | $ | 6,584,295 | $ | 5,936,300 | ||||
| Audit-Related Fees (2) | 53,700 | 156,200 | ||||||
| Tax Fees (3) | 822,905 | 964,932 | ||||||
| All Other Fees (4) | 7,200 | 7,200 | ||||||
| Total | $ | 7,468,100 | $ | 7,064,632 | ||||
| (1) | “Audit Fees” include the aggregate fees incurred for professional services rendered by EY for the review of the Company’s quarterly reports for 2021 and 2020, and its fee for the audit of the Company’s annual consolidated financial statements for the years ended December 31, 2021 and 2020. “Audit Fees” also include fees incurred for professional services related to other statutory and regulatory filings. The fees include EY’s estimate of unbilled fees related to services for 2021. |
| (2) | “Audit-Related Fees” include fees incurred for assurance and related services that are reasonably related to the performance of the audit and not included in the “Audit Fees” described above. These services include audits of the employee benefits plans for 2021 and 2020. |
| (3) | “Tax Fees” are fees incurred for EY’s tax services, which include tax planning, advice and assistance for the Company regarding statutory, regulatory or administrative developments and other international, federal, state and local issues and non-income tax minimization and planning. |
| (4) | “All Other Fees” includes fees for services related to the purchase of online accounting research software for 2021 and 2020. |
Audit Committee Pre-Approval Process
All services provided by EY to the Company in 2021 and in 2020 were specifically pre-approved by the Audit Committee of the Company, as required under its charter. In 2021, the Audit Committee adopted an Audit Committee Pre-Approval Policy, which sets forth the procedures the Audit Committee follows to pre-approve services to be performed by the Company’s independent auditor. Pursuant to such policy, the Audit Committee delegates to the Chair of the Audit Committee authority to grant specific pre-approval on a case-by-case basis, subject to certain dollar limit. The Chair of the Audit Committee is required to report any pre-approval decisions to the Audit Committee at or bankprior to its next scheduled meeting. The Audit Committee and the Chair of the Audit Committee may not delegate to management the Audit Committee’s responsibilities to pre-approve services performed by the Company’s independent auditor.
Report of the Audit Committee
The Audit Committee assists the Board in “street name,” your consentits oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualifications and independence of the independent registered public accounting firm, and (iv) the performance of the Company’s internal auditing department and the independent registered public accounting firm.
The Audit Committee operates pursuant to householdinga charter which is reviewed annually by the Audit Committee. It is not the responsibility of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. This is the responsibility of management and the independent registered public accounting firm, as appropriate.
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In connection with performing its oversight role related to the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K, the Audit Committee has:
Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the SEC.
AUDIT COMMITTEE:
Fred R. Donner (Chair)
Bernard C. Bailey
Carol A. McFate
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ANNUAL REPORT TO SHAREHOLDERS
A copy of our Annual Report on Form 10-K, as supplemented by Form 10-K/A, excluding exhibits, may be sought, or may already have been sought, by or on behalf of the intermediary. If you wish to revoke a consent to householding obtained by a broker, dealer or bank which holds shares for your account, you may contact your broker or PXRE Group at:
shareholders without charge by request to Investor Relations, or TreasurerPXRE Group Ltd.110Wellesley House, 90 Pitts Bay Road
Pembroke, HM 08, BermudaTelephone: or by calling 441-296-5858 and may be accessed on our website at www.argolimited.com.
MISCELLANEOUS
American Stock Transfer & TrustIn addition, the Company serveshas posted copies of the Annual Report on Form 10-K, as transfer agent, registrarsupplemented by Form 10-K/A, for the fiscal year 2021 and dividend paying agentthis proxy statement on its website at www.argolimited.com. References to the Company’s website throughout this proxy statement do not incorporate by reference the information contained on the website, and such information should not be considered a part of this proxy statement.
SHAREHOLDER PROPOSALS FOR 2023 ANNUAL GENERAL MEETING
Under SEC rules and our Bye-Laws, shareholders must follow certain prescribed procedures to introduce an item of business at an annual general meeting. Each of the deadlines below assumes that the 2023 Annual General Meeting of Shareholders will be held on May 5, 2023, and is subject to change if the 2023 Annual General Meeting is held on a different date. In the event that the Company determines to hold the 2023 Annual General Meeting on a date other than May 5, 2023, the Company will publicly announce such date and the new deadlines for PXRE Group’s shares. Correspondencethe matters described below to its shareholders.
Under these procedures, if a shareholder desires to present a proposal for inclusion in our 2023 proxy statement, such shareholder must submit the proposal in writing to us a reasonable amount of time before the Company begins to print and send its proxy materials. Assuming that the 2023 Annual General Meeting is held on May 5, 2023, currently the Company expects this deadline to be February 1, 2023. Proposals must comply with the proxy rules relating to shareholder proposals, in particular Rule 14a-8 under the Exchange Act, to be included in our 2023 proxy materials.
Shareholders who wish to submit a proposal or director nomination for consideration at our 2023 Annual General Meeting, but who do not wish to submit a proposal for inclusion in our proxy materials pursuant to Rule 14a-8 under the Exchange Act, should deliver a copy of their proposal or nomination to us for receipt not later than 60 days prior to the date of our 2023 Annual General Meeting (such deadline currently expected to be on or about March 6, 2023). Any such notice must also meet certain other requirements specified in our Bye-Laws. In addition to satisfying the foregoing requirements under our Bye-Laws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 6, 2023.
In addition to satisfying the requirements under our Bye-Laws with respect to advance notice of any stock accounts, dividendsnomination, any shareholder that intends to solicit proxies in support of director nominees other than the Company’s director nominees in accordance with Rule 14a-19 must provide notice to the Company at the address below no later than 60 calendar days prior to the anniversary of the previous year’s annual meeting or transfers60 calendar days prior to the date of share certificatesthe 2023 Annual General Meeting if the meeting date has changed more than 30 days from the date of this year’s Annual General Meeting (such deadline currently expected to be on or about March 6, 2023). Any such notice of intent to solicit proxies must comply with all the requirements of Rule 14a-19.
In each case, the notices described above should be addressed to:delivered to Argo Group International Holdings, Ltd. c/o Allison D. Kiene, General Counsel and Secretary, Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda.
American Stock Transfer & Trust Company6201 15th AvenueBrooklyn, New York 11219Telephone: (718) 921-8275Facsimile: (718) 921-8331
By OrderYou may obtain a copy of the Board of DirectorsDAVID J. DOYLESecretary
Pembroke, Bermuda
October , 2005
BackCompany’s Bye-Laws by writing to Contentsour Secretary at the above address.
BYE-LAWSOFPXRE GROUP LTD.
PROPOSED AMENDMENTSto Bye-Law 2(1)Subject to Shareholder Approvalat the Special General Meeting of Shareholdersto be held on November18, 2005.
SHARES AND SHARE CAPITAL
2. (1) The authorized share capital of the Company is $380,000,000 divided into the following classes of shares:
(i) 350,000,000 Common Shares, par value $1.00 per share (“Common Shares”), which number of Common Shares is inclusive of 30,000,000 Convertible Common Shares, par value $1.00 per share; and
(ii) 30,000,000 Preferred Shares, par value $1.00 per share (“Preferred Shares”).
PXRE GROUP LTD.110 Pitts Bay RoadPembroke HM 08, Bermuda
I, David J. Doyle, Secretary of PXRE GROUP LTD., DO HEREBY CERTIFY that the following is a true copy of resolutions adopted by the Board of Directors of the Company at a meeting
“that it is advisable and in the best interests of the shareholders to amend, and we do hereby approve the amendment of, PXRE Group’s Bye-Laws to increase the authorized share capital from $60,000,000 to $360,000,000 and to increase the number of authorized Common Shares, par value $1.00 per share, from 50,000,000 to 350,000,000 shares;
that it is advisable and in the best interests of the shareholders to approve, and we do hereby approve, the exchange of all Series D Perpetual Non-Voting Preferred Shares (the “Perpetual Preferred Shares”) issued in a private placement on October 7, 2005 into 34,090,909 Common Shares and the automatic cancellation of the Perpetual Preferred Shares upon receipt of the Common Shares;
that it is advisable and in the best interests of the shareholders to amend, and we do hereby approve the amendment, of PXRE Group’s Bye-Laws to increase the authorized share capital from $360,000,000 to $380,000,000 and to increase the number of authorized Preferred Shares, par value $1.00 per share, from 10,000,000 to 30,000,000 shares;
that it is advisable and in the best interests of the shareholders to approve, and we do hereby approve, the division of 30,000,000 of PXRE Group’s 300,000,000 newly authorized Common Shares into three pre-existing classes of Common Shares (collectively, “Convertible Common Shares”): 10,000,000 additional Class A Convertible Voting Common Shares, par value $1.00 per share (“Class A Convertible Common Shares”), 10,000,000 additional Class B Convertible Voting Common Shares, par value $1.00 per share (“Class B Convertible Common Shares”), and 10,000,000 additional Class C Convertible Voting Common Shares, par value $1.00 per share (“Class C Convertible Common Shares”), such Convertible Common Shares to be automatically redesignated as Common Shares upon, and to the extent of, the exercise of conversion rights attaching to such Convertible Common Shares on a one-for-one basis;”
/s/ David J. Doyle Secretary
Dated 7th October, 2005
EXHIBIT BDESCRIPTION OF DESIGNATIONS OF PREFERENCES AND RIGHTSOF THE PERPETUAL PREFERRED SHARES
DESCRIPTION OF STOCK:
SERIES D PERPETUAL NON-VOTING PREFERRED SHARES($1.00 PAR VALUE PER SHARE)ofPXRE GROUP LTD.
TABLE OF CONTENTS
| /s/ Allison D. Kiene | ||||
| Allison D. Kiene | ||||
| General Counsel and Secretary |
[•], 2022
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ANNEX A
SUPPLEMENTAL INFORMATION
REGARDING PARTICIPANTS IN THE COMPANY’S SOLICITATION OF PROXIES
The following tables (“Directors and Nominees” and “Officers and Employees”) set forth the name and business address of our directors and nominees, and the name, present principal occupation and business address of our officers and employees who, under the rules of the SEC, are considered to be “participants” in our solicitation of proxies from our shareholders in connection with our Annual General Meeting (collectively, the “Participants”).
Directors and Nominees
The principal occupations of our directors and nominees are set forth under Proposal 1 of this Proxy Statement, titled “Election of Directors.” The names of our directors and nominees, and their business addresses, are set forth below.
| Name | Business Address | |
| Bernard C. Bailey | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Thomas A. Bradley | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Fred R. Donner | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Anthony P. Latham | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Dymphna A. Lehane | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Samuel G. Liss | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Carol A. McFate | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| J. Daniel Plants | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda | |
| Al-Noor Ramji | c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda |
Officers and Employees
The principal occupations of our executive officers and employees who are considered Participants are set forth below. The principal occupation refers to such person’s position with the Company, and the business address for each person is c/o Argo Group International Holdings, Ltd., 90 Pitts Bay Road, Pembroke, Bermuda.
Executive Officer and Employee Participants as a Group:
| Name | Position | |
| Thomas A. Bradley | Chief Executive Officer | |
| Scott Kirk | Chief Financial Officer | |
| Allison D. Kiene | General Counsel and Company Secretary | |
| Susan B. Comparato | Chief Administrative Officer | |
| Andrew Hersom | Head of Investor Relations | |
| Gregory Charpentier | Assistant Vice President, Investor Relations and Corporate Finance |
Certain members of management, including Messrs. Hersom and Charpentier, were granted cash retention awards earlier this year. The retention awards pay on the first anniversary of the grant, subject to continued employment. In addition, management may have received sign-on cash bonuses in connection with joining the Company and are covered under the Company’s general non-executive severance policy.
Information Regarding Ownership of Company Securities by Participants
The number of shares of Company common stock beneficially owned by our directors and named executive officers as of October 26, 2022, is set forth under the “Security Ownership of Certain Beneficial Owners and Management” section of this Proxy Statement. The following table sets forth the number of shares beneficially owned as of October 26, 2022, by our other executive officers and employees who are deemed a “participant” in our solicitation of proxies. Except as otherwise noted below, each person identified in the table below, to our knowledge, has sole voting and investment power with respect to the securities they hold, other than property rights of spouses.
| Beneficial Ownership | |||||
| Beneficial Owner | Number of Shares | ||||
| Andrew Hersom | 0 | ||||
| 0 | |||||
Information Regarding Transactions in Company Securities by Participants
The following table sets forth information regarding purchases and sales of Company securities by each Participant during the past two years. Unless otherwise indicated, all transactions were in the public market or pursuant to our equity compensation plans and none of the purchase price or market value of these securities is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities.
| Name | Transaction Date | Shares | Transaction Type | |||||
| Bernard C. Bailey | May 5, 2021 | 2116 | Vested Restricted Share Award | |||||
| 689 | Vested Restricted Share Award | |||||||
| May 6, 2021 | ||||||||
| Granted Restricted Share Award | ||||||||
| May 5, 2022 | ||||||||
| Granted Restricted Share Award | ||||||||
| May 6, 2022 | ||||||||
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DESCRIPTION OF STOCK
The relative rights, preferences and restrictions granted to or imposed upon the Series D Perpetual Non-Voting Preferred Shares, par value $1.00 per share, created by PXRE Group Ltd. and upon the holders thereof are set forth below.
(a) Designation and Number. The designation of Preferred Shares created by this resolution shall be the “Series D Perpetual Non-Voting Preferred Shares, $1.00 par value per share,” of the Company (hereinafter referred to as the “Series D Perpetual Preferred Shares”), and the number of Series D Perpetual Preferred Shares which the Company shall be authorized to issue shall be 375,000 shares.
(b) Priority. The Series D Perpetual Preferred Shares shall rank senior to the Common Shares and all other capital shares of the Company (now or hereafter authorized or issued) other than the Senior Stock, in each case as to dividends and as to the surplus assets of the Company available for distribution upon liquidation, dissolution and winding-up as provided herein.
(a) For purposes of this Description of Stock, the following terms shall have the meanings indicated (such definitions to be equally applicable to both singular and plural forms of the terms defined):
“Adjusted Net Income (Loss)” means, as of any Adjustment Date, the Net Income (or Net Loss) for the quarter ending on the Adjustment Date adjusted downwards by the sum of any Capital Distributions on the Common Shares and Perpetual Capital Distributions declared during the quarter ending on the Adjustment Date.
“Adjustment Date” means, commencing with December 31, 2005, the last day of each calendar quarter.
“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, that Person. For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by”, and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise.
“Assets” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, investment assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory and goods.
“Board of Directors” means the Board of Directors of the Company.
“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York or Bermuda are authorized or obligated by law or executive order to close.
“ClassB Convertible Common Shares” means the Class B Convertible Voting Common Shares, $1.00 par value per share, of the Company.
“ClassC Convertible Common Shares” means the Class C Convertible Voting Common Shares, $1.00 par value per share, of the Company.
“Closing” has the meaning ascribed to such term in the Purchase Agreement.
“Closing Date” has the meaning ascribed to such term in the Purchase Agreement.
“Common Shares” means the Common Shares of the Company, par value $1.00, and shall also include any common shares of the Company hereafter issued and outstanding and any shares of the Company of any other class hereafter issued and outstanding that is not preferred as to dividends or distribution of assets in liquidation
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over any other class of shares of the Company and which has ordinary voting power for the election of directors of the Company.
“Company” means PXRE Group Ltd.
“Company Securities” has the meaning ascribed to such term in the Purchase Agreement.
“Date of Issuance” means the day upon which the Series D Perpetual Preferred Shares are issued by the Company and sold to the Purchasers pursuant to the Purchase Agreement.
“Description of Stock” means this Description of Stock, as amended, modified or supplemented from time to time.
“Dividend Allocation Ratio” means, as of any Adjustment Date (or as of the Date of Issuance, if applicable), the quotient of: (i) the Aggregate Liquidation Preference on such Adjustment Date (or the Date of Issuance, if applicable); divided by (ii) the difference of (a) Shareholders’ Equity on such Adjustment Date (or the Date of Issuance, if applicable) minus (b) the Aggregate Liquidation Preference of such Adjustment Date.
“Earnings Allocation Ratio” means, as of any Adjustment Date, the quotient of: (x) the Aggregate Liquidation Preference on the immediately preceding Adjustment Date; divided by (y) Shareholders’ Equity on the immediately preceding Adjustment Date.
“Exchange Conditions Precedent” means (i) the affirmative vote of the Company’s existing shareholders (a) authorizing an additional 300,000,000 Common Shares; and (b) approving the exchange of the Series D Perpetual Preferred Shares into Common Shares.
“Exchange Ratio” means, at any time of determination, the fraction of which the numerator is 1,000 and the denominator is 11; provided, however, such denominator shall be subject to adjustment for any stock split, issuance of stock dividends and other similar events in respect of the Common Shares (or in respect of the Class B Convertible Common Shares or Class C Convertible Common Shares to the extent applicable in applying the terms of the proviso set forth in the first sentence of Section 6(a) hereof) effected after September 29, 2005.
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Indebtedness” means (a) all indebtedness of the Company and its subsidiaries, including the principal of, and premium, if any, and interest (including interest accruing after the filing of a petition initiating any proceeding under any state, federal or foreign bankruptcy laws, whether or not allowable as a claim in such proceeding) on, all indebtedness, whether outstanding currently or hereafter created (i) for borrowed money, (ii) for money borrowed by one or more other Persons and guaranteed, directly or indirectly, by the Company or any subsidiary thereof, (iii) for money borrowed by one or more other Persons for which the Company or any subsidiary thereof provides security, (iv) constituting purchase money indebtedness the payment of which the Company or any subsidiary thereof is directly or contingently liable, (v) under any lease of any real or personal property, which obligations are capitalized on the consolidated books of the Company and its subsidiaries in accordance with GAAP or (vi) under any other arrangement under which obligations are recorded as indebtedness on the consolidated books of the Company and its subsidiaries in accordance with GAAP and (b) any and all modifications, refundings, deferrals, renewals or extensions of any such indebtedness, or securities, notes or other evidences of indebtedness issued in exchange for such indebtedness. Without limiting the generality of the foregoing, the term “Indebtedness” shall include the Trust Preferred and any comparable securities of the Company or any subsidiary thereof at any time outstanding; provided that Indebtedness shall not include intercompany indebtedness outstanding or hereafter created between the Company and any of its direct or indirect wholly-owned Subsidiaries (as defined in the Purchase Agreement, but limited in this paragraph to direct and indirect wholly owned subsidiaries) or between any two or more such direct or indirect wholly owned Subsidiaries of the Company.
“Market Price” with respect to Common Shares, on any date, shall be deemed to be the reported closing price on the last trading day ending on the trading day before such date of determination. The reported closing price for each day shall be the reported closing price on the principal United States securities exchange or automated quotation system on which the Common Shares are then listed or admitted to trading. If the Common Shares are not then listed or admitted to trading on any national securities exchange or automated quotation
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system or if the closing price cannot be so determined, the Market Price shall be determined (x) by the written agreement of the Company and the respective holder and (y) in the event that no such agreement is reached within twenty (20) days after the date of the event giving rise to the need to determine the Market Price, (A) by an independent appraiser of nationally recognized standing selected by the respective holder and the Company or (B) if the respective holder and the Company cannot agree on an appraiser within twenty (20) days after the date of the event giving rise to the need to determine the Market Price, each shall select an independent appraiser of nationally recognized standing and the two appraisers shall designate a third independent appraiser of nationally recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be borne by the Company. The Company shall cooperate, and shall provide all necessary information and assistance, to permit any determination under the preceding clauses (x) and (y).
“Net Income (Net Loss)” means the net income (loss) reported on the consolidated statements of income and comprehensive income of the Company (after Capital Distributions on the Senior Stock but before any Perpetual Capital Distributions or any PIK Dividends), prepared in accordance with GAAP, filed periodically with the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
“Person” or “person” means an individual, corporation, partnership, firm, association, joint venture, trust, unincorporated organization, limited liability company, government, governmental body, agency, political subdivision or other entity.
“PIK Dividend Value” means an amount equal to the product of: (x) the number of Series D Perpetual Preferred Shares issued during the immediately preceding calendar quarter; and (y) the Series D Perpetual Preferred Liquidation Preference as of the immediately preceding Adjustment Date.
“Public Offering” means the offer for sale to the public in an underwritten offering of Common Shares pursuant to an effective registration statement filed under the Securities Act.
“Public Offering Price” means the price per share at which Common Shares were offered to the public and will be sold in the underwritten Public Offering that is expected to be completed not later than October 21, 2005.
“Purchase Agreement” means the Share Purchase Agreement dated as of September 29, 2005 by and among the Company and the Purchasers, as the same may be amended from time to time.
“Purchase Price” means an amount equal to the lower of (i) $1,000 per share and (ii) the product of the Exchange Ratio multiplied by the Public Offering Price.
“Purchasers” has the meaning ascribed to such term in the Purchase Agreement.
“Quarterly Allocation” means, as of any Adjustment Date, an amount equal to the product of: (x) the Adjusted Net Income (Loss) during the preceding calendar quarter; and (y) the Earnings Allocation Ratio.
“Senior Stock” means only the Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares.
“Series A Preferred Shares” means the Series A Convertible Voting Preferred Shares, par value $1.00 per share, of the Company, including shares allocated as sub-series A1 Preferred Shares and A2 Preferred Shares.
“Series B Preferred Shares” means the Series B Convertible Voting Preferred Shares, par value $1.00 per share, of the Company, including shares allocated as sub-series B1 Preferred Shares and B2 Preferred Shares.
“Series C Preferred Shares” means the Series C Convertible Voting Preferred Shares, par value $1.00 per share, of the Company, including shares allocated as sub-series C1 Preferred Shares and C2 Preferred Shares.
“Shareholders’ Equity” means total shareholders’ equity reported on the consolidated balance sheets of the Company, prepared in accordance with GAAP, and filed periodically with the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
“Trust Preferred” shall mean, collectively, (A) (i) the Junior Subordinated Deferrable Interest Debentures due 2027 of PXRE Corporation, (ii) the 8.85% Capital Trust Pass-through Securities of PXRE Capital Trust I, (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities; (B) (i) the Junior Subordinated Deferrable Interest Debentures due May 15, 2033 of PXRE Corporation, (ii) the 7.35%
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Fixed/Floating Capital Trust Pass-through Securities of PXRE Capital Statutory Trust II, (iii) the PXRE Corporation Guarantee with respect to such Capital Statutory Trust Pass-through Securities; (C) (i) the Junior Subordinated Deferrable Interest Debentures due May 23, 2033 of PXRE Corporation, (ii) the 9.75% Capital Trust Pass-through Securities of PXRE Capital Trust III, (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities; (D) (i) the Junior Subordinated Deferrable Interest Debentures due October 29, 2033 of PXRE Corporation, (ii) the 7.70% Fixed/Floating Capital Trust Pass-through Securities of PXRE Capital Statutory Trust IV, (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities; and (E) (i) the Junior Subordinated Deferrable Interest Debentures due September 30, 2033 of PXRE Corporation, (ii) the 7.58% Fixed/Floating Capital Trust Pass-through Securities of PXRE Capital Statutory Trust V, and (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities.
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(b) The following terms, when used in this Description of Stock, shall have the meanings provided for such terms in the sections set forth below (such definitions to be equally applicable to both singular and plural forms of the terms defined):
| 1,665 | ||||
(c) The words “hereof”, “herein” and “hereunder” and other words of similar import refer to this Description of Stock as a whole and not to any particular Section or other subdivision.
(d) All dollar amounts referenced herein shall be denominated in United States dollars.
(a) General Voting Rights. Except as set forth in Section 3(b) below, the Series D Perpetual Preferred Shares shall have no right to vote on any matter submitted to shareholders at an Annual or Special General Meeting of the Company’s shareholders.
(b) Consent of Series D Perpetual Preferred Shares Required For Variation of Rights and Restrictions. So long as any Series D Perpetual Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required by law overriding the provisions herein, the affirmative vote or consent of the holders of greater than 50% of all of the Series D Perpetual Preferred Shares at the time issued and outstanding, voting as a class, given in person or by proxy either in writing (as may be permitted by law and the Bye-Laws) or at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company:
(i) in any manner authorize, create, designate, issue or sell any class or series of capital shares or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital shares or any debt security which by its terms is convertible into or exchangeable for any equity security or has any other equity feature or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, is pari passu with or is senior to the Series D Perpetual Preferred Shares (including without limitation, any shares of Series D Perpetual Preferred Shares (whether or not junior as to dividends or liquidation preference) having earlier mandatory redemption dates than the mandatory exchange date of the Series D Perpetual Preferred Shares) or which in any manner adversely affects the holders of the Series D Perpetual Preferred Shares, or amend the terms of any existing class or series of capital shares if the effect of such amendment would be to rank such class or series senior to or pari passu with the Series D Perpetual Preferred Shares as to dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company;
(ii) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions, of the Series D Perpetual Preferred Shares;
(iii) reclassify the shares of any class or series of capital shares into shares of any class or series of capital shares (A) ranking, either as to payment of dividends, distributions of Assets or redemptions, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, senior to or pari passu with the Series D Perpetual Preferred Shares (including without limitation, any shares of Series D Perpetual Preferred Shares (whether or not junior as to dividends or liquidation
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preference) having earlier mandatory redemption dates than the mandatory exchange date of the Series D Perpetual Preferred Shares) or (B) which in any manner adversely affects the rights of the holders of the Series D Perpetual Preferred Shares or any powers, rights, privileges or preference appertaining to the Common Shares, which such holders would have after mandatory exchange of the Series D Perpetual Preferred Shares into Common Shares;
(iv) take any action to cause any amendment, alteration or repeal of any of the provisions of the Memorandum of Association or Bye-Laws, if such amendment, alteration or repeal would have an adverse effect on the rights, preferences or privileges of the holders of the Series D Perpetual Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares which such holders would have after mandatory exchange of the Series D Perpetual Preferred Shares into Common Shares (including, without limitation, by granting voting rights to holders of bonds, debentures or other obligations);
(v) any increase or decrease to the authorized number of Series D Perpetual Preferred Shares or issue additional Series D Perpetual Preferred Shares, except as required by the terms of this Description of Stock;
(vi) any amalgamation, merger or sale of the Company unless the aggregate purchase price paid to the Series D Perpetual Preferred Shareholders equals the greater of (A) the Aggregate Liquidation Preference and (B) the product of (x) the aggregate purchase price paid to the Common Shareholders and (y) the Dividend Allocation Ratio;
(vii) the sale or transfer of 25% or more of the Company’s Assets (other than the payment of reinsurance claims in the ordinary course of business);
(viii) in any acquisition by the Company involving aggregate consideration in excess of $100,000,000;
(ix) the voluntary delisting of the Common Shares or the Series D Perpetual Preferred Shares from the New York Stock Exchange or other nationally recognized securities exchange, as applicable;
(x) effect or attempt to effect a voluntary liquidation, dissolution or winding up of the Company; or
(xi) an expansion by the Company into lines of business other than continuing lines of business in which the Company is currently involved.
(a) General. For so long as the Series D Perpetual Preferred Shares remain outstanding, the Company may not make, declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment (collectively, “Capital Distributions”), with respect to the Common Shares of the Company, unless, subject to the Bermuda Companies Act of 1981 (“Companies Act”), the Company simultaneously declares and pays a cash dividend or distribution (the “Perpetual Capital Distributions”) on the Series D Perpetual Preferred Shares in an amount equal to such Capital Distribution multiplied by the Dividend Allocation Ratio as of the Adjustment Date immediately preceding the date of such Capital Distribution (or if an Adjustment Date shall have not occurred prior to the date of such Capital Distribution, then as of the Date of Issuance).
(b) PIK Dividends. If the Exchange Conditions Precedent are not met by April 1, 2006, then, retroactively commencing on the Date of Issuance, additional dividends on the Series D Perpetual Preferred Shares shall begin to accrue at a rate of 15% per annum, increasing to a rate of 17% per annum on April 1, 2007 and further increasing to a rate of 19% per annum on April 1, 2008, which rate shall be calculated on the basis of a year of 360 days consisting of twelve 30-day months. Such additional dividends shall be paid on a quarterly basis on each Adjustment Date in additional Series D Perpetual Preferred Shares having a liquidation preference per share equal to the Series D Perpetual Preferred Liquidation Preference as of the immediately preceding Adjustment Date (“PIK Dividends”); provided, however, that with respect to any retroactive payment of PIK Dividends made pursuant to this Section 4(b), such retroactive payment shall be made on June 30, 2006.
(c) Dividend Preference. Any such dividend that is to be paid in PIK Dividends shall be payable by delivery to such holders, at their respective addresses as they appear in the stock register, of certificates representing the appropriate number of duly authorized, validly issued, fully paid and nonassessable shares of Series D Perpetual Preferred Shares to holders of Series D Perpetual Preferred Shares. Any such dividend that is
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to be paid in Perpetual Capital Distributions shall be payable by delivery of such amounts to such holders at their respective addresses as they appear in the stock register.
Notwithstanding anything to the contrary set forth in this Section 4, if at any time during which any Series D Perpetual Preferred Share remains outstanding the dividend rate payable thereon exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the “Maximum Lawful Rate”), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the dividend rate in respect of Series D Perpetual Preferred Shares shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the dividend rate payable thereon is less than the Maximum Lawful Rate, dividends shall continue to accrue thereon at the Maximum Lawful Rate until such time as the total dividends earned are equal to the total dividends which would have been earned had the dividend rate on such Series D Perpetual Preferred Share been (but for the operation of this paragraph) the dividend rate payable since the Closing.
The rights of the Series D Perpetual Preferred Shares shall rank senior in all respects to the Common Shares and all other classes and series of capital shares of the Company, including without limitation other classes and series of preferred shares other than the Trust Preferred and Senior Stock (collectively, “Junior Stock”).
(a) Priority. In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary:
(i) before any payment or distribution of the Assets of the Company (whether from paid in share capital, share premium or surplus) shall be made to or set apart for the holders of Junior Stock or any other shares of the Company other than the Trust Preferred and the Senior Stock, the holders of the shares of Series D Perpetual Preferred Shares shall be entitled to receive from the Assets of the Company, payment in cash of an initial amount equal to the Purchase Price (the “Series D Perpetual Preferred Liquidation Preference”). Commencing as of December 31, 2005 and on each Adjustment Date thereafter, the Series D Perpetual Preferred Liquidation Preference shall be adjusted upward or downwards by an amount equal to the quotient of: (v) the change in the Aggregate Liquidation Preference as of such Adjustment Date; divided by (w) the number of Series D Perpetual Preferred Shares outstanding. The “Aggregate Liquidation Preference” shall initially be an amount equal to the product of the Purchase Price multiplied by the number of Series D Perpetual Preferred Shares issued upon Closing. Commencing as of December 31, 2005 and on each Adjustment Date thereafter, the Aggregate Liquidation Preference shall be adjusted upward or downwards by an amount equal to the sum of: (x) the Quarterly Allocation, plus (y) the PIK Dividend Value; provided that; the Aggregate Liquidation Preference shall never be less than the product of the Purchase Price multiplied by the number of Series D Perpetual Preferred Shares issued upon Closing, plus the aggregate PIK Dividends less the aggregate Perpetual Capital Distributions. If the Assets distributable upon such liquidation, dissolution or winding-up of the Company shall be insufficient to permit payment to the respective holders of the shares of Series D Perpetual Preferred Shares of the full preferential amounts as set forth in this Section 5(a)(i), then such Assets shall be distributed ratably among the shares of Series D Perpetual Preferred Shares; and
(ii) any proceeds remaining after payment of the Series D Perpetual Preferred Liquidation Preference shall be distributed ratably among the Common Shares and other classes of shares of the Company in accordance with the relevant rights and restrictions thereof, if any.
(b) Notice of Liquidation. Subject to any other requirement under law, written notice of any liquidation, dissolution or winding up of the Company, stating the payment date or dates when and the place or places where the amounts distributable in such circumstances shall be payable, shall be given (not less than thirty (30) days prior to any payment date stated therein), to the holders of record of the Series D Perpetual Preferred Shares at their respective addresses as the same shall appear on the register of shareholders of the Company.
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The following provisions are subject to compliance with applicable law, and if the exercise of these rights would violate relevant law, such rights set out below will be suspended until such rights can be exercised in compliance with applicable law:
(a) General. Each Series D Perpetual Preferred Share outstanding shall be mandatorily exchanged immediately upon satisfaction of the Exchange Conditions Precedent into the number of whole Common Shares (rounded upwards or downwards) equal to the Exchange Ratio, provided, however, that if (i) at the time of such exchange, either a record holder of Series D Perpetual Preferred Shares or an Affiliate thereof is also a record holder of Series B Preferred Shares or Class B Convertible Common Shares, then such holder’s Series D Perpetual Preferred Shares shall be mandatorily exchanged into the number of whole Class B Convertible Common Shares (rounded upwards or downwards) equal to the Exchange Ratio (instead of such number of Common Shares) and (ii) at the time of such exchange, either a record holder of Series D Perpetual Preferred Shares or an Affiliate thereof is also a record holder of Series C Preferred Shares or Class C Convertible Common Shares, then such holder’s Series D Perpetual Preferred Shares shall be mandatorily exchanged into the number of whole Class C Convertible Common Shares (rounded upwards or downwards) equal to the Exchange Ratio (instead of such number of Common Shares). The Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be, issuable upon mandatory exchange of the Series D Perpetual Preferred Shares, when such Common Shares, Class Convertible B Common Shares or Class C Convertible Common Shares, as the case may be, shall be issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and nonassessable Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, respectively.
(b) Surrender and Exchange. Each Series D Perpetual Preferred Share will be exchanged by the holder once the Exchange Conditions Precedent have been met by surrender of such Series D Perpetual Preferred Share, to the Company at its office designated pursuant to the Bye-Laws of the Company. Such holder shall thereupon be entitled to receive the number of Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be, specified in the exchange by Section 6(a) above. The Series D Perpetual Preferred Shares shall be cancelled upon surrender.
(c) Effective Date. The exchange of Series D Perpetual Preferred Shares pursuant to Section 6(c) hereof shall be deemed to have been effected immediately prior to the close of business on the Business Day on which the Exchange Conditions Precedent have been met and the Series D Perpetual Preferred Shares shall have been surrendered to the Company as provided in Section 6(b) hereof. On such day that the exchange of Series D Perpetual Preferred Shares is deemed effected, the person or persons in whose name or names any certificate or certificates for Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be, are issuable upon such exchange, as provided in this Section 6, shall be deemed to have become the holder or holders of record of such Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be.
(d) Share Certificates. As promptly as practicable after the exchange of the Series D Perpetual Preferred Shares, and in any event within ten (10) Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue, stamp or other taxes on the issue of the Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be, or on the share certificate therefor, other than any income or capital gains taxes) will cause to be issued in the name of and delivered to the holder thereof or as such holder may direct, a certificate or certificates for the number of Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be, to which such holder shall be entitled upon such exchange on the effective date of such exchange.
If the Series D Perpetual Preferred Shares shall have not been exchanged for Common Shares, Class B Convertible Common Shares or Class C Convertible Common Shares, as the case may be, in accordance with Section 6(a) prior to December 31, 2006, the Company shall use its reasonable best efforts, subject to the conditions set forth below, in each calendar year beginning with 2007 so long as no such mandatory exchange has occurred and the Series D Perpetual Preferred Shares remain outstanding, to issue and sell in a Public Offering a
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number of Common Shares sufficient to produce net proceeds in an amount at least equal to $100,000,000, sh all make an offer to holders of outstanding Series D Perpetual Preferred Shares to purchase, on a pro rata basis, Series D Perpetual Preferred Shares having up to $100,000,000 in Series D Perpetual Preferred Liquidation Preference and shall purchase such Series D Perpetual Preferred Shares from holders responding to such offer to purchase at a price equal to the greater of (i) the Series D Perpetual Preferred Liquidation Preference, and (ii) the product of the Exchange Ratio multiplied by the price per Common Share realized by the Company in such Public Offering. However, the Company will not be required to sell any Common Shares for such purpose if (i) such use of proceeds from the sale of the Common Shares would have a negative impact on the Company’s then current credit ratings or (ii) the price per share of any of the Common Shares would be less than 75% of the then existing Market Price per share of the Common Shares.
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SHARE PURCHASE AGREEMENTDATED AS OF SEPTEMBER29, 2005BY AND AMONGPXRE GROUP LTD.ANDTHE PURCHASERS NAMED ONEXHIBIT A HERETO
TABLE OF CONTENTS
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| May 5, 2021 | ||||||||
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| May 6, 2021 | Granted Restricted Share Award | |||||||
| May 6, 2022 | 1,665 | Vested Restricted Share Award | ||||||
| June 23, 2022 | 135,000 | Granted Share Appreciation Award | ||||||
| June 23, 2022 | 78,760 | Granted Restricted Share Award | ||||||
| June 23, 2022 | 19,690 | Vested Restricted Share Award | ||||||
| June 23, 2022 | 6,025 | Shares withheld for tax obligation | ||||||
| July 3, 2022 | 6,563 | Vested Restricted Share Award | ||||||
| July 3, 2022 | 2,008 | Shares withheld for tax obligation | ||||||
| August 3, 2022 | 6,563 | Vested Restricted Share Award | ||||||
| August 3, 2022 | 2,974 | Shares withheld for tax obligation | ||||||
| September 3, 2022 | 6,563 | Vested Restricted Share Award | ||||||
| September 3, 2022 | 2,993 | Shares withheld for tax obligation | ||||||
| October 3, 2022 | 6,563 | Vested Restricted Share Award | ||||||
| October 3, 2022 | 2,993 | Shares withheld for tax obligation | ||||||
| May 5, 2021 | ||||||||
| 2116 | ||||||||
| May 5, 2021 | ||||||||
| 689 | ||||||||
| May 6, 2021 | ||||||||
| 1,665 | ||||||||
| May 5, 2022 | ||||||||
| 2,266 | ||||||||
| May 6, 2022 | ||||||||
| 1,665 | ||||||||
| Vested Restricted Share Award | ||||||||
| May 5, 2021 | ||||||||
| 2116 | ||||||||
| May 5, 2021 | ||||||||
| 689 | ||||||||
| May 6, 2021 | ||||||||
| 1,665 | ||||||||
| May 5, 2022 | ||||||||
| 2,266 | ||||||||
| May 6, 2022 | Vested Restricted Share Award | |||||||
| Dymphna A. Lehane | December 7, 2020 | 24.2213 | Acquired shares pursuant to dividend reinvestment plan | |||||
| March 15, 2021 | 20.6186 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| May 5, 2021 | 2116 | Vested Restricted Share Award | ||||||
| May 5, 2021 | 689 | Vested Restricted Share Award | ||||||
| May 6, 2021 | 1,665 | Granted Restricted Share Award | ||||||
| June 7, 2021 | 36.6518 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| September 16, 2021 | 38.1013 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| December 16, 2021 | 34.9068 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| March 16, 2022 | 47.478 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| May 5, 2022 | 2,266 | Granted Restricted Share Award | ||||||
| May 6, 2022 | 1,665 | Vested Restricted Share Award | ||||||
| June 16, 2022 | 65.4914 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| September 16, 2022 | 108.8059 | Acquired shares pursuant to dividend reinvestment plan | ||||||
| May 5, 2021 | ||||||||
| 2116 | ||||||||
III-2
III-3
This SHARE PURCHASE AGREEMENT (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, this “Agreement”), dated as of September 29, 2005, is made and entered into, by and among PXRE Group Ltd., a Bermuda company (the “Company”), and each of the Purchasers named on the signature page hereto (the “Purchasers” and each a “Purchaser”).
WITNESSETH:
WHEREAS, the Company desires to sell to the Purchasers and the Purchasers desire to purchase from the Company, Series D Perpetual Preferred Shares, par value $1.00 per share, upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLEI
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following defined terms shall have the meanings indicated below:
“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, that Person. For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by”, and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities , by contract or otherwise.
“Agreement” has the meaning ascribed to it in the forepart hereof.
“Annual Report” has the meaning ascribed to it in Section 3.9(a).
“Assets and Properties” means, with respect to any Person, all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, Investment Assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory and goods.
“Balance Sheet” has the meaning ascribed to it in Section 3.10.
“Bermuda Approval” means the Bermuda Monetary Authority’s prior written approval of the issuance and transferability of the Company Securities contemplated hereunder.
“Board of Directors” means the Board of Directors of the Company.
“Business Day” means a day other than Saturday, Sunday or any day on which banks located in Bermuda and the State of New York are authorized or obligated to close.
“Closing” means the closing of the transactions contemplated by Section 2.2.
“Closing Date” has the meaning ascribed to it in Section 2.2(a).
“Closing Date Purchaser” has the meaning ascribed to it in Section 7.2(a).
“Common Shares” has the meaning ascribed to it in Section 3.3(a).
“Convertible Common Shares” has the meaning ascribed to it in Section 3.3(a).
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“Convertible Preferred Shares” has the meaning ascribed to it in Section 3.3(a).
“Company” has the meaning ascribed to it in the forepart of this Agreement.
“Company Securities” means, collectively, the Perpetual Preferred Shares and the Common Shares issuable upon the mandatory exchange of the Perpetual Preferred Shares.
“Contract” means any agreement (including licenses with non-governmental Persons), lease, evidence of Indebtedness, mortgage, indenture, security agreement or other instrument or contract, whether written or oral.
“Description of Stock” means the Description of Stock of the Perpetual Preferred Shares in the form attached as Exhibit B hereto.
“Encumbrance” means any security interest, lien, pledge, claim, charge, escrow, encumbrance, option, right of first offer, right of first refusal, preemptive right, mortgage, indenture, security agreement or other similar agreement, arrangement, contract, commitment, understanding or obligation, whether written or oral and whether or not relating in any way to credit or the borrowing of money.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time and any regulations promulgated thereunder.
“ERISA Affiliate” shall mean, with respect to the Company, any trade or business (whether or not incorporated) under common control with the Company and which, together with the Company, are treated as a single employer within the meaning of Sections 414(b) or (c) of the IRC, excluding each Purchaser and each other Person which would not be an ERISA Affiliate if Purchaser did not own any issued and outstanding shares of stock of the Company.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder.
“Exchange Conditions Precedent” means the affirmative vote of the Company’s existing shareholders (a) authorizing an additional 300,000,000 Common Shares; and (b) approving the exchange of the Perpetual Preferred Shares into Common Shares.
“Financial Statements” has the meaning ascribed to it in Section 3.9(b).
“GAAP” has the meaning ascribed to it in Section 3.9(b).
“Governmental Authorizations” has the meaning ascribed to it in Section 3.14(a).
“Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official, department, commission board or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision.
“Indebtedness” means (a) all indebtedness of the Company, including the principal of, and premium, if any, and interest (including interest accruing after the filing of a petition initiating any proceeding under any state, federal or foreign bankruptcy laws, whether or not allowable as a claim in such proceeding) on, all indebtedness, whether outstanding currently or hereafter created (i) for borrowed money, (ii) for money borrowed by others and guaranteed, directly or indirectly, by the Company, (iii) for money borrowed by others for which the Company provides security, (iv) constituting purchase money indebtedness the payment of which the Company is directly or contingently liable, (v) under any lease of any real or personal property, which obligations are capitalized on the Company’s books in accordance with generally accepted accounting principles or (vi) under any other arrangement under which obligations are recorded as indebtedness on the Company’s books in accordance with generally accepted accounting principles and (b) any modifications, refundings, deferrals, renewals or extensions of any such Indebtedness, or securities, notes or other evidences of indebtedness issued in exchange for such Indebtedness; provided that Indebtedness shall not include intercompany indebtedness outstanding or hereafter created between the Company and any of its direct or indirect wholly-owned Subsidiaries or between any two of more such direct or indirect wholly-owned Subsidiaries of the Company.
“Intellectual Property” means trademarks and service marks (whether registered or unregistered), trade names and designs, together with all goodwill related to the foregoing; patents (including any continuations,
III-5
continuations in part, renewals and applications for any of the foregoing); copyrights (including any registrations and applications therefor and whether registered or unregistered); internet domain names; computer software; databases; works of authorship; mask works; technology; trade secrets and other confidential information, know-how, proprietary processes, formulae, algorithms, models, user interfaces, customer lists, inventions, discoveries, concepts, ideas, techniques, methods, source codes, object codes, methodologies and, with respect to all of the foregoing, related confidential data or information.
“Investment Assets” means all debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets owned of record or beneficially by the Company or any Subsidiary.
“IRC” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
“Law” or “Laws” means, the common law and all federal, state, local and foreign laws, rules and regulations, orders, judgments, decrees and other determinations of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.
“Liabilities” means all Indebtedness, obligations and other liabilities (or contingencies that have not yet become liabilities) of a Person, whether absolute, accrued, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due.
“Material Adverse Effect” means a material adverse effect on (x) the business, operations or financial position of any of the Company and its Subsidiaries, taken as a whole, (y) the ability of the Company to perform in a timely manner any of its obligations under this Agreement or any of the other Operative Documents or any transaction contemplated hereby or thereby or (z) the legality, validity or enforceability of this Agreement and the other Operative Documents; provided, however, that any change, effect, event condition or development, occurrence or state of facts resulting from or arising in connection with the following shall not constitute a Material Adverse Effect for purposes of this Agreement, the other Operative Documents and the transactions contemplated hereby and thereby:
Notwithstanding the foregoing, losses arising solely from a single loss occurrence occurring after the date hereof but prior to the Closing (after giving effect to any applicable reinsurance recoverable due to the Company, any reinstatement premiums due to or payable by the Company and any adjustments in profit and ceding commissions, in each case relating to such losses) shall be excluded from the determination of whether a Material Adverse Effect has occurred solely to the extent that such losses do not collectively exceed $30 million in the aggregate on a net after-tax basis.
“Material Contracts” means (i) all of the Company’s and its Subsidiaries’ Contracts which involve aggregate payments over the term of each such Contract by or to the Company or its Subsidiaries of more than $5 million or which extend for a term of more than a year from the date hereof, (ii) all of the Company’s and its Subsidiaries’ material loan agreements, bank lines or credit agreements, indentures, mortgages, deeds of trust, pledge and security agreements, letters of credit or other debt instruments, (iii) all employment contracts entered into by the Company or any of its Subsidiaries, (iv) any guarantees of more than $5 million (individually) by the Company or any of its Subsidiaries, (v) all non-competition and other similar agreements (including without limitation those limiting the Company or any Affiliate thereof from directly or indirectly engaging in any line of business, offering any products or services or otherwise competing with any Person) and (vi) all other material contracts not made in the ordinary course of business; provided that Material Contracts shall not include
III-6
reinsurance agreements or retrocessional agreements entered into in the ordinary course of business of the Company and its Reinsurance Subsidiaries.
“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, and to which Company, any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.
“Operative Documents” means this Agreement, the Registration Rights Agreement, all other agreements to be executed and delivered pursuant to this Agreement between one or more Purchasers, on the one hand, and the Company, on the other hand, the Description of Stock and all other documents, certificates or instruments as may be contemplated hereby or thereby, as modified or amended from time to time.
“Perpetual Preferred Shares” means the Series D Perpetual Preferred Shares, in each case having the rights, restrictions, privileges and preferences specified in the Description of Stock.
“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.
“Private Placement Memorandum” has the meaning ascribed to it in Section 3.10.
“Proxy Statement” means the proxy statement to be delivered to the shareholders of the Company in connection with the special meeting of the Company’s shareholders to consider the proposals to (i) authorize an additional 300,000,000 Common Shares and (ii) approve the exchange of the Perpetual Preferred Shares into Common Shares contained in the Description of Stock.
“Public Offering” means the offer for sale to the public in an underwritten offering of Common Shares pursuant to an effective registration statement filed under the Securities Act.
“Purchase Price” has the meaning ascribed to it in Section 2.1.
“Purchasers” has the meaning ascribed to it in the forepart of this Agreement.
“Quarterly Report” has the meaning ascribed to it in Section 3.9(a).
“Reinsurance Agreements” has the meaning ascribed to it in Section 3.17(a).
“Reinsurance Subsidiary” means each of PXRE Reinsurance Ltd., a company organized under the laws of Bermuda and a direct wholly-owned subsidiary of the Company, and PXRE Reinsurance Company, an insurance company organized under the laws of Connecticut and an indirect wholly-owned Subsidiary of the Company.
“SAP” means, with respect to a reinsurance or insurance company, the accounting procedures and practices prescribed or permitted from time to time by the National Association of Insurance Commissioners and adopted or promulgated by the insurance regulatory authority in the state in which such reinsurance or insurance company is domiciled and employed in a consistent manner throughout the periods involved; provided that, with respect to reinsurance or insurance companies not domiciled in the United States, SAP shall mean the accounting procedures and practices adopted or promulgated from time to time by the insurance regulatory authority in the jurisdiction in which such reinsurance or insurance company is domiciled.
“SEC” means the United States Securities and Exchange Commission.
“SEC Document” means each report, schedule, registration statement and definitive proxy statement filed by the Company with the SEC since December 31, 2004.
“Securities Act” means the Securities Act of 1933, as amended, of the United States of America and the rules and regulations of the SEC thereunder.
“Series D Perpetual Preferred Shares” means the Series D Exchangeable Non-Voting Preferred Shares, par value $1.00 per share, issued pursuant to this Agreement and having the rights, restrictions, privileges and preferences specified in the Description of Stock.
III-7
“Shareholder Approval” means the Company’s shareholders’ approval of the following matters, in each case as described in the Proxy Statement: (i) the authorization of an additional 300,000,000 Common Shares and (ii) the approval of the exchange of the Perpetual Preferred Shares into Common Shares.
“Shareholders’ Meeting” means the special meeting of the Company’s shareholders to be held by the Company in accordance with Section 5.2 hereof.
“Statutory Statements” means those statements of PXRE Reinsurance Company prepared pursuant to, and in accordance with, the requirements of applicable state insurance laws.
“Subsidiary” means any Person in which the Company, directly or indirectly through Subsidiaries or otherwise, beneficially owns more than 50% of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof.
“Taxes” has the meaning ascribed to it in Section 3.19(a).
“Tax Returns” has the meaning ascribed to it in Section 3.19(a).
“Transfer” means, directly or indirectly, any sale, transfer, assignment, hypothecation, pledge or other disposition of any Company Securities or any interests therein.
ARTICLEII
SALE AND PURCHASE OF COMPANY SECURITIES; CLOSING
2.1 Sale and Purchase of Company Securities. Subject to the terms and conditions hereof and in reliance upon the representations and warranties of the Purchasers and the Company contained herein or made pursuant hereto, the Company agrees to sell to each of the Purchasers, and each Purchaser severally agrees to purchase from the Company on the Closing Date, the number of Perpetual Preferred Shares set forth opposite such Purchaser’s name on Exhibit A hereto. The aggregate principal purchase price to be paid to the Company by each such Purchaser for such Perpetual Preferred Shares is specified opposite each respective Purchaser’s name on Exhibit A (such amount, the “Purchase Price”).
2.2 The Closing.
(a) Subject to the terms and conditions hereof, the closing (the “Closing”) of the purchase and sale of the Perpetual Preferred Shares will take place at the offices of Conyers Dill & Pearman, Clarendon House, Church Street, Hamilton, Bermuda, or at such other place as the Company and Purchasers shall mutually agree, at 10:00 A.M., Bermuda time, on the fifth Business Day following the execution of this Agreement (the date and time of the Closing are herein referred to as the “Closing Date”).
(b) Subject to the terms and conditions hereof, on the Closing Date (i) the Company will deliver to the Purchasers the Perpetual Preferred Shares by delivering to each Purchaser a certificate, registered in the name of such Purchaser (or its designee, if any such designee is specified on Exhibit A) and reflecting the number of Perpetual Preferred Shares purchased by such Purchaser and (ii) each Purchaser will deliver to the Company, by wire transfer to an account designated by the Company, an amount equal to the Purchase Price for such Perpetual Preferred Shares in federal or other immediately available funds. At the Closing, there shall be delivered to the placement agents’ counsel in New York, Simpson Thacher & Bartlett LLP, the certificates and other agreements, documents and instruments to be delivered under Article VII hereof.
(c) The holders of the Perpetual Preferred Shares will be entitled to the benefits of a registration rights agreement, to be dated October 5, 2005 (the “Registration Rights Agreement”), among the Company and the Purchasers, substantially in the form of Exhibit C hereto. Pursuant to the Registration Rights Agreement, as promptly as practicable following the special Shareholders’ meeting but in no event later than April 1, 2006, the Company shall register with the SEC the resale of the Perpetual Preferred Shares, if the Exchange Conditions Precedent are not satisfied, or (as applicable) the Common Shares if the Exchange Conditions Precedent are satisfied.
III-8
ARTICLEIII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchasers as follows:
3.1 Organization and Qualification. The Company and each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company and each Subsidiary is duly qualified and is authorized to do business and is in good standing as a foreign corporation in each state or jurisdiction where the nature of its business or the ownership of property make such qualification necessary, except where the failure to be so qualified, individually or in the aggregate with all such failures, would not and could not reasonably be expected to have a Material Adverse Effect.
3.2 Authority.
(a) The Company has full power and authority to execute and deliver this Agreement and the other Operative Documents, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby (subject to the Shareholder Approval and the Bermuda Approval). The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the transactions contemplated hereby and thereby have been, and the other Operative Documents will be, duly and validly authorized by all necessary action by its Board of Directors, and no other corporate action (other than the Shareholder Approval solely with respect to the matters described in the definition of such term) is necessary to authorize the execution, delivery and performance of this Agreement and the other Operative Documents and the consummation by the Company of the transactions contemplated hereby and thereby. This Agreement, has been, and on the Closing Date, the other Operative Documents will be, duly and validly executed and delivered by the Company. This Agreement, constitutes, and on the Closing Date the other Operative Documents will constitute, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to the enforcement of creditors’ rights generally and by general principles of equity.
(b) The Special Capital Committee of the Board of Directors by resolutions duly adopted at a meeting, duly called and held, has unanimously (i) determined that this Agreement, the issuance and sale of the Company Securities and the other transactions contemplated hereby are advisable and in the best interests of the Company and its shareholders and (ii) has approved this Agreement, the issuance and sale of the Company Securities and the other transactions contemplated hereby.
3.3 Capitalization.
(a) The authorized capital stock of the Company consists of: (i) 50,000,000 common shares, par value $1.00 per share (the “Common Shares”), which include 20,000,000 convertible common shares (the “Convertible Common Shares”), of which 22,357,955 Common Shares and 7,037,166 Convertible Common Shares were issued and outstanding on September 26, 2005; and (ii) 10,000,000 preferred shares, par value $1.00 per share, of which 15,000 shares are designated as Series A Preferred Shares (of which 10,000 shares are sub-designated as A1 Preferred Shares and 5,000 shares are sub-designated as A2 Preferred Shares), 10,000 shares are designated as Series B Preferred Shares (of which 6,666 2/3 shares are sub-designated as B1 Preferred Shares and 3,333 1/3 shares are sub-designated as B2 Preferred Shares) and 5,000 shares are designated as Series C Preferred Shares (of which 3,333 2/3 shares are sub-designated as C1 Preferred Shares and 1,666 1/3 shares are sub-designated as C2 Preferred Shares) (of which 3,168.533 shares of A2 Preferred Shares, 1,588.492 shares of B2 Preferred Shares and 1,056.176 shares of C2 Preferred Shares were issued and outstanding on September 26, 2005) (collectively, the “Convertible Preferred Shares”). When issued, all Company Securities will be duly authorized, validly issued, fully paid and non-assessable. As of the Closing, the Perpetual Preferred Shares, the Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares and Common Shares shall constitute the only equity securities of the Company outstanding other than as disclosed in Schedule 3.3. All Common Shares issuable upon the mandatory exchange of the Perpetual Preferred Shares will, when issued, be duly authorized, validly issued, fully paid and non-assessable. None of the Company Securities are subject to preemptive or similar rights.
III-9
(b) Except as set forth on Schedule 3.3, and as contemplated by this Agreement and the other Operative Documents, no Common Shares are reserved for issuance other than Common Shares reserved in accordance with Section 6.4 hereof.
(c) Except as set forth on Schedule 3.3, there are no outstanding options, warrants, subscriptions, rights, convertible or exchangeable securities or other agreements or plans under which the Company may become obligated to issue, sell or transfer Common Shares or other capital stock or equity securities of the Company.
(d) Except as set forth on Schedule 3.3, and except as provided in the Investment Agreement, dated April 4, 2002, by and among the Company and certain purchasers signatories thereto, there are no outstanding registration rights with respect to any Common Shares or other capital stock or equity securities of the Company.
(e) Except as set forth on Schedule 3.3, and except as provided by the terms of the Company Securities, there are no anti-dilution protections or other adjustment provisions in existence with respect to any Common Shares or other capital stock or equity securities of the Company.
(f) Except as set forth on Schedule 3.3 or the Bye-laws of the Company, there are no voting trusts, shareholder agreements, proxies or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the issuance, sale, redemption, registration, voting or transfer or other disposition of Common Shares or other capital stock or equity securities of the Company
3.4 Subsidiaries; Joint Ventures.
(a) The Company’s only Subsidiaries are those set forth on Schedule 3.4 hereto. The capital stock of such Subsidiaries is owned, beneficially and of record and free and clear of all Encumbrances, by the Company or a Subsidiary thereof as set forth on Schedule 3.4 hereto.
(b) All outstanding capital stock of the Subsidiaries has been duly authorized and validly issued and is fully paid and non-assessable. There are no outstanding options, warrants, subscriptions, rights, convertible securities or other agreements or plans under which any Subsidiary may become obligated to issue, sell or transfer any shares of its capital stock or other securities.
(c) Except as set forth on Schedule 3.4, neither the Company nor any of its Subsidiaries is engaged in any joint venture or partnership with any other Person.
3.5 No Conflicts. Except as set forth on Schedule 3.5 hereto, the execution and delivery by the Company of this Agreement and the other Operative Documents, the performance by the Company of its obligations under this Agreement and the other Operative Documents and the consummation of the transactions contemplated hereby and thereby do not and will not (i) result in a violation of the Company’s organizational documents, (ii) conflict with, or constitute a default under, any Contract to which the Company or any Subsidiary is a party, (iii) result in any violation of any Law or order, judgment or decree of any court or Governmental or Regulatory Authority having jurisdiction over the Company or any of its assets or properties or (iv) result in, or require, the creation or imposition of any Encumbrance upon any of the assets or properties of the Company, which, in the case of clause (ii), (iii) or (iv) above, individually or in the aggregate, would or could reasonably be expected to have a Material Adverse Effect.
3.6 Brokers. Other than Goldman, Sachs & Co. and Banc of America Securities LLC, no agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with the transactions contemplated by this Agreement or the other Operative Documents on the basis of any act or statement made or alleged to have been made by the Company or any of its Affiliates, directors, officers or other representatives.
3.7 Exemption from Registration. Assuming the accuracy on the date hereof and on the Closing Date of the representations and warranties of each Purchaser set forth in Section 4.3 below, (i) the issuance and the sale of the Perpetual Preferred Shares to the Purchasers hereunder is, and (ii) the mandatory exchange of the Perpetual Preferred Shares into the Common Shares immediately upon the satisfaction of the Exchange Conditions Precedent will be, exempt from the registration requirements of the Securities Act. Neither the Company nor any Person authorized to act on the Company’s behalf has taken any action (including, without limitation, any offering of any securities of the Company under circumstances which would require the integration of such
III-10
offering with the offering or issuance of the Company Securities under the Securities Act) which could be reasonably expected to subject the offering, issuance or sale of the Company Securities to the registration requirements of Section 5 of the Securities Act.
3.8 Litigation. Except as set forth in Schedule 3.8, there are no actions, suits, proceedings or investigations pending, or to the knowledge of the Company or any of its Subsidiaries, threatened, against or affecting the Company or any Subsidiary, other than those that, individually or in the aggregate, would not and could not reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries are in compliance in all material respects with (i) all orders or judgments issued by any Governmental or Regulatory Authority with respect to the Company or any Subsidiary thereof and (ii) all consent decrees and other agreements with any Governmental or Regulatory Authority to which the Company or any Subsidiary thereof is a party or by which any of their respective assets are bound.
3.9 SEC Filings and Financial Statements.
(a) The Company has filed all forms, reports and documents required to be filed by it pursuant to Section 13 or Section 15(d) of the Exchange Act within the last 12 months on a timely basis or has received and complied with a valid extension of time for filing. The Company has made available to the Purchasers the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2004 (the “Annual Report”) and the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2005 and June 30, 2005 (the Quarterly Report for the fiscal quarter ended June 30, 2005 hereinafter referred to as the “Quarterly Report”). Except as set forth on Schedule 3.9, all Company filings with the SEC from and after December 31, 2004 complied as to form and substance in all material respects with the rules and regulations of the Commission under the Exchange Act on the respective date of filing and as of such date (or if amended or superseded by a filing prior to the date of this Agreement, on the date of such filing), and such filings did not, and the Private Placement Memorandum does not, contain any untrue statement of 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.
(b) Except as set forth on Schedule 3.9, each of the consolidated financial statements (including, in each case, any related notes thereto) (collectively, the “Financial Statements”) contained in the Annual Report and the Quarterly Report (i) was prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved (except as may be expressly described in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the Commission on Form 10-Q under the Exchange Act) and (ii) fairly presents in all material respects the consolidated financial position of the Company as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements in the Quarterly Report were or are subject to normal and recurring year-end adjustments, none of which are reasonably expected to be material in nature.
3.10 Events Subsequent to the Date of the Last Financial Statement. Except as otherwise disclosed in the SEC Documents, the Statutory Statements, the Financial Statements or Schedule 3.10, since June 30, 2005, except as contemplated by this Agreement, reflected on Schedule 3.10 or on the balance sheet contained in the Quarterly Report (the “Balance Sheet”) the Company has not (i) sold, assigned, transferred or granted any exclusive license with respect to any patent, trademark, trade name, service mark, copyright, trade secret or other intangible asset necessary for the operation of its business substantially as now conducted, (ii) suffered any loss of property (other than in the ordinary course of business of the Company and its Subsidiaries), or waived any right of substantial value to the Company or a Subsidiary of the Company or (iii) entered into any commitment, obligation, understanding or other arrangement, contingent or otherwise, to effect, directly or indirectly, any of the foregoing. Except as otherwise disclosed in the SEC Documents, the Statutory Statements, the Financial Statements or Schedule 3.10, or in the Private Placement Memorandum (the “Private Placement Memorandum”), dated the date hereof, relating to the Perpetual Preferred Shares, since June 30, 2005, no events have occurred which individually or in the aggregate have had or could reasonably be expected to have a Material Adverse Effect.
3.11 Absence of Undisclosed Liabilities. Except as reflected in the Annual Report or the Quarterly Report, reserved against in the financial statements contained therein or in the notes thereto or otherwise
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disclosed in the SEC Documents, the Statutory Statements, the Financial Statements or Schedule 3.11, there are no Liabilities of, relating to or affecting the Company or any Subsidiary of the Company or any of their respective Assets and Properties, other than Liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2004.
3.12 Title to Assets, Properties and Rights. The Company (or a Subsidiary of the Company) has good and marketable title (or a valid leasehold interest) to all of the Assets and Properties (whether real, personal or mixed) necessary for the conduct of the business of Company and its Subsidiaries substantially as now conducted, free and clear of all Encumbrances, except for (i) liens for current taxes, assessments and other governmental charges not yet due and payable or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded for which reserves have been established as required by GAAP or SAP; (ii) easements, covenants, conditions and restrictions (whether or not of record) as to which no material violation or encroachment exists or, if such violation or encroachment exists, as to which the cure of such violation or encroachment would not materially interfere with the conduct of the Company’s business; (iii) any zoning or other governmentally established restrictions or encumbrances; (iv) workers or unemployment compensation liens arising in the ordinary course of business; (v) carriers’, landlords’, mechanic’s, materialman’s, supplier’s, vendor’s or similar liens arising in the ordinary course of business securing amounts which are not delinquent, which remain payable without penalty or which are being contested in good faith and by appropriate proceedings, (vi) purchase money liens on any office equipment hereafter acquired or the assumption of any lien on such office equipment; or (vii) Encumbrances disclosed on Schedule 3.12 or any minor imperfection of title or Encumbrances which, individually or in the aggregate with other Encumbrances, do not and could not reasonably be expected to materially impair the use or value of the Assets and Properties of the Company and its Subsidiaries. Such Assets and Properties are in such operating condition and repair as is suitable for the uses for which they are used in the Company’s business, are not subject to any condition which materially interferes with the use thereof by the Company or a Subsidiary of Company, as the case may be, and constitute all assets, properties, interests in properties and rights necessary to permit the Company and its Subsidiaries to carry on their business after the Closing substantially as conducted by the Company and its Subsidiaries prior thereto.
3.13 Patents, Trademarks, Copyrights and Licenses. The Company (or a Subsidiary) owns or has the right pursuant to a license to use all the Intellectual Property necessary for the conduct of the business of the Company and its Subsidiaries as now conducted. To the best knowledge of the Company, neither the Company nor any Subsidiary has interfered with, infringed upon or misappropriated any Intellectual Property rights of any Person, and except as set forth on Schedule 3.13, neither the Company nor any Subsidiary has received from any Person in the past two years any notice, charge, complaint, claim or assertion thereof, and no such claim is impliedly threatened by an offer to license from another Person under a claim of use.
3.14 Governmental Consents.
(a) The Company and each of its Subsidiaries has, and is in good standing with respect to, all governmental consents, approvals, licenses (including without limitation insurance licenses), authorizations, permits, certificates, inspections and franchises (collectively, “Governmental Authorizations”) necessary to continue to conduct the business of the Company and its Subsidiaries as now conducted and to own or lease and operate the Assets and Properties necessary for the conduct by the Company and its Subsidiaries of their business as now conducted, all of which are valid and in full force and effect, except for such failures that, individually or in the aggregate, do not have and could not reasonably be expected to have a Material Adverse Effect.
(b) Each of the Reinsurance Subsidiaries is duly licensed, authorized, approved or accredited (as required by the respective jurisdiction) to conduct a reinsurance business in the jurisdictions listed on Schedule 3.14, and is not transacting any insurance or reinsurance business in any jurisdiction in which it is not so licensed, authorized, approved, accredited (as the case may be) or otherwise permitted to transact such business.
(c) Except as set forth in Schedule 3.14:
(i) neither the Company nor any of its Subsidiaries has received any notice, oral or written, (A) that it is required to obtain, or that it is engaging in any activity that would require it to obtain, any Governmental Authorization that it does not now possess or (B) that it is engaging in any activity that would cause modification, limitation, non-renewal, revocation or suspension of any Governmental Authorization and no
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action, inquiry, investigation or proceeding looking to or contemplating any of the actions specified in clauses (A) and (B) above is pending or, to the knowledge of the Company, threatened;
(ii) all reports, statements, documents, registrations, filings and submissions to state insurance regulatory authorities submitted or made by the Company or its Subsidiaries complied in all material respects with applicable Law in effect when filed, and in each instance were filed in all material respects on a timely basis;
(iii) no material deficiencies have been asserted by any such regulatory authority with respect to any such reports, statements, documents, registrations, filings or submissions that have not been satisfied in all material respects; and
(iv) the Company has made available for inspection by the Purchasers all filings made by the Reinsurance Subsidiaries with any Governmental or Regulatory Authority since December 31, 2003, including, without limitation, each Statutory Statement, and any reports of examination, market conduct studies or other reports relating to any Reinsurance Subsidiary issued by any Governmental or Regulatory Authority since December 31, 2003.
3.15 No Consent or Approval Required. No consent, approval, waiver, permit, order or authorization of, or declaration to or filing with, any Person or Governmental or Regulatory Authority, and no consent under any permit or any Contract is required by the Company or any of its Subsidiaries for the valid authorization, execution and delivery by the Company of this Agreement, the other Operative Documents or its consummation of the transactions contemplated hereby and thereby, other than (i) those consents, approvals, authorizations, declarations or filings which have been obtained or made, as the case may be prior to the Closing Date, (ii) required filings with the SEC and the New York Stock Exchange, (iii) the obtaining of the Bermuda Approval, (iv) the Shareholder Approval and (v) the consents described on Schedule 3.15.
3.16 Compliance with Laws. The Company and each of its Subsidiaries has duly complied in all material respects with, and their Assets and Properties, business operations and leaseholds used in connection with the business of the Company and its Subsidiaries are in material compliance with, the provisions of all Laws applicable to the Company and each of its Subsidiaries, Assets and Properties and the conduct of their business, and there have been no citations, notices or orders of noncompliance issued to the Company or any of its Subsidiaries under or with respect to any such Law.
3.17 Reinsurance Contracts; Retrocession Agreements.
(a) Each retrocession and reinsurance agreement pursuant to which a Reinsurance Subsidiary has ceded, transferred, reinsured or assumed any obligations or liabilities under any reinsurance or insurance agreement with respect to which such Reinsurance Subsidiary has booked any liability or recoverable or under which such Reinsurance Subsidiary has any contingent liabilities or rights (collectively, the “Reinsurance Agreements”) is in full force and effect. Each such Reinsurance Agreement is a valid and binding agreement of the applicable Reinsurance Subsidiary, enforceable against such Reinsurance Subsidiary in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity)). To the knowledge of the Company, each Reinsurance Agreement is a valid and binding obligation of each other party thereto, enforceable against such party in accordance with the terms of such Reinsurance Agreement (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity)).
(b) Except as noted on Schedule 3.17, no Reinsurance Subsidiary, nor, to the knowledge of the Company, any other party to a Reinsurance Agreement pursuant to which such Reinsurance Subsidiary has ceded, transferred or reinsured any obligations or liabilities (“Retrocessional Agreements”) is in default in any material respect as to any provision thereof, and no such Retrocession Agreement contains any provision providing that the other party thereto may commute or, in the case of any Retrocession Agreement whose term has not
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previously expired, terminate such Retrocession Agreement by reason of the transactions contemplated by this Agreement or the other Operative Documents. Except as set forth in Schedule 3.17, (i) to the knowledge of the Company, none of the other parties to any such Retrocession Agreement is insolvent or the subject of a rehabilitation, (ii) to the knowledge of the Company, the financial condition of any such other party to a Retrocession Agreement is not impaired to the extent that a default thereunder is reasonably anticipated and (iii) no notice of intended cancellation or termination has been received by the Company or any of its Subsidiaries from any of such other parties.
3.18 Loss Reserves; Actuarial Reports. The reserves for payment of benefits, losses, claims and expenses under all reinsurance and retrocession agreements to which any Reinsurance Subsidiary is a party reflected in, or included with, the financial statements set forth in the Statutory Statements and Financial Statements (i) were computed in accordance with Standards of Practice issued by the Actuarial Standards Board (including the Casualty Actuarial Society’s Statement of Principles Regarding Property and Casualty Loss and Loss Adjustment Expense Reserves), (ii) are based on actuarial assumptions that are consistent with the relevant contract provisions and (iii) are in compliance with the requirements of applicable Law. The admitted assets of each Reinsurance Subsidiary as determined under applicable Laws are in an amount at least equal to the minimum amounts required by applicable Laws.
3.19 Taxes.
(a) The Company and each Subsidiary of the Company has filed all material federal, state, local, foreign and other tax returns, statements, forms and reports, and any other returns (including information returns), statements, forms and reports (“Tax Returns”) with all Governmental or Regulatory Authorities required to be filed by it. The Company and each Subsidiary has paid or caused to be paid, or duly reserved for in the Financial Statements, all taxes, fees, assessments and other governmental charges or levies (including interest and penalties) (“Taxes”) that are material owed by the Company and each Subsidiary of the Company. The Company and each Subsidiary of the Company has withheld and paid all material Taxes required to have been withheld and paid, including Taxes in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. Neither the Company nor any Subsidiary of the Company has any material liabilities for Taxes other than those incurred in the ordinary course of business and in respect of which adequate reserves are being maintained by it in accordance with GAAP or SAP, as the case may be. There are no applicable Taxes, fees or other governmental charges payable by the Company or any Subsidiary of the Company in connection with the execution and delivery of this Agreement or the other Operative Documents or in connection with any of the transactions contemplated hereby or thereby (including without limitation the issuance of the Company Securities as contemplated herein and therein).
(b) Except as set forth in Schedule 3.19, all material deficiencies asserted or assessments made by any Governmental or Regulatory Authority with respect to Taxes of the Company or any Subsidiary of the Company have been paid or are being contested in good faith. Except as disclosed in Schedule 3.19, (i) there are no action, suits, investigations, audits or claims in progress by any Governmental or Regulatory Authority relating to Taxes of the Company or any Subsidiary of the Company, (ii) no issue has been raised by written inquiry of a Governmental or Regulatory Authority in any current or prior examination which, by application of the same principles, would reasonably be expected to result in a material proposed deficiency for any subsequent taxable period, (iii) no claim has been made by a Governmental or Regulatory Authority in a jurisdiction where the Company or any Subsidiary of the Company does not file Tax Returns to the effect that the Company or such Subsidiary, as applicable, is or may be subject to taxation by that jurisdiction, and (iv) there are no outstanding waivers or comparable consents regarding the application of any statute of limitations in respect of Taxes of the Company or any Subsidiary of the Company.
(c) None of the Company or any Subsidiary of the Company or any of their respective directors or officers has received any written or, to the knowledge of the Company, oral notice from any taxing authority that it intends to conduct an audit or investigation of the Company or any Subsidiary of the Company. The Company is not subject to any ruling of any taxing authority (other than the assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act, 1966 of Bermuda as described in Amendment No. 1 to the Company’s Registration Statement on Form S-3 filed with the SEC in September of 2005).
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(d) There are no material liens for Taxes of the Company or any Subsidiary of the Company upon the assets of the Company or any Subsidiary of the Company, except for liens arising as a matter of Law relating to current Taxes not yet due.
3.20 Employees. The Company has complied in all respects with all applicable laws relating to the employment of labor, including provisions relating to wages, hours, equal opportunity, collective bargaining and the payment of Social Security and other taxes. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of the Company and there is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of the Company, threatened against or involving the Company.
3.21 ERISA.
(a) Schedule 3.21 lists each defined benefit plan, within the meaning of Section 3(35) of ERISA (whether or not subject to Title IV thereof), maintained by the Company or any ERISA Affiliate within the last six years (or with respect to which any of them could reasonably be expected to have any liability), and copies of the most recent actuarial valuation report, if any, with respect to any such plan has been made available to Purchaser. None of the Company, any ERISA Affiliate or any organization to which any of them is a successor or parent corporation (within the meaning of Section 4069(6) of ERISA) has engaged in any transaction which is subject to Section 4069 of ERISA.
(b) Neither the Company nor any ERISA Affiliate has any obligation to contribute to any Multiemployer Plan subject to Title IV of ERISA, and there are no circumstances pursuant to which the Company or any ERISA Affiliate could be assessed with withdrawal liability by any such Multiemployer Plan under Section 4201 of ERISA.
(c) Schedule 3.21 lists each employee benefit plan maintained by the Company or any Subsidiary and each such plan that is intended to be qualified under Section 401 of the IRC has received a favorable determination as to its qualified status from the Internal Revenue Service, and to the knowledge of the Company, nothing has occurred with respect to the operation of any such plan which could cause the loss of such qualification.
(d) Each employee benefit plan maintained by the Company or any ERISA Affiliate has been maintained in accordance with its terms and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable Laws.
(e) Neither the Company nor any ERISA Affiliate has incurred any liability under Section 4062, 4063 or 4064 of ERISA.
3.22 Ordinary Course. Except as set forth on Schedule 3.22, since June 30, 2005, the Company and each of its Subsidiaries has conducted its operations only in the ordinary course of business consistent with past practice.
3.23 Insurance. A complete and correct list and copies of all policies of insurance of any kind or nature covering the Company and its Subsidiaries, including, without limitation, policies of life, fire, theft, employee fidelity and other casualty and liability insurance, has been provided to the Purchasers, and such policies are in full force and effect. Such policies are in amounts customary for the industry in which Company or such Subsidiary operates.
3.24 Statutory Statements.
(a) The Company has previously furnished to the Purchasers true and complete copies of the following statutory statements, in each case together with all exhibits, schedules and notes thereto and any affirmations and certifications filed therewith (collectively, the “Statutory Statements”): (i) the annual statement of each Reinsurance Subsidiary as at December 31 in each of the years ended 2002, 2003 and 2004 (the “Annual Statements”); and (ii) the quarterly statement of PXRE Reinsurance Company for the quarterly period ended June 30, 2005 (the “Quarterly Statements”).
(b) Except as set forth on Schedule 3.24, the Statutory Statements (i) present fairly the statutory financial condition of each Reinsurance Subsidiary for the periods therein specified, (ii) were prepared in conformity with
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SAP, except as expressly set forth within the subject financial statements and (iii) were correct in all material respects when filed, and there were no material omissions therefrom. The Statutory Statements were compiled from and are in accordance with the books and records of the Reinsurance Subsidiaries.
3.25 Binding Authority. No reinsurance intermediary, agent, manager or broker has the legal power or authority to bind any Reinsurance Subsidiary with respect to any reinsurance or insurance contract.
3.26 Material Contracts. Schedule 3.26 sets forth a list of all Material Contracts of the Company and its Reinsurance Subsidiaries. Each such Material Contract of the Company or any Reinsurance Subsidiary is a valid and binding agreement of Company or its Subsidiaries (as the case may be) enforceable against the Company or such Subsidiary in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity)), and neither the Company nor any of its Subsidiaries has any knowledge that any Material Contract is not a valid and binding agreement against the other parties thereto. The Company and each of its Subsidiaries has fulfilled all material obligations required pursuant to the Material Contract to have been performed by the Company or such Subsidiary on its part.
3.27 Affiliate Transactions. Except as set forth in the Company’s proxy statement for the year 2004 as filed with the SEC (the “2004 Proxy Statement”) or the SEC Documents, since January 1, 2005, there have been no transactions between the Company or any of its Subsidiaries and any director, executive officer, shareholder or Affiliate of the Company or any of its Subsidiaries or loans, guarantees or pledges to, by or for the Company or any of its Subsidiaries from, to, by or for any of such persons, other than consulting agreements involving aggregate consideration of less than $10,000. Other than as set forth in the 2004 Proxy Statement or the SEC Documents, none of the executive officers, or directors of the Company or any of its Subsidiaries, or any spouse or relative of any of such persons, has been a director or officer of, or has had any direct or indirect interest in, any person or business enterprise which during such period has been a supplier, customer or sales agent of the Company or any of its Subsidiaries or has competed with or been engaged in any business of the kind being conducted by the Company or any of its Subsidiaries.
ARTICLEIV
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Each Purchaser, severally and not jointly, hereby represents and warrants to the Company as follows:
4.1 Organization; Power and Authority. Each Purchaser, is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and each Purchaser has full power and authority to execute and deliver this Agreement and the other Operative Documents to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby (subject to the Bermuda Approval). The execution and delivery by such Purchaser of this Agreement and the performance by such Purchaser of its obligations hereunder and thereunder have been, and the other Operative Documents to which it is a party will be, duly and validly authorized by such Purchaser. This Agreement has been duly and validly executed and delivered by such Purchaser and constitute, and upon the execution and delivery by such Purchaser of the other Operative Documents to which it is a party, such other Operative Documents will constitute, legal, valid and binding obligations of such Purchaser enforceable against it in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to the enforcement of creditors’ rights generally and by general principles of equity.
4.2 No Conflicts. The execution, delivery and performance of this Agreement and the other Operative Documents to which it is a party and the consummation by such Purchaser of the transactions contemplated hereby and thereby do not and will not conflict with, or constitute a default under, any Contract to which such Purchaser is a party, or result in a violation of such Purchaser’s organizational documents or any order, judgment or decree of any court or Governmental or Regulatory Authority having jurisdiction over such Purchaser or any of
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its properties and, no consent, authorization or order of, or filing or registration with, any Governmental or Regulatory Authority, except for such filings as may be required by the Exchange Act and except for the Bermuda Approval, is required by such Purchaser for the execution, delivery and performance of this Agreement or any of the other Operative Documents to which it is a party.
4.3 Investor Representations. Each Purchaser, severally and not jointly, hereby represents and warrants to the Company, Goldman, Sachs & Co. and Banc of America Securities LLC as follows:
(a) Such Purchaser is acquiring the Company Securities for its own account as principal, for investment purposes only, and not for or with a view to the resale, distribution or granting of a participation therein, in whole or in part, in violation of the Securities Act or the securities laws of any State applicable to such Purchaser.
(b) Such Purchaser acknowledges its understanding that the offering and sale of the Company Securities has not been registered under the Securities Act, on the basis of the exemption in Section 4(2) thereof relating to transactions not involving a Public Offering, or any state securities laws. Such Purchaser understands that the Company’s reliance on the Section 4(2) exemption is based on the representations herein made by the Purchasers. Such Purchaser is an “Accredited Investor” as that term is defined in Regulation D under the Securities Act.
(c) Such Purchaser acknowledges that it is familiar with the limitations which are imposed by the Securities Act on any Transfer of an interest in the Company Securities. Such Purchaser understands and acknowledges that it may have to bear the economic risk of its investment in the Company Securities for an indefinite period of time unless the Company Securities are subsequently registered under the Securities Act , pursuant to Section 2.2(c) or otherwise, or an exemption therefrom is available. Such Purchaser hereby agrees that the Company Securities will not be transferred prior to the earlier of (x) April 1, 2006 and (y) the date of the Shareholders’ Meeting, and thereafter will not be transferred other than (i) pursuant to a registration under the Securities Act or pursuant to an exemption therefrom, (ii) in compliance with any applicable state securities and insurance laws, and (iii) with prior Bermuda Approval.
(d) Such Purchaser acknowledges that Goldman, Sachs & Co. and Banc of America Securities LLC have not provided, and will not be providing, such Purchaser with any material regarding the Company Securities or the Company except for the Private Placement Memorandum. In addition, such Purchaser acknowledges that it has carefully reviewed the Private Placement Memorandum. Such Purchaser has been given access to all information regarding the Company and the business, condition and operations of the Company that such Purchaser has requested in order to evaluate its investment in the Company Securities. Such Purchaser has been given the opportunity to ask questions of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Company Securities and other matters pertaining to such Purchaser’s investment in the Company Securities. Such Purchaser and its representatives have been solely responsible for Purchaser’s investigation of the Company and its management and business, for Purchaser’s own analysis of the merits and risks of its investment pursuant to this Agreement, and for its own analysis of the fairness and desirability of the terms of the investment.
(e) Such Purchaser acknowledges that Goldman, Sachs & Co. and Banc of America Securities LLC make no representation or warranty, expressed or implied, as to the accuracy or completeness of the information provided or to be provided to such Purchaser by the Company, and nothing contained in any documents provided to such Purchaser is, or shall be relied upon as, a promise or representation by Goldman, Sachs & Co. or Banc of America Securities LLC.
(f) Such Purchaser acknowledges that an investment in the Company Securities involves a high degree of risk. In making its decision to purchase the Company Securities, (i) such Purchaser has such business and financial experience as is required to give it the capacity to protect its own interests in connection with the purchase of the Company Securities, (ii) such Purchaser has not relied and will not rely on any investigation that Goldman, Sachs & Co., Banc of America Securities LLC or any person acting on their behalf may have conducted with respect to the Company Securities or the Company and (iii) such Purchaser will make its
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own investment decision regarding the Company Securities based on its own knowledge and investigation of the Company and the Company Securities.
(g) Such Purchaser understands that the Company Securities have not been registered under the Securities Act and may not be re-offered, resold, pledged or otherwise transferred except pursuant to Rule 144 under the Securities Act (if available) or pursuant to another applicable exemption under the Securities Act, and that, in each case, such offer, sale, pledge or transfer must be made in accordance with any applicable securities laws of any state of the United States.
(h) Such Purchaser understands that Goldman, Sachs & Co. and Banc of America Securities LLC do not make any representation as to the availability of Rule 144 or any other exemption under the Securities Act for the re-offer, resale, pledge or transfer of the Company Securities.
(i) Such Purchaser understands that, unless and until registered for sale under the Securities Act, the Company Securities will bear the following legend:
“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT (i) PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER APPLICABLE STATE SECURITIES LAWS AS TO WHICH AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE BEEN DELIVERED TO THE COMPANY AND (ii) WITH THE PRIOR WRITTEN APPROVAL OF THE BERMUDA MONETARY AUTHORITY.”
(j) Brokers. No agent, broker, finder, investment banker, financial advisor or other similar Person will be entitled to any fee, commission or other compensation in connection with any of the transactions contemplated by this Agreement or the other Operative Documents on the basis of any act or statement made or alleged to have been made by such Purchaser or any of its Affiliates, directors, officers or other representatives.
4.4 Additional Information. No information provided in writing by such Purchaser in connection with the preparation of the Proxy Statement shall, at the time such information is provided, at the time of the mailing of the Proxy Statement, on the date of the Shareholders’ Meeting and on the Closing Date, contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; provided however that the Purchasers shall have the right to correct any untrue statements or omissions so long as such correction is received by the Company within a reasonable period of time prior to the mailing of the Proxy Statement.
ARTICLEV
SHAREHOLDER AND REGULATORY APPROVAL AND OTHER CONSENTS
5.1 Proxy Statement and Other Filings; Board Recommendations.
(a) Within ten (10) Business Days of the Closing Date, the Company shall prepare and file with the SEC a preliminary Proxy Statement and any necessary supplements and amendments thereto. Each of the parties hereto shall use all commercially reasonable efforts to finalize the Proxy Statement as promptly as practicable after the date hereof. Each of the Purchasers shall cooperate with the Company in the preparation of the Proxy Statement and in the preparation of any amendments or supplements thereto (including, if required by Law or regulation of the SEC, the providing to the Company of information concerning its business and financial statements and affairs). In addition, the parties shall cooperate in the preparation of the Proxy Statement and any amendments and supplements thereto. As promptly as practicable after it has been determined by the Company that the Proxy Statement is final, the Proxy Statement shall be mailed to the shareholders of Company. Each of the parties hereto shall cause the Proxy Statement to comply in all material respects as to form and substance with respect to such party with the applicable requirements of (i) the Exchange Act, (ii) the Securities Act, (iii) the rules and regulations of the New York Stock Exchange and (iv) Bermuda law. As promptly as practicable after the date of
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this Agreement, each of Company and Purchasers will prepare and file any other filings required to be filed by such party by it under the Exchange Act, the Securities Act or any other federal, foreign or blue sky or related Laws relating to the issuance of the Company Securities and the transactions contemplated by this Agreement and the other Operative Documents. The Company shall notify the Purchasers promptly upon the receipt of any comments from the SEC or its staff or any other government officials relating to the Proxy Statement or of any request by the SEC or its staff or any other government officials for amendments or supplements to preliminary Proxy Statement or for additional information and, except as may be prohibited by Law applicable to such party, each party will supply the other with copies of all related correspondence between such party or any of its representatives, on the one hand, and the SEC or its staff or any other government officials, on the other hand. Each of the Company and the Purchasers will cause all documents that it is responsible for filing with the SEC or other regulatory authorities under this Section 5.1(a) to comply in all material respects with all applicable requirements of Law.
(b) The Proxy Statement shall include a proposal that the shareholders of the Company approve (i) the authorization of an additional 300,000,000 Common Shares, and (ii) the exchange of the Perpetual Preferred Shares into Common Shares.
(c) Each of the Purchasers, on the one hand, and the Company, on the other hand, shall promptly inform the other of any event which is required to be set forth in an amendment or supplement to the Proxy Statement or any other filing and the Company shall amend or supplement the Proxy Statement to the extent required by Law to do so.
5.2 Shareholder Meeting.
(a) The Company shall take all action necessary, in accordance with its Memorandum of Association, Bye-Laws and applicable Law, to call and convene the Shareholders’ Meeting as promptly as practicable after the date hereof for the purpose of voting upon the matters included in the Proxy Statement. The Company may adjourn or postpone the Shareholders’ Meeting if, and only if, the requisite number of Common Shares necessary to conduct business at the Shareholders’ Meeting are not represented, either in person or by proxy. Without limiting the generality of the foregoing, the Company agrees that, subject to its rights to terminate this Agreement pursuant to Section 9.1, its obligations pursuant to the first sentence of this Section 5.2 shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of an offer to merge, amalgamate, consolidate, or acquire substantially all of the assets of, the Company. The Company shall use all commercially reasonable efforts to (i) hold the Shareholder’s Meeting as soon as practicable after the date hereof, (ii) solicit from its shareholders proxies in favor of the proposals included in the Proxy Statement and (iii) obtain a favorable vote at the Shareholder’s Meeting on the proposals included in the Proxy Statement.
(b) The Board of Directors shall recommend that the Company’s shareholders vote in favor of adopting and approve the proposals described in clauses (i) and (ii) Section 5.1(b) and the Proxy Statement shall include a statement to such effect. The Board of Directors shall not withdraw or modify, in a manner adverse to the Purchasers, the approval or recommendation by such Board of Directors of this transaction contemplated hereby.
5.3 Other Authorizations; Consents.
(a) Each party hereto shall take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and shall use all reasonable efforts to obtain, as promptly as practicable, (i) all authorizations, consents, orders and approvals of all Governmental or Regulatory Authorities that may be or become necessary for such party’s execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the other Operative Documents and (ii) all approvals and consents (including, without limitation, those approvals, consents and authorizations specified in Schedule 3.15) required under all Contracts to which the Company or any of its Subsidiaries is a party (including, without limitation, all Contracts involving indebtedness of the Company) to consummate the transactions contemplated hereby. Each party will cooperate fully (including, without limitation, by providing all information the other party reasonably requests) with the other parties in promptly seeking to obtain all such authorizations, consents, orders and approvals. Notwithstanding the foregoing, none of the Purchasers nor any of their respective Affiliates shall have any obligation to dispose of, hold separate or otherwise restrict its enjoyment of any of its Assets and Properties.
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(b) Each party hereto shall promptly inform the other party of any communication from any Governmental or Regulatory Authority regarding any of the transactions contemplated by this Agreement. If any party or Affiliate thereof receives a request for additional information or documentary material from any such Governmental or Regulatory Authority with respect to the transactions contemplated hereby, then such party will endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request.
5.4 Further Assurances. The Company will, whenever and as often as reasonably requested to do so by the Purchasers do, execute, acknowledge and deliver any and all such other and further acts, assignments, transfers and any instruments of further assurance, approvals and consents as are necessary or proper in order to complete, ensure and perfect the sale, transfer and conveyance to the Purchasers the Company Securities and the consummation of the other transactions contemplated hereby.
ARTICLEVI
COMPANY COVENANTS
6.1 Visits and Inspections. The Company shall permit authorized representatives of each Purchaser, from time to time but only during normal business hours, to visit and inspect the Assets and Properties of the Company, inspect, audit and make extracts from the books and records of the Company and its Subsidiaries, and discuss with the officers, employees and independent accountants of the Company and its Subsidiaries, its business, assets, liabilities, financial condition, business prospects and results of operations.
6.2 Maintenance of Books and Records; Financial Statements; Report; Etc. The Company shall keep, and cause its Subsidiaries to keep, adequate records and books of account with respect to its business activities in which proper entries are made in accordance with generally accepted accounting principles reflecting all of its Subsidiaries’ financial transactions. The Company shall furnish to each Purchaser promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports which the Company has made available to its shareholders and copies of any regular, periodic and special reports or registration statements which the Company files with the SEC or any Governmental or Regulatory Authority which may be substituted therefor, or any national securities exchange.
6.3 Use of Proceeds. The Company shall use the net proceeds from the sale of the Perpetual Preferred Shares to expand its reinsurance business in the lines of business currently conducted.
6.4 Shares Issuable Upon Mandatory Exchange. On and after the Closing Date, the Company shall reserve and keep available, out of its authorized and unissued stock, solely for the purpose of effecting the mandatory exchange of the Perpetual Preferred Shares upon the satisfaction of the Exchange Conditions Precedent, the full number of Common Shares as shall be sufficient to effect the mandatory exchange of the Perpetual Preferred Shares from time to time outstanding.
6.5 Public Offering. The Company will use its reasonable best efforts to cause the Public Offering to be completed as promptly as practicable after the date of this Agreement.
ARTICLEVIA
COVENANT OF THE PURCHASERS
6A.1 Standstill. Each of the Purchasers agrees, for itself and each of its respective Affiliates, that during the period from the Closing Date to the earlier of (i) the day immediately following the date of the Special Shareholders’ Meeting and (ii) April 1, 2006, the holders of the Perpetual Preferred Shares shall refrain from (a) selling, pledging or otherwise transferring, or entering into any agreement to sell, pledge or otherwise transfer, any Perpetual Preferred Shares, (b) directly or indirectly selling Perpetual Preferred Shares or Common Shares short, (c) directly or indirectly engaging in hedging and similar transactions involving Perpetual Preferred Shares or Common Shares or securities convertible into Common Shares, (d) directly or indirectly initiating or participating in any proxy contest that seeks control of the Company (provided that this shall not prohibit any
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holder from exercising any voting rights it may have) and (e) directly or indirectly making any offer to purchase the Company or any of its assets.
ARTICLEVII
CONDITIONS TO CLOSING
7.1 The Purchasers’ Conditions. The obligations of each Purchaser hereunder are subject to the following (all or any of which may be waived in whole or in part by such Purchaser in its sole discretion):
(a) Representations and Warranties. The representations and warranties of the Company set forth in this Agreement shall be true, correct and complete in all material respects on and as of the Closing Date (other than those that are qualified by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall have been true, correct and complete in all respects), and any representations and warranties made as of a specified date earlier than the Closing Date shall have been true, correct and complete in all material respects on and as of such earlier date (other than those that are qualified by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall have been true, correct and complete in all respects).
(b) Material Adverse Effect. Except as disclosed herein, in the SEC Documents, the Statutory Statements or the Financial Statements, on the date hereof there shall have been no event, occurrence, development or state of circumstances that individually, or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.
(c) Closing of the Pubic Offering. There shall have occurred or, concurrent with the Closing hereunder, be occurring, a closing of the sale of the Company’s Common Shares offered pursuant to an underwritten public offering commenced within several days’ following the date of this Agreement and valued in the aggregate at not less than $75,000,000.
(d) Performance. The Company shall have performed and complied, in all material respects, with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by the Company at or before the Closing.
(e) Officers’ Certificates. The Purchasers shall have received (i) a certificate, dated the Closing Date and executed by the Chief Executive Officer of the Company certifying as to the matters covered by Sections 7.1(a) and 7.1(d) hereof and (ii) a certificate, dated the Closing Date and executed by the Secretary of the Company, each in form and substance as is customary for transactions such as those contemplated by this Agreement.
(f) Delivery of Documents and Perpetual Preferred Shares. Each Purchaser shall have received duly executed copies of the Operative Documents and the Perpetual Preferred Shares purchased by such Purchaser hereunder.
(g) No Actions or Proceedings. No action, proceeding, investigation, regulation or legislation (including, without limitation, any temporary restraining order, preliminary or permanent injunction or other order) shall have been instituted or issued by, or threatened or proposed before any, Governmental or Regulatory Authority to enjoin, restrain or prohibit the consummation of the transactions contemplated hereby or the other Operative Documents, including, without limitation, the issuance of the Perpetual Preferred Shares.
(h) Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to, any Governmental or Regulatory Authority (including, without limitation, the Bermuda Approval and the other consents, authorizations and approvals set forth in Section 3.15 and Schedule 3.15) necessary to permit the Purchasers and the Company to perform their respective obligations under this Agreement and the other Operative Documents to which they are a party, and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given, shall be in form and substance reasonably satisfactory to Purchasers and shall be in full force and effect.
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(i) No Change in Law. As of the Closing Date, there shall not have been any change in any Law applicable to any Purchaser that would prevent the performance of this Agreement or the consummation by such Purchaser of any material aspect of the transactions contemplated hereby.
(j) Ratings. The Reinsurance Subsidiaries shall have a rating of “A-” or higher from A.M. Best & Company and a rating of “A-” or higher from Standard & Poor’s and neither rating agency shall have publicly announced, orally or in writing, a pending downgrade of the rating assigned to any Reinsurance Subsidiary to a rating below “A-”. For the avoidance of doubt, the placing of such ratings on ratings watch, with or without negative implications, shall not constitute a public announcement of a pending downgrade.
(k) Third Party Consents. All approvals, consents and waivers necessary, or reasonably requested by the Purchasers (other than with respect to any Governmental or Regulatory Authority and the Shareholder Approval), including, without limitation, those listed on Schedule 8.1(l) to permit the Purchasers and the Company to perform their respective obligations under this Agreement and the other Operative Documents to which they are a party, and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given, shall be in form and substance reasonably satisfactory to Purchasers and shall be in full force and effect.
(l) Opinions of Counsel. The Purchasers shall have received opinions from Conyers Dill & Pearman, special Bermuda counsel for the Company, and Sidley Austin Brown & Wood LLP, special U.S. counsel for the Company, as to (i) the good standing of the Company, (ii) the due authorization of the Company to enter into this Agreement, (iii) the validity of the Perpetual Preferred Shares and (iv) the sale of the Perpetual Preferred Shares by the Company to the Purchasers being exempt from registration under the Securities Act.
(m) Minimum Number of Perpetual Preferred Shares Being Sold. The Company shall be selling at least 375,000 shares of the Perpetual Preferred Shares pursuant to this Agreement at the Closing.
7.2 Company’s Conditions. The obligations of the Company hereunder are subject to the following (all or any of which may be waived in whole or in part by the Company in its sole discretion):
(a) Payment. The Company shall have received full payment of the Purchase Price from each Purchaser in consideration for the sale of the Perpetual Preferred Shares being sold to such purchaser pursuant to this Agreement at the Closing (each such Purchaser, a “Closing Date Purchaser”)
(b) Delivery of Documents. The Company shall have received duly executed copies of the Operative Documents from each Closing Date Purchaser.
(c) Representations and Warranties. The representations and warranties of each Closing Date Purchaser set forth in this Agreement shall be true, correct and complete in all material respects on and as of the Closing Date (other than those that are qualified by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true, correct and complete in all respects), and any representations and warranties made as of a specified date earlier than the Closing Date shall have been true, correct and complete in all material respects on and as of such earlier date (other than those that are qualified by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall have been true, correct and complete in all respects).
(d) Performance. Each Closing Date Purchaser shall have performed and complied, in all material respects, with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by such Closing Date Purchaser at or before the Closing.
(e) Officers’ Certificates. The Company shall have received from each Closing Date Purchaser (i) a certificate, dated the Closing Date and executed by an officer of such Closing Date Purchaser certifying as to the matters covered by Sections 7.2(a) and 7.2(c) hereof, and (ii) a certificate, dated the Closing Date and executed by the secretary or assistant secretary of such Closing Date Purchaser each in form and substance as is customary for transactions as those contemplated by this Agreement.
(f) No Actions or Proceedings. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, Governmental or Regulatory Authority or legislative body to enjoin, restrain or prohibit the consummation of the transactions contemplated hereby or by the Perpetual Preferred Shares.
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(g) Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to, any Governmental or Regulatory Authority (including, without limitation, the Bermuda Approval and the other consents, authorizations and approvals set forth in Section 3.15 and Schedule 3.15) necessary to permit the Closing Date Purchasers and the Company to perform their respective obligations under this Agreement and the Operative Agreements to which they are a party, and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given, and shall be in full force and effect. The Company shall have obtained copies of all Consents referred to in Schedule 3.15, which shall be in form and substance acceptable to the Closing Date Purchasers and their counsel.
(h) No Change in Law. As of the Closing Date, there shall not have been any change in any Law applicable to any Closing Date Purchaser that would prevent the performance of this Agreement or the consummation by such Closing Date Purchaser of any material aspect of the transactions contemplated hereby.
(i) Minimum Number of Perpetual Preferred Shares Being Sold. If any of the conditions set forth in Section 7.1 shall have not been satisfied in accordance with its terms, one or more of the Purchasers of not fewer than an aggregate of 187,500 shares of the Perpetual Preferred Shares shall have waived each such condition in accordance with Section 9.6 and shall have agreed to purchase such Perpetual Preferred Shares at the Closing.
ARTICLEVIII
TERMINATION AND ABANDONMENT
8.1 Termination of Agreement and Abandonment of Transactions. Anything herein to the contrary notwithstanding, this Agreement and the transactions contemplated hereby may be terminated at any time before the Closing if, and only if, there shall have occurred and be continuing a Material Adverse Effect; provided however, this Agreement shall also terminate and be of no further force and effect in the event that the Closing hereunder shall not have occurred by October 30, 2005. Under such circumstances, the Purchasers shall give written notice of termination to the Company.
ARTICLEIX
MISCELLANEOUS
9.1 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission against facsimile confirmation or mailed by prepaid first class certified mail, return receipt requested, or mailed by nationally recognized overnight courier prepaid, to the parties at the following addresses or facsimile numbers:
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All such notices, requests and other communications will (i) if delivered personally against written receipt to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third Business Day following mailing or upon receipt and (iv) if delivered by nationally recognized overnight courier to the address as provided in this Section, be deemed given on the earlier of the first Business Day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto.
9.2 Payment of Expenses. The Company and the Purchasers will each be responsible for the payment of their own respective costs and expenses incurred in connection with the negotiations leading up to and the performance of their respective obligations pursuant to this Agreement.
9.3 Entire Agreement. This Agreement and the other Operative Documents supersede all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contain the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof.
9.4 Survival of Covenants. The covenants and agreements of the Company and Purchasers contained in this Agreement will survive the Closing.
9.5 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the Company shall at its own cost and expense execute and deliver to Purchasers such other documents and instruments, provide such materials and information and take such other actions as Purchasers may reasonably request to consummate the transactions contemplated by this Agreement and the other Operative Documents and otherwise to cause the Company to fulfill their obligations under this Agreement and the other Operative Documents.
9.6 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.
9.7 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.
9.8 Third Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person.
9.9 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by the Company without the prior written consent of Purchasers, or by any Purchaser without the prior written consent of the Company and any attempt to do so will be void; provided that this Agreement shall in no event prohibit or restrict in any manner the transferability of the Company Securities; and provided, further, that any Purchaser may assign its rights under this Agreement and the other Operative Documents (i) to any Affiliate of such Purchaser subject to the prior consent of the Company, which consent may be withheld by the Company only if such assignment would result or is reasonably likely to result in material negative tax consequences to the Company or any of its shareholders (it being understood that no such assignment shall relieve assignor of its obligation hereunder) and (ii) to another Purchaser or any Affiliate of another Purchaser subject to the prior consent of the Company, which consent may be withheld by the Company only if such assignment would result or is reasonably likely to result in material negative tax consequences to the Company or any of its shareholders (it being understood that such assignment
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will relieve assignor of its obligations hereunder). Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.
9.10 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.
9.11 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.
9.12 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
9.13 Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT, THE OTHER OPERATIVE DOCUMENTS OR ANY DOCUMENTS RELATED HERETO.
9.14 Jurisdiction. Each party hereby irrevocably submits to the exclusive jurisdiction of the state courts of the State of New York located in New York County and the United States Federal District Court of the Southern District of New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereof and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein); provided however, that such consent to jurisdiction is solely for the purpose referred to in this Section 9.14 and shall not be deemed to be a general submission to the jurisdiction of said Courts other than for such purpose.
9.15 Construction. The parties hereto agree that this Agreement is the product of negotiation between sophisticated parties and individuals, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in, the drafting of each provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party hereto but rather shall be given a fair and reasonable construction without regard to the rule of contra proferentum.
9.16 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
9.17 Publicity. At all times at or before the Closing, the parties hereto shall each consult with the other parties hereto before issuing or making any reports, statements, or releases to the public with respect to this Agreement or the other Operative Documents and the transactions contemplated hereby and thereby and shall use good faith efforts to agree on the text of a joint public report, statement, or release or shall use good faith efforts to obtain the other parties’ approval of the text of any public report, statement, release to be made solely on behalf of a party.
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9.18 Confidentiality.
(a) Any information delivered pursuant to the terms of this Agreement or received in connection with the negotiation or preparation of this Agreement or the other Operative Documents (including, without limitation, in connection with the performance by the Purchasers of their due diligence) which is known or should be known to the receiving party to be confidential shall be kept confidential by the parties and shall not be divulged to third parties, other than to the respective parties’ affiliates, members, beneficial interest holders and managers, accountants, attorneys and advisors (collectively, “Representatives”); provided that each party shall be responsible for the confidentiality of information given to its respective Representatives; and provided further, that any party may disclose any information pursuant to any legal requirement or any court, regulatory or governmental order, request or requirement. Each party shall give the other parties notice of any required legal or court, regulatory or governmental disclosure so that such other parties may have an opportunity to seek to prevent or limit disclosure.
(b) The provisions of Section 9.18(a) shall not apply to information that is (i) received by a party (or an Affiliate of such party) that is or becomes generally available to the public other than as a result of a breach by such party or any of its Affiliates of the provisions of Section 9.18(a), (ii) hereafter lawfully acquired by a party (or an Affiliate of such party) on a non-confidential basis from a source that, to such party’s knowledge at the time, is not providing such information in violation of a confidentiality or similar agreement with any Person or (iii) known to such party prior to receipt thereof from the other party or its Affiliates.
[signature page to follow]
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
PXRE Group Ltd.By: /s/ Robert P. Myron Name: Robert P. MyronTitle: SVP & Treasurer
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
ANCHORAGE CAPITAL MASTER OFFSHORE, LTD.By: Anchorage Advisors, L.L.C., its advisorBy: Anchorage Advisors Management, L.L.C.,its Managing Member
By: /s/ Anthony Davis Name: Anthony DavisTitle: Managing Member
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Cannell Capital LLCBy: /s/ J. Carlo Cannell Name: J. Carlo CannellTitle: Managing Member
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
CapZ PXRE Holdings, LLCBy: Capital Z Financial Services Private Fund II, L.P.,its Managing Member
By: Capital Z Partners, Ltd, its ultimate general partnerBy: /s/ Craig Fisher Name: Craig FisherTitle: General Counsel
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
CapZ PXRE Holdings Private, LLC
By: Capital Z Financial Services Private Fund II, L.P.,its Managing Member
By: Capital Z Partners, Ltd, its ultimate general partnerBy: /s/ Craig Fisher Name: Craig FisherTitle: General Counsel
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
D.E. Shaw Investment Group, L.L.C.
By: D.E. Shaw & Co., L.P., as managing memberBy: /s/ Max Stone Name: Max StoneTitle: Managing Director
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
D.E. Shaw Valence Portfolios, L.L.C.
By: D.E. Shaw & Co., L.P., as managing memberBy: /s/ Max Stone Name: Max StoneTitle: Managing Director
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Endicott Management CompanyBy: /s/ Robert I. Usdan Name: Robert I. UsdanTitle: Co-PresidentEndicott Partners, L.P.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Endicott Management CompanyBy: /s/ Robert I. Usdan Name: Robert I. UsdanTitle: Co-PresidentEndicott Partners II, L.P.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Endicott Management CompanyBy: /s/ Robert I. Usdan Name: Robert I. UsdanTitle: Co-PresidentEndicott Offshore Investors, Ltd.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Endicott Management CompanyBy: /s/ Robert I. Usdan Name: Robert I. UsdanTitle: Co-PresidentEngineers Joint Pension Plan & Trust
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Endicott Management CompanyBy: /s/ Robert I. Usdan Name: Robert I. UsdarTitle: Co-PresidentInternational Bancshares CorporationEmployees Profit Sharing Plan & Trust
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Endicott Portfolio Management, LLCBy: /s/ Robert I. Usdar Name: Robert I. UsdarTitle: Co-PresidentEHL Endicott Limited.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Eton Park Capital Management, L.P.By: /s/ Eric Mindich Name: Eric MindichTitle:
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
OZ Master Fund, Ltd.By: /s/ Joel Frank Name:Title:
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Perry Partners, L.P.By: /s/ Michael Neus Name: Perry Capital, L.L.C. asinvestment advisor, by:
Name: Michael C. NeusTitle: General Counsel
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Perry Partners International, Inc.By: /s/ Michael Neus Name: Perry Capital, L.L.C. asinvestment advisor, by:
Name: Michael C. NeusTitle: General Counsel
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
RESERVOIR MASTER FUND, L.P.by RMF GP, L.L.C., its general partnerby Reservoir PCA Fund, L.P., its sole memberby Reservoir Capital Group, L.L.C.,its general partner
By: /s/ Craig Huff Craig HuffPresident
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Royal Capital Management, LLCBy: /s/ Yale Fergang Name: Yale FergangTitle: Managing Member
on behalf ofRoyal Capital Value Fund, LPRoyal Capital Value Fund (QP), LPRoyal Cap Value Fund, Ltd.and Seneca Capital, LP
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
SAB Capital Partners, L.P.By: SAB Capital Advisors, L.L.C., General Partner
By: /s/ Brian Jackelow Name: Brian JackelowTitle: Chief Fianancial Officer
SAB Overseas Master Fund, L.P.By: SAB Capital Advisors, L.L.C., General PartnerBy: /s/ Brian Jackelow Name: Brian JackelowTitle: Chief Fianancial Officer
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IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed and delivered by the duly authorized representative of each party hereto as of the date first above written.
Scopia Partners LLCby Scopia Management, Inc.,Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
Scopia Partners QP LLCby Scopia Management, Inc.,Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
Scopia PX LLCby Scopia Management, Inc.,Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
Scopia Long LLCBy Scopia Management, Inc.,Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
Scopia International Limitedby Scopia Management, Inc.,Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
Scopia PX International Limitedby Scopia Management, Inc.,Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
The Coast Fund L.P. by Scopia Management,Inc., Investment ManagerBy: /s/ Matthew Sirovich Name: Matthew SirovichTitle: Executive Vice President
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EXHIBIT CFORM OF REGISTRATION RIGHTS AGREEMENT
PXRE GROUP LTD.SERIES D PERPETUAL PREFERRED SHARESREGISTRATION RIGHTS AGREEMENT
To the Purchasers named in Exhibit A to the Purchase Agreement
Ladies and Gentlemen:
PXRE Group Ltd., a Bermuda corporation (the “Company”), proposes to issue and sell in a private placement pursuant to Section 4(2) of the Securities Act (as defined below) (such issuance and sale, the “Initial Placement”) to the several parties named in Exhibit A to the Purchase Agreement (the “Initial Purchasers”) for whom you (the “Representatives”) are acting as representatives, upon the terms set forth in a purchase agreement dated September 29, 2005 (the “Purchase Agreement”), $ aggregate principal amount of its Series D Perpetual Preferred Shares, par value $1.00 per share (the “Preferred Shares”).
The Preferred Shares will be manditorily exchanged into Common Shares, par value $1.00 per share, of the Company (“Common Shares”), upon the satisfaction of certain conditions as set forth in the Private Placement Memorandum.
As an inducement to you to enter into the Purchase Agreement and in satisfaction of a condition to your obligations thereunder, the Company agrees with you, (i) for your benefit and (ii) for the benefit of the holders from time to time of the Preferred Shares and the Common Shares issuable upon conversion of the Preferred Shares (including you), as follows:
As used in this Agreement, the following terms have the respective meanings set forth below:
Agreement: shall mean this Registration Rights Agreement among the Initial Purchasers and the Company;
Commission: shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act;
Exchange Act: shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations of the Commission promulgated thereunder;
Holder: shall mean any holder of Registrable Securities;
Majority Holders: shall mean the Holders holding a majority of the then outstanding Registrable Securities, provided, however, that Preferred Shares or Common Shares for which Preferred Shares have been exchanged which have been sold or otherwise transferred pursuant to the Shelf Registration Statement or Company Registration Statement shall not be included in the calculation of the Majority Holders;
Notice and Questionnaire: shall mean a Notice of Registration Statement and Selling Shareholder Questionnaire substantially in the form of Exhibit A hereto;
Person: shall mean an individual, partnership, joint-stock company, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof;
Prospectus: shall mean the prospectus included in the Shelf Registration Statement or Company Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Shelf Registration Statement or Company Registration Statement, and all amendments and supplements to such prospectus, including all documents filed
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after the date of such prospectus by the Company under the Exchange Act and incorporated or deemed to be incorporated by reference in such prospectus;
Registrable Securities: shall mean (A) the Preferred Shares, (B) the Common Shares issuable upon conversion of the shares of Preferred Shares and (C) any stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Preferred Shares or the Common Shares issuable upon conversion of the Preferred Shares, provided, however, that Registrable Securities shall not include securities in clauses (A), (B) or (C) above which have been transferred pursuant to a Shelf Registration Statement or Company Registration Statement;
Registration Expenses: shall mean all expenses incurred by the Company in compliance with Section 2(a) and (b) hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and expenses of one counsel for the Selling Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company) but shall exclude underwriting fees, discounts and expenses with respect to the sale of the Registrable Securities;
Security, Securities: shall have the meaning set forth in Section 2(I) of the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder;
Selling Expenses: shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for each of the Selling Holders other than fees and expenses of one counsel for the Selling Holders;
Shelf Registration Statement: means a “shelf” registration statement of the Company filed pursuant to the provisions of Section 2 hereof which covers some or all of the Registrable Securities on Form S-3 or on another appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, or any additional registration statements filed because the Company could not obtain the withdrawal of a stop order suspending the effectiveness of the Shelf Registration Statement or pursuant to Section 2(a)(i)(2) hereof, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated or deemed to be incorporated by reference therein.
(a) Shelf Registration Statement.
(i) The Company shall prepare and file with the Commission promptly following receipt of notice from the Holders (the “Demand Notice”) and in any event within 30 days the date of the Purchase Agreement, a Shelf Registration Statement with respect to resales of the Registrable Securities by the Holders from time to time in accordance with the methods of distribution designated by such Holders and set forth in such Shelf Registration Statement (subject to Section 2(d)(xviii) hereof) and thereafter shall use their reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act within days after receipt of the Demand Notice. The Company shall supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for the Shelf Registration Statement, or by the Securities Act, the Exchange Act or the Commission.
(ii) (1) Each Holder wishing to sell Registrable Securities pursuant to the Shelf Registration Statement and related Prospectus agrees to deliver to the Company the Notice and Questionnaire, together with such information as the Company shall reasonably request, to the Company at least ten business days prior to the effectiveness of the Shelf Registration Statement. The Company shall take action to name each Holder as of the date that is five calendar days prior to the effectiveness of the Shelf Registration Statement so that such Holder is named as a selling security holder in the Shelf Registration Statement at the time of its
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effectiveness and is permitted to deliver the Prospectus forming a part thereof as of such time to purchasers of such Holder’s Registrable Securities in accordance with applicable law.
(2) After the Shelf Registration Statement has become effective, the Company shall, upon the request of any Holder of Registrable Securities, promptly send a Notice and Questionnaire to such Holder. From and after the date on which the Shelf Registration Statement has become effective, the Company shall (i) as promptly as is practicable after the date a completed and signed Notice and Questionnaire and such other information as the Company may reasonably request is delivered to the Company by such holder, and in any event within [five] Business Days after such date, prepare and file with the Commission (x) a supplement to the Prospectus or, if required by applicable law regulation or decision of the staff of the Commission, a post-effective amendment to the Shelf Registration Statement, provided, however, that if and when requested by the Holders of the Preferred Shares, each underwritten offering of Common Shares shall be for not less than $50,000,000, and provided further that the Company will not be required to prepare and file with the Commission a prospectus supplement with respect to an underwritten offering of Common Shares of under such Shelf Registration Statement, more frequently than twice in any 12-month period, and (y) any other document required by applicable law, so that the Holder delivering such Notice and Questionnaire is named as a selling security holder in the Shelf Registration Statement and is permitted to deliver the Prospectus to purchasers of such Holder’s Registrable Securities in accordance with applicable law, and (ii) use their reasonable best efforts to cause any such post-effective amendment to become effective under the Securities Act as promptly as is practicable; provided, however, that if a Notice and Questionnaire is delivered to the Company during a Blackout Event, the Company shall not be obligated to take the actions set forth in clauses (i) and (ii) until the termination of such Blackout Event.
No Holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or any Company Registration Statement as provided in Section 2(b) or to use the Prospectus forming a part thereof for resales of Registrable Securities unless such Holder has complied with the foregoing requirements and has provided the information as requested by the Company in accordance with this Agreement for such Holder to be named as a selling securityholder in the Shelf Registration Statement (any such named Holder, a “Selling Holder”).
(iii) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective under the Securities Act in order to permit the Prospectus forming a part thereof to be usable, subject to Section 2(a)(iv) hereof, by all Selling Holders until the earliest of (i) the second anniversary of the Initial Placement, (ii) the date on which all the Registrable Securities may be sold by non-affiliates (“affiliates” for such purpose having the meaning set forth in Rule 144 under the Act) of the Company pursuant to paragraph (k) of Rule 144 (or any successor provision) promulgated by the Commission under the Securities Act, (iii) the date as of which all the Registrable Securities have been transferred pursuant to Rule 144 under the Securities Act (or any similar provision then in force) and (iv) such date as of which all the Registrable Securities have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the “Shelf Registration Period”).
The Company will, (x) subject to Section 2(a)(iv), prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement continuously effective for the Shelf Registration Period, (y) subject to Section 2(a)(iv), cause the related Prospectus to be supplemented by any required supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act and (z) comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by the Shelf Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Shelf Registration Statement as so amended or such Prospectus as so supplemented.
(iv) If, in the reasonable good faith judgment of the Company, any pending bankruptcy or insolvency, pending material merger, acquisition, corporate reorganization, other material transaction or other event or circumstance involving the Company or any of its affiliates makes it imprudent for the Company to file a registration statement or to be in registration (any such event, circumstance or transaction, a “Blackout Event”), the Company shall not be obligated to effect (whether by filing a registration statement, seeking effectiveness of a registration statement or otherwise) any registration requested by Holders or affiliate
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thereof. If the Company determines that a Blackout Event exists, any sale of securities by any Holder or any affiliate thereof, shall be postponed until the Blackout Event no longer exists, provided, however, that no such postponement shall exceed 90 days. The Company may suspend the use of the Prospectus for the duration of any Blackout Event.
(v) Underwriting. If the any of the Holders intend to distribute the Registrable Securities by means of an underwriting, they shall so advise the Company as part of their request made pursuant to Section 2(a)(i).
(b) Company Registration Statement.
(i) If the Company shall determine to register any of its Common Shares either for its own account or for the account of any other shareholder (each such instance, a “Company Registration Statement” and the period during which such Company Registration Statement is effective, the “Company Registration Period”), other than a registration relating solely to employee benefit plans, or a registration relating solely to a Rule 145 transaction under the Securities Act, or a registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities, the Company will:
(1) promptly give to each of the Holders a written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and
(2) include in such Company Registration Statement (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, the Registrable Securities specified in a written request or requests made by the Holders within days after receipt of the written notice from the Company described in clause (1) above, except as set forth in Section 2(b)(ii) below. Such written request may specify all or a part of the Holders’ Registrable Securities. Each Holder wishing to sell Registrable Securities pursuant to the Company Registration Statement and related Prospectus agrees to deliver to the Company the Notice and Questionnaire, together with such information as the Company shall reasonably request, to the Company at least [five] business days prior to the effectiveness of the Company Shelf Registration Statement. Upon the delivery of the Notice and Questionnaire, and such other information as the Company shall reasonably request, to the Company, such Holder shall be deemed a Selling Holder. In the event any Holder requests inclusion in a Company Registration Statement pursuant to this Section 2(b) in connection with a distribution of Registrable Securities to its partners, the Company Registration Statement shall provide for the resale by such partners, if requested by such Holder.
(ii) Underwriting. If the Company Registration Statement of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise each of the Holders as a part of the written notice given pursuant to Section 2(b)(i)(1) above. In such event, the right of each of the Holders to registration pursuant to this Section 2(b) shall be conditioned upon such Holders’ participation in such underwriting and the inclusion of such Holders’ Registrable Securities in the underwriting to the extent provided herein. The Holders whose shares are to be included in such registration shall (together with the Company and the other stockholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for underwriting by the Company. Notwithstanding any other provision of this Section 2(b), if the underwriter or underwriters determine that marketing factors require a limitation on the number of shares to be underwritten, the underwriter may limit the number of Registrable Securities to be included in the registration and underwriting pursuant to Section 2(d)(xviii).
(c) Expenses of Registration. All Registration Expenses incurred in connection with any Shelf Registration Statement or Company Registration Statement , qualification or compliance pursuant to this Section 2 shall be borne by the Company, and all Selling Expenses shall be borne by the Selling Holders.
(d) Registration Procedures. In connection with the Shelf Registration Statement or Company Registration Statement, the following provisions shall apply, as applicable:
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(i) The Company shall:
(1) furnish to the Selling Holders, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement or Company Registration Statement, and each amendment thereof, and a copy of any Prospectus, and each amendment or supplement thereto (excluding amendments caused by the filing of a report under the Exchange Act), and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Selling Holders reasonably and promptly propose; and
(2) include information regarding the Selling Holders and the methods of distribution they have designated for their Registrable Securities provided to the Company in Notice and Questionnaires as necessary to permit such distribution by the methods specified therein.
(ii) Subject to Section 2(a)(iv), the Company shall ensure that (i) each of the Shelf Registration Statement and Company Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any amendment or supplement thereto comply in all material respects with the Securities Act and the rules and regulations thereunder, (ii) each of the Shelf Registration Statement or Company Registration Statement and any amendment thereto does not, when it becomes effective, 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 not misleading and (iii) any Prospectus forming a part of the Shelf Registration Statement or Company Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the Company makes no representation with respect to information with respect to any underwriter or any Holder required to be included in the Shelf Registration Statement or Company Registration Statement or Prospectus pursuant to the Securities Act or the rules and regulations thereunder and which information is included therein in reliance upon and in conformity with information furnished to the Company in writing by such underwriter or Holder.
(iii) The Company, as promptly as reasonably practicable, shall advise the Selling Holders:
(1) when the Shelf Registration Statement or Company Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective;
(2) of any request by the Commission following effectiveness of the Shelf Registration Statement or Company Registration Statement for amendments or supplements to the Shelf Registration Statement or Company Registration Statement or the Prospectus or for additional information (other than any such request relating to a review of the Company’s Exchange Act filings);
(3) of the determination by the Company that a post-effective amendment to the Shelf Registration Statement or Company Registration Statement would be appropriate;
(4) of the commencement or termination of (but not the nature of or details concerning) any Blackout Event;
(5) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or Company Registration Statement or the initiation of any proceedings for that purpose;
(6) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities included in the Shelf Registration Statement or Company Registration Statement for sale in any jurisdiction or the initiation or threat of any proceeding for such purpose;
(7) of the happening of (but not the nature of or details concerning) any event that requires the making of any changes in the Shelf Registration Statement or Company Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and the Shelf Registration Statement, Company Registration Statement or the Prospectus, as the case may be, does not include an
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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 case of the Prospectus, in light of the circumstances under which they were made) not misleading; and
(8) of the Company’s suspension of the use of the Prospectus as a result of any of the events or circumstances described in paragraphs (2) through (7) above, and of the termination of any such suspension.
(iv) The Company shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement or Company Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for offer or sale in any jurisdiction at the earliest possible time.
(v) The Company shall promptly furnish to each Selling Holder, without charge, at least one copy of the Shelf Registration Statement or Company Registration Statement and any post-effective amendment thereto, including all exhibits (including those incorporated by reference), financial statements and schedules.
(vi) The Company shall, during the Shelf Registration Period or Company Registration Period, promptly deliver to each Selling Holder and any sales or placement agent or underwriters acting on their behalf, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Shelf Registration Statement or Company Registration Statement (excluding documents incorporated by reference), and any amendment or supplement thereto, as such person may reasonably request; and, except as provided in Sections 2(a)(iv) and 2(d)(xvi) hereof, the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto during the Shelf Registration Period or Company Registration Period.
(vii) Prior to any offering of Registrable Securities pursuant to the Shelf Registration Statement or the Company Registration Statement, the Company shall cooperate with the Selling Holders and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale, under the securities or blue sky laws of such jurisdictions within the United States as any such Selling Holder reasonably request and shall maintain such qualification in effect so long as required and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Shelf Registration Statement or Company Registration Statement; provided, however, that the Company will not be required to (A) qualify generally to do business as a foreign corporation or as a dealer in securities in any jurisdiction where it is not then so qualified or to (B) take any action which would subject it to service of process or taxation in any such jurisdiction where it is not then so subject.
(viii) The Company shall cooperate with the Selling Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to the Shelf Registration Statement or Company Registration Statement free of any restrictive legends and registered in such names as Selling Holders may request.
(ix) Subject to the exceptions contained in (A) and (B) of Section 2(d)(vii) hereof, the Company shall use its reasonable best efforts to cause the Registrable Securities covered by the Shelf Registration Statement or Company Registration Statement to be registered with or approved by such other federal, state and local governmental agencies or authorities, and self-regulatory organizations in the United States as may be necessary to enable the Holders to consummate the disposition of such Registrable Securities as contemplated by the Shelf Registration Statement or the Company Registration Statement; without limitation to the foregoing, the Company shall make all filings and provide all such information as may be required by the National Association of Securities Dealers, Inc. (the “NASD”) in connection with the offering under the Shelf Registration Statement or the Company Registration Statement of the Transfer Restricted Securities (including, without limitation, such as may be required by NASD Rule 2710 or 2720), and shall cooperate with each Holder in connection with any filings required to be made with the NASD by such Holder in that regard.
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(x) Upon the occurrence of any event described in Section 2(d)(iii) hereof, the Company shall as soon as reasonably practicable prepare and file with the Commission a post-effective amendment to the Shelf Registration Statement or Company Registration Statement or an amendment or supplement to the related Prospectus or any document incorporated therein by reference or file a document which is incorporated or deemed to be incorporated by reference in such Shelf Registration Statement or Prospectus, as the case may be, so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the Shelf Registration Statement or Company Registration Statement and the Prospectus, in each case as then amended or supplemented, will not include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus in light of the circumstances under which they were made) not misleading and, in the case of a post-effective amendment, use its reasonable best efforts to cause it to become effective as promptly as practicable; provided that the Company’s obligations under this paragraph (x) shall be suspended if the Company has suspended the use of the Prospectus in accordance with Section 2(a)(iv) hereof and given notice of such suspension to Selling Holders, it being understood that the Company’s obligations under this Section 2(d)(x) shall be automatically reinstated at the end of such Blackout Event.
(xi) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its Holders as soon as practicable but in any event not later than [ ] days after the end of a 12-month period (or [ ] days, if such period is a fiscal year) after (i) the effective date of the Shelf Registration Statement or Company Registration Statement, (ii) the effective date of each post-effective amendment to the Shelf Registration Statement or Company Registration Statement, and (iii) the date of each filing by the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference or deemed to be incorporated by reference in the Shelf Registration Statement or Company Registration Statement, an earnings statement satisfying the provisions of Section 11(a) of the Act and Rule 158 promulgated by the Commission thereunder.
(xii) Upon request of the Majority Holders, the Company shall cause all Registrable Securities issued (or, in the case of Common Shares issuable upon conversion of the Preferred Shares) to be listed on each securities exchange or quotation system on which the Common Shares are then listed no later than the date the Shelf Registration Statement or the Company Registration Statement is declared effective and, in connection therewith, to make such filings as may be required under the Exchange Act and to have such filings declared effective as and when required thereunder.
(xiii) The Company may require each Holder of Registrable Securities to be sold pursuant to the Shelf Registration Statement or Company Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such Registrable Securities sought by the Notice and Questionnaire and such additional information as may, from time to time, be required by the Securities Act and the rules and regulations promulgated thereunder, and the obligations of the Company to any Holder hereunder shall be expressly conditioned on the compliance of such Holder with such request.
(xiv) The Company, subject to the provisions of paragraph (xviii) of this Section 2(d), shall enter into such customary agreements (including underwriting agreements) and take all other appropriate actions as may be reasonably requested in order to expedite or facilitate the registration or the disposition of the Registrable Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification and contribution provisions and procedures no less favorable than those set forth in Section 5. The plan of distribution in the Shelf Registration Statement or the Company Registration Statement and the Prospectus included therein shall permit resales of Registrable Securities to be made by selling security holders through underwriters, brokers and dealers, and shall also include such other information as the Selling Holders may reasonably request.
(xv) In connection with an underwritten offering, if any, the Company shall, if reasonably requested in writing by Majority Holders:
(1) make reasonably available for inspection during normal business hours by any underwriter participating in any disposition pursuant to such Shelf Registration Statement or Company Registration Statement, and any attorney, accountant or other agent retained by any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and their
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subsidiaries as is customary for due diligence examinations in connection with public offerings; provided, however, if the foregoing inspection would otherwise disrupt the Company’s conduct of its business, such inspection shall, to the greatest extent practicable, be coordinated by the underwriters on behalf of the other parties;
(2) cause the Company’s officers, directors, employees, accountants and auditors to supply, during normal business hours, all relevant information reasonably requested by any such underwriter, attorney, accountant or agent in connection with any such Shelf Registration Statement or Company Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless disclosure thereof is made in connection with a court, administrative or regulatory proceeding or required by law, or such information has become available to the public generally through the Company or through a third party without an accompanying obligation of confidentiality; provided, further, that if the foregoing information gathering would otherwise disrupt the Company’s conduct of its business, such information gathering shall, to the greatest extent practicable, be coordinated by the underwriters on behalf of the other parties;
(3) deliver a letter, addressed to the Selling Holders and the underwriters, if any, in which the Company shall make such representations and warranties in form, substance and scope as are customarily made by issuers to underwriters;
(4) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the underwriters, if any) addressed to each Selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in public offerings;
(5) obtain “cold comfort” letters and updates thereof from the current and former independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement or Company Registration Statement), addressed to each Selling Holder (provided such Holder furnishes the accountants, prior to the date such “cold comfort” letter is required to be delivered, with such representations as the accountants customarily require in similar situations) and the underwriters, if any, in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with primary underwritten offerings; and
(6) deliver such documents and certificates as may be reasonably requested by the Selling Holders or, in the case of an underwritten offering, the underwriters, if any, including those to evidence compliance with Section 2(d)(x) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (3), (4), (5) and (6) of this Section 2(d)(xv) shall be performed at (A) the effectiveness of such Shelf Registration Statement or Company Registration Statement and each post-effective amendment thereto and (B) the closing under any underwriting or similar agreement as and to the extent required thereunder.
If any of the Registrable Securities covered by the Shelf Registration Statement or Company Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage each such offering will be selected by the Majority Holders of such Registrable Securities included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten offering unless such Holder (a) agrees to sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting arrangements and other documents required under the terms of such underwriting agreements. The Holders of Registrable Securities that participate in an underwritten offering shall be required to pay on a ratable
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basis all registration expenses associated with or arising as a result of the underwritten offering, payable by such Holders pursuant to Section 2 hereof.
(xvi) Each Selling Holder agrees that, upon receipt of notice of the happening of an event described in Sections 2(d)(iii)(2) through and including 2(d)(iii)(7), each Holder shall forthwith discontinue (and shall cause its agents and representatives to discontinue) disposition of Registrable Securities and will not resume disposition of Registrable Securities until such Selling Holder has received copies of an amended or supplemented Prospectus contemplated by Section 2(d)(x) hereof, or until such Selling Holder is advised in writing by the Company that the use of the Prospectus may be resumed or that the relevant Blackout Event has been terminated, as the case may be; provided that the foregoing shall not prevent the sale, transfer or other disposition of Registrable Securities by a Selling Holder in a transaction which is exempt from, or not subject to, the registration requirements of the Securities Act, so long as such Selling Holder does not and is not required to deliver the applicable Prospectus or the Shelf Registration Statement or Company Registration Statement in connection with such sale, transfer or other disposition, as the case may be; and provided, further, that the provisions of this Section 2(d)(xvi) shall not prevent the occurrence of a registration default.
(xvii) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or “assist in the distribution” (within the meaning of the NASD Rules) thereof, whether as a Holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company shall assist such broker-dealer in complying with the NASD Rules, including, without limitation, by:
(1) if the NASD Rules shall so require, engaging a “qualified independent underwriter” (as defined in the NASD Rules) to participate in the preparation of the Shelf Registration Statement or Company Registration Statement, to exercise usual standards of due diligence with respect thereto and, if any portion of the offering contemplated by the Shelf Registration Statement or Company Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the price of such Registrable Securities;
(2) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 3 hereof; and
(3) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the NASD Rules.
(xviii) Anything herein to the contrary notwithstanding, the Company will not be required to pay the costs and expenses of, or to participate in the marketing or “road show” presentations of, or agree to indemnification or contribution agreements with respect to, more than two underwritten offerings initiated at the request of the Majority Holders, or to effect more than two underwritten offerings at the request of such Holders. The Company will not be required to pay the costs and expenses of, or to participate in the marketing or “road show” presentations of, an underwritten offering unless the Majority Holders have requested that such Registrable Securities be included in such an underwritten offering. Upon receipt by the Company, from the Majority Holders of a request for an underwritten offering, the Company will, within [10] days thereafter, cause the Company to mail notice to all Holders of Registrable Securities stating that: (i) the Company has received a request from the Holders of the requisite amount of Registrable Securities to effect an underwritten offering on behalf of such Holders; (ii) under the terms of this Agreement, all Holders of Registrable Securities may include their Registrable Securities in such underwritten offering, subject to the terms and conditions set forth in this Agreement and subject to the right of the underwriters to reduce, in light of market conditions and other similar factors, the aggregate principal amount of Registrable Securities included in such underwritten offering; (iii) all Holders electing to include Registrable Securities in such underwritten offering must notify the Company in writing of such election (the “Election”), and setting forth an address and facsimile number to which such written elections may be sent and the deadline (which shall be 12:00 midnight on the 10th calendar day after such notice is mailed to Holders or, if not a Business Day, the next succeeding Business Day (the “Deadline”)) by which such elections must be received by the Company; and (iv) setting forth such other instructions as shall be necessary to enable Holders to include their Registrable Securities in such underwritten offering. No Holder shall be entitled to participate in an underwritten offering unless such Holder notifies the Company of such Election by the Deadline. Notwithstanding anything to the contrary contained herein, if the underwriters for an underwritten
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offering to be effected pursuant to this Section 2(d)(xviii) advise the Holders of the Registrable Securities to be included in such underwritten offering that, because of the aggregate principal amount of Registrable Securities that such Holders have requested be included in the underwritten offering, the success of the offering would likely be materially adversely affected by the inclusion of all Registrable Securities requested to be included, then the principal amount of Registrable Securities to be offered for the accounts of Holders shall be reduced pro rata, according to the aggregate principal amount of Registrable Securities requested for inclusion by each such Holder, to the extent necessary to reduce the size of the offering to the size recommended by the underwriter. Notwithstanding anything to the contrary contained herein, neither the Company nor any Person, other than a Holder Registrable Securities and only with respect to its Registrable Securities, shall be entitled to include any securities in the underwritten offering.
(e) Without the consent of the Majority Holders, the Company will not grant rights to any other person with respect to the registration under the Securities Act of the securities of the Company that are pari passu with, or superior in any respect to, those rights granted to the Holders of the Registrable Securities hereunder.
(a) The Company agrees to indemnify and hold harmless each Holder of Registrable Securities covered by the Shelf Registration Statement or Company Registration Statement, the directors, officers, partners, members, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other Federal or state law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or Company Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, 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, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by any of them in connection with defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to any Holder to the extent that any such loss, claim, damage or liability arises out of or is based upon (A) any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder specifically for inclusion therein, (B) use of the Shelf Registration Statement or Company Registration Statement or the related Prospectus during a period when use of such Prospectus has been suspended pursuant to Section 2(a)(iv) or Section 2(d)(xvi) hereof; provided, in each case, that Holders received prior notice of such suspension, or (C) if the Holder was required under applicable law to deliver a Prospectus and fails to deliver a Prospectus, as then amended or supplemented, provided that the Company shall have delivered to such Holder such Prospectus, as then amended or supplemented. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
(b) Each Holder of Registrable Securities covered by the Shelf Registration Statement or Company Registration Statement severally and not jointly agrees to indemnify, hold harmless and reimburse
(i) the Company,
(ii) each of its directors,
(iii) each of its officers, and
(iv) each person who controls the Company within the meaning of either the Securities Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder,
but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity; provided that the indemnity to be paid by each respective Holder shall not exceed the net proceeds received by such Holder from the offer and sale of its Registrable Securities.
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This indemnity agreement shall be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 3 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 3, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it was not otherwise notified of such action and such failure results in the forfeiture by the indemnifying party of any rights or defenses. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if:
(i) the use of counsel chosen by the indemnifying party to represent the indemnified party would not be permissible under the applicable standards of professional responsibility;
(ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party and that representation of the indemnified party by counsel chosen by the indemnifying party would be inappropriate due to actual or potential differing interests among the parties represented by such counsel;
(iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or
(iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party.
It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Neither an indemnifying party nor an indemnified party will, without the prior written consent of the other parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not such other parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of such other parties from all liability arising out of such claim, action, suit or proceeding. An indemnifying party shall not be liable for any losses, claims, damages or liabilities by reason of any settlement of any action or proceeding effected without such indemnifying party’s prior written consent, which consent will not be unreasonably withheld.
(d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 3 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have an obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively “Losses”), as incurred, to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from any sales of Registrable Securities under the Shelf Registration Statement or Company Registration Statement. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed
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to be equal to the total net proceeds from the Initial Placement of the Registrable Securities pursuant to the Purchase Agreement (before deducting expenses). Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions received in connection with the Initial Placement of the Registrable Securities as set forth in the Purchase Agreement, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Registrable Securities registered under the Securities Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Shelf Registration Statement or the Company Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to whether any untrue statement or omission or alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 3(d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 3, each person who controls a Holder within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act, each officer of the Company who signed the Shelf Registration Statement or Company Registration Statement and each director of the Company shall have the same rights to contribution as the Company, and each person who controls an underwriter within the meaning of either the Securities Act or the Exchange Act and each officer and director of each underwriter shall have the same rights to contribution as such underwriter, subject in each case to the applicable terms and conditions of this Section 3 (d).
(e) The provisions of this Section 3 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder, any underwriter, the Company, or any of the officers, directors or controlling persons referred to in Section 3 hereof, and will survive the sale by a Holder of Registrable Securities covered by the Shelf Registration Statement or Company Registration Statement.
(a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Majority Holders; provided that with respect to any matter that directly or indirectly affects the exclusive rights of the Initial Purchasers hereunder, the Company shall obtain the written consent of each of the Initial Purchasers against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Registrable Securities are being sold pursuant to the Shelf Registration Statement or Company Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of the Registrable Securities being sold rather than registered under such Shelf Registration Statement or Company Registration Statement.
(c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier, or air courier guaranteeing overnight delivery:
(i) if to the Initial Purchasers, initially at its address set forth in the Purchase Agreement;
(ii) if to any other Holder, at the most current address of such Holder maintained by the transfer agent for the Preferred Shares or Common Shares, or, in the case of the Selling Holder, the address set for in its Notice and Questionnaire; and
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(iii) if to the Company, initially at the Company’s address set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly given when received, if delivered by hand or air courier, and when sent, if sent by first-class mail or telecopier.
The Initial Purchasers or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders. The Company hereby agrees to extend the benefits of this Agreement to any Holder and underwriter and any such Holder and underwriter may specifically enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(h) Severability. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Preferred Shares or the Common Shares issuable upon conversion of the Preferred Shares is required hereunder, Preferred Shares or Common Shares issued upon conversion of the Preferred Shares held by the Company or its affiliates (other than subsequent Holders of Preferred Shares or the Common Shares issued upon conversion of the Preferred Shares if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
(j) Termination. This Agreement and the obligations of the parties hereunder shall terminate upon the end of the Shelf Registration Period or Company Registration Period, as applicable, except for any liabilities or obligations under Sections 2(a)(iv), 2(c) or 3 to the extent arising prior to the end of such Shelf Registration Period or Company Registration Period.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned has executed this Registration Rights Agreement as of the date first above written.
PXRE GROUP LTD.By: Name:Title:
INITIAL PURCHASERSBy: Name:Title:
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EXHIBIT AFORMOF SELLING SECURITY HOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial holder of Series D Perpetual Preferred Shares (the “Preferred Shares”), par value $1.00 per share, of PXRE Group Ltd. (“PXRE” or the “Company”) or common shares, par value $1.00 per share, of the Company issuable upon conversion of the Preferred Shares (together with the Preferred Shares, the “Registrable Securities”) of the Company understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) dated as of October , 2005 between the Company and the initial purchasers named therein. The Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to the benefits of the Registration Rights Agreement. In order to sell or otherwise dispose of any Registrable Securities pursuant to the Shelf Registration Statement, a beneficial owner of Registrable Securities generally will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers of Registrable Securities and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification provisions as described below). Beneficial owners that do not complete this Notice and Questionnaire and deliver it to the Company as provided below will not be named as selling securityholders in the prospectus and therefore will not be permitted to sell any Registrable Securities pursuant to the Shelf Registration Statement. Beneficial owners are encouraged to complete and deliver this Notice and Questionnaire prior to the effectiveness of the Shelf Registration Statement so that such beneficial owners may be named as selling securityholders in the related prospectus at the time of effectiveness. Upon receipt of a completed Notice and Questionnaire from a beneficial owner following the effectiveness of the Shelf Registration Statement, the Company will, as promptly as practicable but in any event within five business days of such receipt, file such amendments to the Shelf Registration Statement or supplements to the related prospectus as are necessary to permit such holder to deliver such prospectus to purchasers of Registrable Securities.
Certain legal consequences may arise from being named as selling securityholders in the Shelf Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under Item 3) pursuant to the Shelf Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.
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The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:
QUESTIONNAIRE
1. (a) Full Legal Name of Selling Securityholder:
(b) Full legal name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in (3) below are held:
(c) Full legal name of broker-dealer or other third party through which Registrable Securities listed in (3) below are held:
(d) Full legal name of DTC Participant (if applicable and if not the same as (b) or (c) above) through which Registrable Securities listed in (3) below are held:
2. Address for Notices to Selling Securityholder:
3. Beneficial Ownership of Registrable Securities:
Type and Principal Amount of Registrable Securities beneficially owned:
Unless otherwise indicated in the space provided below, all Registrable Securities listed in response to this Item (3) as listed above will be included in the Shelf Registration Statement. If the undersigned does not wish all such Registrable Securities to be so included, please indicate below the amount of RegistrableSecurities to be included:
4. Beneficial Ownership of Company securities owned by the Selling Securityholder:
Except as set forth below in this Item (4), the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item (3).
Type and amount of other securities beneficially owned by the Selling Securityholder (include CUSIP No(s). if applicable):
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5. Relationship with the Company:
Except as set forth below, neither the undersigned nor any of its affiliates, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
6. Plan of Distribution:
Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Registrable Securities listed above in Item (3) pursuant to the Shelf Registration Statement only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned or alternatively through underwriters or broker-dealers or agents. If the Registrable Securities are sold through underwriters or broker-dealers or agents, the Selling Securityholder will be responsible for underwriting discounts or commissions or agent’s commissions. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities, short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. The Selling Securityholder may pledge or grant a security interest in some or all of the Registrable Securities owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the Registrable Securities from time to time pursuant to the prospectus. The Selling Securityholder also may transfer and donate shares in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling securityholder for purposes of the prospectus.
State any exceptions here:
Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company.
The undersigned acknowledges that it understands its obligation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations) and the provisions of the Securities Act of 1933, as amended, relating to prospectus delivery, in connection with any offering of Registrable Securities pursuant to the Shelf Registration Statement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.
The Selling Securityholder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons set forth therein.
Pursuant to the Registration Rights Agreement, the Company has agreed under certain circumstances to indemnify the Selling Securityholders against liabilities.
In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective. All
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notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below.
In the event any Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item 3 above after the date on which such information is provided to the Company, the Selling Securityholder will notify the transferee(s) at the time of transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement.
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company without independent investigation or inquiry in connection with the preparation or amendment of the Shelf Registration Statement and the related prospectus.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its authorized agent.
Beneficial OwnerBy: Name:Title:
Dated:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO
PXRE CORPORATIONPXRE HOUSE110 PITTS BAY ROADPEMBROKE HM 08BERMUDAFACSIMILE NO.: (441) 296-6162ATTN: JEFFREY L. RADKE
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September 28, 2005
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. c/o Capital Z Partners, Ltd. 54 Thompson Street New York, NY 10012
RER REINSURANCE HOLDINGS, L.P.c/o RER Reinsurance Holdings, L.P.777 Main StreetSuite 2250Fort Worth, TX 76102
RESERVOIR CAPITAL PARTNERS, L.P.RESERVOIR CAPITAL MASTER FUND, L.P. c/o Reservoir Capital Management L.L.C. 650 Madison Avenue 26th Floor New York, NY 10022
Robert Stavis c/o Bessemer Venture Partners 1865 Palmer Avenue Suite 104 Larchmont, NY 10538
Re: Agreement to Vote
Dear Ladies and Gentlemen:
Reference is made to the proposed placement by PXRE Group Ltd. (the “Company”), through Goldman, Sachs & Co. and Banc of America Securities LLC, of up to $400 million Series D Perpetual Non-Voting Preferred Shares of the Company (the “Preferred Shares”) with qualified institutional buyers. As you aware, the Preferred Shares shall be mandatorily exchangeable for Common Shares of the Company immediately upon satisfaction of specified conditions precedent, including the affirmative vote of the Company’s existing shareholders (i) authorizing an additional 300 million of the Company’s Common Shares; and (ii) approving the exchange of the Preferred Shares into Common Shares.
This will serve to confirm the agreement of each of you to vote the entirety of your respective equity holdings of the Company in favor of (x) authorizing an additional 300 million of the Company’s Common Shares, and (y) approving the exchange of the Preferred Shares into Common Shares all upon, and subject to, the terms of the Preferred Shares. Such vote shall be given at the time of the special meeting of the Company’s shareholders being called for the purpose of such authorization of additional Common Shares and approval of the exchange of Preferred Shares into Common Shares.
To evidence your agreement with the foregoing, please sign and return to us a counterpart hereof, whereupon this letter and the acceptance by you of the terms hereof shall constitute a binding agreement with the Company, effective as of September 28, 2005.
Very truly yours,PXRE GROUP LTD.By: /s/ Robert Myron Name: Robert Myron Title: Senior Vice President and Treasurer
To evidence your agreement with the foregoing, please sign and return to us a counterpart hereof, whereupon this letter and the acceptance by you of the terms hereof shall constitute a binding agreement with the Company, effective as of September 28, 2005.
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.By: Capital Z Partners, L.P., its general partnerBy: Capital Z Partners, Ltd. its sole general partnerBy: /s/ Craig Fisher Name: Craig FisherTitle: General Counsel
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.By: Capital Z Partners, L.P., its general partnerBy: Capital Z Partners, Ltd. its sole general partnerBy: /s/ Craig Fisher Name: Craig FisherTitle: General Counsel
To evidence your agreement with the foregoing, please sign and return to us a counterpart hereof, whereupon this letter and the acceptance by you of the terms hereof shall constitute a binding agreement with the Company, effective as of September 28, 2005.
RESERVOIR CAPITAL PARTNERS, L.P.By: Reservoir Capital Group, L.L.C., its sole general partnerBy: /s/ Craig Huff Name: Craig HuffTitle: President
RESERVOIR CAPITAL MASTER FUND, L.P.By: Reservoir Capital Group, L.L.C., its sole general partnerBy: /s/ Craig Huff Name: Craig HuffTitle: President
To evidence your agreement with the foregoing, please sign and return to us a counterpart hereof, whereupon this letter and the acceptance by you of the terms hereof shall constitute a binding agreement with the Company, effective as of September 28, 2005.
RER REINSURANCE HOLDINGS, L.P.By: /s/ Richard E. Rainwater Name: Richard E. RainwaterTitle: General PartnerBy: Melissa T. Parish, Attorney-in-Fact
To evidence your agreement with the foregoing, please sign and return to us a counterpart hereof, whereupon this letter and the acceptance by you of the terms hereof shall constitute a binding agreement with the Company, effective as of September 28, 2005.
/s/ Robert Stavis Robert Stavis
DESCRIPTION OF STOCK:
SERIES A CONVERTIBLE VOTING PREFERRED SHARES($1.00 PAR VALUE PER SHARE),
SERIES B CONVERTIBLE VOTING PREFERRED SHARES($1.00 PAR VALUE PER SHARE),
SERIES C CONVERTIBLE VOTING PREFERRED SHARES($1.00 PAR VALUE PER SHARE),
CLASSA CONVERTIBLE VOTING COMMON SHARES($1.00 PAR VALUE PER SHARE),
CLASSB CONVERTIBLE VOTING COMMON SHARES($1.00 PAR VALUE PER SHARE)
AND
CLASSC CONVERTIBLE VOTING COMMON SHARES($1.00 PAR VALUE PER SHARE)
of
PXRE GROUP LTD.
TABLE OF CONTENTS
| Vested Restricted Share Award | |||||||||
| Carol A. McFate | December 4, 2020 | ||||||||
| March 12, 2021 | 721.87 | Acquired shares pursuant to dividend reinvestment plan | |||||||
| May 5, 2021 | 2116 | Vested Restricted Share Award | |||||||
| May 5, 2021 | 689 | Vested Restricted Share Award | |||||||
| May 6, 2021 | 1,665 | Granted Restricted Share Award | |||||||
| May 5, 2022 | 2,266 | Granted Restricted Share Award | |||||||
| May 6, 2022 | 1,665 | Vested Restricted Share Award | |||||||
| J. Daniel Plants(1) | May 2, 2022 | Common Shares purchased by Voce Capital Management LLC or its affiliates | |||||||
| Common Shares purchased by Voce Capital Management LLC or its affiliates | |||||||||
| 1,700 | |||||||||
| Granted Restricted Share Award | |||||||||
| Al-Noor Ramji | May 5, 2021 | Vested Restricted Share Award | |||||||
| Vested Restricted Share Award | |||||||||
| Granted Restricted Share Award | |||||||||
| Granted Restricted Share Award | |||||||||
| May 6, 2022 | 1,665 | Vested Restricted Share Award | |||||||
| Scott Kirk | March 15, 2021 | 3,227 | Granted Restricted Share Award | ||||||
| March 15, 2021 | 3,650 | Granted Restricted Share Award | |||||||
| March 15, 2021 | 4,841 | Granted Performance Share Award | |||||||
| March 15, 2021 | 4,840 | Granted Performance Share Award | |||||||
| December 28, 2021 | 8,629 | Granted Restricted Share Award | |||||||
| March 15, 2022 | 8,536 | Granted Performance Share Award | |||||||
| March 15, 2022 | 4,268 | Granted Performance Share Award | |||||||
| March 15, 2022 | 4,269 | Granted Performance Share Award | |||||||
| March 15, 2022 | 17,073 | Granted Restricted Share Award | |||||||
| March 15, 2022 | 807 | Vested Restricted Share Award | |||||||
| March 15, 2022 | 427 | Shares withheld for tax obligation | |||||||
| March 15, 2022 | 912 | Vested Restricted Share Award | |||||||
| March 15, 2022 | 483 | Shares withheld for tax obligation | |||||||
| Allison D. Kiene | March 15, 2021 | Granted Restricted Share Award | |||||||
| Granted Performance Share Award | |||||||||
| Granted Performance Share Award | |||||||||
| March 31, 2021 | 158 | Purchased shares through Employee Stock Purchase Plan | |||||||
| June 30, 2021 | 132 | Purchased shares through Employee Stock Purchase Plan | |||||||
| September 30, 2021 | 219 | Purchased shares through Employee Stock Purchase Plan | |||||||
| March 15, 2022 | 399 | Vested Restricted Share Award | |||||||
| March 15, 2022 | 118 | Shares withheld for tax obligation | |||||||
| March 15, 2022 | 3,658 | Granted Performance Share Award | |||||||
| March 15, 2022 | 1,829 | Granted Performance Share Award | |||||||
| March 15, 2022 | 1,830 | Granted Performance Share Award | |||||||
| March 15, 2022 | 7,317 | Granted Restricted Share Award | |||||||
| March 31, 2022 | 328 | Purchased shares through Employee Stock Purchase Plan | |||||||
| June 30, 2022 | 139 | Purchased shares through Employee Stock Purchase Plan | |||||||
| Susan Comparato | December 31, 2020 | Purchased shares through Employee Stock Purchase Plan | |||||||
| Granted Restricted Share Award | |||||||||
| Granted Performance Share Award | |||||||||
| Granted Performance Share Award | |||||||||
| Vested Restricted Share Award | |||||||||
| Shares withheld for tax obligation | |||||||||
| Vested Restricted Share Award | |||||||||
| Shares withheld for tax obligation | |||||||||
| Purchased shares through Employee Stock Purchase Plan | |||||||||
| June 30, 2021 | 21 | Purchased shares through Employee Stock Purchase Plan | |||||||
| September 30, 2021 | 26 | Purchased shares through Employee Stock Purchase Plan |
| December 31, 2021 | 31 | Purchased shares through Employee Stock Purchase Plan | ||||||||
| March 15, 2022 | 540 | Vested Restricted Share Award | ||||||||
| March 15, 2022 | 195 | Shares withheld for tax obligation | ||||||||
| March 15, 2022 | 228 | Vested Restricted Share Award | ||||||||
| March 15, 2022 | 83 | Shares withheld for tax obligation | ||||||||
| March 15, 2022 | 3,048 | Granted Performance Share Award | ||||||||
| March 15, 2022 | 1,524 | Granted Performance Share Award | ||||||||
| March 15, 2022 | 1,525 | Granted Performance Share Award | ||||||||
| March 15, 2022 | 6,098 | Granted Restricted Share Award | ||||||||
| March 16, 2022 | 1,130 | Vested Restricted Share Award | ||||||||
| March 16, 2022 | 408 | Shares withheld for tax obligation | ||||||||
| March 31, 2022 | 29 | Purchased shares through Employee Stock Purchase Plan | ||||||||
| June 30, 2022 | 37 | Purchased shares through Employee Stock Purchase Plan | ||||||||
| September 30, 2022 | 82 | Purchased shares through Employee Stock Purchase Plan | ||||||||
| Andrew Hersom | September 30, 2022 | |||||||||
| Purchased shares through Employee Stock Purchase Plan | ||||||||||
| Greg Charpentier | March 5, 2021 | ) | Sold Common Shares | |||||||
| March 9, 2021 | (20 | ) | ||||||||
| ) | Sold Common Shares | |||||||||
| 304 | ||||||||||
| Granted Restricted Share Award |
VI-2
DESCRIPTION OF STOCK
(1) The relative rights, preferences and restrictions granted to or imposed upon the respective classes and series of Preferred Shares and Convertible Common Shares created by PXRE Group Ltd. and upon the holders thereof are set forth below.
(a) Designation and Number. The designation of convertible Preferred Shares created by this resolution shall be:
(i) ‘Series A Convertible Voting Preferred Shares, $1.00 par value per share,’ of the Company, allocated among two sub-series, A1 Preferred Shares and A2 Preferred Shares (hereinafter referred to as the ‘Series A Preferred Shares’), and the number of Series A Preferred Shares which the Company shall be authorized to issue shall be 7,500 shares;
(ii) ‘Series B Convertible Voting Preferred Shares, $1.00 par value per share,’ of the Company, allocated among two sub-series, B1 Preferred Shares and B2 Preferred Shares (hereinafter referred to as the ‘Series B Preferred Shares’), and the number of Series B Preferred Shares which the Company shall be authorized to issue shall be 5,000 shares; and
(iii) ‘Series C Convertible Voting Preferred Shares, $1.00 par value per share,’ of the Company, allocated among two sub-series, C1 Preferred Shares and C2 Preferred Shares (hereinafter referred to as the ‘Series C Preferred Shares’), and the number of Series C Preferred Shares which the Company shall be authorized to issue shall be 2,500 shares.
(b) Priority. The Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares shall rank senior to the Common Shares, the Convertible Common Shares and all other capital shares of the Company (now or hereafter authorized or issued) other than the Trust Preferred and the Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares shall rank pari passu with each other, in each case as to dividends and as to the surplus assets of the Company availabletransactions listed for distribution upon liquidation, dissolution and winding-up as provided herein.
(a) For purposes of this Description of Stock, the following terms shall have the meanings indicated (such definitions to be equally applicable to both singular and plural forms of the terms defined):
‘Affiliates’ means, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, that Person; provided, however, that with respect to Capital Z, CZI shall not be considered an Affiliate. For the purposes of this definition, ‘control’ (including with correlative meanings, the terms ‘controlling’, ‘controlled by’, and ‘under common control with’) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise.
‘Assets’ of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, investment assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory and goods.
‘Business Day’ means any day other than a Saturday, Sunday or a day on which banking institutionsJ. Daniel Plants also include transactions in the State of New York or Bermuda are authorized or obligatedCompany’s securities by law or executive order to close.
‘Voce Capital Z’ means, collectively, Capital Z Financial Services Fund II, L.P.Management LLC and Capital Financial Services Private Fund II, L.P.
‘ClassIV Director’ means a Capital Z Director or Reservoir Director or Rainwater Director.
VI-3
‘ClassA Common Shares’ means, collectively, the Class A Convertible Voting Common Shares, $1.00 par value per share, of the Company.
‘ClassB Common Shares’ means, collectively, the Class B Convertible Voting Common Shares, $1.00 par value per share, of the Company.
‘ClassC Common Shares’ means, collectively, the Class C Convertible Voting Common Shares, $1.00 par value per share, of the Company.
‘Closing’ has the meaning ascribed in the Purchase Agreement.
‘Common Shares’ means the Common Shares and shall also include any common shares of the Company hereafter issued and outstanding and any shares of the Company (other than the Preferred Shares and the Convertible Common Shares) of any other class hereafter issued and outstanding that is not preferred as to dividends or distribution of assets in liquidation over any other class of shares of the Company or has ordinary voting power for the election of directors of the Company.
‘Company’ means PXRE Group Ltd.
‘Company Securities’ shall have the meaning given such term in the Purchase Agreement.
‘Convertible Common Shares’ means the Class A Common Shares, the Class B Common Shares and the Class C Common Shares.
‘CZI’ means Capital Z Investments, L.P. and Capital Z Investments II, L.P.
‘Description of Stock’ means this Description of Stock, as amended, modified or supplemented from time to time.
‘Exchange Act’ means the United States Securities Exchange Act of 1934, as from time to time amended, and the rules, regulations and interpretations promulgated thereunder.
‘Fair Market Value’ with respect to Common Shares, on any date, shall be deemed to be the average of the reported closing prices for each of the five (5) consecutive trading days ending on the trading day before such date of determination. The reported closing price for each day shall be the reported closing price on the principal United States securities exchange or automated quotation system on which the Common Shares are then listed or admitted to trading. If the Common Shares are not then listed or admitted to trading on any national securities exchange or automated quotation system or if the closing price cannot be so determined, the Fair Market Value shall be determined (x) by the written agreement of the Company and the respective holder and (y) in the event that no such agreement is reached within twenty (20) days after the date of the event giving rise to the need to determine the Fair Market Value, (A) by an independent appraiser of nationally recognized standing selected by the respective holder and the Company or (B) if the respective holder and the Company cannot agree on an appraiser within twenty (20) days after the date of the event giving rise to the need to determine the Fair Market Value, each shall select an independent appraiser of nationally recognized standing and the two appraisers shall designate a third independent appraiser of nationally recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be borne by the Company. The Company shall cooperate, and shall provide all necessary information and assistance, to permit any determination under the preceding clauses (x) and (y). With respect to Convertible Common Shares, the Fair Market Value shall equal the Fair Market Value of the Common Shares into which such Convertible Shares are convertible.
‘Fully Converted’ or ‘upon a Fully Converted basis’ or ‘upon Full Conversion’ means, with respect to any Person as of any date, that all Preferred Shares held by such Person have been (or shallits affiliates since J. Daniel Plants may be deemed to have been,beneficial ownership of those securities as appropriate) converted into Class A Common Shares, Class B Common Shares and/or Class C Common Shares, asa result of his affiliation with Voce Capital Management LLC and its affiliates. Mr. Plants disclaims beneficial ownership of the case may be, atCompany’s securities held by Voce Capital Management LLC and its affiliates except to the Current Conversion Price asextent of such date and immediately thereafter such Class A Common Shares, Class B Common Shares and Class C Common Shares shall have been (or shall be deemed to have been, as appropriate) converted into Common Shares, in each case in accordance with Section 6 of this Description of Stock.his pecuniary interest therein.
‘GAAP’ means United States generally accepted accounting principles, consistently applied.
VI-4Miscellaneous Information Concerning Participants
Except as described in this Annex A or in this proxy statement, neither any participant nor any of their respective associates or affiliates (together, the “Participant Affiliates”) is either a party to Contents
‘Indebtedness’ means (a) all indebtednessany transaction or series of the Company and its subsidiaries, including the principaltransactions since January 1, 2021 or has knowledge of and premium, if any and interest (including interest accruing after the filingcurrent proposed transaction or series of a petition initiating any proceeding under any state, federal or foreign bankruptcy laws, whether or not allowable as a claim in such proceeding) on, all indebtedness, whether outstanding currently or hereafter createdproposed transactions (i) for borrowed money, (ii) for money borrowed by one or more other Persons and guaranteed, directly or indirectly, by the Company or any subsidiary thereof, (iii) for money borrowed by one or more other Persons forto which the Company or any subsidiary thereof provides security, (iv) constituting purchase money indebtedness the payment of its subsidiaries was or is to be a participant, (ii) in which the Companyamount involved exceeds $120,000 and (iii) in which any participant or any subsidiary thereof isParticipant Affiliate had, or will have, a direct or indirect material interest. Furthermore, except as described in this Annex A or in this proxy statement, (a) no participant or Participant Affiliate, directly or contingently liable, (v) underindirectly, beneficially owns any lease of any real or personal property, which obligations are capitalized on the consolidated books of the Company and its subsidiaries in accordance with GAAP or (vi) under any other arrangement under which obligations are recorded as indebtedness on the consolidated books of the Company and its subsidiaries in accordance with GAAP and (b) any and all modifications, refundings, deferrals, renewals or extensions of any such indebtedness, or securities, notes or other evidences of indebtedness issued in exchange for such indebtedness. Without limiting the generality of the foregoing, the term ‘Indebtedness’ shall include the Trust Preferred and any comparable securities of the Company or any securities of any subsidiary thereof at any time outstanding; provided that Indebtedness shall not include intercompany indebtedness outstanding or hereafter created betweenof the Company, and (b) no participant owns any of its direct or indirect wholly-owned Subsidiaries (as defined in the Purchase Agreement, but limited in this paragraph to direct and indirect wholly owned subsidiaries) or between any two of more such direct or indirect wholly owned Subsidiaries of the Company.
‘Investment Agreement’ means the Investment Agreement dated as of the Closing Date (as defined in the Purchase Agreement) by and among the Company, the Purchasers (as defined in the Purchase Agreement) and such other Persons as may become a party thereto from time to time, as the same may be amended from time to time.
‘Permitted Tender Offer Amount’ means, as of any date, an amount equal to (a) 20% of the cumulative amount by which the Company’s consolidated net income (determined in accordance with GAAP) in any calendar year commencing with the year ending December 31, 2002 exceeds $50,000,000 minus (b) the sum of all cash and the fair market value of all non-cash consideration paid or payable by the Company or any Affiliate thereof in respect of redemptions, offers to purchase, tender offers or other acquisitions of capital stocksecurities of the Company effectedof record but not beneficially.
Except as described in this Annex A or commenced after December 10, 2001.
‘Person’in this proxy statement, no participant or ‘person’ means an individual, corporation, partnership, firm, association, joint venture, trust, unincorporated organization, limited liability company, government, governmental body, agency, political subdivisionParticipant Affiliate has entered into any agreement or other entity.
‘Preferred Shares’ means, collectively, the Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares.
‘Purchase Agreement’ means the Share Purchase Agreement dated as of December 10, 2001 by and among the Company and the Purchasers, as the same may be amended from time to time.
‘Purchasers’ shall have the meaning given such term in the Purchase Agreement.
‘Rainwater’ means Richard E. Rainwater, an individual.
‘Reservoir’ means, collectively, Reservoir Capital Partners, L.P. and Reservoir Capital Master Fund, L.P.
‘Securities Act’ means the United States Securities Act of 1933, as from time to time amended, and the rules, regulations and interpretations promulgated thereunder.
‘Stated Value’ shall mean,understanding with any person with respect to each Preferred Share, $10,000.00.
‘Tax Gross-Up’ shall mean an additional cash payment to be made to(i) any Purchaser who (i) receives a cash payment in lieu of Convertible Common Shares on the conversion of Preferred Shares pursuant to Section 6(a)(iv) hereof, (ii) is or, in the case of a Purchaser that is a partnership for U.S. federal income tax purposes and that has a direct or indirect partner that is, then subject to U.S. federal income tax on the receipt of the cash payment in lieu of Convertible Common Shares as ordinary income (all such persons referred to
VI-5
herein as ‘U.S. Tax Purchasers’ and each, a ‘U.S. Tax Purchaser’) and (iii) would have realized a ‘long-term capital gain’ or a ‘long-term capital loss’ (within the meaning of Section 1222(3) or (4) of the Internal Revenue Code of 1986, as amended (the ‘Code’), on a sale of the Convertible Common Shares into which the Preferred Shares would otherwise have been converted, such additional cash payment equal to an amount such that (a) the sum of (i) the Fair Market Value of the Convertible Common Shares that such U.S. Tax Purchaser would otherwise have received plus (ii) the additional cash payment hereunder, such sum multiplied by 1 minus the highest U.S. federal income tax rate which would be applicable to any ordinary income received by a U.S. taxpayer of the same type (individual, corporation or other entity) as such U.S. Tax Purchaser, equals (b) the Fair Market Value of the Convertible Common Shares that such U.S. Tax Purchaser would otherwise have received multiplied by 1 minus the highest U.S. federal income tax rate which is then generally applicable to ‘net capital gain’ (within the meaning of Section 1222(11) of the Code) received by a U.S. taxpayer of the same type (individual, corporation or other entity) as such U.S. Tax Purchaser in the taxable year of the conversion.
‘Trust Preferred’ shall mean, collectively, (i) the Junior Subordinated Deferrable Interest Debentures due 2027 of PXRE Corporation, (ii) the 8.85% Capital Trust Pass-through Securities of PXRE Capital Trust I and (iii) the PXRE Corporation Guarantee with respect to such Capital Trust Pass-through Securities.
(b) The following terms, when used in this Description of Stock, shall have the meanings provided for such terms in the sections set forth below (such definitions to be equally applicable to both singular and plural forms of the terms defined):
(table continued on next page)
VI-6
(table continued from previous page)
(c) The words ‘hereof’, ‘herein’ and ‘hereunder’ and other words of similar import refer to this Description of Stock as a whole and not to any particular Section or other subdivision.
(d) All dollar amounts referenced herein shall be denominated in United States dollars.
(a) General Voting Rights. Except as otherwise provided specifically herein and in the Bye-Laws or required by Bermuda law, (i) each Preferred Share and Convertible Common Share shall have the right and power and be entitled to vote on any question or matter upon which, or in any proceeding at which, the holders of Common Shares of the Company are entitled to vote and to be represented at and to receive notice of any meeting of shareholders, (ii) the holders of Preferred Shares, Convertible Common Shares and Common Shares shall vote together as one class and not as separate classes and (iii) each holder of Preferred Shares and/or Convertible Common Shares shall be entitled to that number of votes for each Preferred Share and each Convertible Common Share held by such holder equal to the number of Common Shares that would be received by such holder if such shares were Fully Converted as of the record date for the vote which is being taken or, if no such record date is established, as of the date such vote is taken or any written consent of shareholders is solicited.
(i) Subject to clause (iii) below and notwithstanding anything to the contrary in the Bye-Laws, Capital Z and each Affiliate thereof to whom or which (as the case may be) any Company Securities are Transferred (as such term is defined in the Purchase Agreement), to the extent such Transfer does not result in the transferring Person or any other Person being considered a United States Shareholder within the meaning of Section 951(b) of the Code, without regard to Section 953(c) of the Code and without the application of Bye-Law 20(4), shall be exempt from the application of the aggregate voting limitation set forth in Bye-Law 20(4) of the Bye-Laws of the Company or any similar provision in the Bye-Laws as may be in effect from time to time (collectively, ‘Bye-Law 20(4)’).
(ii) For the avoidance of doubt, the holding of Company Securities by Reservoir and Rainwater shall be subject to application of the aggregate voting limitation set forth in Bye-Law 20(4).
(iii) In no event shall Purchasers and their respective Affiliates be permitted to exercise control, collectively through the Company Securities or any other shares, in excess of 49.9% of the aggregate voting power of the Company on any shareholder voting matters (the ‘Aggregate Voting Limitation’). Notwithstanding the foregoing, the preceding sentence shall in no event limit or modify in any manner
VI-7
the rights granted to the holders of Preferred Shares and Convertible Common Shares under clauses (b), (c), (d), (e) and (f) of this Section 3 and under clause (c) of Section 9 of this Description of Stock. The Aggregate Voting Limitation shall be applied in the manner set forth in Bye-Law 20(4) as if the Maximum Percentage set forth therein was equal to 49.9%.
(b) Election of Directors. The Preferred Shares and Convertible Common Shares shall not have the right and power or be entitled to vote in the election of directors of the Company except as set forth below:
(i) so long as Capital Z and its Affiliates and their limited partners shall own at least 50% of the Series A Preferred Shares acquired by Capital Z under the Purchase Agreement (including for purposes of such calculation, all Class A Common Shares then held by such Persons), the holders of the Series A Preferred Shares and Class A Common Shares shall have, in addition to the other voting rights set forth herein, the exclusive right, voting separately as a class, to annually elect by the affirmative vote of the holders of at least 50% of all Series A Preferred Shares and Class A Common Shares, voting together, two individuals to each serve as Class IV Directors of the Company (each, a ‘Capital Z Director’);
(ii) so long as Capital Z and its Affiliates and their limited partners shall own at least 20% but less than 50% of the Series A Preferred Shares acquired by Capital Z under the Purchase Agreement (including for purposes of such calculation, all Class A Common Shares then held by such Persons), the holders of the Series A Preferred Shares and Class A Common Shares shall have, in addition to the other voting rights set forth herein, the exclusive right, voting separately as a class, to annually elect by the affirmative vote of the holders of at least 50% of all Series A Preferred Shares and Class A Common Shares, voting together, one individual to serve as a Class IV Director of the Company; provided that in the event that Capital Z and its Affiliates and their limited partners shall own less than 20% of the Series A Preferred Shares acquired by Capital Z pursuant to the Purchase Agreement (including for purposes of such calculation, all Class A Common Shares then held by such Persons), then the holders of the Series A Preferred Shares shall be entitled to vote generally in the election of directors in accordance with Section 3(a) hereof; and
(iii) so long as Reservoir and its Affiliates and their limited partners shall own at least 30% of the Series B Preferred Shares acquired by Reservoir under the Purchase Agreement (including for purposes of such calculation, all Class B Common Shares then held by such Persons), the holders of the Series B Preferred Shares and Class B Common Shares shall have, in addition to the other voting rights set forth herein, the exclusive right, voting separately as a class, to annually elect by the affirmative vote of the holders of at least 50% of all Series B Preferred Shares and Class B Common Shares, voting together, one individual to serve as a Class IV Director of the Company (the ‘Reservoir Director’); provided that in the event that Reservoir and its Affiliates and their limited partners shall own less than 30% of the Series B Preferred Shares acquired by Reservoir pursuant to the Purchase Agreement (including for purposes of such calculation, all Class B Common Shares then held by such Persons), then the holders of the Series B Preferred Shares shall be entitled to vote generally in the election of directors in accordance with Section 3(a) hereof.
(iv) so long as Rainwater and his Affiliates shall own at least 60% of the Series C Preferred Shares acquired by Rainwater under the Purchase Agreement (including for purposes of such calculation, all Class C Common Shares then held by such Persons), the holders of the Series C Preferred Shares and Class C Common Shares shall have, in addition to the other voting rights set forth herein, the exclusive right, voting separately as a class, to annually elect by the affirmative vote of the holders of at least 50% of all Series C Preferred Shares and Class C Common Shares, voting together, one individual to serve as a Class IV Director of the Company (the ‘Rainwater Director’); provided that in the event that Rainwater and his Affiliates shall own less than 60% of the Series C Preferred Shares acquired by Rainwater pursuant to the Purchase Agreement (including for purposes of such calculation, all Class C Common Shares held by such Persons), then the holders of the Series C Preferred Shares shall be entitled to vote generally in the election of directors in accordance with Section 3(a) hereof.
(c) Consent of Series A Preferred Shares Required For Variation of Rights and Restrictions. So long as any Series A Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required by law overriding the provisions herein, the affirmative vote or consent of the holders of at least 50% of all of the Series A Preferred Shares at the time issued and outstanding, voting as a class, given in person or by proxy either in writing (as may be permitted by law and the Bye-Laws) or
VI-8
at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company:
(i) in any manner authorize, create, designate, issue or sell any class or series of capital shares or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital shares or any debt security which by its terms is convertible into or exchangeable for any equity security or has any other equity feature or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, is pari passu with or is senior to the Series A Preferred Shares or which in any manner adversely affects the holders of the Series A Preferred Shares or the Class A Common Shares, or amend the terms of any existing class or series of capital shares if the effect of such amendment would be to rank such class or series senior to or pari passu with the Series A Preferred Shares as to dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company;
(ii) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions, of the Series A Preferred Shares or the Class A Common Shares;
(iii) reclassify the shares of any class or series of capital shares into shares of any class or series of capital shares (A) ranking, either as to payment of dividends, distributions of Assets or redemptions, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, senior to or pari passu with the Series A Preferred Shares or (B) which in any manner adversely affects the rights of the holders of the Series A Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares or Class A Common Shares, as the case may be, which such holders would have after conversion of the Series A Preferred Shares into Class A Common Shares or conversion of the Class A Common Shares into Common Shares;
(iv) take any action to cause any amendment, alteration or repeal of any of the provisions of the Memorandum of Association or Bye-Laws, if such amendment, alteration or repeal would have an adverse effect on the rights of the holders of the Series A Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares or Class A Common Shares which such holders would have after conversion of the Series A Preferred Shares into Class A Common Shares or conversion of Class A Common Shares into Common Shares (including, without limitation, by granting voting rights to holders of bonds, debentures or other obligations); or
(v) any change to the authorized number of Preferred Shares or Convertible Common Shares or issuance of additional Preferred Shares or Convertible Common Shares.
(d) Consent of Series B Preferred Shares Required For Variation of Rights and Restrictions. So long as any Series B Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required by law overriding the provisions herein, the affirmative vote or consent of the holders of at least 50% of all of the Series B Preferred Shares at the time issued and outstanding, voting separately as a class, given in person or by proxy either in writing (as may be permitted by law and the Bye- Laws) or at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company:
(i) in any manner authorize, create, designate, issue or sell any class or series of capital shares or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital shares or any debt security which by its terms is convertible into or exchangeable for any equity security or has any other equity feature or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, is pari passu with or is senior to the Series B Preferred Shares or which in any manner adversely affects the holders of the Series B Preferred Shares or the Class B Common Shares, or amend the terms of any existing class or series of capital shares if the effect of such amendment would be to rank such class or series senior to or pari passu with the Series B Preferred
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Shares as to dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company;
(ii) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions, of the Series B Preferred Shares or the Class B Common Shares;
(iii) reclassify the shares of any class or series of capital shares into shares of any class or series of capital shares (A) ranking, either as to payment of dividends, distributions of Assets or redemptions, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, senior to or pari passu with the Series B Preferred Shares or (B) which in any manner adversely affects the rights of the holders of the Series B Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares or Class B Common Shares, as the case may be, which such holders would have after conversion of the Series B Preferred Shares into Class B Common Shares or conversion of the Class B Common Shares into Common Shares;
(iv) take any action to cause any amendment, alteration or repeal of any of the provisions of the Memorandum of Association or Bye-Laws of the Company, if such amendment, alteration or repeal would have an adverse effect on the rights of the holders of the Series B Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares or Class B Common Shares which such holders would have after conversion of the Series B Preferred Shares into Class B Common Shares or conversion of Class B Common Shares into Common Shares (including, without limitation, by granting voting rights to holders of bonds, debentures or other obligations); or
(v) any change to the authorized number of Preferred Shares or Convertible Common Shares or issuance of additional Preferred Shares or Convertible Common Shares.
(e) Consent of Series C Preferred Shares Required For Variation of Rights and Restrictions. So long as any Series C Preferred Shares remain issued and outstanding, unless the vote or consent of the holders of a greater number of shares shall then be required by law overriding the provisions herein, the affirmative vote or consent of the holders of at least 50% of all of the Series C Preferred Shares at the time issued and outstanding, voting separately as a class, given in person or by proxy either in writing (as may be permitted by law and the Bye- Laws) or at any special or annual meeting, shall be necessary to permit, effect or validate the taking of any of the following actions by the Company:
(i) in any manner authorize, create, designate, issue or sell any class or series of capital shares or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital shares or any debt security which by its terms is convertible into or exchangeable for any equity security or has any other equity feature or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, is pari passu with or is senior to the Series C Preferred Shares or which in any manner adversely affects the holders of the Series C Preferred Shares or the Class C Common Shares, or amend the terms of any existing class or series of capital shares if the effect of such amendment would be to rank such class or series senior to or pari passu with the Series C Preferred Shares as to dividends or distribution of assets, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company;
(ii) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions, of the Series C Preferred Shares or the Class C Common Shares;
(iii) reclassify the shares of any class or series of capital shares into shares of any class or series of capital shares (A) ranking, either as to payment of dividends, distributions of Assets or redemptions, including, without limitation, distributions to be made upon a liquidation, dissolution or winding-up of the Company, senior to or pari passu with the Series C Preferred Shares or (B) which in any manner adversely affects the rights of the holders of the Series C Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares or Class C Common Shares, as the case may be which such
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holders would have after conversion of the Series C Preferred Shares into Class C Common Shares or conversion of the Class C Common Shares into Common Shares; or
(iv) take any action to cause any amendment, alteration or repeal of any of the provisions of the Memorandum of Association or Bye-Laws of the Company, if such amendment, alteration or repeal would have an adverse effect on the rights of the holders of the Series C Preferred Shares or any powers, rights, privileges or preference appertaining to Common Shares or Class C Common Shares which such holders would have after conversion of the Series C Preferred Shares into Class C Common Shares or conversion of Class C Common Shares into Common Shares (including, without limitation, by granting voting rights to holders of bonds, debentures or other obligations).
(f) Consent Required for Certain Actions. Each action or series of actions set forth below in this Section 3(f) shall require:
(x) if Capital Z, Reservoir and Rainwater (together with their Affiliates and limited partners) own, in the aggregate, at least 40% of the Preferred Shares originally purchased by them (including for the purposes of such calculation any Convertible Common Shares and Common Shares into which such Convertible Common Shares have converted), the consent of each of (i) holders of more than 50% of the issued and outstanding Series A Preferred Shares and Class A Common Shares, voting together as a single class, and (ii) holders of more than 50% of the issued and outstanding Series B Preferred Shares, Series C Preferred Shares, Class B Common Shares and Class C Common Shares, all voting together as a single class;
(y) if the condition specified in clause (x) is not satisfied and Capital Z (together with its Affiliates and limited partners) owns at least 50% of the Preferred Shares purchased by it (including for the purposes of such calculation any Convertible Common Shares and Common Shares into which such Convertible Common Shares have converted), the consent of holders of more than 50% of the issued and outstanding Series A Preferred Shares and Class A Common Shares, voting together as a single class; and
(z) if the condition specified in clause (x) is not satisfied and Resevoir and Rainwater, collectively (together with their Affiliates and limited partners) own at least 50% of the Preferred Shares originally purchased by them (including for the purposes of such calculation any Convertible Common Shares and Common Shares into which such Convertible Common Shares have converted), the consent of holders of more than 50% of the issued and outstanding Series B Preferred Shares, Series C Preferred Shares, Class B Common Shares and Class C Common Shares, all voting together as a single class:
(i) at any time before the third anniversary of the Closing, involve one or more redemptions, offers to purchase, tender offers or other acquisitions of capital stock of the Company by or on behalf of the Company collectively involving the payment by or on behalf of the Company or any subsidiary thereof of cash and/or other consideration having an aggregate fair market value in excess of the Permitted Tender Offer Amount.
(ii) result in a sale of the Company by merger, sale of Assets or consolidation or amalgamation where the per share consideration paid to the holders of Preferred Shares on an as converted basis is less than 200% of the Current Conversion Price;
(iii) result in the sale or transfer of 25% or more of the Company’s Assets;
(iv) result in a voluntarily delisting of the Common Shares from the New York Stock Exchange;
(v) (A) at any time before the third anniversary of the Closing, involve or result in the incurrence of additional Indebtedness from and after the Closing in excess of $50,000,000 in the aggregate, and provided such $50,000,000 shall not be inclusive of the first $55,000,000 of any refinancing of the First Union Credit Agreement (as defined in the Purchase Agreement) and (B) at any time on or after the third anniversary of the Closing, involve or result in a ratio of Indebtedness to total capital (equal to the sum of shareholders equity plus indebtedness including Trust Preferred, as it appears on the Company’s balance sheet as of the date of measurement and prepared in accordance with GAAP) in excess of 0.25 to 1.00;
(vi) effect or attempt to effect a voluntary liquidation, dissolution or winding up of the Company;
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(vii) result in an expansion by the Company into lines of business other than continuing lines of business in which the Company is currently involved;
(viii) at any time before the third anniversary of the Closing increase the amount of dividends and other distributions (whether of cash or other property or rights) paid with respect to Common Shares, at a cumulative annualized rate of more than 10% from the last dividend declared prior to the Closing, from and after the Closing (such amount, as reduced by the amount of all cash and the fair market value of all property and rights paid by or on behalf of the Company as a dividend or distribution with respect to Common Shares, is referred to as the ‘Permitted Dividend Amount’);
(ix) involve the purchase or renewal of retrocessional or reinsurance coverage from companies with a Standard & Poor’s or A.M. Best rating below ‘A-’ unless, in each case, such coverage is acquired pursuant to a contract that requires the applicable reinsurer or retrocessionaire (the ‘Reinsuring Company’) to post and maintain collateral upon a loss in an amount equal to the reserves for such loss and either (A) the obligations of such Reinsuring Company are guaranteed by a direct or indirect parent thereof having Standard & Poor’s and A.M. Best ratings of ‘A-’ or better or (B) such Reinsuring Company has capital and surplus as of the date of purchase or renewal of such coverage of at least $1 billion; provided, however, that notwithstanding the foregoing in this clause (ix), the Company may continue to purchase and renew reinsurance coverage with Select Re and renew, but not increase, coverage with Pennsylvania Lumbermans Mutual Insurance Company, in each case in the ordinary course of business consistent with past practice;
(x) at any time before the third anniversary of the Closing, effect an acquisition by the Company involving aggregate consideration in excess of $50,000,000;
(xi) involve or result in any additional or increased investmentfuture employment by the Company or any of its Subsidiaries inaffiliates or (ii) any hedge funds or similar investments beyond the amounts held at September 30, 2001 without the prior unanimous approval of the Investment Committee of the Board of Directors; or
(xii) at any time on or after the third anniversary of the Closing, involves or results in (A) the payment of any dividend or other distribution (whether in cash or other property or rights) with respectfuture transactions to Common Shares or (B) involves or results in a redemption, offer to purchase, tender offer or other acquisition of capital stock of the Company by or on behalf of the Company collectively involving the payment by or on behalf ofwhich the Company or any subsidiary thereof of cash and/its affiliates will or other consideration having an aggregate fair market valuemay be a party.
Except as described in excessthis Annex A or in this proxy statement, there are no contracts, arrangements or understandings by any participant or Participant Affiliate since January 1, 2021 with any person with respect to any securities of the greaterCompany, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of (i)profit, division of losses or profits, or the Permitted Tender Offer Amountgiving or withholding of proxies.
Except for ownership described in this Annex A or in this proxy statement, and (ii)excluding any director or executive officer of the Permitted Dividend Amount.
(a) General. For the purposes of this Section 4, each December 31, March 31, June 30 and September 30 (commencing December 31, 2001) onCompany acting solely in that capacity, no person who is a party to an arrangement or understanding pursuant to which any Preferred Shares shall be outstanding shall be deemeda nominee for election as director is proposed to be a ‘Dividend Due Date’. The holderselected has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the Annual General Meeting.
ANNEX B – NON-GAAP FINANCIAL MEASURES
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET INCOME (LOSS)
“Operating income (loss)" is an internal performance measure used in the management of the Preferred Shares shallCompany's operations and represents operating results after-tax (at an assumed effective tax rate of 15%) and preferred share dividends excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, non- operating expenses, and other similar non-recurring items. The Company excludes net realized investment gains or losses, net foreign exchange gain or loss, non-operating expenses, and other similar non-recurring items from the calculation of operating income because these amounts are influenced by and fluctuate in part, by market conditions that are outside of management’s control. In addition to presenting net income determined in accordance with U.S. GAAP, the Company believes that showing operating income enables investors, analysts, rating agencies and other users of the Company's financial information to more easily analyze our results of operations and underlying business performance. Operating income should not be entitledviewed as a substitute for U.S. GAAP net income. The reconciliation of operating income to receive, if, when andnet income is as declaredfollows:
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET INCOME (LOSS)
(in millions)
(unaudited)
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Net income (loss), as reported | $ | 6.7 | $ | (54.1 | ) | |||
| Income tax (benefit) provision | (1.4 | ) | 7.7 | |||||
| Net income (loss), before taxes | 5.3 | (46.4 | ) | |||||
| Add (deduct): | ||||||||
| Net realized investment (gains) losses | (32.6 | ) | 3.6 | |||||
| Foreign currency exchange losses (gains) | 1.6 | 15.4 | ||||||
| Non-operating expenses | 43.7 | 21.1 | ||||||
| Impairment of intangibles | 43.2 | - | ||||||
| Operating loss before taxes and preferred share dividends | 61.2 | (6.3 | ) | |||||
| Income tax provision (benefit), as assumed rate (1) | 9.2 | (0.9 | ) | |||||
| Preferred share dividends | 10.5 | 4.6 | ||||||
| Operating income (loss) | $ | 41.5 | $ | (10.0 | ) | |||
| (1) | For the purpose of calculating Operating Income, an assumed tax rate of 15% was used for all periods presented. |
TO VOTE BY MAIL, PLEASE DETACH HERE, SIGN AND DATE THE PROXY CARD, AND RETURN IN THE POSTAGE - PAID ENVELOPE PROVIDED ARGO GROUP INTERNATIONAL HOLDINGS, LTD. Annual General Meeting of Shareholders This proxy is solicited by the Board of Directors outThe undersigned hereby acknowledges receipt of funds legally available therefor, cumulative dividendsthe Notice of the Annual General Meeting of Shareholders and Proxy Statement of Argo Group International Holdings, Ltd. (“Argo Group”) and hereby appoints B Thomas A. Bradley and Allison D. Kiene and each of them, acting individually, with full power of L substitution in each, as proxies of the undersigned, to represent the undersigned and vote all common shares of Argo Group that the undersigned may be entitled to vote at the Annual General Meeting of U Shareholders to be held on each share (i)December 15, 2022, at 9:00 am local Bermuda time (8:00 a.m. Eastern Time) E at Wellesley House South, W Room (2nd Floor), 90 Pitts Bay Rd., Pembroke HM 08, Bermuda, and at any time such dividends are to be paid in shares of Preferred Shares in accordance with the terms hereof, the rate of 8% per annum and (ii) at any time such dividends are to be paid in cash in accordance with the terms hereof, the rate of 8% per annum,adjournment or postponement thereof, as indicated on the sum of (x)reverse side. P This proxy, when properly executed, will be voted in the Stated Value on each Preferred Share plus (y)manner directed herein by the amount of any accruedundersigned R shareholder . WHERE NO INSTRUCTION IS SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH O COMPANY NOMINEE LISTED IN ITEM 1 (A - G) ON THE REVERSE SIDE AND FOR ITEMS 2 and unpaid dividends thereon, and no more, calculated on the basis of a year of 360 days consisting of twelve 30-day months, payable on each Dividend Due Date,3 . While you may mark instructions with respect to the quarterly period ending on the day immediately preceding such Dividend Due Date (except that if any such date is not a Business Day, then such dividend shall be payable on the next Business Day following such Dividend Due Date, provided that for the purposes of computing such dividend payment, no interest or sum in lieu of interest shall accrue from such Dividend Due Date to the next Business Day following such Dividend Due Date). Dividends on each Preferred Share shall accrue and be cumulative from and after the date of issuance of such Preferred Share whether or not such dividends are declared and whether or not there shall be net profits or net assetsall of the Company legally available for the payment of such dividends. The amount of Dividends payable per share for each full dividend period shall be computed by dividing by four the 8% annual rate. The record date for the payment of dividends on the Preferred Shares shallnominees, you may mark a vote “FOR” only X seven nominees in no event be more than sixty (60) days nor less than fifteen (15) days prior tototal . If you mark a
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Dividend Due Date. Any such dividend that is to be paid in Preferred Shares shall be payable by delivery to such holders, at their respective addresses as they appear in the stock register, of certificates representing the appropriate number of duly authorized, validly issued, fully paid and nonassessable shares of Series A Preferred Shares to holders of Series A Preferred Shares, Series B Preferred Shares to holders of Series B Preferred Shares and Series C Preferred Shares to holders of Series C Preferred Shares. Any such dividend that is to be paid in cash shall be payable by delivery of such cash amounts to such holders at their respective addresses as they appear in the stock register.
(b) Formof Dividends. Dividends payable on any Dividend Due Date shall, if declared by the Board of Directors of the Company or any duly authorized committee thereof and regardless of when actually paid, accrue and be payable (i) prior to the third anniversary of the Closing, in Series A Preferred Shares to holders of Series A Preferred Shares, in Series B Preferred Shares to holders of Series B Preferred Shares and in Series C Preferred Shares to holders of Series C Preferred Shares and (ii) from and after the third anniversary of the Closing, accrue and be payable in cash. The number of Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares, as the case may be, so payable on any Dividend Due Date as a dividend per Series A Preferred Share, Series B Preferred Share or Series C Preferred Share, as the case may be, shall be equal to the amount of dividends that would have been payable on such share if such dividend were being paid in cash on such Dividend Due Date divided by the Stated Value. Any additional Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares issued pursuant to this Section 4(b) shall be governed by this resolution and shall be subject in all respects to the same terms as the Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares, respectively, originally issued hereunder. Notwithstanding anything in this paragraph to the contrary, at the sole election of the Company contained in a resolution of the Board of Directors or any duly authorized committee thereof, in substitution in whole or in part for such dividends payable in Preferred Shares (pursuant to clause (i) above), such dividends may be paid in cash to the extent of any dividends that, if paid in additional Preferred Shares, would otherwise cause the Purchasers and their Affiliates to own more than 49.9% of the capital stock of the Company on a fully diluted and Fully Converted basis.
(c) Dividend Preference. Any dividend which shall not be paid on the Dividend Due Date on which it shall become due shall be deemed to be ‘past due’ until such dividend is paid. So long as any dividend in respect of any outstanding Preferred Share shall be past due at any time such dividends are to be paid in cash in accordance with the terms hereof, the dividend rate applicable to such Preferred Share shall be increased to 10% per annum compounded quarterly.
Notwithstanding anything to the contrary set forth in this Section 4, if at any time during which any Preferred Share remains outstanding the dividend rate payable thereon exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the ‘Maximum Lawful Rate’), then in such event and so long as the Maximum Lawful Rate would be so exceeded, the dividend rate in respect of Preferred Shares shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the dividend rate payable thereon is less than the Maximum Lawful Rate, dividends shall continue to accrue thereon at the Maximum Lawful Rate until such time as the total dividends earned are equal to the total dividends which would have been earned had the dividend rate on such Preferred Share been (but for the operation of this paragraph) the dividend rate payable since the Closing.
Dividends paid on Preferred Shares in an amount less than the total amount of such dividends at the time accumulated and payable on such shares shall be allocated pro rata on a share-by-share basis among all such Preferred Shares at the time outstanding.
The rights of Series A Preferred Shares, the Series B Preferred Shares and Series C Preferred shares shall rank pari passu with each other vote “FOR” with respect to fewer than seven nominees, your Y shares will be voted by the rightnamed proxies as you instructed with respect to receive dividends,those nominees . If you mark a vote “FOR” with respect to more than seven nominees, all of your instructions on Proposal 1 will be invalid, and such Preferred Shares shall rank senior in all respectsthe named proxies will not vote your shares with respect to Common Shares, the Convertible Common Shares and all other classes and series of capital sharesany of the Company, including without limitation other classes and series of preferred shares other than the Trust Preferred (collectively, ‘Junior Shares’).nominees. YOUR VOTE IS VERY IMPORTANT – PLEASE SUBMIT YOUR PROXY TODAY CONTINUED AND TO BE SIGNED ON REVERSE SIDE PLEASE VOTE TODAY! SEE REVERSE SIDE FOR THREE EASY WAYS TO VOTE. PRELIMINARY PROXY CARD DATED OCTOBER 26, 2022, SUBJECT TO COMPLETION
If
1 . Election of seven directors for a dividend upon any Preferred Shares, or any other outstanding preferred stockterm to end as of the Company ranking on a parity2023 annual general meeting and until their successors are duly elected and qualified : While you may mark instructions with the Preferred Shares asrespect to dividends, is in arrears, all dividendsany or other distributions declared upon each series of such stock may only be declared pro rata so that in all cases the amount of dividends or other distributions declared per share of each such series bear to each other the same ratio that the accumulated and
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unpaid dividends per share on the shares of each such series bear to each other. Except as set forth above, if a dividend upon any Preferred Shares, or any other outstanding stock of the Company ranking on a parity with the Preferred Shares as to dividends, is in arrears: (i) no dividends, in cash, stock or other property, may be paid or declared and set aside for payment or any other distribution made upon any stock of the Company ranking junior to the Preferred Shares as to dividends; (ii) no stock of the Company ranking on a parity with the Preferred Shares as to dividends may be (A) redeemed pursuant to a sinking fund or otherwise, except (1) by means of a redemption pursuant to which all outstanding shares of Preferred Shares and all stock of the Company ranking on a parity with the Preferred Shares as to dividends are redeemed or pursuant to which a pro rata redemption is made from all holders of the Preferred Shares and all stock of the Company ranking on a parity with the Preferred Shares as to dividends (in each case, only so long as the Preferred Shares is otherwise redeemable pursuant hereto), the amount allocable to each series of such stock being determined on the basis of the aggregate liquidation preference of the outstanding shares of each series and the shares of each series being redeemed only on a pro rata basis or (2) by conversion of such stock ranking on a parity with the Preferred Shares as to dividends into, or exchange of such stock for, Junior Shares or (B) purchased or otherwise acquired for any consideration by the Company except (1) pursuant to an acquisition made pursuant to the terms of one or more offers to purchase all of the outstanding shares of the Preferred Shares and all stock of the Company ranking onnominees, you may mark a parity with the Preferred Shares as to dividends (which offers shall describe such proposed acquisition of all such stock ranking on a parity with the Preferred Shares), which offers shall each have been accepted by the holders of more than 50% of the shares of each series or class of stock receiving such offer outstanding at the commencement of the first of such purchase offers, or (2) by conversion of such stock ranking on a parity with the Preferred Shares as to dividends into, or exchange of such stock for, Junior Stock; and (iii) no stock ranking junior to the Preferred Shares as to dividends may be redeemed, purchased or otherwise acquired for consideration (including pursuant to sinking fund requirements) except by conversion into or exchange for Junior Shares.
(a) Priority. In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary:
(i) before any payment or distribution of the Assets of the Company (whether from paidvote “FOR” only seven nominees in share capital, share premium or surplus) shall be made to or set apart for the holders of Junior Shares or any other shares of the Company other than Trust Preferred, the holders, on a pari passu basis, of the shares of (A) Series A Preferred Shares shall be entitled to receive from the Assets of the Company, payment in cash of an amount equal to the aggregate of the Stated Value per share of each issued and outstanding Series A Preferred Share plus all accrued and unpaid dividends thereon (the ‘Series A Preferred Liquidation Preference’), (B) Series B Preferred Shares shall be entitled to receive from the Assets of the Company, payment in cash of an amount equal to the aggregate of the Stated Value per share of the issued and outstanding Series B Preferred Shares plus all accrued and unpaid dividends thereon (the ‘Series B Preferred Liquidation Preference’) and (C) Series C Preferred Shares shall be entitled to receive from the Assets of the Company, payment in cash of an amount equal to the aggregate of the Stated Value per share of each issued and outstanding Series C Preferred Share plus all accrued and unpaid dividends thereon (the ‘Series C Preferred Liquidation Preference’)total . If the Assets distributable upon such liquidation, dissolution or winding-up of the Company shall be insufficient to permit payment to the respective holders of the shares of Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares of the full preferential amounts as set forth in this Section 5(a)(i), then such Assets shall be distributed ratably among the shares of Series A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares; and (ii) any proceeds remaining after payment of the Series A Preferred Liquidation Preference, the Series B Preferred Liquidation Preference and the Series C Preferred Liquidation Preference shall be distributed ratably among the Common Shares, the Convertible Common Shares and other classes of shares of the Company in accordance with the relevant rights and restrictions thereof, if any.
(b) Notice of Liquidation. Subject to any other requirement under law, written notice of any liquidation, dissolution or winding up of the Company, stating the payment date or dates when and the place or places where the amounts distributable in such circumstances shall be payable, shall be given (not less than thirty (30) days
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prior to any payment date stated therein), to the holders of record of the Preferred Shares at their respective addresses as the same shall appear on the register of shareholders of the Company.
The following provisions are subject to compliance with applicable law, and if the exercise of these rights would violate relevant law, such rights set out below will be suspended until such rights can be exercised in compliance with applicable law:
(a) General. Each holder of Preferred Shares shall have the right, at the option of such holder, at any time to convert, upon the terms and provisions of this Section 6, one or more Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares into fully paid and nonassessable Class A Common Shares, Class B Common Shares or Class C Common Shares, respectively, or any class of shares or other securities into which such Class A Common Shares, Class B Common Shares or Class C Common Shares shall have been changed or any class of shares or other securities resulting fromyou mark a reclassification thereof.
(i) Such conversion of Series A Preferred Shares to Class A Common Shares shall be made at the conversion rate of one Series A Preferred Share for a number of Class A Common Shares equal to a fraction (the ‘Series A Conversion Ratio’), (i) the numerator of which is equal to the Series A Preferred Liquidation Preference on a per share basis and (ii) the denominator of which is equal to the Current Conversion Price in effect at such time. The Class A Common Shares issuable upon conversion of the Series A Preferred Shares, when such Class A Common Shares shall be issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and nonassessable Class A Common Shares.
(ii) Such conversion of Series B Preferred Shares to Class B Common Shares shall be made at a conversion rate of one Class B Preferred Share for a number of Class B Common Shares equal to a fraction (the ‘Series B Conversion Ratio’), (i) the numerator of which is equal the Series B Liquidation Preference on a per share basis and (ii) the denominator of which is equal to the Current Conversion Price in effect at such time. The Class B Common Shares issuable upon conversion of the Series B Preferred Shares, when such Class B Common Shares shall be issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and nonassessable Class B Common Shares.
(iii) Such conversion of Series C Preferred Shares to Class C Common Shares shall be made at a conversion rate of one Class C Preferred Share for a number of Class C Common Shares equal to a fraction (the ‘Series C Conversion Ratio’), (i) the numerator of which is equal the Series C Liquidation Preference on a per share basis and (ii) the denominator of which is equal to the Current Conversion Price in effect at such time. The Class C Common Shares issuable upon conversion of the Series C Preferred Shares, when such Class C Common Shares shall be issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and nonassessable Class C Common Shares.
(iv) To the extent necessary to prevent the Purchasers and their Affiliates from owning more than 49.9% of the capital shares of the Company upon a fully diluted and Fully Converted basis, subject to the provisions of Section 7(i) hereof, the Company shall have the right (but not the obligation) to make a cash payment in lieu of a payment in Class A Common Shares, Class B Common Shares or Class C Common Shares, as the case may be, equal to the Fair Market Value at the time of such conversion of the Common Shares that the Purchasers would have received upon Full Conversion in excess of the 49.9% limitation. Such right must be exercised, if at all, and the cash payment and related Tax Gross-Up must be paid, at the time of such conversion.
(b) Surrender, Election and Payment. Each Preferred Share may be converted by the holder thereof during normal business hours on any Business Day by surrender of such Preferred Share, accompanied by written evidence of the holder’s election to convert such Preferred Share, to the Company at its office designated pursuant to the Bye-Laws of the Company (or, if such conversion is in connection with an underwritten public offering of Common Shares, at the location at which the underwriting agreement requires that such Common Shares (or Preferred Shares) be delivered). Payment of the conversion price for the Convertible Common Shares specified in such election shall be made by applying to such payment an aggregate number of Preferred Shares equal to the number obtained by dividing (x) the number of Class A
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Common Shares, Class B Common Shares or Class C Common Shares, as the case may be, specified in such election by (y) the Series A Conversion Ratio, the Series B Conversion Ratio or the Series C Conversion Ratio, respectively. Such holder shall thereupon be entitled to receive the number of Convertible Common Shares specified in such election.
(c) Effective Date. Each conversion of Preferred Shares pursuant to Section 6(c) hereof shall be deemed to have been effected immediately prior to the close of business on the Business Day on which such Preferred Shares shall have been surrendered to the Company as provided in Section 6(c) hereof, and such conversion shall be at the Current Conversion Price in effect at such time. On each such day that the conversion of Preferred Shares is deemed effected, the person or persons in whose name or names any certificate or certificates for Class A Common Shares, Class B Common Shares or Class C Common Shares, as the case may be, are issuable upon such conversion, as provided in Section 6(e) hereof, shall be deemed to have become the holder or holders of record of such Class A Common Shares, Class B Common Shares or Class C Common Shares, as the case may be.
(d) Share Certificates. As promptly as practicable after the conversion of any Preferred Shares, in whole or in part, and in any event within ten (10) Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue, stamp or other taxes on the issue of the Convertible Common Shares or on the share certificate therefor, other than any income or capital gains taxes) will cause to be issued in the name of and delivered to the holder thereof or as such holder may direct, a certificate or certificates for the number of Class A Common Shares, Class B Common Shares or Class C Common Shares, as the case may be, to which such holder shall be entitled upon such conversion on the effective date of such conversion.
(e) Acknowledgment of Obligation. The Company will, at the time of or at any time after each conversion of Preferred Shares, upon the request of the holder thereof or of any Common Shares issued upon such conversion, acknowledge in writing its continuing obligation to afford to such holder all rights, if any, to which such holder shall continue to be entitled; provided, that if any such holder shall fail to make any such request, the failure shall not affect the continuing obligations of the Company to afford such rights to such holder.
(f) Current Conversion Price. The term ‘Conversion Price’ shall mean initially $15.69. The term ‘Current Conversion Price’ as used herein shall mean the Conversion Price, as the same may be adjusted from time to time as hereinafter provided (including, without limitation, pursuant to Section 7 hereof), in effect at any given time; provided, however, that the Current Conversion Price shall not be lower than the par value of the Class A Common Shares, the Class B Common Shares or the Class C Common Shares. In determining the Current Conversion Price, the result shall be expressed to the nearest $0.01, but any such lesser amount shall be carried forward and shall be considered at the time of (and together with) the next subsequent adjustment which, together with any adjustments to be carried forward, shall amount to $0.01 per Class A Common Share, Class B Common Share or Class C Common Share more.
(g) Reservation of Convertible Common Shares and Common Shares. The Company shall at all times reserve and keep available out of authorized but unissued the maximum number of Convertible Common Shares and Common Shares into which all Preferred Shares and Convertible Common Shares, respectively, from time to time issued and outstanding are convertible.
(h) Mandatory Conversion. The following conversion provisions shall also be applicable to the Preferred Shares:
(i) If not previously converted, all of the issued and outstanding A1 Preferred Shares, B1 Preferred Shares and C1 Preferred Shares, inclusive of all dividends paid in Preferred Shares in accordance with this Description of Stock, will be mandatorily converted into Class A Common Shares, Class B Common Shares or Class C Common Shares, respectively, on the third anniversary of the Closing (the ‘First Mandatory Conversion’). If not previously converted by the Purchasers, all of the issued and outstanding A2 Preferred Shares, B2 Preferred Shares and C2 Preferred Shares inclusive of all dividends paid in Preferred Shares in accordance with this Description of Stock, will be mandatorily converted into Class A Common Shares, Class B Common Shares or Class C Common Shares,
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respectively, on the sixth anniversary of the Closing (the ‘Second Mandatory Conversion’, and collectively with the First Mandatory Conversion, the ‘Mandatory Conversion’). To the extent that less than all of the Preferred Shares to be converted are converted (for whatever reason) the Convertible Common Shares issued in such Mandatory Conversion shall be allocated among the holders on a pro rata basis.
(ii) The conversion price used in connection with the First Mandatory Conversion shall be determined as follows:
(a) if the Current Conversion Price as of the date of the First Mandatory Conversion (the ‘Conversion Date’) is equal to or less than the Fair Market Value of the Common Shares as of the Conversion Date (the ‘Conversion Date FMV’), the Current Conversion Price used in the First Mandatory Conversion shall be the Conversion Price as of the Conversion Date;
(b) if the Current Conversion Price as of the Conversion Date is greater than the Conversion Date FMV, the conversion price used in the First Mandatory Conversion shall equal the sum of (x) the product obtained by multiplying the Conversion Date FMV by 0.8 plus (y) the product obtained by multiplying the Current Conversion Price as of the Conversion Date by 0.2.
(iii) The conversion price used in connection with the Second Mandatory Conversion shall be the Current Conversion Price as of the date of the Second Mandatory Conversion.
(iv) The mechanics for conversion and other provisions relating to the conversion of Preferred Shares set forth elsewhere in this Section 6 and in Section 7 hereof shall apply to the automatic conversion of Preferred Shares pursuant to this Section 6(h).
The Conversion Price shall be adjusted, from time to time, as follows:
(a) Adjustments for Recapitalizations, Etc. In case the Company shall (i) subdivide its outstanding Common Shares, (ii) combine the issued and outstanding Common Shares into a smaller number of shares, (iii) issue by reclassification of Common Shares, any shares of the Company or (iv) pay a dividend or make a distribution on the outstanding Common Shares in capital shares of the Company, then, in any such case, the Current Conversion Price in effect immediately prior to such action shall be adjusted to a price such that if the holder of a Preferred Share were to Fully Convert such Preferred Share immediately after such action, such holder would be entitled to receive the number of shares of the Company which such holder would have owned immediately following such action had such Preferred Shares been converted immediately prior thereto (with any record date requirement being deemed to have been satisfied), and, in any such case, such Conversion Price shall thereafter be subject to further adjustments under this Section 7. An adjustment made pursuant to this Section 7(a) shall become effective retroactively immediately after the effective date.
(b) Adjustments for Issuances of Additional Shares. Subject to the exceptions referred to in Section 7(e) hereof, in case the Company shall at any time or from time to time after the date hereof issue any additional Common Shares (‘Additional Common Shares’) either (i) for no consideration or (ii) for a consideration per share that is either (A) less than 95% of the Fair Market Value of the Common Shares on the last day prior to the date of announcement of such issuance in a registered public offering or (B) less than the Fair Market Value of the Common Shares in a private transaction, then (in the case of either clause (i) or (ii)), and thereafter successively upon each such issuance, the Current Conversion Price shall be adjusted pursuant to the following formula:
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provided, however, that any such adjustment shall be made only if such adjustment results in a Current Conversion Price less than the Current Conversion Price in effect immediately prior to the issuance of such Additional Common Shares. The Company may, but shall not be required to, make any adjustment of the Current Conversion Price if the amount of such adjustment shall be less than one percent (1%) of the Current Conversion Price immediately prior to such adjustment, but any adjustment that would otherwise be required then to be made which is not so made shall be carried forward and shall be made at the time of (and together with) the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than one percent (1%) of the Current Conversion Price immediately prior to such adjustment.
(c) Certain Rules in Applying the Adjustment for Additional Share Issuances. For purposes of any adjustment as provided in Section 7(b) hereof, the following provisions shall also be applicable:
(i) Cash Consideration. In case of the issuance of Additional Common Shares for cash, the consideration received by the Company therefor shall be deemed to be the cash proceeds received by the Company for such Additional Common Shares after deducting any commissions or other expenses paid or incurred by the Company for any underwriting of, or otherwise in connection with the issuance of such Additional Common Shares.
(ii) Non-Cash Consideration. In case of the issuance of Additional Common Shares for a consideration other than cash, or a consideration a part of which shall be other than cash, the amount of the consideration other than cash so received or to be received by the Company shall be deemed to be the value of such consideration at the time of its receipt by the Company as determined in good faith by the Board, except that where the non-cash consideration consists of the cancellation, surrender or exchange of outstanding obligations of the Company (or where such obligations are otherwise converted into Common Shares), the value of the non-cash consideration shall be deemed to be the principal amount of the obligations canceled, surrendered, satisfied, exchanged or converted. If the Company receives consideration, part or all of which consists of publicly traded securities (i.e., in lieu of cash), the value of such non-cash consideration shall be the aggregate fair market value of such securities (based on the latest reported sale price regular way) as of the close of the day immediately preceding the date of their receipt by the Company.
(iii) Options, Warrants, Convertibles, Etc.
(a) In case of the issuance, whether by distribution or sale to holders of its Common Shares or to others, by the Company of (i) any security (other than Preferred Shares and Convertible Common Shares) that is convertible into Common Shares or (ii) any rights, options or warrants to purchase Common Shares, if inclusion thereof in calculating adjustments under this Section 7 would result in a Current Conversion Price lower than if excluded, the Company shall be deemed to have issued, for the consideration described below, the number of Common Shares into which such convertible security may be converted when first convertible, or the number of Common Shares deliverable upon the exercise of such rights, options or warrants when first exercisable, as
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the case may be (and such shares shall be deemed to be Additional Common Shares for purposes of Section 7(b) hereof).
(b) The consideration deemed to be received by the Company at the time of the issuance of such convertible securities or such rights, options or warrants shall be the consideration so received determined as provided in Section 7(c)(i) and (ii) hereof plus (x) any consideration or adjustment payment to be received by the Company in connection with such conversion or, as applicable, (y) the aggregate price at which Common Shares are to be delivered upon the exercise of such rights, options or warrants when first exercisable (or, if no price is specified and such shares are to be delivered at an option price related to the Fair Market Value of the subject Common Shares, an aggregate option price bearing the same relation to the Fair Market Value of the subject Common Shares at the time such rights, options or warrants were granted).
(c) If, subsequently, (1) such number of shares into which such convertible security is convertible, or which are deliverable upon the exercise of such rights, options or warrants, is increased or (2) the conversion or exercise price of such convertible security, rights, options or warrants is decreased, then the calculations under the preceding two sentences (and any resulting adjustment to the Current Conversion Price under Section 7(b) hereof)vote “FOR” with respect to such convertible security, rights, options or warrants,fewer than seven nominees, your shares will be voted by the named proxies as the case may be, shall be recalculated as of the time of such issuance but giving effect to such changes (but any such recalculation shall not result in the Current Series A Conversion Price being higher than that which would be calculated without regard to such issuance).
(d) On the expiration or termination of such rights, options or warrants, or rights to convert, the Current Conversion Price hereunder shall be readjusted (up or down as the case may be) to such Current Conversion Price as would have been obtained had the adjustments madeyou instructed with respect to the issuance of such rights, options, warrants or convertible securities been made upon the basis of the delivery of only the number of Common Shares actually delivered upon the exercise of such rights, options or warrants or upon the conversion of any such securities and at the actual exercise or conversion prices (but any such recalculation shall not result in the Current Conversion Price being higher than that which would be calculated without regard to such issuance)those nominees .
(iv) Number of Shares Outstanding. The number of Common Shares at the time outstanding shall exclude all Common Shares then owned or held by or for the account of the Company but shall include the aggregate number of Common Shares at the time deliverable in respect of outstanding convertible securities, rights, options and warrants; provided, that to the extent that such rights, options, warrants or conversion privileges are not exercised, such Common Shares shall be deemed to be outstanding only until the expiration dates of the rights, warrants, options or conversion privileges or the prior cancellation thereof.
(d) Adjustment for Development. The Current Conversion Price shall be adjusted upwards or downwards as of each Adjustment Date (as defined below) by multiplying the Current Conversion Price immediately prior to such adjustment date by If you mark a fraction (i) the numerator of which is (x) Adjusted Shareholders’ Equity minus (y) the cumulative amount of any Loss Development (as defined below) recognized after the Closing in excess of $7,000,000 (the ‘LD Above Deductible’) and (ii) the denominator of which is the Adjusted Shareholders’ Equity, it being understood that no adjustment pursuant to this Section 7(d) shall be made if such adjustment shall increase the initial Conversion Price as adjusted by the provisions of this Section 7 other than those contained in this Section 7(d). The LD Above Deductible shall be applied on an after- tax basis. The term ‘Adjusted Shareholders’ Equity’ shall mean the common shareholders’ equity, as reflected in the GAAP financial statements of the Company as of September 30, 2001 (the ‘September Financial Statement’), provided that such shareholders’ equity shall be adjusted by substituting the loss and expense reserves set forth in the Definitive Loss Reserve Report (as defined below) for the corresponding reserves set forth in the September Financial Statement. The term ‘Adjustment Dates’ shall mean the dates of completion of the annual audit and reserve review of the Company by the Company’s duly appointed auditorvote “FOR” with respect to more than seven nominees, all of your instructions on Proposal 1 will be invalid, and the years ended December 31, 2001, 2002 and 2003 and
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the term ‘Adjustment Date’ shall mean any of such dates of completion, as well as the dates of completion of any reserve audit requested by the Purchasers. The term ‘Loss Development’ shall mean (i) any net positive or adverse loss and loss expense reserve development (including without limitation as a result of uncollectible reinsurance, net of any allowance for uncollectible reinsurance recorded as of September 30, 2001, reinstatement premiums and any adjustments in profit commissions and ceding commissions) on reserves for losses incurre on or prior to September 30, 2001 and loss adjustment expenses related thereto and establishednamed proxies will not vote your shares with respect to (x)any of the losses and loss adjustment expenses relatednominees . ONLY VOTE FOR 7 NOMINEES X OR 3 . Vote by Mail – If you do not have access to a touch - tone telephone or to the events of September 11, 2001 (the ‘WTC Loss’)Internet, please sign, date and return the proxy card in the envelope provided, or mail to : Argo Group c/o First Coast Results, Inc . , (y) lines of business other than the Discontinued Operations200 Business Park Circle, Suite 112 , Saint Augustine, FL 32095 . TO VOTE BY MAIL, PLEASE DETACH HERE, SIGN AND DATE THE PROXY CARD, AND RETURN IN THE POSTAGE - PAID ENVELOPE PROVIDED Please mark vote as in this exmple FOR AGAINST ABSTAIN THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH COMPANY NOMINEE LISTED IN ITEM 1 (A - G) AND FOR ITEMS 2 and the WTC Loss in an amount not to exceed $12,000,0003. DATED: (Signature if held jointly) (Signature if held jointly) (Title) WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN . EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC . , SHOULD INDICATE THE CAPACITY IN WHICH SIGNING . PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY . COMPANY RECOMMENDED NOMINEES 1A. Bernard C. Bailey 1B. Thomas A. Bradley 1C. Dymphna A. Lehane 1D. Samuel G. Liss 1 E . Carol A . McFate 1 F . J . Daniel Plants 1 G . Al - Noor Ramji FOR WITHHOLD CAPITAL RETURNS MASTER, LTD. NOMINEES OPPOSED BY THE COMPANY FOR WITHHOLD 1H. Ronald D. Bobman 1I. David W. Michelson 2. Approve, on an after-taxadvisory, non - binding basis, and (z) the Discontinued Operations (defined below), in each casecompensation of our Named Executive Officers. 3. Approve the appointment of KPMG LLP as set forth in the loss reserve report delivered to the Purchasers on December 10, 2001 (the ‘Definitive Loss Reserve Report’); and (ii) any liability or loss (other than legal fees and expenses) arising out of material litigation existing at the time of Closing. The term ‘Discontinued Operations’ shall mean (i) Lloyds’ Syndicate 1224, (ii) the excess and surplus lines insurance business assumed from Transnational Insurance Company and (iii) the casualty business underwritten by PXRE Direct Underwriting Managers, Inc. The Purchasers shall have the right to request a reserve audit at any time they should reasonably believe it necessary. The reserve audit shall be performed by an independent actuary mutually acceptable to the Company and the Purchasers (the ‘Appointed Actuary’). Upon conclusion of the reserve audit, the Appointed Actuary shall issue a written reserve opinion and the conclusion set forth in such reserve opinion shall be binding upon the Company and the Purchasers. The expense of any reserve audit requested by the Purchasers shall be borne by the Purchasers.
(e) Exclusions from the Adjustment for Additional Share Issuances. No adjustment of the Current Conversion Price under Section 7(b) hereof shall be made as a result of or in connection with (i) the issuance of Common Shares upon conversion of the Convertible Common Shares, (ii) the issuance or grant of any options, warrants or other rights convertible into capital shares of the Company to employees, officers and directors of the Company pursuant to restricted stock agreements or stock options or other equity compensation plans (such plans having been approved by the shareholders of the Company), or the issuance of the Company’s capital shares thereunder, in an amount notindependent registered public accounting firm for the fiscal year ending December 31, 2022 and to exceed 500,000 Common Shares per calendar year and 2,100,000 Common Shares in the aggregate (subject to adjustment pursuant to Section 7(a)) or (iii) issuances in connection with an underwritten public offering of Common Shares at a price 95% or more of the Fair Market Value at the time of such offering.
(f) Accountants’ Certification. Whenever the Current Conversion Price is adjusted as provided in this Section 7, the Company will promptly obtain a certificate of the Chief Financial Officer of the Company setting forth the Current Conversion Price as so adjusted, the computation of such adjustment and a brief statement of the facts accounting for such adjustment, and will mail to the holders of Series A Preferred Shares a copy of such certificate. The holders of the Preferred Shares may within sixty (60) days object to the calculation of the Current Conversion Price by providing written notice to the Company in accordance with the Bye-Laws of the Company, which notice will set forth the basis of such objection. Such objection shall be submitted to the Company’s auditor for review (at the expense of the Company) andrefer the determination of the Company’s auditor shall be binding.
(g) Other Adjustments. In case any event shall occur asits remuneration to which any of the provisions of this Section 7 are not strictly applicable but the failure to make any adjustment would not fairly protect the conversion rights represented by the Preferred Shares in accordance with the essential intent and principles of Sections 6 and 7 hereof, then, in each such case, upon the request of the holders of a majority of the Preferred Shares, the Company shall appoint a firm of independent public accountants of recognized national standing selected by the Board (who may be the regular auditors of the Company), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in Sections 6 and 7 hereof, necessary to preserve, without dilution, the conversion rights represented by the Preferred Shares. Upon receipt of such opinion, the Company will promptly mail copies thereof to the holders of the Preferred Shares and shall make the adjustments described therein.
(h) Consolidation, Merger or Amalgamation. If the Company shall at any time consolidate with or merge into another corporation (where the Company is not the continuing corporation after such merger or consolidation) or if the Company is amalgamated, or the Company shall sell, transfer or lease all or
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substantially all of its Assets, or the Company shall change its Common Shares into property other than capital shares of the Company, then, in any such case, the holder of a Preferred Share shall thereupon (and thereafter) be entitled to receive, upon the Full Conversion of such Preferred Shares in whole or in part, the securities or other property to which (and upon the same terms and with the same rights as) a holder of the number of Common Shares deliverable upon Full Conversion of such Preferred Share would have been entitled if such Full Conversion had occurred immediately prior to such consolidation, merger or amalgamation, such sale of Assets or such change (with any record date requirement being deemed to have been satisfied), and such conversion rights shall thereafter continue to be subject to further adjustments under this Section 7, without limiting any other rights of holders of Preferred Shares. The Company shall take such steps in connection with such consolidation, merger or amalgamation, such sale of Assets or such change as may be necessary to assure such holder that the provisions of the shares of Preferred Shares shall thereafter continue to be applicable in relation to any securities or property thereafter deliverable upon the conversion of the Preferred Shares, including, but not limited to, obtaining a written obligation to supply such securities or property upon such conversion and to be so bound by the Preferred Shares.
(i) If any adjustment to the Current Conversion Price pursuant to this Section 7 would result in the Purchasers and their Affiliates being able to convert into more than 49.9% of the capital shares of the Company upon a fully diluted and Fully Converted basis, the Company shall have the right (but not the obligation) to elect (within 5 business days of the date of the event giving rise to such adjustment) to make a cash payment in lieu of effecting such adjustment to the Current Conversion Price. Such cash payment shall equal the sum of the Fair Market Value as of the date of conversion of the Common Shares that the Purchasers would have received in excess of the 49.9% limitation upon the Full Conversion of their Preferred Shares as of the date of such adjustment plus the related Tax Gross-Up. Such cash payment shall be allocated pro rata among the Preferred Shares and shall be payable upon conversion of any such Preferred Shares pursuant to Section 6 of this Description of Stock.
(j) Notices. In case at any time:
(i) the Company shall take any action which would require an adjustment in the Current Conversion Price pursuant to Section 7(a) or (c); or
(ii) the Company shall authorize the granting to the holders of its Common Shares of any distributions on Common Shares as set forth in Section 7(a); or
(iii) there shall be any reorganization, reclassification or change of Common Shares (other than a change in par value or, if and when permitted by law, from par value to no par value or from no par value to par value), or any consolidation, merger or amalgamation to which the Company is a party and for which approval of any shareholders of the Company is required, or any sale, transfer or lease of all or substantially all of the Assets of the Company; or
(iv) there shall be a voluntary dissolution, liquidation or winding-up of the Company;
then, in any one or more of such cases, unless the matter is to be determined at a general meeting of shareholders, the Company shall give written notice to the holders of the Preferred Shares, not less than ten (10) days before any record date or other date set for definitive action, of the date on which such action, distribution, reorganization, reclassification, change, sale, transfer, lease, consolidation, merger, amalgamation, dissolution, liquidation or winding-up shall take place, as the case may be. Such notice shall also set forth such facts as shall indicate the effect of any such action (to the extent such effect may be known at the date of such notice) on the Current Conversion Price and the kind and amount of the shares and other securities and property deliverable upon conversion of the Preferred Shares. Such notice shall also specify any date as of which the holders of the Common Shares of record shall be entitled to exchange their Common Shares for securities or other property deliverable upon any such reorganization, reclassification, change, sale, transfer, lease, consolidation, merger, amalgamation, dissolution, liquidation or winding-up, as the case may be.
(a) Each of the Purchasers acknowledge that any persons designated by the Purchasers to serve on the Board of Directors who are not employees or officers of one of the Purchasers or of the general partner or managing
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partner of such Purchaser or of an entity listed on Schedule B hereto, or in the case of any Purchaser who is an individual, such individual, must be reasonably acceptable to the Board of Directors of the Company.
(b) Until such time as the Purchasers (together with their Affiliates and limited partners) no longer beneficially own in the aggregate at least 50% of the Preferred Shares acquired by such Persons under the Purchase Agreement (including for the purposes of such calculation, the Convertible Common Shares held by such Persons), the Board of Directors shall consist of eleven directors.
(c) So long as Reservoir and Rainwater collectively (together with respective Affiliates and their limited partners) beneficially owns 20% or more of the Preferred Shares acquired by Reservoir and Rainwater under the Purchase Agreement or the terms of this Description of Stock (including for purposes of such calculation, all Class B Common Shares and Class C Common Shares then held by such Persons), a Reservoir Director or Rainwater Director (at Reservoir’s election) shall serve on each of the committees of the Board of Directors; provided that a Reservoir Director or Rainwater Director shall not serve on the Audit Committee of the Board of Directors if such person does not meet the requirementsDirectors. ARGO GROUP YOUR VOTE IS IMPORTANT Please take a moment now to vote your shares of the rules and regulations of the New YorkArgo Group Common Stock Exchange (the ‘NYSE Rules’), or on the Compensation Committee if as a result the Company could not avail itself of the available exemptions of the Internal Revenue Code of 1986, as amended, or Section 16(b) of the Exchange Act, including Rule 16b-3 thereunder or any successor rule.
(d) So long as Capital Z (together with its Affiliates and their limited partners) together beneficially owns 20% or more of the Preferred Shares acquired by Capital Z under the Purchase Agreement or the terms of this Description of Stock (including for purposes of such calculation, all Class A Common Shares then held by such Persons), one of the Capital Z Directors shall serve on each of the committees of the Board of Directors; provided a Capital Z Director shall not serve on the Audit Committee of the Board of Directors if such person does not meet the requirements of the rules and regulations of the NYSE Rules or on the Compensation Committee if as a result the Company could not avail itself of the available exemptions of the Internal Revenue Code of 1986, as amended, or Section 16(b) of the Exchange Act, including Rule 16b-3 thereunder or any successor rule.
(e) Whether or not Capital Z, Reservoir or Rainwater designates any member of the Board of Directors, each of Capital Z, Reservoir and Rainwater, so long as either (together with its Affiliates and their limited partners) continues to beneficially own 20% or more of the Preferred Shares acquired by Capital Z, Reservoir or Rainwater, as the case may be, under the Purchase Agreement or the terms of this Certificate of Designations (including for the purposesupcoming Annual General Meeting of such calculation,Shareholders. All votes must be received by 9:00 a.m. local Bermuda time (8:00 a.m. Eastern Time) on December 13, 2022. YOU CAN VOTE TODAY IN ONE OF THREE WAYS: 1. Vote by Internet – Please access https : //www . pr oxyvotenow . com/argo , and follow the Convertible Common Shares held by such Persons), may designate one individual (each,simple instructions provided . Please note you must type an ‘Observer’) to attend all meetings of the Board of Directors (and any committees thereof) in a non-voting observer capacity. Each Observer shall be entitled to receive all notices, reports, presentations and materials as if the Observer were a member of the Board. Each Observer may“s” after http . You will be required to deliverprovide the unique control number printed below . OR 2. Vote by Telephone – Call toll - free from the U . S . or Canada at 1 - 855 - 457 - 4813 , on a confidentiality agreement reasonablytouch - tone telephone . If outside the U . S . or Canada, call + 1 - 575 - 635 - 4403 . Please follow the simple instructions provided . You will be required to provide the unique control number printed below . CONTROL NUMBER: You may submit your proxy by telephone or Internet 24 hours a day, 7 days a week. Your telephone or Internet vote authorizes the Company, and shall be subjectproxyholder(s) to removal from any meeting or barred from review of any information relating to (i) the Company’s relationship with the persons or series represented by such person at the Board’s option or (ii) if the Company reasonably believes upon the advice of counsel that such exclusion is necessary to preserve the attorney-client privilege. Such confidentiality agreement shall not limit the right of the such Observer to share with Capital Z, Reservoir or Rainwater, as the case may be (or any of its Affiliates, as the case may be) any confidential information relating to the Company disclosed to such Observer provided that Capital Z, Reservoir or Rainwater, as the case may be (or its Affiliates, as the case may be) maintains confidential information confidential tovote your shares in the same extentmanner as such Observer is required under such confidentiality agreement.if you had marked, signed and returned a proxy card.
(a) Designation and Number of ClassA, ClassB and ClassC Common Shares. The designation of Convertible Common Shares by this resolution shall be:
(i) ‘Class A Common Shares, $1.00 par value,’ of the Company, and the number of Class A Common Shares which the Company shall be authorized to issue shall be 10,000,000 shares;
(ii) ‘Class B Common Shares, $1.00 par value,’ of the Company, and the number of Class B Common Shares which the Company shall be authorized to issue shall be 6,666,666 and 2/3 shares; and
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(iii) ‘Class C Common Shares, $1.00 par value,’ of the Company, and the number of Class C Common Shares which the Company shall be authorized to issue shall be 3,333,333 and 1/3 shares;
(b) Priority. The Convertible Common Shares shall rank pari passu with the Common Shares.
(c) Voting.
(i) Except as otherwise provided specifically herein and in the Bye-Laws or required by Bermuda law, (A) each Convertible Common Share shall have the right and power and be entitled to vote on any question or matter upon which, or in any proceeding at which, the holders of Common Shares of the Company are entitled to vote and to be represented at and to receive notice of any meeting of shareholders (except for election or removal of directors of the Company, as to which the Convertible Common Shares shall only be able to vote for election or removal of Class IV Directors as set forth in Section 3 of this Description of Stock), (B) the holders of Preferred Shares, Convertible Common Shares and Common Shares shall vote together as one class and not as separate classes and (C) each holder of Convertible Common Shares shall be entitled to that number of votes for each Convertible Common Share held by such holder equal to the number of Common Shares that would be received by such holder if such Preferred Share were Fully Converted pursuant to Section 9(d) hereof.
(ii) Notwithstanding the foregoing, the Class A Common Shares, the Class B Common Shares and the Class C Common Shares shall be entitled to vote with the Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares in the election of the Capital Z Directors, respectively, the Reservoir Director and the Rainwater Director, respectively, in each case as set forth in Section 3 of this Description of Stock.
(d) Conversion. Convertible Common Shares shall automatically convert into Common Shares on a one-for-one ratio upon a transfer of record ownership thereof to any Person other than (i) Capital Z, Reservoir, Rainwater, or any of their respective Affiliates or limited partners (including without limitation in connection with a public offering of such shares) or (ii) a Person approved by the Board in its sole discretion. Convertible Common Shares may be converted at the option of the holder thereof into Common Shares on a one-for-one ratio at any time that such holder would be entitled to vote Preferred Shares generally in the election of directors in accordance with clause (b)(ii), (b)(iii) or (b)(iv) of Section 3 of this Description of Stock.
(e) General. Except as provided for in this Section 9 or elsewhere in this Description of Stock, the Convertible Common Shares shall have the same rights, preferences and restrictions as the Common Shares.
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October 3, 2005
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. c/o Capital Z Partners, Ltd. 54 Thompson Street New York, NY 10012
RESERVOIR CAPITAL PARTNERS, L.P.RESERVOIR CAPITAL MASTER FUND, L.P. c/o Reservoir Capital Management L.L.C. 650 Madison Avenue 26th Floor New York, NY 10022
RER REINSURANCE HOLDINGS, L.P. c/o RER Reinsurance Holdings, L.P. 777 Main Street Suite 2250 Fort Worth, TX 76102
Robert Stavis c/o Bessemer Venture Partners 1865 Palmer Avenue Suite 104 Larchmont, NY 10538
Dear Ladies and Gentlemen:
Reference is made to the Description of Stock (the “Description of Stock”) for the Series A Convertible Voting Preferred Shares, Series B Convertible Voting Preferred Shares, Series C Convertible Voting Preferred Shares, (the foregoing Series of Preferred Shares are hereinafter collectively referred to as the “Voting Preferred Shares”), Class A Convertible Voting Common Shares (“Class A Convertible Common Shares”), Class B Convertible Voting Common Shares (“Class B Convertible Common Shares”) and Class C Convertible Voting Common Shares (“Class C Convertible Common Shares”), (the foregoing Classes of Convertible Voting Common Shares are hereinafter collectively referred to as the “Convertible Common Shares”), of PXRE Group Ltd. (the “Company”). Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such terms in the Description of Stock.
WHEREAS:
(1) The Company wishes to raise additional share capital by the issue of further stock of the Company, including, without limitation, Convertible Common Shares;
(2) The Company has issued Series D Perpetual Non-Voting Preferred Shares (“Perpetual Preferred Shares”) to holders of Voting Preferred Shares, and such Perpetual Preferred Shares are mandatorily exchangeable for Convertible Common Shares;
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(3) On October 2, 2005, the Board of Directors of the Company adopted a resolution declaring it advisable to effect the division of 30,000,000 of the Company’s 300,000,000 newly authorized Common Shares into Convertible Common Shares: 10,000,000 additional Class A Convertible Common Shares, 10,000,000 additional Class B Convertible Common Shares, and 10,000,000 additional Class C Convertible Common Shares, such Convertible Common Shares to be automatically redesignated as Common Shares upon, and to the extent of, the exercise of conversion rights attaching to such Convertible Common Shares on a one-for-one basis;
(4) The Board of Directors further directed that this action be submitted for consideration of the Company’s shareholders at a Special Meeting (the “Meeting”) to be called for that purpose on November 18, 2005;
(5) Under Sections 3(c), 3(d) and 3(e) of the Description of Stock, when the Company authorizes any capital shares ranking pari passu with, or senior to, any Series of Voting Preferred Shares, or which in any manner adversely affects the holders of the Voting Preferred Shares or the Convertible Common Shares, any such action requires the consent of holders of more than 50% of each affected Series Voting Preferred Shares, voting separately; and
(6) The action to be proposed at the Meeting referenced above will increase the authorized number of Class A Convertible Common Shares, Class B Convertible Common Shares and Class C Convertible Common Shares.
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the Company and the holders of Preferred Shares and Convertible Common Shares do hereby agree and consent as follows:
1. Consent to Division of 30,000,000 of the Company’s 300,000,000 Authorized Common Shares into Convertible Common Shares. Subject to approval of the proposal referenced above by the requisite vote of the shareholders of the Company at the Meeting by ordinary resolution in accordance with the Bye-laws of the Company, the Board may amend its Bye-laws and do such other things in order to effect the division of 30,000,000 of the Company’s 300,000,000 authorized Common Shares into 10,000,000 additional Class A Convertible Common Shares, 10,000,000 additional Class B Convertible Common Shares, and 10,000,000 additional Class C Convertible Common Shares.
2. Miscellaneous. This agreement (a) shall be governed by and construed in accordance with the laws of Bermuda, without regard to principles of conflicts of laws and, in connection therewith, each party hereto consents to the exclusive jurisdiction of the Supreme Court of Bermuda over any dispute arising from this letter agreement; (b) shall not be assigned or delegated by any party hereto without the consent of the other parties hereto and shall be binding upon the parties’ respective successors and permitted assigns; (c) may be executed in counterparts and delivered by facsimile transmission; and (d) constitutes the entire agreement among the parties hereto relating to the subject matter hereof and supersedes all prior agreements or understandings among the parties hereto relating to such subject matter.
IN WITNESS WHEREOF, the Company and the holders of Voting Preferred Shares and Convertible Common Shares have caused this agreement and consent to be executed by their duly authorized representatives.
[SIGNATURE PAGES FOLLOW]
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PXRE GROUP LTD.By: /s/ Robert Myron Name: Robert MyronTitle: Senior Vice President and Treasurer
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CAPITAL Z FINANCIAL SERVICES FUND II, L.P.By: Capital Z Partners, L.P., its general partnerBy: Capital Z Partners, Ltd. its sole general partnerBy: /s/ Craig Fisher Name: Craig FisherTitle: General Counsel
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.By: Capital Z Partners, L.P., its general partnerBy: Capital Z Partners, Ltd. its sole general partnerBy: /s/ Craig Fisher Name: Craig FisherTitle: General Counsel
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RESERVOIR CAPITAL PARTNERS, L.P.By: Reservoir Capital Group, L.L.C., its sole general partnerBy: /s/ Craig Huff Name: Craig HuffTitle: President
RESERVOIR CAPITAL MASTER FUND, L.P.By: Reservoir Capital Group, L.L.C., its sole general partnerBy: /s/ Craig Huff Name: Craig HuffTitle: President
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RER REINSURANCE HOLDINGS, L.P.By: /s/ Richard E. Rainwater Name: Richard E. RainwaterTitle: General PartnerBy: Melissa T. Parish, Attorney-in-Fact /s/ Robert Stavis Robert Stavis
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PROXYPXRE GROUP LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeffrey L. Radke and John M. Modin, and each of them, as proxies and agents, with full power of substitution, to vote for and on behalf of the undersigned all of the Common Shares, Convertible Common Shares or Convertible Voting Preferred Shares of PXRE Group Ltd. that the undersigned would be entitled to vote if personally present at the Special General Meeting of Shareholders to be held on November 18, 2005 at the Company’s headquarters located at 110 Pitts Bay Road, Pembroke HM 08, Bermuda at 9:00 a.m., local time, or at any adjournment or postponement thereof.
UNLESS A CONTRARY DIRECTION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED FOR (1) A PROPOSED AMENDMENT TO PXRE GROUP’S BYE-LAWS TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES; (2) A PROPOSED EXCHANGE OF ALL PERPETUAL PREFERRED SHARES ISSUED IN A PRIVATE PLACEMENT INTO COMMON SHARES (OR CONVERTIBLE COMMON SHARES) AND THE AUTOMATIC CANCELLATION OF THE PERPETUAL PREFERRED SHARES UPON RECEIPT OF THE COMMON SHARES; (3) A PROPOSED AMENDMENT TO PXRE GROUP’S BYE-LAWS TO INCREASE THE NUMBER OF AUTHORIZED PREFERRED SHARES; AND (4) A PROPOSED DIVISION OF PXRE GROUP’S NEWLY AUTHORIZED COMMON SHARES INTO THREE PRE-EXISTING CLASSES OF CONVERTIBLE COMMON SHARES.
Please date, sign and mailyour proxy card in theenvelope provided as soonas possible.
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THIS PROXY CARD. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE 
The undersigned hereby revokes any proxy or proxies heretofore given for such shares.
Signature of Shareholder __________________ Date ______ Signature of Shareholder __________________ Date ______
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.