SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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the Registrant
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
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Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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maximum aggregate value of
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filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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March 31,
2010
Dear
Shareholder:
You are
cordially invited to attend the Annual General Meeting of Shareholders of CRM
Holdings, Ltd. to be held on Wednesday, May 5, 2010 at 12:00 p.m. (local time)
at the Fairmont Hamilton Princess, 76 Pitts Bay Road, Pembroke, Bermuda. On the
following pages you will find the formal notice of the Annual General Meeting of
Shareholders and the proxy statement.
All
holders of record of the Company’s Common Shares at the close of business on
March 23, 2010 will be entitled to notice of, and to vote at, the Annual General
Meeting of Shareholders. To assure that you are represented at the Annual
General Meeting, whether or not you plan to attend the meeting in person, please
read carefully the accompanying proxy statement, which describes the matters to
be voted upon, and please complete, date, sign and return the enclosed proxy
card promptly.
We look
forward to seeing you at the Annual General Meeting.
Sincerely,
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Chairman
of the Board of Directors
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Chief
Executive Officer
CRM
HOLDINGS, LTD.
PO
BOX HM 2062
HAMILTON
HM HX
BERMUDA
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 5, 2010
NOTICE IS
HEREBY GIVEN that the Annual General Meeting of Shareholders of CRM Holdings,
Ltd. (the Company) will be held on Wednesday, May 5, 2010, at 12:00 p.m. (local
time), at the Fairmont Hamilton Princess, 76 Pitts Bay Road, Pembroke, Bermuda,
and at any adjournment or postponement thereof, for the following
purposes:
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1.
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To
elect three Class II Directors;
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2.
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To
direct the Company to elect director designees who shall serve as
directors of the Company’s subsidiary, Twin Bridges (Bermuda)
Ltd.;
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3.
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To
appoint Ernst & Young LLP as the Company’s independent auditors for
the year ended December 31, 2010 and authorize the Board of Directors,
acting through the Audit Committee, to set the fees for the independent
auditors;
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4.
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To
approve changing the name of CRM Holdings, Ltd. to Majestic Capital,
Ltd.;
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5.
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To
approve the Company’s Amended and Restated
Bye-Laws;
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6.
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To
approve, and authorize the Board of Directors to effect a reverse share
split of the Company’s Common and Class B shares within a range of 1-for-5
shares to 1-for-10 shares; and
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7.
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To
transact such other business as may properly come before the Annual
General Meeting or at any adjournment or postponement
thereof.
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Shareholders
of record, as shown by the Register of Members of the Company, at the close of
business on March 23, 2010 are entitled to notice of, and to vote at, the Annual
General Meeting or any adjournment or postponement thereof.
All
shareholders are cordially invited to attend the Annual General Meeting. If you
do not expect to be present at the Annual General Meeting, you are requested to
complete, date and sign the enclosed proxy and mail it promptly in the enclosed
envelope to make sure that your shares are represented at the Annual General
Meeting. In order for the votes represented by your proxy to be counted, your
proxy must be received at least one hour before the Annual General Meeting. In
the event you decide to attend the Annual General Meeting in person, you may, if
you desire, revoke your proxy by voting your shares in person prior to the vote
pursuant to the proxy.
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By
Order of the Board of Directors,
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Louis
J. Viglotti, Esq.
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Secretary
and General Counsel
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Hamilton,
Bermuda
March 31,
2010
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YOUR
VOTE IS IMPORTANT
IF
YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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TABLE
OF CONTENTS
VOTING
INSTRUCTIONS AND INFORMATION
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1
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What
am I voting on?
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1
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Who
is entitled to vote?
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1
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How
do I vote?
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2
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How
many votes do I have?
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2
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What
constitutes a quorum?
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How
many votes are required to approve each proposal?
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3
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What
is the effect of abstentions and broker non-votes on voting
results?
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3
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What
is the effect of signing the proxy card but not designating how shares
should be voted?
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3
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Who
will count the votes?
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May
I change my vote or revoke my proxy?
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How
does the Board of Directors recommend I vote?
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Who
will pay for the cost of this proxy solicitation?
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What
is “householding”?
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2009
Audited Financial Statements
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PROPOSAL
NO. 1 ELECTION OF DIRECTORS
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Directors
of CRM Holdings currently serving as Class II Directors
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Board
of Directors’ Recommendation
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Directors
of CRM Holdings currently serving as Class III Directors
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Directors
of CRM Holdings currently serving as Class I Directors
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Executive
Officers who are not Directors:
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THE
BOARD AND BOARD COMMITTEES
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Meetings
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Executive
Sessions
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Board
Leadership Structure
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Committee
Charters
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Audit
Committee
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Nominating
and Corporate Governance Committee
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Compensation
Committee
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Finance
and Investment Committee
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Other
Committees
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Oversight
of Risk Management
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Director
Compensation
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CORPORATE
GOVERNANCE
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Guidelines
of Corporate Governance
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Code
of Business Conduct and Ethics
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Director
Independence and Independence Determinations
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Communications
with the Board of Directors
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COMPENSATION
DISCUSSION AND ANALYSIS
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COMPENSATION
COMMITTEE REPORT
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EXECUTIVE
COMPENSATION
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2009
Summary Compensation Table
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2009
Grants of Plan-Based Awards
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Employment
Agreements
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Annual
Incentive Cash Bonuses
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Restricted
Share Awards under Our 2005 Long-Term Incentive Plan
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Total
Mix of Compensation
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2009
Outstanding Equity Awards at Fiscal Year-End
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2009
Option Exercises and Stock Vested
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Potential
payments upon termination or change-in-control
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COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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RELATED
PARTY TRANSACTIONS
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Our
Related Party Transactions
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Our
Related Party Review, Approval or Ratification Process
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SHARE
OWNERSHIP INFORMATION
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Principal
Shareholders Table
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Section
16(a) Beneficial Ownership Reporting Compliance
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PROPOSAL
NO. 2 ELECTION OF DIRECTOR DESIGNEES OF TWIN BRIDGES (BERMUDA)
LTD.
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Nominees
for Election of Twin Bridges Director Designees:
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Board
of Directors’ Recommendation
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PROPOSAL
NO. 3. APPROVAL OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION OF THE BOARD OF
DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO SET THE FEES FOR THE
INDEPENDENT AUDITORS
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Board
of Directors’ Recommendation
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Independent
Registered Public Accountants’ Fees
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Pre-Approval
Policy for Services of the Independent Registered Public Accounting
Firm
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Audit
Committee Report
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PROPOSAL
NO. 4. CHANGE OF NAME FROM CRM HOLDINGS, LTD. TO
MAJESTIC CAPITAL, LTD.
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Board
of Directors’ Recommendation
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PROPOSAL
NO. 5. APPROVAL OF AMENDED AND RESTATED
BYE-LAWS
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Electronic
Delivery of Documents
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Treasury
Shares
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Execution
of Instruments without Seal
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Flexibility
in Titles and Identities of Officers
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Directors’
Authority
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Size
of the Board
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Capitalization
of Profits
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Poll
Voting
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Name
Change
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Text
of the Proposed Amended and Restated Bye-laws
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Board
of Directors’ Recommendation
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PROPOSAL
NO. 6. APPROVE AND AUTHORIZE THE BOARD OF DIRECTORS
TO EFFECT A REVERSE SHARE SPLIT OF OUR COMMON AND CLASS B
SHARES
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Purposes
of Reverse Share Split
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Anticipated
Effects of Reverse Share Split
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Board
of Directors Discretion
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No
Dissenters Rights
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Approval
Required
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Board
of Directors’ Recommendation
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OTHER
MATTERS
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Shareholder
Proposals
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Future
Electronic Delivery of Documents to Our Shareholders
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APPENDIX
A
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APPENDIX
B
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ANNUAL
MEETING PROXY CARD
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CRM
Holdings, Ltd.
PO
Box HM 2062
Hamilton
HM HX
Bermuda
PROXY
STATEMENT
For
the
ANNUAL
GENERAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 5, 2010
VOTING
INSTRUCTIONS AND INFORMATION
This
proxy statement is furnished in connection with the solicitation of proxies by
CRM Holdings, Ltd. (the Company, CRM Holdings, we, us or our) on behalf of the
Board of Directors (the Board or Board of Directors) for the 2010 Annual General
Meeting of Shareholders (the Annual General Meeting) to be held on Wednesday,
May 5, 2010, at 12:00 p.m. (local time) at the Fairmont Hamilton Princess, 76
Pitts Bay Road, Pembroke, Bermuda, and at any adjournment or postponement
thereof.
This
proxy statement, the attached Notice of Annual General Meeting and the enclosed
Proxy Card are first being mailed to CRM Holdings’ shareholders on or about
March 31, 2010.
What
am I voting on?
There are
six proposals scheduled to be voted on at the meeting:
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1.
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To
elect three Class II Directors;
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2.
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To
direct CRM Holdings to elect director designees to serve as directors of
Twin Bridges (Bermuda) Ltd. (Twin Bridges), our wholly-owned Bermuda-based
reinsurance subsidiary;
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3.
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To
appoint Ernst & Young LLP as the Company’s independent auditors for
the year ended December 31, 2010 and authorize the Board of Directors,
acting through the Audit Committee, to set the fees for the independent
auditors;
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4.
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To
approve changing the name of CRM Holdings, Ltd. to Majestic Capital,
Ltd.;
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5.
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To
approve our Amended and Restated Bye-Laws;
and
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6.
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To
approve and authorize the Board of Directors to effect a reverse share
split of our common and Class B shares within a range of 1-for-5 shares to
1-for-10 shares.
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Each
proposal is described in more detail in this proxy statement. Other than matters
incident to the conduct of the Annual General Meeting, we do not know of any
business or proposals to be considered at the Annual General Meeting other than
those discussed in this Proxy Statement. If any other business is proposed and
properly presented at the Annual General Meeting, the proxies received from our
shareholders give the proxy holders the authority to vote on the matter at their
discretion.
Who
is entitled to vote?
You are
entitled to notice of, and to vote at or direct the voting of your shares at,
our Annual General Meeting if you were a shareholder of record at the close of
business (Bermuda time) on March 23, 2010. As of that date, we had 16,566,489
common shares issued and outstanding. This number does not include 395,000
non-voting class B shares. The common shares comprise all of our issued and
outstanding voting shares.
How
do I vote?
You can
vote your shares at the Annual General Meeting in one of the following three
ways:
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By Internet
or Telephone.
If you have internet or telephone access, you may
submit your proxy by following the voting instructions on the proxy card.
If you vote by internet or telephone, you do not need to return your proxy
card.
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By
Mail.
Mark the enclosed proxy card, sign and date it, and return it
in the pre-paid envelope that has been provided. To be valid, your vote by
mail must be received by 5:00 p.m., Eastern Daylight Savings Time, on
Tuesday, May 4, 2010.
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In Person
at the Annual General Meeting.
You can vote in person at the Annual
General Meeting. If you own shares in street name, you will need to obtain
a legal proxy from your broker or bank and bring the legal proxy to the
meeting. Please note that if you own common shares in street name and
request a legal proxy, any previously executed proxy will be revoked and
your vote will not be counted unless you appear at the meeting and vote in
person.
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How
many votes do I have?
You will
generally have one vote for each of our common shares that you held as at the
close of business on March 23, 2010, unless you owned “controlled
shares.”
Under
Section 63 of our Amended and Restated Bye-Laws (the Bye-Laws), if the
“controlled shares” of any person would otherwise represent more than 9.9% of
the voting power of all of the shares entitled to vote at a meeting of our
shareholders, then the votes conferred by the shares of such person’s
“controlled shares” shall be reduced by whatever amount is necessary so that
after any such reduction the votes conferred by the “controlled shares” of such
person shall not exceed such 9.9% limitation. “Controlled shares” in reference
to any person means all common shares that confer the right to vote that a
person is deemed to own directly, indirectly (within the meaning of Section
958(a) of the Internal Revenue Code of 1986, as amended (the Code)), or, in the
case of a U.S. person (as defined in the Bye-Laws), constructively (within the
meaning of Section 958(b) of the Code). The reduction in votes is generally to
be applied proportionately among all shares and shareholders who are members of
the shareholder’s “control group.” “Control group” means, with respect to any
person, all shares that confer the right to vote directly owned by such person
and all shares that confer the right to vote directly owned by each other
shareholder any of whose shares that confer the right to vote are included in
the controlled shares of such person.
In
addition, if the shares held directly by any “related group” would otherwise
exceed the 9.9% limitation, then the votes conferred by the shares held directly
by members of such “related group” shall be reduced by whatever amount is
necessary so that after any such reduction the votes conferred by the shares
held directly by such related group shall not exceed the 9.9% limitation. The
reduction in votes is generally to be applied proportionately among all directly
held shares of such related group. “Related group” means a group of shareholders
that are investment vehicles and are under common control or
management.
For
purposes of applying these provisions, shareholders will be entitled to direct
that the Board (1) treat them (and certain affiliates) as U.S. persons, and/or
(2) treat them (and certain related shareholders) as one person for purposes of
determining a shareholder’s control group. The amount of any reduction of votes
that occurs by operation of the above limitations will generally be allocated
proportionately among all other shareholders. Consequently, under these
provisions certain shareholders may have their voting rights limited to less
than one vote per share, while other shareholders may have voting rights in
excess of one vote per share.
In
addition, our Board of Directors may adjust a shareholder’s voting rights to the
extent that it reasonably determines in good faith that an adjustment is
necessary in order to avoid adverse tax consequences or materially adverse legal
or regulatory treatment to us, any of our subsidiaries or any of our
shareholders or their affiliates. This adjustment may result in a shareholder
having voting rights in excess of one vote per share. Therefore, your voting
rights might increase above 5% of the aggregate voting power of the outstanding
common shares, thereby possibly resulting in your becoming a reporting person
subject to Schedule 13D or 13G filing requirements under the U.S. Securities
Exchange Act of 1934, as amended (the Securities Exchange Act of
1934).
If your
voting interests have been adjusted such that your vote is greater than or less
than one vote per share, pursuant to the terms of our Bye-Laws as described
above, then the attached proxy card indicates the voting interest attributed to
you by the Board of Directors.
What
constitutes a quorum?
A quorum
is required to transact business at the Annual General Meeting. A quorum exists
when there are not less than four persons present in person or by proxy holding
in excess of 50% of the votes entitled to be cast at the Annual General Meeting.
Votes attributable to common shares owned by shareholders who are present in
person or by proxy at the Annual General Meeting, but who elect to abstain from
voting, will be counted towards the presence of a quorum. In addition, broker
“non-votes” will be counted towards to the presence of a quorum. A broker
“non-vote” occurs when a nominee (such as a broker) holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular matter and has not
received instructions from the beneficial owner.
How
many votes are required to approve each proposal?
The
approval of each of the matters to be voted upon at the Annual General Meeting
requires the affirmative vote of a majority of the votes cast at the Annual
General Meeting, provided there is a quorum.
What
is the effect of abstentions and broker non-votes on voting
results?
Abstentions
and broker non-votes, if any, will not affect the voting results on our
proposals.
What
is the effect of signing the proxy card but not designating how shares should be
voted?
Votes
attributable to common shares held by shareholders who have signed their proxy
cards but have not designated how such shares are to be voted will be counted
towards the presence of a quorum and will be voted “FOR” Proposals Nos. 1, 2, 3,
4, 5 and 6 as described in this proxy statement.
Who
will count the votes?
The Proxy
Committee of our Board of Directors has appointed Appleby Management (Bermuda),
Ltd. as the inspector of election to count votes cast in person or by
proxy.
May
I change my vote or revoke my proxy?
Any
person signing a proxy in the form accompanying this proxy statement has the
power to revoke it prior to the Annual General Meeting or at the Annual General
Meeting prior to the vote pursuant to the proxy. A proxy may be revoked by any
of the following methods:
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by
writing a letter to our corporate secretary at: Louis J. Viglotti, Esq.,
General Counsel and Secretary, CRM Holdings, Ltd., PO Box HM 2062,
Hamilton HM HX, Bermuda, stating that the proxy is revoked;
or
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by
submitting another proxy with a later date;
or
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by
voting in person at the Annual General Meeting (attendance at the Annual
General Meeting will not, in and of itself, revoke the earlier
proxy).
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Any
notice of revocation of an outstanding proxy must be received at least one hour
before the Annual General Meeting. Any shareholder entitled to vote at the
Annual General Meeting may attend the Annual General Meeting and any shareholder
who has not submitted a proxy or who has properly revoked a proxy or who votes
prior to the vote pursuant to the proxy may vote in person at the Annual General
Meeting. Please note, however, that if your shares are held of record by a
broker, bank or other nominee, you may not vote in person at the Annual General
Meeting, unless you request and obtain a valid proxy from your bank or
broker.
How
does the Board of Directors recommend I vote?
The Board
of Directors unanimously recommends that you vote:
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1.
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FOR
the election of Keith S. Hynes, Salvatore A. Patafio and Louis Rosner as
Class II Directors;
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2.
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FOR
directing CRM Holdings to elect director designees to serve as directors
of Twin Bridges;
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3.
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FOR
the appointment of Ernst & Young LLP as the Company’s independent
auditors for the year ended December 31, 2010 and authorization of the
Board of Directors, acting through the Audit Committee, to set the fees
for the independent auditors;;
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4.
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FOR
the approval of changing the name of CRM Holdings, Ltd. to Majestic
Capital, Ltd.;
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5.
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FOR
the approval of our Amended and Restated Bye-Laws;
and
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6.
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FOR
the approval and authorization of the Board of Directors to effect a
reverse share split of our common and Class B shares within a range of
1-for-5 shares to 1-for-10 shares.
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Who
will pay for the cost of this proxy solicitation?
We will
pay the costs relating to this proxy statement, the proxy card and the Annual
General Meeting. We have retained Georgeson Shareholder Communications, Inc. to
solicit proxies personally or by mail or facsimile at an anticipated cost of
approximately $7,500, plus routine out-of-pocket disbursements. We may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to beneficial owners.
Directors, officers and regular employees may also solicit proxies by mail,
facsimile or other means or in person. They will not receive any additional
payments for the solicitation.
What
is “householding”?
If you
and others who share your mailing address own our common shares or shares of
other companies through bank or brokerage accounts, you may have received a
notice that your household will receive only one proxy statement from each
company whose shares are held in such accounts. This practice, known as
“householding,” is designed to reduce the volume of duplicate information and
reduce printing and postage costs. You may discontinue householding by
contacting your bank or broker.
You may
also request delivery of an individual copy of the proxy statement by contacting
us at (441) 295-6689, or by writing to our corporate secretary at: Louis J.
Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., PO Box HM
2062, Hamilton HM HX, Bermuda.
You may
be able to initiate householding if your bank or broker has chosen to offer this
service, by following the instructions provided by your bank or
broker.
2009
Audited Financial Statements
Under our
Bye-Laws and Bermuda law, audited financial statements must be presented to
shareholders at an annual general meeting of shareholders. To fulfill this
requirement, we will present at the annual meeting consolidated financial
statements for the fiscal year 2009, which have been audited by Ernst &
Young LLP. Those financial statements are included in our Annual Report on Form
10-K for the year ended December 31, 2009, a copy of which is being delivered,
or is otherwise made available, together with this proxy statement.
Representatives of Ernst & Young LLP are expected to attend the annual
meeting and to respond to appropriate questions and will have the opportunity to
make a statement should they so desire. No vote is required by shareholders with
respect to our 2009 audited financial statements.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Three
individuals are to be elected as Class II directors at this Annual General
Meeting. Our Board of Directors currently consists of 8 individuals, although
the size of our Board is presently fixed at 9 directors. The full Board has 9
members in the absence of any vacancies. The Board is divided into three classes
of approximately equal size serving staggered three-year terms. Currently, there
is one vacancy in Class III.
The term
of the Class II directors will expire at the Annual General Meeting. Our current
Class II directors are Keith S. Hynes, Salvatore A. Patafio, and Louis Rosner.
Each is currently a director of CRM Holdings. Upon the recommendation of the
Nominating and Corporate Governance Committee, the Board has nominated each of
Mr. Hynes, Mr. Patafio and Mr. Rosner to stand for re-election at the Annual
General Meeting as a Class II director. If elected, these directors will hold
office until their respective successors have been duly elected and qualified at
the 2013 Annual General Meeting or, if earlier, their death, resignation or
removal. The election of each nominee for director requires the affirmative vote
of a majority of the votes cast at the Annual General Meeting. Proxies cannot be
voted for a greater number of persons than the nominees named. Each person
nominated has agreed to serve if elected. If any of the nominees for director
should become unavailable for election for any presently unforeseen reason, the
persons named in the accompanying proxy card have the right to use their
discretion to vote for a substitute nominee to be determined by our Board of
Directors.
Directors
of CRM Holdings currently serving as Class II Directors
The
following is biographical information concerning the persons who currently serve
as Class II Directors, whose terms will expire in 2010, unless re-elected at the
Annual General Meeting to hold office until our annual general meeting of
shareholders in 2013:
|
|
Principal
Occupation, Business Experience and
Directorships
|
KEITH
S. HYNES
Chairman
of the Board
Director since 2005
Age
57
|
Mr.
Hynes has served as a member of our Board of Directors since November 2005
and as the Chairman of the Board since March 2009, having previously
served as Deputy Chairman since December 2006. Mr. Hynes served as a
member of the Board of Directors of one of our subsidiaries, Majestic
Insurance Company (Majestic), from November 2006 until January 2008. From
September 1999 until his retirement in March 2007, Mr. Hynes served as
Executive Vice President and Chief Financial Officer of Max Re Capital
Ltd. From 1994 to 1999, Mr. Hynes held various senior management
positions, including chief financial officer, at Renaissance Re Holdings,
Ltd. From 1983 to 1994, Mr. Hynes held various positions, including chief
financial officer, at Hartford Steam Boiler Inspection and Insurance Co,
and from 1978 to 1983, he held various positions at Aetna Life and
Casualty Company. Mr. Hynes served as a director of Grand Central Re Ltd.
from 2001 until 2007 and as a director of DaVinciRe Holdings Ltd. from
2001 to 2006. Mr. Hynes is a chartered financial analyst admitted to the
CFA Institute. Mr. Hynes graduated from the State University of New York
at Albany with a B.S. in math and computer science and holds an M.B.A. in
Finance and Accounting from the Amos Tuck School of Business at Dartmouth
College.
Mr.
Hynes has significant experience in insurance and reinsurance, spanning a
30 year career in the industry. Mr. Hynes has served as a director of
other insurance companies and has held various senior management positions
at several large insurance and reinsurance companies, most recently as
chief financial officer of Max Re Capital Ltd., a global insurance
enterprise, with over a $1 billion dollars of gross written premiums,
dedicated to providing diversified specialty insurance and reinsurance
products. In addition, Mr. Hynes has a strong background in accounting,
finance and risk assessment, and his credentials include being a chartered
financial analyst admitted to the CFA Institute and holding an M.B.A. in
Finance and Accounting.
Mr. Hynes’
experience and background provides the Board with the perspective of
someone with experience in all facets of a global insurance enterprise,
including direct responsibility for financial and accounting
issues.
|
|
|
SALVATORE
A. PATAFIO
Director since 2005
Age
65
|
Mr.
Patafio has served as a member of our Board of Directors since September
2005. Mr. Patafio, who is retired, has more than thirty years of extensive
experience in various aspects of human resources with IBM Corporation,
most recently as Human Resources Manager, Commercial Alliances. From 2002
until 2004, Mr. Patafio held the position of Manager of Human Resources at
Micron Technology. For more than five years prior to 2002, Mr. Patafio was
a Human Resources Consultant at Dominion Semiconductor L.L.C. He is a
graduate of the University of Bridgeport with a B.S. in Industrial and
Labor Relations.
Mr.
Patafio has an extensive background in human resources, spanning a 35 year
career. Mr. Patafio spent 30 years at IBM Corporation in various human
resource management positions, including several years as the Employee
Relations Manager for a 10,000 person facility. Mr. Patafio has
significant experience in staffing and recruitment, compensation,
performance planning, benefits, and employee relations, among other aspect
of human resources. In particular, Mr. Patafio’s experience and background
helps our Board address the challenges faced by our company with respect
to setting effective executive compensation and other human resources
issues.
|
|
|
|
|
LOUIS
ROSNER, ESQ.
Director since 2005
Age
61
|
Mr.
Rosner has served as a member of our Board of Directors since September
2005. Mr. Rosner has been involved in the private practice of law,
concentrating in employment, labor relations and related business matters,
since 1985. Prior to such time he was a Board Attorney and Litigation
Specialist with the National Labor Relations Board. Mr. Rosner graduated
from Cornell University with a B.S. degree and holds a J.D. from Antioch
School of Law. Mr. Rosner also serves on the board of The Work Group, a
community based non-profit agency which works with disadvantaged
youths.
Mr.
Rosner has a broad legal background in personnel and employment matters
and business affairs. Mr. Rosner’s experience includes advising employers
on personnel policies and practices, terms of employment, contractual
agreements, general business matters, strategy and regulatory issues. Mr.
Rosner has also been involved with other boards, having served as an
independent director of two non-profit agencies. Mr. Rosner’s broad
experience and background as an attorney provide him with insights into
our governance, challenges, opportunities and
operations.
|
|
|
Board
of Directors’ Recommendation
OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF MR. HYNES, MR.
PATAFIO, AND MR. ROSNER AS CLASS II DIRECTORS. PROXIES WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
Directors
of CRM Holdings currently serving as Class III Directors
The
following is biographical information concerning the persons who are currently
serving as Class III Directors, whose term will expire in 2011:
|
|
Principal
Occupation, Business Experience and
Directorships
|
CHARLES
I. JOHNSTON
Director since 2006
Age
55
|
Mr.
Johnston has served as a member of our Board of Directors since May 2006.
Since August 2008, Mr. Johnston has served as a managing director of
Deutsche Bank Securities, Inc. in the private wealth management division.
Mr. Johnston had been the managing member of Johnston Capital Management,
LLC, from April 2006 to August 2008. Before this, Mr. Johnston served as
Chief Executive Officer of Ladenburg Thalmann & Co. Inc., an
investment brokerage firm, from April 2004 until March 2005. Mr. Johnston
served as a managing director of Lehman Brothers, an investment banking
institution, where his responsibilities included acting as the global head
of the private client services group, from June 1996 until February 2004.
Mr. Johnston graduated from Colgate University with a B.A. in Russian
Studies and holds an M.B.A. from the Amos Tuck School of Business at
Dartmouth College.
Mr.
Johnston has a wide-ranging knowledge of the capital markets, having
served as the chief executive officer of a publicly traded investment
brokerage firm and in various management positions at two large investment
banking institutions, Lehman Brothers and Deutsche Bank Securities. In
addition, Mr. Johnston has significant academic credentials, including an
M.B.A. and a previous certification as a public accountant. Mr. Johnston’s
experience and background is invaluable to the Board’s oversight of our
investment strategies and objectives and capital and liquidity
resources.
|
|
|
|
|
JAMES
J. SCARDINO
Deputy
Chairman and Chief Executive Officer
Director since 2006
Age
56
|
Mr.
Scardino has served as our Chief Executive Officer since March 2009 and as
Deputy Chairman of the Board since May 2009. Mr. Scardino also serves as
the Chief Executive Officer of our operating subsidiaries, Twin Bridges,
Majestic, Compensation Risk Managers, LLC (CRM), Compensation Risk
Managers of California, LLC (CRM of CA), and Eimar, LLC (Eimar). Mr.
Scardino served as our Chief Financial Officer from August 2005 to May
2009, as Executive Vice President, Chief Financial Officer of Majestic
from July 2007 to May 2009, and as Chief Financial Officer of CRM, CRM of
CA, and Eimar from August 2005 to May 2009. From 2003 to 2005, Mr.
Scardino held the position of Senior Vice President, Finance with RSC
Insurance Brokerage, Inc., where his responsibilities included financial
management. From March 2000 until May 2003, Mr. Scardino was Executive
Vice President of Allied American Insurance Agency, Inc., where he was
responsible for program management. Mr. Scardino graduated from the
University of California, Berkeley with a B.A. in Anthropology and holds
an M.B.A. from the Amos Tuck School of Business at Dartmouth
College.
Mr.
Scardino has an extensive background in insurance, spanning a 30 year
career in the industry. Mr. Scardino has served in various financial
management positions on both the agency and insurance company sides of the
industry, including as chief financial officer of us and another large
insurance company. His academic credentials include holding an M.B.A. Mr.
Scardino’s day to day leadership as our chief executive officer provides
him with an intimate knowledge of our operations.
|
|
|
Directors
of CRM Holdings currently serving as Class I Directors
The
following is biographical information concerning the persons who currently serve
as Class I Directors, whose terms will expire in 2012:
|
|
Principal
Occupation, Business Experience and
Directorships
|
DAVID
M. BIRSNER
Director since 2005
Age
42
|
Mr.
Birsner has served as a member of our Board of Directors since September
2005. Mr. Birsner served as a member of the Board of Directors of Majestic
from November 2006 until January 2008. Since 1996, Mr. Birsner has served
as an insurance broker for Hickey-Finn and Company, Inc., where his
responsibilities have involved insurance sales and service. Mr. Birsner
graduated from Siena College with a B.A. in Marketing.
Mr.
Birsner’s background comes from the retail insurance brokerage business,
having been an insurance agent and broker for the past 14 years. Mr.
Birsner’s experience includes the placement and servicing of various types
of insurance products, including workers’ compensation, with an emphasis
on the contracting industry. From this, Mr. Birsner brings to our Board
experience and a background in sales and marketing of insurance products
from the retail agency side of the business.
|
|
|
|
|
DANIEL
G. HICKEY, SR.
Director since 2005
Age
65
|
Mr.
Hickey, Sr. has served as a member of our Board of Directors since
September 2005. Mr. Hickey, Sr. has also served as a member of the Board
of Directors of Majestic since our acquisition of Majestic in November
2006. He served as a member of the board of managers of CRM, CRM CA and
Eimar from 1999, 2001 and 2003, respectively, until December 2005. Since
1980, Mr. Hickey, Sr. has served as President of Hickey-Finn and Company,
Inc., an insurance brokerage firm, where his responsibilities have
involved sales and management functions. Mr. Hickey, Sr. graduated from
Marist College with a B.A. in Psychology. Mr. Hickey, Sr. is the father of
Daniel G. Hickey, Jr., who was our Chief Executive Officer and Chairman of
the Board prior to March 13, 2009.
Mr.
Hickey, Sr. has extensive experience in the retail insurance brokerage
business. For the past 30 years, Mr. Hickey, Sr. has owned and operated a
retail insurance agency, and Mr. Hickey, Sr. has developed a significant
background in insurance agency operations and the selling and servicing of
various insurance products, including workers’ compensation insurance.
From this, Mr. Hickey, Sr. brings to the Board an understanding of the
sales and marketing of insurance products, as well as his executive
leadership and management experience.
|
|
|
|
|
PHILIP
J. MAGNARELLA
Director since 2005
Age
72
|
Mr.
Magnarella has served as a member of our Board of Directors since
September 2005. Mr. Magnarella, who is retired, has significant experience
working in various areas of education. From 1994 until 2004, Mr.
Magnarella held various administrative and consulting positions with the
Moore County Schools in Carthage North Carolina. From 2000 until 2004, Mr.
Magnarella was also a program evaluator for Sandhills Community College
and Hoke County Schools, both in North Carolina. Mr. Magnarella graduated
from the State University College at Buffalo with a B.S. degree in
Industrial Arts Education and holds an M.Ed from the State University of
New York at Buffalo in Counseling and Guidance, a CAS from the State
University College, New Paltz, New York in Education Administration, and
an Ed.D from Columbia University, New York, N.Y. in Education
Administration.
Mr.
Magnarella has extensive experience in education, spanning over a 35 year
career. Mr. Magnarella served as the superintendent of a large school
district for 10 years, and his academic credentials include a doctorate in
education from Columbia University. Mr. Magnarella brings to our Board a
unique background from this experience in education, which provides a
perspective to the Board in leadership and governance.
|
|
|
Executive
Officers who are not Directors:
The
following is biographical information concerning each our executive officers who
are not directors:
|
|
Principal
Occupation, Business Experience and
Directorships
|
JOSEPH
F. TAYLOR
Chief Financial Officer
Age
59
|
Mr.
Taylor has served as our Chief Financial Officer since May 2009. Mr.
Taylor has also served as Executive Vice President, Chief Financial
Officer of Majestic and as Chief Financial Officer of CRM, CRM CA and
Eimar since May 2009. He previously served as our Chief Compliance
Officer from May 2008 to May 2009 and as our Senior Vice President of
Compliance from August 2005 to May 2008. From July 2002 to August 2005,
Mr. Taylor served as Chief Financial Officer of CRM. Prior to this, Mr.
Taylor held various positions in investment management, financial
management and public accounting. Mr. Taylor graduated from Iona College
with a B.BA. in Accounting and is a certified public accountant. In 2002,
Mr. Taylor filed for personal bankruptcy. In appointing Mr. Taylor to the
position of Chief Financial Officer, our Board of Directors determined
that Mr. Taylor’s past bankruptcy filing would not have a material impact
upon his ability to perform his duties due to (1) the length of time that
had elapsed since the bankruptcy filing, (2) the reasons for the filing,
and (3) his current positive net worth.
|
|
|
|
|
LOUIS
J. VIGLOTTI, ESQ.
General Counsel and Secretary
Age
53
|
Mr.
Viglotti has served as our General Counsel since September 2005 and as
Secretary since December 2005. Mr. Viglotti has also served as General
Counsel of CRM since 2002 and as General Counsel of Eimar and CRM of CA
since 2002 and 2003, respectively. Mr. Viglotti has over 20 years of legal
experience. Prior to 2002, he was a partner in the law firm of Vergilis,
Stenger, Roberts, Pergament & Viglotti in Poughkeepsie, New York. Mr.
Viglotti graduated from Marist College, with a B.A. in Pre-Law and holds a
J.D. from Pace University School of Law. Mr. Viglotti is admitted to
practice before the U.S. Supreme Court, the Federal District Courts for
the Southern and Eastern Districts of New York, and New York State
courts.
|
|
|
|
|
CHESTER
J. WALCZYK
Chief
Operating Officer
Age
55
|
Mr.
Walczyk has served as our Chief Operating Officer since September 2005.
Mr. Walczyk has served as Executive Vice President, Chief Operating
Officer and a member of the Board of Directors of Majestic since November
2006 and May 2007, respectively. Mr. Walczyk has also served as Chief
Operating Officer of CRM since November 2004 and as Chief Operating
Officer of CRM of CA and Eimar since July 2005. Prior to this, Mr. Walczyk
served as Vice President of Loss Control of CRM from 2000 to January 2003,
when he was promoted to Senior Vice President of Loss Control and Risk
Management, which position he has also held at CRM of CA since October
2003. Mr. Walczyk began his career in the industry in 1980 as a Loss
Control Consultant. Mr. Walczyk holds the professional designation of
Associate in Risk Management (ARM) and has significant experience in the
areas of risk management, underwriting, product development and marketing,
which he has used to develop and present training seminars throughout the
country. Mr. Walczyk graduated from the State University of New York at
Buffalo with a B.S. in Industrial Technology.
|
|
|
ROBERT
V. POLANSKY
Chief Marketing Officer
Age
43
|
Mr.
Polansky has served as our Chief Marketing Officer since May 2008, having
previously served as Senior Vice President of Sales and Product
Development since December 2006. From 1999 until December 2006, Mr.
Polansky was Executive Vice President of Gallagher Re, where his
responsibilities included developing and implementing new products and
managing a team of domestic reinsurance brokers. Mr. Polansky graduated
from Providence College with a B.S. in Marketing and
Finance.
|
|
THE
BOARD AND BOARD COMMITTEES
Our Board
of Directors currently consists of 8 individuals, although the size of our Board
is presently fixed at 9 directors. The Board is divided into three classes of
approximately equal size serving staggered three-year terms. There is currently
one vacancy on our Board that has not been filled. The Board has four primary
standing committees: the Audit Committee, the Compensation Committee, the
Nominating and Corporate Governance Committee and the Finance and Investment
Committee. The members of these committees are:
Name
|
Audit
Committee
|
Compensation
Committee
|
Nominating
and Corporate Governance Committee
|
Finance
and Investment Committee
|
David
M. Birsner
|
|
|
|
|
Daniel
G. Hickey, Sr.
|
|
|
|
Chair
|
Keith
S. Hynes*
|
X
|
|
|
X
|
Charles
I. Johnston*
|
Chair
|
X
|
|
X
|
Philip
J. Magnarella*
|
|
X
|
Chair
|
|
Salvatore
A. Patafio*
|
X
|
Chair
|
X
|
|
Louis
Rosner, Esq.*
|
|
|
X
|
X
|
James
J. Scardino
|
|
|
|
|
*
Independent director
In
addition to these committees, our Board also has a standing Qualified Legal
Compliance Committee, Proxy Committee and Disclosure Committee.
Meetings
The Board
and its Committees held the following number of meetings during
2009:
|
Number
of meetings in 2009
|
Board
of
Directors
|
7
|
Audit
Committee
|
4
|
Compensation
Committee
|
4
|
Nominating
and Corporate Governance
Committee
|
4
|
Finance
and Investment
Committee
|
4
|
All of
our incumbent directors attended in person, or by telephone from outside of the
United States, at least 75% of the total number of meetings of the board and any
committee on which he served. We encourage and expect all of our directors to
attend our annual general meetings of shareholders, in the absence of a
scheduling conflict or other valid reason. Seven out of eight then-current
directors attended in person the 2009 Annual General Meeting held on May 5,
2009.
Executive
Sessions
As
required by our Guidelines of Corporate Governance, the Board holds meetings in
“executive sessions.” Executive sessions are meetings of the non-employee
members of the Board (including those who may not be independent) and are
scheduled throughout the year. For 2009, the Board held five executive session
meetings.
Board
Leadership Structure
In March
2009, we separated the chairman of the Board and chief executive officer
positions. Mr. Hynes serves as our non-executive Chairman of the Board, while
Mr. Scardino serves as our Chief Executive Officer. We separated the positions
in recognition of the differences between the two roles, and we believe that
this action will improve accountability and provide checks and balances in the
boardroom. Having an independent chairman helps us ensure that our chief
executive officer is accountable for managing the company in close alignment
with the interests of shareholders, while also recognizing that managing the
board can be a separate and time intensive responsibility. The change was a
logical next step in the development of our Board and management structure. It
helps us curb conflicts of interest, promote oversight of risk, and manage the
relationship between the Board and the chief executive officer. Our chief
executive officer is responsible for overseeing the day-to-day leadership and
performance of the company, while our chairman of the Board provides guidance to
our chief executive officer, oversees Board meetings and agendas, and, if
requested by shareholders, ensures that he is available for consultation and
direct communication.
Committee
Charters
The Board
has adopted written charters for all of its committees, including the Audit
Committee, the Compensation Committee and the Nominating and Corporate
Governance Committee. The respective charters govern each committee’s duties and
conduct. Each committee reviews its charter annually for any appropriate
revisions. You may obtain copies of all of the committees’ charters free of
charge on our website at www.crmholdingsltd.bm, or by contacting our corporate
secretary at: Louis J. Viglotti, Esq., General Counsel and Secretary, CRM
Holdings, Ltd., P.O. Box HM 2062, Hamilton HM HX, Bermuda.
Audit
Committee
The Audit
Committee consists of directors Johnston, who chairs the committee, Hynes and
Patafio. Our Board has determined that all directors serving on our Audit
Committee meet the independence standards required of Audit Committee members by
the Securities Exchange Act of 1934 and Nasdaq’s listing standards. Our Board
has also determined that none of the Audit Committee members has participated in
preparing our financial statements or any of our subsidiaries’ financial
statements at any time during the past three years and that all of our Audit
Committee members are able to read and understand fundamental financial
statements, including a balance sheet, income statement and cash flow
statement.
Mr.
Hynes, who is a chartered financial analyst admitted to the CFA Institute, has
been designated as the Audit Committee financial expert. In making this
determination, our Board made a qualitative assessment of Mr. Hynes’ level of
knowledge and experience based on a number of factors, including his formal
education, past financial experience, and professional certification in
finance.
The Audit
Committee is primarily concerned with assisting our Board of Directors in
monitoring the integrity of our financial statements, our independent auditor’s
qualifications and independence, performance of our independent auditors and our
compliance with legal and regulatory requirements. The Audit Committee’s
responsibilities also include appointing, reviewing, determining funding for and
overseeing our independent auditors and their services, and to the extent it
deems necessary or appropriate among other responsibilities:
|
·
|
reviewing
and discussing with our management team and independent auditors our
audited financial statements, related accounting and auditing principles,
practices and disclosures;
|
|
·
|
reviewing
and discussing our audited annual and unaudited quarterly financial
statements before their filing;
|
|
·
|
establishing
procedures for the receipt, retention and treatment of complaints we
receive regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of
concerns regarding our financial statements or accounting
policies;
|
|
·
|
reviewing
reports from the independent auditors on all critical accounting policies
and practices to be used for our financial statements and reviewing the
results of those audits; and
|
|
·
|
monitoring
the adequacy of our operating and internal controls as reported by our
management and the independent or internal
auditors.
|
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee consists of directors Magnarella,
who chairs the committee, Patafio and Rosner. Our Board has determined that all
directors on the Nominating and Corporate Governance Committee meet Nasdaq’s
listing standards for independence.
The
Nominating and Corporate Governance Committee’s primary responsibilities are
to:
|
·
|
identify
individuals qualified to become directors for recommendation to our Board
of Directors;
|
|
·
|
identify
and recommend for appointment to our Board of Directors, directors
qualified to fill vacancies on any committee of our board of
directors;
|
|
·
|
have
sole authority to retain and terminate any consultant or search firm to
identify director candidates and to have sole authority to approve the
consultant or search firm’s fees and other retention
terms;
|
|
·
|
develop
and recommend to the Board a set of corporate governance principles and
code of business conduct and ethics applicable to us;
and
|
|
·
|
exercise
oversight of the evaluation of the Board and
management.
|
Our
Nominating and Corporate Governance Committee considers the following criteria
for membership on our Board:
|
·
|
personal
and professional integrity, exceptional ability and judgment, diversity of
experience and leadership ability;
|
|
·
|
a
high-quality education and extensive business, professional or academic
experience;
|
|
·
|
the
requisite reputation, character, skills and judgment, which, in the
Nominating and Corporate Governance Committee’s view, have prepared the
candidate for dealing with the multifaceted financial, business and other
issues that confront boards of companies with our similar size,
complexity, reputation and level of
success;
|
|
·
|
whether
or not the person has any relationships that might impair his or her
independence, such as any business, financial or family relationships with
us or our management;
|
|
·
|
whether
or not the person serves on boards of, or is otherwise affiliated with,
competing companies;
|
|
·
|
whether
or not the person is willing to serve as, and willing and able to commit
the time necessary for the performance of the duties of, a director;
and
|
|
·
|
the
contribution which the person can make to the Board and the
company.
|
The
Nominating and Corporate Governance Committee will consider all shareholder
recommendations for candidates for our Board of Directors. The Nominating and
Corporate Governance Committee will also consider candidates recommended by our
current directors, executive officers, employees and others.
All
shareholder recommendations of candidates for our Board should be in writing and
received by us between 150 days and 120 days before the date of the first
anniversary of the notice convening the previous year’s annual general meeting.
Therefore, if you are proposing to a submit a candidate for our Board for
consideration by our Nominating and Corporate Governance Committee for the 2011
Annual General Meeting, the information should be received by us between
November 1, 2010 and December 1, 2010. Your candidate recommendation submission
should contain the following information:
|
·
|
the
shareholder’s name and address, as it appears in the register of
shareholders;
|
|
·
|
a
representation that the shareholder is a holder of record of shares
entitled to vote and intends to appear in person or by proxy at the
meeting to make such nomination;
|
|
·
|
the
class and number of shares which are held by the
shareholder;
|
|
·
|
the
name and address of each individual to be
nominated;
|
|
·
|
a
description of all arrangements or understandings between the shareholder
and any such nominee and any other person or persons (naming such person
or persons) pursuant to which such nomination is to be made by the
shareholder;
|
|
·
|
a
description of all material personal and business relationships between
the shareholder and any such nominee during the prior 10
years;
|
|
·
|
such
other information regarding any such nominee that would be required to be
included in a proxy statement filed pursuant to Regulation 14A under the
Exchange Act;
|
|
·
|
the
signed consent of any such nominee to serve as a director, if so elected;
and
|
|
·
|
the
certification of any such nominee as to the accuracy and completeness of
the information provided in such
submission.
|
Once the
Nominating and Corporate Governance Committee has identified prospective
nominees, background information will be solicited on the candidates, and all
candidates will be investigated, interviewed and evaluated. The Committee then
reports its findings and recommendations to our Board for a final determination
of the nominees. No distinctions will be made between internally recommended
candidates and candidates recommended by our shareholders.
All
nominees for director in this proxy statement met our Board’s criteria for
membership and were recommended by the Nominating and Corporate Governance
Committee for election by shareholders at this Annual General
Meeting.
Compensation
Committee
The
Compensation Committee consists of directors Patafio, who chairs the committee,
Magnarella and Johnston. Our Board has determined that all directors on the
Compensation Committee meet Nasdaq’s listing standards for independence. Each
committee member is also a “non-employee director” as defined under Rule 16b-3
of the Securities Exchange Act of 1934 and an “outside director” as defined
under Code Section 162(m).
The
Compensation Committee’s responsibilities include:
|
·
|
reviewing
and approving corporate and individual goals and objectives relevant to
the compensation of our executive
officers;
|
|
·
|
evaluating
the performance of our executive officers in light of such corporate and
individual goals and objectives and, based on that evaluation, together
with the other independent directors if directed by the board of
directors, determining the base salary and bonus of the executives
officers;
|
|
·
|
administering
any management incentive plan, stock option plan or other similar plan we
may adopt and approving all grants made pursuant to such plan;
and
|
|
·
|
making
recommendations to our Board of Directors regarding director compensation
and any equity-based compensation
plans.
|
Further
information on the role of the Compensation Committee is described below under
the section entitled “Compensation Discussion and Analysis.”
Finance
and Investment Committee
The
Finance and Investment Committee consists of directors Hickey, Sr., who chairs
the committee, Hynes, Johnston and Rosner. The Finance and Investment
Committee’s primary responsibility is to oversee our Board’s responsibilities
relating to our financial affairs and make recommendations to the Board in
connection with our investment policy. The Finance and Investment Committee also
oversees:
|
·
|
our
cash management and investment policies and
guidelines;
|
|
·
|
new
business initiatives and strategic investments, policies and strategies
for achieving investment
objectives;
|
|
·
|
issuances
of our shares;
|
|
·
|
any
repurchases of our common shares;
|
|
·
|
proposed
acquisitions or dispositions of assets, material capital expenditures and
long-term commitments; and
|
|
·
|
the
performance of our investment managers and their compliance with our
investment policy.
|
Other
Committees
In
addition to these committees, our Board also has a standing Qualified Legal
Compliance Committee, Proxy Committee and Disclosure Committee.
The
Qualified Legal Compliance Committee consists of the same members as our Audit
Committee, who are directors Johnston, Hynes and Patafio. The Qualified Legal
Compliance Committee’s function is to receive, review, investigate and take any
appropriate actions on reports from our in-house attorneys or outside counsel of
material violations of U.S. federal or state laws or of a material breach of a
fiduciary duty arising under U.S. federal or state law. The Disclosure Committee
consists of certain members of our management team, including our chief
executive officer and chief financial officer. The Disclosure Committee is
primarily responsible for designing our disclosure controls and procedures and
reviewing and supervising all of our filings with the Securities and Exchange
Commission (SEC) and press releases. The Proxy Committee consists of directors
Rosner, who chairs the committee, Magnarella and Patafio. The Proxy Committee’s
primary responsibilities are to appoint the inspector of election for our annual
general meetings, represent proxies as assigned by our shareholders, oversee the
proxy voting process and ensure that all proxies are accurately
represented.
Oversight
of Risk Management
Insurance
companies make money by managing various types of risk for others. Consequently,
we are essentially a risk warehouse: we engage in writing, pricing, and serving
insurance contracts that cover workers’ compensation risks for companies and
organizations. The risk-intensive nature of our operations makes the risk
dynamics that we are exposed to very different from other industries. The risk
and volatility from our insurance products cannot be eliminated; rather we seek
to understand and mange our risk. We do this through an enterprise risk
management program. The enterprise risk management program guides us in
identifying and quantifying our risks, setting risk tolerances based on our
overall corporate objectives, and taking the necessary actions to manage risk in
light of our corporate objectives.
Our
enterprise risk management program is overseen by our vice president of internal
audit and risk management, who reports directly to our chief executive officer.
Our Audit Committee has primary responsibility for overseeing our risk
management, although our full Board of Directors is actively involved as well.
On a quarterly basis, our Audit Committee receives a report from the vice
president of internal audit and risk management that discusses the most
significant risks that we are facing as well as discussions on how the risk
exposures are tracked and monitored. Our full Board reviews our enterprise risk
management program on a whole on an annual basis. In addition, each of our Board
committees considers the risks within its area of responsibilities. For example,
our Compensation Committee considers the risks that may be implicated by our
executive compensation programs, and our Nominating and Corporate Governance
Committee focuses on risks that may result from changes in our corporate
strategy to develop and recommend to the Board corporate governance principles
and the Company’s corporate policies.
Director
Compensation
Our
current compensation and benefit program for non-management directors is
designed to achieve the following goals: compensation should fairly pay
directors for work required for a company of our size and scope; compensation
should align our directors’ interests with the long-term interests of
shareholders; and the structure of the compensation should be simple,
transparent and easy for our shareholders to understand. Our program therefore
consists of two components: retainer fees paid in cash and an annual grant of
restricted stock under our 2005 Long-Term Incentive Plan.
Our
non-employee directors receive annual compensation of $50,000 in cash as our
retainer fee for the directors’ services. We also award our directors an annual
grant of $25,000 of restricted shares, which vest over a three year period, at a
rate of one-third each year. Our directors are also reimbursed for any
out-of-pocket expenses they may incur for their services. We also pay our
directors who serve on certain committees and on the Board of Directors of
Majestic an additional cash stipend for the additional time required by such
service.
On
November 4, 2009, the Board, upon the recommendation of the Compensation
Committee, approved a decrease to the annual cash compensation paid to our
directors. This decrease resulted in a 20% reduction to the annual fees paid for
Board and committee service effective January 1, 2010, and is expected to yield
annualized pre-tax expense savings of approximately $123,000.
The
following table shows our non-management director compensation plan for the 2009
and 2010 fiscal years:
Fees
Earned or Paid in Cash($)
|
|
|
|
|
Non-Employee
Director Retainer
|
|
50,000
|
|
40,000
|
Non-Employee
Director Restricted Stock Grant (grant date fair value)
|
|
25,000
|
|
25,000
|
Chairman
of the Board
|
|
50,000
|
|
40,000
|
Audit
Committee Member
|
|
25,000
|
|
20,000
|
Audit
Committee Chairperson
|
|
50,000
|
|
40,000
|
Compensation
Committee Member
|
|
10,000
|
|
8,000
|
Compensation
Committee Chairperson
|
|
15,000
|
|
12,000
|
Nominating
& Corporate Governance Committee
|
|
10,000
|
|
8,000
|
Nominating
& Corporate Governance Chairperson
|
|
15,000
|
|
12,000
|
Finance
& Investment Committee Member
|
|
10,000
|
|
8,000
|
Finance
& Investment Committee Chairperson
|
|
15,000
|
|
12,000
|
Majestic
Board of Directors Member
|
|
25,000
|
|
20,000
|
The
following table shows the compensation earned by our non-employee directors for
the 2009 fiscal year:
Name
|
Fees
Earned or Paid in Cash ($)
|
|
|
|
|
David
M. Birsner
|
50,000
|
|
25,000
|
|
75,000
|
Daniel
G. Hickey, Sr.
|
81,058
|
|
25,000
|
|
106,057
|
Keith
S. Hynes
|
114,135
|
|
25,000
|
|
139,134
|
Charles
I. Johnston
|
99,135
|
|
25,000
|
|
124,134
|
Philip
J. Magnarella
|
75,000
|
|
25,000
|
|
100,000
|
Salvatore
A. Patafio
|
100,000
|
|
25,000
|
|
125,000
|
Louis
Rosner, Esq.
|
64,038
|
|
25,000
|
|
89,038
|
(1)
|
Each
non-employee director received an award of restricted stock valued at
$25,000 (22,727 shares) on May 5, 2009. The amounts reflected in the table
represent the aggregate grant date fair value of the equity awards made
during the fiscal year calculated in accordance with FASB ASC Topic 718,
except that no estimate of forfeitures is made. The assumptions we used to
value the stock awards are found in Note 18 to our Consolidated Financial
Statements in our annual report on Form 10-K for the year ended December
31, 2009, as filed with the SEC. The aggregate number of unvested
restricted shares held by each director at December 31, 2009 is as
follows:
|
|
Number
of Unvested
Shares
Outstanding at
December
31, 2009
|
David
M. Birsner
|
28,441
|
Daniel
G. Hickey, Sr.
|
28,441
|
Keith
S. Hynes
|
28,441
|
Charles
I. Johnston
|
28,441
|
Philip
J. Magnarella
|
28,441
|
Salvatore
A. Patafio
|
28,441
|
Louis
Rosner, Esq.
|
28,441
|
CORPORATE
GOVERNANCE
Our Board
members are kept informed of our business through discussions with our chief
executive officer and other executive officers, by reviewing materials provided
to them, by visiting our offices and by participating in meetings of the Board
and its committees. The Board is committed to good business practices,
transparency in financial reporting and the highest level of corporate
governance.
Guidelines
of Corporate Governance
Our
Board’s commitment to good corporate governance is reflected in our Guidelines
of Corporate Governance, which describe the Board’s views on a wide range of
governance topics. The Nominating and Corporate Governance Committee is
responsible for overseeing and reviewing the Guidelines at least annually and
recommending any proposed changes to the Board for approval. You may obtain a
copy of our Guidelines of Corporate Governance free of charge on our website at
www.crmholdingsltd.bm, or by contacting our corporate secretary at: Louis J.
Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM
2062, Hamilton HM HX, Bermuda.
Code
of Business Conduct and Ethics
In
addition to our Guidelines of Corporate Governance, our Board has adopted a Code
of Business Conduct and Ethics. The Code of Business Conduct and Ethics includes
provisions relating to conflicts of interest, corporate opportunities,
confidentiality, fair dealing, protection and proper use of company assets,
gifts and entertainment, equal employment opportunity and harassment, records
retention, compliance with laws, rules and regulations, and ethical behavior.
Our Code of Business Conduct and Ethics is intended to meet the definition of a
“code of ethics” under applicable SEC rules. It applies to all of our directors,
officers and employees, including our chief executive officer, chief financial
officer and other executive officers. You may obtain a copy of our Code of
Business Conduct and Ethics free of charge on our website at
www.crmholdingsltd.bm, or by contacting our corporate secretary at: Louis J.
Viglotti, Esq., General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM
2062, Hamilton HM HX, Bermuda.
Director
Independence and Independence Determinations
Under
Nasdaq’s listing standards and our Guidelines of Corporate Governance, our Board
of Directors must have a majority of “independent” directors who meet the
applicable criteria for independence. Our Board examines the independence of the
directors on an annual basis in both fact and appearance to promote arms-length
oversight. To make the independence determinations, the Board relies on the
standards set forth in Rule 5600 of the Nasdaq Marketplace Rules. The
independence standards require the Board to affirmatively determine whether a
director is “independent” by reviewing a set of objective standards. These
objective standards generally provide that no director or nominee for director
qualifies as “independent” unless our Board affirmatively determines that the
directors does not have a relationship with us which, in the opinion of the
Board, would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director. In addition to the objective standards, Rule
5600 specifies certain transactions that will automatically disqualify a
director from being considered independent.
Based
upon this, our Board has affirmatively determined that we have a majority of
“independent” directors that comprise our Board, as required by Nasdaq’s listing
standards and our Guidelines of Corporate Governance. Our independent directors
as of December 31, 2009 were directors Hynes, Johnston, Magnarella, Patafio and
Rosner. The Board believes that these directors are independent, because they
are not executive officers or employees of CRM Holdings or its subsidiaries and
otherwise satisfy all of the Nasdaq independence requirements and, in the
opinion of the Board of Directors, are not individuals having a relationship
which will interfere with the exercise of independent judgment in carrying out
the responsibilities of a director. As part of our Board’s evaluation process,
each director provided confirmation that all of the objective criteria for
independence are satisfied and that each director has no other relationship with
CRM Holdings or its subsidiaries which would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director.
Communications
with the Board of Directors
Shareholders
may communicate with our Board of Directors or the chairman of the Audit
Committee, Compensation Committee, Nominating and Corporate Governance Committee
and Finance and Investment Committee by writing to the Chairman of the Board or
the chairman of the intended committee, as the case may be, at: c/o Louis J.
Viglotti, General Counsel and Secretary, CRM Holdings, Ltd., P.O. Box HM 2062,
Hamilton HM HX, Bermuda. The envelope should clearly indicate the person or
persons to whom the corporate secretary should forward the communication.
Communications will be distributed to the Board, or to any individual director
or directors as appropriate, depending on the facts and circumstances outlined
in the communications.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This
Compensation Discussion and Analysis is designed to provide our shareholders
with an understanding of our executive compensation decision-making processes,
our compensation philosophy and program objectives, and an overview of our
executive compensation program. It discusses our Compensation Committee’s
determinations of how and why, in addition to what, compensation actions were
taken for our executive officers.
We did
not achieve our overall financial and shareholder performance expectations for
fiscal year 2009. Specifically, we experienced significant net losses and, as a
result, shareholder returns were well below desired results. Accordingly, the
following key decisions were made regarding our compensation
programs:
|
·
|
For
the second year in a row, we paid no bonuses to our executive officers,
and our Compensation Committee does not anticipate paying bonuses to our
executive officers until we return to
profitability.
|
|
·
|
No
long-term incentive awards were granted to our executive officers based on
our 2009 financial results and share
price.
|
|
·
|
Because
our long-term incentive program is denominated entirely in equity
vehicles, it has reflected the decline in our stock price, such that our
executive officers’ unvested restricted shares have declined in value
along with the declines in our share
price.
|
|
·
|
Four
of our executive officers volunteered a temporary 6% reduction to their
respective base salaries effective January 1,
2010.
|
|
·
|
We
have continued a company-wide base salary freeze for
2010.
|
Our
Named Executive Officers
We made
the following changes to our management team and executive officer positions
during 2009:
|
·
|
Mr.
Hickey, Jr., our founder, chairman of the board and chief executive
officer, resigned from the company on March 13, 2009 (for further
information concerning Mr. Hickey, Jr.’s resignation and severance, see
“Employment Agreements — Mr. Hickey, Jr.”
below).
|
|
·
|
Mr.
Scardino, our former chief financial officer, was promoted to chief
executive officer on May 5, 2009, having served as our acting chief
executive officer after Mr. Hickey, Jr.’s
resignation.
|
|
·
|
Mr.
Taylor, our former chief compliance officer, was promoted to chief
financial officer on May 5, 2009.
|
For 2009,
our Named Executive Officers and their titles were:
|
|
|
James
J. Scardino
|
|
Chief
Executive Officer/Chief Financial Officer
|
Joseph
F. Taylor
|
|
Chief
Financial Officer
|
Louis
J. Viglotti
|
|
General
Counsel and Secretary
|
Chester
J. Walczyk
|
|
Chief
Operating Officer
|
Robert
V. Polansky
|
|
Chief
Marketing Officer
|
Daniel
G. Hickey, Jr.
|
|
Former
Chief Executive Officer
|
Our
Executive Compensation Decision Process
Overview
Our
compensation planning and decision-making process is an on-going process.
Although many of the decisions are made in either the fourth or first quarter of
a fiscal year, the compensation planning process neither begins nor ends with
any particular meeting. This continued to be the case during 2009. Our
Compensation Committee regularly met to review and continue developing our
compensation programs. Our Compensation Committee’s intention is to continually
review our business and succession planning and evaluate our executive officers’
performance and their compensation packages.
Management’s
Role in the Compensation Setting Process
Our
corporate staff (including finance, human resources and legal staff members)
supports the Compensation Committee in its work and no executive officers (other
than the chief executive officer, with respect to compensation for each of the
other executive officers) determine or recommend the amount or form of executive
compensation.
Our chief
executive officer plays a significant part in the compensation setting process
for our executive officers (except for his own). Generally, our chief executive
officer’s role is to:
|
·
|
evaluate
the performance of each executive, other than
himself,
|
|
·
|
recommend
business performance-targets and objectives to our Compensation Committee
for the upcoming year with respect to each executive, other than himself,
and
|
|
·
|
recommend
salary levels with respect to each executive, other than
himself.
|
Our
Compensation Committee is solely responsible for making decisions with respect
to our chief executive officer’s compensation package.
Compensation
Advisors
Our
Compensation Committee’s charter grants it the authority to hire and fire
advisors and compensation consultants. We are obligated to pay any advisors
retained by the Compensation Committee. These advisors report directly to the
Committee. Consistent with its charter, the Compensation Committee is not bound
by the recommendations provided by its professional advisors, and reserves the
right to make decisions which are inconsistent with that advice, to the extent
that the Committee believes such decisions are in our best interests. Our
Compensation Committee did not engage any consultants during 2008 or
2009.
Competitive
Market Analysis
When
making compensation decisions, our Compensation Committee will sometimes
consider the compensation of our executive officers relative to the compensation
paid to similarly-situated executives at companies that we consider to be our
peers. Under this approach, our Compensation Committee uses comparable company
analysis or survey data as a “market check” after determining the compensation.
We believe that information regarding pay practices at other companies can be
useful in three respects:
|
·
|
our
compensation practices must be competitive in the
marketplace,
|
|
·
|
the
marketplace information is one of the many factors that we consider in
assessing the reasonableness of compensation,
and
|
|
·
|
the
information helps us to establish the targets for our compensation
decisions.
|
This is
not to say, however, that we will solely rely on these analyses. Rather, we
believe that competitive market analysis should be just that—a point of
reference for measurement—but not the determinative factor for our executive
officers’ compensation. We do not believe that it is appropriate to establish
compensation levels exclusively based on competitive market analysis, because we
believe that we must make decisions based upon our business objectives. As such,
our competitive market analysis is not outcome determinative in our decisions
but instead provides us with confirmation that our compensation packages were
similar to those of our peer group.
During
2009, our Compensation Committee considered a competitive market analysis for
our chief executive officer’s compensation. Our Compensation Committee reviewed
surveys, reports, and other market data compiled by Equilar Inc., an on-line
database of executive and director compensation, which is drawn directly from
SEC filings. Our Compensation Committee considered the information from Equilar
in setting the compensation of our chief executive officer following our
management changes. The compensation information from Equilar was used by our
Compensation Committee to measure the competitiveness of our proposed chief
executive officer compensation package against that of other companies within
our industry with comparable revenues.
The
following companies comprised our performance peer group:
American
Physicians Capital Inc.
|
Mercer
Insurance Group, Inc.
|
American
Safety Insurance Holdings, Ltd.
|
National
Interstate Corp.
|
Amerisafe,
Inc.
|
Navigators
Group, Inc.
|
Baldwin
& Lyons, Inc.
|
NYMAGIC,
Inc.
|
Brooke
Corp.
|
Procentury
Corp.
|
Citizens,
Inc.
|
Radian
Group, Inc.
|
Darwin
Professional Underwriters, Inc.
|
RLI
Corp.
|
Employers
Holdings, Inc.
|
Seabright
Insurance Holdings, Inc.
|
First
Mercury Financial Corp.
|
Specialty
Underwriters Alliance, Inc.
|
FPIC
Insurance Group, Inc.
|
Tower
Group, Inc.
|
Gainsco,
Inc.
|
Universal
Insurance Holdings, Inc.
|
Meadowbrook
Insurance Group, Inc.
|
|
Evaluations
Our
Compensation Committee’s charter and our Guidelines of Corporate Governance
require an annual review by the Compensation Committee of the chief executive
officer’s corporate and individual goals and objectives relevant to his
compensation. These findings then help our Compensation Committee in setting our
chief executive officer’s base salary and bonus, subject to the terms of his
employment agreement.
Our
Compensation Committee used a formal evaluation to set the chief executive
officer’s compensation package for 2009. This process included receiving input
from our Board of Directors and other executive officers through a written
questionnaire. The questionnaire’s responses were then reviewed by our
Compensation Committee on an anonymous basis and discussed with the chief
executive officer. The evaluations allowed the Compensation Committee to
continually work with our chief executive officer to highlight and improve on
his strengths and weaknesses. The evaluations also provide our Compensation
Committee with a form of subjective analysis to assist in setting future
incentive payments. Our Compensation Committee completed its evaluation for the
2009 performance period in March 2010.
For the
other executive officers, our Compensation Committee uses an informal evaluation
process that includes regular review of our on-going business performance
compared with their objectives and discussions with the chief executive officer,
other members of our Board and our other executives.
Our
Compensation Philosophy and Program Objectives
Our core
compensation philosophy is to pay our executive officers competitive levels of
compensation that best reflect their individual responsibilities and
contributions to us, while providing incentives to achieve our business and
financial objectives. We endeavor to reward our executive officers for proactive
and timely performance, value creation, achievement of our business plan,
performance at or above the expected levels and an overall entrepreneurial
spirit. For our executive officers whose roles directly impact the production of
our revenues (producers), we seek to reward the executives through higher annual
incentive opportunities and lower base salaries, thereby implementing our
philosophy of more pay-for-performance. Our compensation programs are also
designed, in part, to encourage our executive officers to think and act like,
and over time to become, shareholders of our company. We want our executive
officers to profitably grow our business and to take appropriate risk with our
capital in order to generate returns for our shareholders, while at the same
time sharing the downside risk if those risks cause poor performance or
loss.
We
therefore try to create an environment that fosters and rewards the following
objectives:
Objective
|
Discussion
|
Execution
and Efficiency
|
We
seek to reward our executive officers for effectively executing all phases
of our business operations and for achieving key benchmarked goals,
including prudent revenue and premium growth, net income growth, strong
return on equity, and a favorable combined ratio (which is the amount that
an insurer must pay to cover claims and expenses as a percentage of every
dollar of earned premium).
|
Company
Performance
|
We
seek to reward our executive officers for the following performance
objectives:
●
finding
and assuming attractively priced risk for our workers’ compensation
insurance products;
●
generating profitable returns on our fee-based workers’
compensation products;
●
strategic partnerships; and
●
positive return on equity and enhancement of our capital
position.
|
Individual
Performance
|
We
seek to reward our executive officers for their personal contribution to
both short-term and long-term business results, their successful execution
of key strategic objectives, their demonstrated leadership capability,
their demonstrated application of relevant technical expertise, and their
ethical conduct and regulatory
compliance.
|
While we
believe that overall compensation levels should be sufficiently competitive to
attract, maintain and motivate skilled and talented executives, we also believe
that compensation must be set at reasonable levels.
Our
Executive Compensation Program
Overview
Our
executive officers’ compensation program consists of the following four
components:
|
·
|
Long-Term
Incentive Awards
|
|
·
|
Additional
Benefits and Perquisites
|
We
believe that an appropriate mix of short-term compensation, such as base
salaries, annual cash bonuses, and perquisites, with long-term compensation
helps us to achieve our compensation philosophy and objectives. We also believe
that the appropriate mix of these elements helps our goals of aligning our
executives’ interests with those of our shareholders. The proportions of our
named executive officers’ individual compensation components in relation to
their total compensation for 2009 are presented below under the heading
“Executive Compensation – Total Mix of Compensation.” Based on this, we believe
that our executive officer’s compensation program strikes an appropriate balance
between salary and incentive compensation policies. The short-term and long-term
incentives are tied to the evaluation of our executive officers’ performance as
a whole. We use a holistic approach to executive compensation but try to balance
the individual compensation elements for each executive officer
individually.
Base
Salary
Base
salary is an important element of our executive officers’ compensation program.
We seek to recognize the experience, skills, knowledge and responsibilities of
our executive officers. We establish base salary levels which also seek to
provide our executive officers with a minimum level of monthly income and steady
cash flow during the course of the year that is not contingent on short-term
variances in our operating performance.
The base
salary amounts are set by our Compensation Committee by using its subjective
judgment to determine the appropriate amounts. The base salary level of our
executive officers are based on our overall compensation philosophy, the
experience and industry knowledge of the executive officer, the quality and
effectiveness of his leadership abilities, the input from our chief executive
officer (other than with respect to his base salary) and the base salaries paid
to executives in comparable positions at companies in the same industry. We did
not apply any specific weighting to these factors, but instead relied on our
subjective judgment and an understanding of the market for executive officers in
the insurance industry.
We
annually review our executives’ base salaries and expect our executive officers’
salaries to stay relatively constant, materially increasing their respective
salary levels only when the insurance market changes drastically or when an
executive assumes a larger role. When doing so, we will primarily consider our
compensation philosophy, our business performance, the present state of the
insurance industry employment market and overall increases in the economic cost
of living.
In
connection with the management changes during 2009, we increased the base
salaries of two of our executive officers. These increases were consistent with
our compensation philosophy of materially increasing salary levels when an
executive officer is promoted and assumes a larger role and more
responsibilities within our organization.
Mr.
Scardino, our former chief financial officer, was promoted to chief executive
officer on May 5, 2009. As a part of this promotion, his base salary was
increased from $350,000 to $450,000, a 29% increase. However, while the base
salary received by Mr. Scardino increased, the base salary paid to the chief
executive officer position actually decreased – from $650,000 to $450,000, or a
31% decrease. Our Compensation Committee set Mr. Scardino’s base salary at
$450,000, using its subjective judgment, taking into account current market
conditions and our current and projected business and operations.
Mr.
Taylor, our former chief compliance officer, was promoted to the role of chief
financial officer on May 5, 2009. As a result of this promotion, Mr. Taylor’s
base salary was increased from $200,000 to $275,000, a 38% increase. However,
similar to our chief execution position, while Mr. Taylor’s base salary
increased, the base salary paid to our chief financial officer position actually
decreased – from $350,000 to $275,000, or a 21% decrease. Our Compensation
Committee set Mr. Taylor’s base salary at $275,000, using its subjective
judgment, taking into account current market conditions and our current and
projected business and operations.
In
addition, we increased Mr. Polansky’s base salary to $265,000 from $250,000, or
a 6% increase, which took into account the contractual protections foregone by
Mr. Polansky when he became an “at will” employee when his employment agreement
expired by its terms effective January 1, 2010.
The base
salaries of chief operating officer and general counsel remained the same in
2008 and 2009. These were the minimum amounts for base salaries required under
their respective employment agreements.
Effective
January 1, 2010, four of our executive officers volunteered a temporary 6%
reduction to their base salaries. The four executive officers are Mr. Scardino,
Mr. Taylor, Mr. Viglotti, and Mr. Walczyk. The salary reduction will continue at
the executive officer’s discretion and will be reviewed no later than November
1, 2010. The adjustment will not change any terms of the employment contracts
and will not otherwise affect the determination of other amounts owing or that
may become owing under the contracts that are based on the level of base salary.
The reduction was offered in view of our 2009 operating results and in support
of our cost reduction strategy and return to profitability.
Annual
Cash Bonuses
In
addition to base salaries, our executive officers are eligible for annual cash
bonuses. We did not pay cash bonuses for 2008 or 2009, and we do not expect to
pay any bonuses for 2010.
Cash
bonuses are intended to reward individual performance by achieving specified,
performance-based goals established for the year. Our Compensation Committee
annually reviews our executive officers’ cash bonus opportunities. We believe
cash bonuses can represent an integral part of our compensation philosophy and
can provide an incentive to create business and shareholder value.
Incentive Opportunities
. Our
executive officers are eligible for cash bonuses under their respective
employment agreements. Our Compensation Committee has discretion to award annual
incentive payments up to a specified percentage of executive officer’s base
salary, which can be paid in cash, restricted shares under our equity incentive
plan, or a combination thereof. The following table shows the potential
incentive payouts to our executive officers:
|
|
Bonus
at Target
Performance
Level
|
|
Bonus
at Maximum
Performance
Level
|
Chief
Executive Officer
|
|
50%
of Base Salary
|
|
100%
of Base Salary
|
Chief
Financial Officer
|
|
50%
of Base Salary
|
|
75%
of Base Salary
|
Chief
Operating Officer
|
|
50%
of Base Salary
|
|
75%
of Base Salary
|
General
Counsel
|
|
50%
of Base Salary
|
|
75%
of Base Salary
|
In making
the annual incentive payment award determinations, our Compensation Committee
determines the amounts based on its subjective judgment using both quantitative
business factors and qualitative input from our chief executive officer
regarding his evaluation of the annual performance and contribution of each
executive officer (other than his own performance).
During
2009, our chief marketing officer had an employment agreement that provided for
an annual cash incentive opportunity of 40% of his annual salary. As opposed to
our other executive officers, our chief marketing officer’s incentive
opportunity did not provide for payment of the incentive opportunity in
restricted shares. This difference was based on him being a “producer,” and we
therefore sought to reward him through annual cash incentive opportunities and a
lower base salary. This employment expired by its terms effective January 1,
2010, and Mr. Polansky has continued his employment with us as our chief
marketing officer on “at will” basis. Therefore, Mr. Polansky is eligible for
discretionary annual incentive opportunities in amounts set by our Compensation
Committee.
Performance Goals for 2009
.
Our Compensation Committee determined at the end of 2008 that annual incentive
compensation awards would be not be paid for 2009 based on our projected
financial results. As a result, our Compensation Committee did not set
performance goals for 2009.
In
previous years, our Compensation Committee retained discretion to award annual
incentive payments to our executive officers on a discretionary basis, relying
in part on earnings per share performance targets established in the beginning
part of the year. This would be combined with a subjective judgment
determination and qualitative considerations by the Committee. We believe that
considering an earnings per share target reflects our continuing desire to
create shareholder value and provides for a direct linkage to shareholder
expectations and share price growth. We may, however, shift our performance
targets away from earnings per share or net income in the coming
years.
No Incentive Payouts for
2009
. Our Compensation Committee did not award annual incentive cash
bonuses to our executive officers for 2009. This decision was based on our poor
financial results for the 2009 fiscal year. We believe that not paying annual
incentive cash bonuses is consistent with our compensation philosophy and
program objectives of paying our executive officers incentives for achieving our
business and financial objectives.
Based
upon our current expected levels of financial performance for 2010, cost
reduction strategy and desire to return to profitability, our Compensation
Committee does not expect to pay annual cash bonuses to our executive officers
based on our expected 2010 performance. Our Compensation Committee, however,
retains the discretion to review the bonus parameters and may pay discretionary
cash bonuses to our executive officers upon our actual performance substantially
exceeding our current levels of expected financial performance.
Long-Term
Incentive Awards
We
adopted the 2005 Long-Term Incentive Plan that provides for grants of incentive
stock options, non-qualified stock options, restricted shares, stock
appreciation rights, performance awards, restricted share units, phantom shares
and other share based awards to our executives, directors and key employees. The
2005 Long-Term Incentive Plan is administered by our Compensation Committee. We
believe that stock-based incentives should be appropriately granted to our
executive officers to help align their interests with those of our shareholders,
in accordance with our compensation policy. Through these equity grants, we seek
to emphasize the importance of improving the performance of our stock price,
increasing shareholder value over the long-term and encouraging our executive
officers to own our common shares.
To date,
we have only granted restricted shares, despite other equity awards, including
stock options, being available under the plan. The restricted shares vest in
three equal installments over a three-year period from when they are granted. We
believe these grants provide an effective means of long-term incentive
compensation because:
|
·
|
the
vesting feature of the shares provides an incentive to remain employed
with us;
|
|
·
|
the
long-term nature of the vesting period provides the executives with an
incentive to improve stock price performance and to increase our
shareholder value; and
|
|
·
|
using
restricted shares allows us to fix our compensation costs at the date of
grant, instead of expensing stock options which is subject to the
volatility of our stock price.
|
Our
Compensation Committee did not grant awards of restricted shares to our
executive officers as part of the 2009 annual performance review and
compensation determination. In making this decision, our Compensation Committee
considered our current share price and the failure of our 2009 financial results
to achieve our expectations.
Our
Compensation Committee did, however, grant awards of restricted shares to Mr.
Scardino and Mr. Taylor in connection with our management changes in May 2009.
Mr. Scardino received a grant of 100,000 restricted shares, which had a grant
date fair value of $110,000, or 24% of his increased base salary, upon his
full-time assumption of the chief executive officer position. Mr. Taylor
received a grant of 25,000 restricted shares, which had a grant date fair value
of $27,500, or 10% of his increased base salary, upon his assumption of the
chief financial officer position. The amounts were determined by the
Compensation Committee’s using its subjective judgment and took into account the
incentive to assume new responsibilities, the long-term vesting of the feature
of the restricted shares, the reduction in base salaries associated with the
positions, and the fact that both positions were filled internally.
Additional
Benefits and Perquisites
Our final
primary compensation element consists of other benefits and perquisites provided
to our executive officers.
All of
our executive officers are eligible to participate in our employee benefit
plans, including medical, dental, vision, group life insurance, disability and
our 401(k) plan. In each case, we provide these benefits to our executive
officers on the same basis as our other employees.
We have a
tax-qualified employee stock purchase plan, generally available to all employees
including executive officers, that allows participants to acquire our common
shares at a discount price. This plan has a three-month look-back and allows
participants to buy our common shares at a 15% discount to the market price with
up to 15% of their salary (subject to IRS limits), with the objective of
allowing employees to profit when the value of our common shares increases over
time.
We also
provide our executive officers with perquisites, including vehicle allowances,
tax gross-ups, life insurance policy premiums, housing allowances, personal
financial or tax advice, which are described in more detail in a footnote to our
Summary Compensation Table. We believe that the provided perquisites are
generally comparable to those offered to executive officers in companies similar
to our size and industry. We also believe that these perquisites help us to
attract and retain our executives. Our Compensation Committee regularly reviews
these benefits to determine that such prerequisites are reasonable and
justified. If our Compensation Committee determines that the perquisites are not
reasonable or justified, then our Compensation Committee may stop offering the
perquisites to our executive officers.
Severance
and Change-in-Control Agreements
Finally,
we also provide our executive officers with severance and change-in-control
benefits under their employment agreements. We believe that severance packages
are a common characteristic of compensation for key executive officers. They are
intended to provide our executive officers with a sense of security in making
the commitment to dedicate their professional career to our success. Due to our
size relative to other public companies and our relatively short operating
history, we believe that severance and change-in-control agreements are
necessary to help us attract and retain necessary skilled and qualified
executive officers to continue to grow our business.
Our
Compensation Policies
Section
162(m) Policy
Section
162(m) of the U.S. Internal Revenue Code denies a U.S. federal income tax
deduction for compensation paid in excess of $1 million by our U.S. domiciled
subsidiaries to our chief executive officer and next four most highly
compensated executive officers. Qualified performance-based compensation is not
subject to the deduction limit if certain requirements are met.
To date,
we have not adopted a “Section 162(m)” policy, but we may do so in the future.
We believe that our Compensation Committee will consider the impact of Section
162(m) in the future and will design our executive compensation program, such as
our annual incentive payments and restricted stock awards, to be eligible for
tax deductions to the extent permitted by the relevant tax regulations,
including Section 162(m) of the Code. However, we may from time to time pay
compensation to our executive officers that may not be deductible if there are
non-tax reasons for doing so.
Common
Share Ownership Requirements
Part of
our compensation philosophy involves common share ownership by our executive
officers, because we believe that it helps to align their financial interests
with those of our shareholders. We also recognize, on the other hand, that our
executive officers cannot acquire more than 10% of our common shares without
triggering adverse tax consequences. We have not adopted a formal written policy
on common share ownership requirements, because of these stringent tax
guidelines. We do, however, strongly encourage our executive officers to acquire
and own our common shares. We also recognize that the use of hedging instruments
creates a divergence in the alignment of interests and, consequently, strongly
discourage our executives from using hedging instruments that would diminish
their financial risk of ownership.
Timing
of Awards
Our
Compensation Committee has the sole authority to issue equity awards under our
2005 Long-Term Incentive Plan. We do not expect the Compensation Committee to
delegate any authority to our executive officers to grant awards, although it is
allowed to do so under the plan. Other than new hires, we and the Compensation
Committee plan to tie the grant of equity awards to specific, recurring dates,
generally coinciding with our quarterly Compensation Committee meetings. We
believe this approach will guard against possible manipulations of issuance
dates benefiting our executive officers or employees. We also expect that the
Compensation Committee may make annual restricted stock awards to our executive
officers and key employees.
Financial
Restatement
Although
we have not adopted a formal written policy, it is our Board of Directors’
informal policy that the Compensation Committee will, to the extent permitted by
governing law, have the sole and absolute authority and discretion to make
retroactive adjustments to any cash or equity based incentive payments to
executive officers where the payment was based upon the achievement of certain
financial results that were subsequently the subject of a restatement, without
regard to misconduct being involved. If the Compensation Committee were to
exercise this discretion, we would seek to recover any amount determined to have
been improperly paid to the executive.
Relationship
between Compensation and Risk
We have
reviewed our compensation policies and practices for all employees, including
our executive officers, and determined that our compensation programs will not
have a material adverse effect on us. In reaching this conclusion, we reviewed
our compensation programs for certain design features which have been identified
by experts as having the potential to encourage excessive risk-taking, including
too much focus on equity; compensation mix overly weighted toward annual
incentives; highly leveraged payout curves and uncapped payouts; unreasonable
goals or thresholds; and steep payout cliffs at certain performance levels that
may encourage short-term business decisions to meet payout
thresholds.
We have
noted several design features of our compensation programs for all employees,
including our executive officers, which reduce the likelihood of excessive
risk-taking:
|
·
|
Our
annual cash incentives for all employees, including our executive
officers, are discretionary in nature, which allows our Compensation
Committee and management to consider all aspects of our
performance.
|
|
·
|
Our
annual cash incentive targets focus on our overall performance,
profitability and stock price; we do not pay incentives based on
particular operating unit or business line
results.
|
|
·
|
Our
program design seeks to provide a balanced mix of cash and equity and
annual and longer-term incentives.
|
|
·
|
We
currently do not grant stock
options.
|
|
·
|
The
three-year vesting feature of our restricted stock awards discourages
short-term risk taking and accounts for the time horizon of
risk.
|
|
·
|
We
impose “claw back” provisions on annual incentive payments made to our
executive officers, which allows us to make retroactive adjustments to any
cash or equity based incentive payments to executive officers where the
payments were based upon the achievement of financial results that were
later restated, without regard to misconduct being
involved.
|
|
·
|
We
consider compliance and ethical behaviors as integral factors in all
performance assessments.
|
COMPENSATION
COMMITTEE REPORT
We have
reviewed and discussed the Compensation Discussion and Analysis with management.
Based on our review and discussion with management, we have recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this proxy statement and CRM Holdings’ annual report on Form 10-K for the year
ended December 31, 2009.
|
|
|
Compensation
Committee
|
|
|
|
|
Salvatore
A. Patafio (Chairman)
|
|
|
|
|
Dr.
Philip J. Magnarella
|
|
|
|
|
|
|
EXECUTIVE
COMPENSATION
2009
Summary Compensation Table
The
following table sets forth information concerning the compensation of our named
executive officers during the fiscal years ended December 31, 2007, 2008 and
2009:
Name
and principal position
|
|
|
|
|
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
All
Other
Compensation
($)(4)
|
|
|
James
J. Scardino,
Chief
Executive Officer / Chief Financial Officer(1)
|
|
2009
2008
2007
|
|
427,308
350,000
300,000
|
|
110,000
75,006
—
|
|
—
—
75,000
|
|
45,080
44,738
48,767
|
|
582,388
469,744
423,767
|
Joseph
F. Taylor,
Chief
Financial Officer(1)
|
|
2009
|
|
247,308
|
|
27,500
|
|
—
|
|
22,759
|
|
297,566
|
Louis
J. Viglotti,
General
Counsel
|
|
2009
2008
2007
|
|
300,000
300,000
300,000
|
|
—
75,006
—
|
|
—
—
195,000
|
|
37,282
28,091
23,444
|
|
332,716
403,097
518,444
|
Chester
J. Walczyk,
Chief
Operating Officer
|
|
2009
2008
2007
|
|
300,000
300,000
177,846
|
|
—
75,006
—
|
|
—
—
75,000
|
|
37,282
38,950
34,459
|
|
337,282
413,956
409,459
|
Robert V. Polansky,
Chief
Marketing Officer
|
|
2009
2008
2007
|
|
250,000
250,000
250,000
|
|
—
125,006
—
|
|
—
—
100,000
|
|
30,605
29,139
32,266
|
|
280,605
404,145
382,266
|
Daniel
G. Hickey, Jr.,
Former
Chief Executive Officer(1)
|
|
2009
2008
2007
|
|
212,500
650,000
650,000
|
|
—
500,002
446,018
|
(5)
|
—
—
|
|
3,428,362
28,280
15,825
|
|
3,640,862
1,178,282
2,151,843
|
(1)
|
During
2009, we had changes to our executive officer positions, which are
discussed above under heading “Compensation Discussion and Analysis – Our
Named Executive Officers.”
|
(2)
|
Each
of our executive officers contributed a portion of his salary to our
401(k) savings plan.
|
(3)
|
There
were no equity award forfeitures by our executive officers during the
fiscal years ended December 31, 2007, 2008 and 2009. The assumptions we
used to value the stock awards are found in Note 18 to our Consolidated
Financial Statements in our annual report on Form 10-K for the year ended
December 31, 2009, as filed with the
SEC.
|
(4)
|
The
following table is a breakdown of the compensation and benefits included
in the All Other Compensation:
|
|
|
|
|
|
|
|
|
Life
Insurance
Policy
Premiums
($)
|
|
|
|
Personal
Financial
or
Tax
Advice
($)
|
|
401(k)
Company
Contributions
|
|
|
James
J. Scardino
|
|
2009
2008
2007
|
|
635
3,975
17,532
|
|
12,000
12,000
12,000
|
|
432
468
450
|
|
17,313
14,495
15,410
|
|
—
—
—
|
|
14,700
13,800
3,375
|
|
—
—
—
|
Joseph
F. Taylor
|
|
2009
|
|
320
|
|
10,200
|
|
432
|
|
—
|
|
—
|
|
11,807
|
|
—
|
Louis
J. Viglotti
|
|
2009
2008
2007
|
|
500
1,023
6,306
|
|
11,400
11,400
11,400
|
|
432
318
225
|
|
—
—
—
|
|
10,000
1,550
2,138
|
|
10,385
13,800
3,375
|
|
—
—
—
|
Chester
J. Walczyk
|
|
2009
2008
2007
|
|
403
2,162
9,840
|
|
12,000
12,000
11,308
|
|
432
468
225
|
|
13,832
10,520
9,711
|
|
—
—
—
|
|
10,615
13,800
3,375
|
|
—
—
—
|
Robert
V. Polansky
|
|
2009
2008
2007
|
|
1,068
2,504
14,946
|
|
9,000
9,000
9,000
|
|
432
318
225
|
|
4,672
3,517
5,405
|
|
1,272
—
—
|
|
14,161
13,800
2,690
|
|
—
—
—
|
Daniel
G. Hickey, Jr.
|
|
2009
2008
2007
|
|
—
—
—
|
|
2,700
11,700
11,700
|
|
391
780
750
|
|
—
—
—
|
|
5,000
2,000
—
|
|
12,750
13,800
3,375
|
|
3,407,521
—
—
|
With the
exception of Mr. Hickey, Jr.’s severance payments, all amounts in the table
reflect our actual cash outlays, since there are no perquisites that do not
involve any incremental costs to us. As discussed below under the
heading “Related Party Transactions – Our Related Party Transactions,” Mr.
Hickey, Jr.’s severance included the immediate vesting and distribution of
46,040 unvested restricted shares that were previously granted to Mr. Hickey,
Jr., which did not result in a cash outlay. In addition, the continuation of Mr.
Hickey, Jr’s welfare benefits did not result in immediate cash outlay and such
benefits will be paid over a period of three years.
(5)
|
This
amount represents a grant of restricted shares received in lieu of an
annual cash bonus. At Mr. Hickey, Jr.’s election, instead of receiving an
annual cash incentive payment for his 2006 performance, our Compensation
Committee granted him an award of 55,822 shares of restricted stock under
2005 Long-Term Incentive Plan, with a grant date fair value of $446,016.
The vesting of the restricted shares was based solely on Mr. Hickey, Jr.’s
continued employment with us and they vested ratably over a two-year
period.
|
2009
Grants of Plan-Based Awards
The
following table shows the restricted stock grants to our named executive
officers during the fiscal year ended December 31, 2009 and the estimated
possible payouts under the annual cash bonus incentive awards:
|
|
|
Estimated
Possible Payouts Under
Non-Equity
Incentive Plan Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units
(#)
|
Grant
Date
Fair
Value
of
Stock
and
Options($)
|
|
|
|
James
J. Scardino
|
5/6/09
|
2005
LTIP
|
|
|
|
100,000
|
110,000
|
|
Employment
Agreement
|
—
|
225,000
|
450,000
|
|
|
Joseph
F. Taylor
|
5/6/09
|
2005
LTIP
|
|
|
|
25,000
|
27,500
|
|
Employment
Agreement
|
—
|
137,500
|
206,250
|
|
|
Louis
J. Viglotti
|
|
Employment
Agreement
|
—
|
150,000
|
225,000
|
|
|
Chester
J. Walczyk
|
|
Employment
Agreement
|
—
|
—
|
150,000
|
|
|
Robert
V. Polansky
|
|
Employment
Agreement
|
—
|
—
|
100,000
|
|
|
Daniel
G. Hickey, Jr.
|
|
Employment
Agreement
|
—
|
650,000
|
1,300,000
|
|
|
For
additional information concerning our grants of plan based awards, see the
following discussion of the employment agreements with our executive officers
and restricted share awards under our 2005 Long-Term Incentive
Plan.
Employment
Agreements
We
currently have employment agreements with all of our executive officers, except
for Mr. Polansky, our chief marketing officer. For all of these agreements,
after the initial contract term, the term of each agreement is automatically
renewed for successive one-year terms, unless either party delivers notice to
the other party of its intention not to renew the term of the agreement. The
severance portions of these employment agreements are discussed in more detail
under the heading “Potential payments upon termination or
change-in-control.”
Mr.
Scardino
. On August 31, 2009, we entered into an employment agreement
with Mr. Scardino, which operated retroactively with an effective date of May 5,
2009, and supersedes the employment agreement between us and Mr. Scardino, dated
as of January 1, 2007. Under the terms of this employment agreement, we will
employ Mr. Scardino as our chief executive officer until December 31, 2012, with
successive one-year renewals thereafter. Mr. Scardino will receive an annual
base salary of $450,000, to be reviewed annually by the Compensation Committee
for increase. Mr. Scardino is also eligible for an annual incentive award with a
target award opportunity of 50% of his then-current base salary and a maximum
bonus opportunity of 100% of such salary, based upon his individual performance,
our profitability and our stock price. The amount of the annual bonus will be
subject to the discretion of our Compensation Committee and will be paid in
cash, restricted stock or some combination thereof. We will also pay Mr.
Scardino’s monthly rental payment for an apartment located in Poughkeepsie, New
York, and he will receive $12,000 per year for a car allowance.
Mr.
Taylor
. On November 24, 2009, we entered into an employment agreement
with Mr. Taylor, which operated retroactively with an effective date of May 5,
2009, and supersedes the employment agreement between us and Mr. Taylor, dated
as of January 1, 2007. Under the terms of this employment agreement, we will
employ Mr. Taylor as our chief financial officer until December 31, 2012, with
successive one-year renewals thereafter. Mr. Taylor will receive an annual base
salary of $275,000, to be reviewed annually by the Compensation Committee for
increase. Mr. Taylor is also eligible for an annual incentive award with a
target award opportunity of 50% of his then-current base salary and a maximum
bonus opportunity of 75% of such salary, based upon his individual performance,
our profitability and our stock price. The amount of the annual bonus will be
subject to the discretion of our Compensation Committee and will be paid in
cash, restricted stock or some combination thereof. Mr. Taylor will also receive
$12,000 per year for a car allowance.
Mr.
Viglotti
. Under the terms of his employment agreement, we will employ Mr.
Viglotti as our general counsel for a period of 5 years, beginning in December
2005, with successive one-year renewals thereafter. Mr. Viglotti’s employment
agreement provides for an annual base salary of not less than $300,000, which
will be reviewed by the Compensation Committee annually for increase. Mr.
Viglotti is also eligible to receive an annual incentive award with a target
award opportunity of 50% of his then-current base salary and a maximum bonus
opportunity of no less than 75% of such salary based on performance criteria as
determined annually by our Compensation Committee. Mr. Viglotti will also
receive $11,700 per year for a car allowance and $10,000 for financial
counseling.
Mr.
Walczyk
. Under the terms of his employment agreement, which was
terminated as of January 1, 2010 and replaced with a new agreement as described
below, we would employ Mr. Walczyk as our chief operating officer for a period
of 3 years, beginning January 2007. Mr. Walczyk received an annual salary of
$300,000, which was to be reviewed annually by the Compensation Committee for
increase. Mr. Walczyk was also eligible for, but not guaranteed, an annual bonus
payment up to 50% of his base salary, as then in effect, based upon his
individual performance, profitability of the company and the company’s stock
price. The amount of the annual bonus was subject to the discretion of the
Compensation Committee and would have been paid in cash, restricted stock or
some combination thereof. Mr. Walczyk would also receive $12,000 per year for a
car allowance.
On
December 30, 2009, we entered into a new employment agreement with Mr. Walczyk,
which is effective January 1, 2010, and superseded the employment agreement
between us and Mr. Walczyk, dated as of January 1, 2007. Under the terms of this
employment agreement, we will employ Mr. Walczyk as our chief operating officer
until December 31, 2012, with successive one-year renewals thereafter. Mr.
Walczyk will receive an annual salary of $300,000, to be reviewed annually by
the Compensation Committee for increase. Mr. Walczyk is also eligible for an
annual incentive award with a target award opportunity of 50% of his
then-current base salary and a maximum bonus opportunity of 75% of such salary,
based upon his individual performance, our profitability and our stock price.
The amount of the annual bonus will be subject to the discretion of our
Compensation Committee and will be paid in cash, restricted stock or some
combination thereof. Mr. Walczyk will also receive $12,000 per year for a car
allowance
Mr.
Polansky
. Mr. Polansky had an employment agreement in effect for 2009,
which was expired effective January 1, 2010. Under the terms of Mr. Polansky’s
employment agreement, we employed him as our senior vice president of sales and
product development for a period of 3 years, beginning in December 2006. Mr.
Polansky received an annual base salary of $250,000, which was reviewed annually
by our Compensation Committee. Mr. Polansky was also eligible to receive an
annual incentive award at the discretion of the Compensation Committee with a
target opportunity of 40% of his base salary and a targeted annual grant of
restricted common shares having a fair market value equal to 30% of his base
salary amount, up to 50% of his base salary amount. Mr. Polansky would also
receive $9,000 per year for a car allowance. On November 20, 2009, we and Mr.
Polansky mutually agreed that the employment agreement would expire by its terms
effective January 1, 2010. Mr. Polansky has continued his employment with us as
our chief marketing officer on “at will” basis.
Mr. Hickey,
Jr.
Under the terms of Mr. Hickey, Jr.’s employment agreement, which was
terminated as of March 13, 2009, we were to employ him as our chief executive
officer and a member of our board for a period of 5 years, beginning December
2005. Mr. Hickey, Jr. was entitled to receive an initial base salary of not less
than $650,000, which was to be reviewed annually by the Compensation Committee.
Mr. Hickey, Jr. was also eligible to receive an annual incentive award with a
target award opportunity of 100% of his then-current base salary and a maximum
bonus opportunity of no less than 200% of such salary based on performance
criteria as determined annually by our Compensation Committee. Mr. Hickey, Jr.
was also eligible to receive an additional annual producer incentive bonus of
2.5% of our net income, provided that net income in the year in question is not
less than $25,000,000. In addition, Mr. Hickey, Jr. was eligible to participate
in our long-term incentive compensation programs, as determined by the
Compensation Committee. Pursuant to the provisions of Mr. Hickey, Jr.’s
employment agreement, his total compensation package (including base salary, the
annual incentive award, the producer incentive bonus and the long-term incentive
compensation) was to be targeted at no less than the 75th percentile of an
appropriate group of peer companies, as determined by the Compensation
Committee. Mr. Hickey, Jr. also had the right to lease a private aircraft for
business purposes provided that he determined that such travel was reasonable.
Our Compensation Committee had limited the amount of Mr. Hickey, Jr.’s private
aircraft use to 200 hours per fiscal year. Mr. Hickey, Jr. would also receive
$11,700 per year for a car allowance and $10,000 per year for financial
counseling.
Effective
March 13, 2009, Mr. Hickey, Jr. resigned as a director and officer, and his
employment agreement was terminated pursuant to the mutual agreement of the
parties. We entered into a separation agreement with Mr. Hickey, Jr. under which
we agree to:
|
·
|
pay
him a total of $3,300,000 in two payments of $1,500,000 each and one
payment of $300,000, all of which payments are subject to Mr. Hickey’s
continued compliance with the restrictive covenants described
below;
|
|
·
|
immediately
vest and distribute 46,040 unvested shares of restricted shares that were
previously granted to Mr. Hickey, Jr. on January 16, 2008;
and
|
|
·
|
continue
paying his welfare benefits to which he was entitled under his employment
agreement for a period of three
years.
|
The
separation agreement prohibits Mr. Hickey, Jr. from competing with us in the
California self-insured workers compensation market until March 13, 2012 and
from soliciting our employees, customers, brokers or agents for a period ending
on March 13, 2011. In addition, the separation agreement provides that Mr.
Hickey, Jr. shall cooperate reasonably with us and assist us in any litigation
until March 13, 2012.
Annual
Incentive Cash Bonuses
The terms
of the annual incentive cash bonuses for our executive officers are discussed in
our Compensation Discussion and Analysis under the heading “Annual Cash
Bonuses.”
Restricted
Share Awards under Our 2005 Long-Term Incentive Plan
Restricted
share awards are common shares that are subject to restrictions until they vest,
as determined by our Compensation Committee. Our Compensation Committee has the
sole discretion under the plan to determine the employees to receive a
restricted share award, the number of shares granted, when the shares will be
paid to the participant, whether the shares will be issued at the beginning or
the end of a restricted period, and any other terms and conditions with respect
to vesting, deferral, payment options and other award characteristics. Pursuant
to the terms of our grant document, holders of restricted shares do not have the
right to vote the restricted shares or to receive dividends. Any award based
solely on continued employment or the passage of time generally vests ratably
over a minimum three-year period, subject to certain exceptions for de minimis
awards, death, disability or retirement. In the case of performance based
awards, vesting generally occurs over a performance period of not less than one
year. Unless our Compensation Committee decides otherwise, or unless an
employee’s employment agreement otherwise provides, if a participant’s
employment is terminates for any reason, the restricted shares that have not
vested are immediately forfeited.
In May
2009, we granted restricted shares to Mr. Scardino and Mr. Taylor. The vesting
of these awards is based solely on continued employment with us. The restricted
shares vest ratably over a three-year period, subject to certain exceptions for
death, disability or retirement.
Total
Mix of Compensation
The
proportions of our named executive officers’ individual compensation components
in relation to their total compensation for 2009 were:
|
|
|
|
|
|
Non-Equity
Incentive
Plan Compensation
|
|
|
James
J. Scardino
|
|
73%
|
|
19%
|
|
0%
|
|
8%
|
Joseph
F. Taylor
|
|
83%
|
|
9%
|
|
0%
|
|
8%
|
Louis
J. Viglotti
|
|
90%
|
|
0%
|
|
0%
|
|
10%
|
Chester
J. Walczyk
|
|
89%
|
|
0%
|
|
0%
|
|
11%
|
Robert
V. Polansky
|
|
89%
|
|
0%
|
|
0%
|
|
11%
|
Daniel
G. Hickey, Jr.
|
|
91%
|
|
0%
|
|
0%
|
|
9%
|
2009
Outstanding Equity Awards at Fiscal Year-End
The
following table shows the amount of outstanding unvested restricted share awards
as of December 31, 2009:
|
|
Stock
Awards
|
|
|
Number
of Shares or Units of Stock That Have Not Vested as of December 31,
2009
(#)(1)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested as of December 31,
2009
($)(2)
|
James
J.
Scardino
|
|
106,906
|
|
36,348
|
Joseph
F.
Taylor
|
|
29,604
|
|
10,065
|
Louis
J.
Viglotti
|
|
6,906
|
|
2,348
|
Chester
J.
Walczyk
|
|
6,906
|
|
2,348
|
Robert
V.
Polansky
|
|
11,510
|
|
3,913
|
(1)
|
The
vesting schedule for the restricted share awards is as
follows:
|
Mr.
Scardino’s Vesting Schedule
|
|
|
|
|
|
1/16/08
|
|
1/16/10
1/16/11
|
|
3,453
3,453
|
5/6/09
|
|
5/6/10
5/6/11
5/6/12
|
|
33,334
33,333
33,333
|
Mr.
Taylor’s Vesting Schedule
|
|
|
|
|
|
1/16/08
|
|
1/16/10
1/16/11
|
|
2,302
2,302
|
5/6/09
|
|
5/6/10
5/6/11
5/6/12
|
|
8,334
8,333
8,333
|
Mr.
Viglotti’s Vesting Schedule
|
|
|
|
|
|
1/16/08
|
|
1/16/10
1/16/11
|
|
3,453
3,453
|
Mr.
Walczyk’s Vesting Schedule
|
|
|
|
|
|
1/16/08
|
|
1/16/10
1/16/11
|
|
3,453
3,453
|
Mr.
Polansky’s Vesting Schedule
|
|
|
|
|
|
1/16/08
|
|
1/16/10
1/16/11
|
|
5,755
5,755
|
(2)
|
The
values shown here are based on the closing share price on December 31,
2009 ($0.34).
|
2009
Option Exercises and Stock Vested
The
following table shows the number of shares that our executives received in 2009
from the vesting of previously granted restricted share awards, along with the
market value realized on the vesting date:
|
|
Stock
Awards
|
|
|
Number
of Shares
Acquired
on Vesting (#)
|
|
Value
Realized
on
Vesting ($)
|
James
J.
Scardino
|
|
7,401
|
|
8,378
|
Joseph
F.
Taylor
|
|
4,294
|
|
5,173
|
Louis
J.
Viglotti
|
|
6,626
|
|
7,836
|
Chester
J.
Walczyk
|
|
5,967
|
|
7,447
|
Robert
V.
Polansky
|
|
13,520
|
|
13,998
|
Daniel
G. Hickey,
Jr.
|
|
96,972
|
|
177,262
|
Potential
payments upon termination or change-in-control
As part
of the employment agreements with each of our executive officers, we have agreed
to provide them with certain benefits in the event of termination or a
change-in-control. Generally, benefits under these agreements are triggered upon
the termination of the executive’s employment by us without “cause” or by
employee for “good reason.” Terminations for other reasons, such as retirement,
death, disability or a change of control, also trigger enhanced benefits under
certain of these arrangements.
Circumstances
Triggering Payments
. “Cause,” “good reason” and “change of control” are
generally defined in our executive officers’ employment agreements as
follows:
“Cause”
includes:
|
·
|
breach
of any of the material terms or covenants of the employment agreement,
specifically including the confidentiality, litigation cooperation,
non-disparagement, non-disclosure, non-competition or non-solicitation
provisions;
|
|
·
|
conviction
of, or plea of nolo contendre to, any felony, or any act that is
materially and demonstrably injurious to our financial condition or our or
the executive officer’s reputation;
|
|
·
|
drug
or alcohol use which impairs the executive officer’s ability to perform
his duties;
|
|
·
|
engaging
in conduct constituting gross neglect or willful misconduct in carrying
out the executive officer’s duties and that is demonstrably injurious to
our financial condition or our or the executive officer’s
reputation;
|
|
·
|
act
or omission of dishonesty, fraud, misrepresentation, conflict of interest
or breach of fiduciary duty;
|
|
·
|
material
failure to diligently, faithfully and competently perform a substantial
portion of the executive officer’s responsibilities, duties, or
functions;
|
|
·
|
commission
of any act or acts that harm our reputation, standing or credibility
within the communities it or he operates or with its clients or suppliers;
or
|
|
·
|
act
or series of acts constituting gross neglect and/or willful misconduct
resulting in a restatement of our financial statements due to material
non-compliance with any financial reporting requirement within the meaning
of Section 304 of The Sarbanes-Oxley Act of
2002.
|
“Good
reason” includes:
|
·
|
a
material diminution or change, materially adverse to the executive
officer, in the executive officer’s positions, titles, or offices, status,
rank, nature of responsibilities, or authority within the company, or a
removal of the executive officer from or any failure to elect or re-elect
or, as the case may be, nominate the executive officer to any such
positions or offices;
|
|
·
|
an
assignment of duties to the executive which are inconsistent with the
executive officer’s respective title and
position;
|
|
·
|
a
decrease in either annual base salary or target annual incentive award
opportunity below a certain level;
|
|
·
|
any
other failure by us to perform any material obligation under, or breach by
us of any material provision of, the employment
agreement.
|
A “change
of control” occurs where:
|
·
|
any
sale, lease, exchange or other transfer (in one or a series of related
transactions) of all or substantially all of our
assets;
|
|
·
|
any
“person” as such term is used in Section 13(d) and Section 14(d) of the
Exchange Act is or becomes, directly or indirectly, the “beneficial owner”
as defined in Rule 13d-3 under the Exchange Act of our securities that
represent 51% or more of the combined voting power of our then outstanding
voting securities;
|
|
·
|
during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (together with any new directors whose
election by the Board whose nomination by the shareholders of the Company
was approved by a vote of the Board then still in office who are either
directors at the beginning of such period or whose election or nomination
for election was so previously approved) cease for any reason to
constitute a majority of the Board then in office;
or
|
|
·
|
the
Board or our shareholders approve a merger or consolidation of us with any
other corporation, other than a merger, amalgamation or consolidation
which would result in our voting securities of outstanding immediately
prior thereto continuing to represent at least 50% of the total voting
power represented by our voting securities immediately after such merger,
amalgamation or consolidation, or the Board or our shareholders approve a
plan of complete liquidation of the Company or an agreement for the sale
or disposition by the Company (in one or a series of transactions) of all
or substantially all of the Company’s
assets.
|
Summary of
Agreements
. The following table and footnotes describe and quantify the
potential payments upon termination or change in control for each of our
executive officers, assuming that termination or change-in-control was effective
as of December 31, 2009. The amounts shown in the table below do not include
payments and benefits to the extent they are provided on a non-discriminatory
basis to salaried employees generally upon termination of employment, which
include: (1) accrued salary, incentive and vacation pay; and (2) other and
additional benefits then due or earned under our applicable plans and
programs.
Post-Termination
and Change of Control Benefits
Mr.
Scardino, Chief Executive Officer(1)
|
|
Executive
Benefits and Payments Upon Termination
|
|
Termination
without
Cause
or for
Good
Reason(2)
|
|
|
|
|
|
|
|
Severance
Pay
|
|
$
|
900,000
|
|
|
$
|
1,350,000
|
|
|
$
|
—
|
|
Prorated
Annual Incentive Award(5)
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
225,000
|
|
Welfare
Benefit Programs
|
|
|
43,467
|
|
|
|
28,488
|
|
|
|
—
|
|
Vesting
of Restricted Share Awards(6)
|
|
|
36,348
|
|
|
|
36,348
|
|
|
|
36,348
|
|
Total
Compensation
|
|
$
|
1,204,815
|
|
|
$
|
1,639,836
|
|
|
$
|
261,348
|
|
(1)
|
On
August 31, 2009, we entered into an employment agreement with Mr.
Scardino, which operated retroactively with an effective date of May 5,
2009, and supersedes the employment agreement between us and Mr. Scardino,
dated as of January 1, 2007. The benefits and amounts in the table above
are based on the agreement that was effective May 5,
2009.
|
(2)
|
If
Mr. Scardino’s employment agreement is terminated by us without “cause” or
if Mr. Scardino terminates his employment for “good reason,” he will be
entitled to receive the following benefits: (i) severance pay equal to
200% of his base salary immediately prior to the termination date (here,
$450,000); (ii) a pro rata unpaid annual incentive award payable for the
year in which termination occurs, based on actual performance; (iii) the
continuation of any welfare benefit programs for 18 months; and (iv) the
immediate vesting of all unvested restricted shares. All payments would be
made in a lump sum payment following Mr. Scardino’s departure, except for
the severance pay which would be paid in 24 equal monthly payments, the
welfare benefits which would be paid over the 18-month period and the pro
rata unpaid annual incentive award which would be paid at the time annual
incentive payments are generally paid to
employees.
|
(3)
|
If
Mr. Scardino’s employment is terminated by us without “cause” or by Mr.
Scardino for “good reason” upon the occurrence of or within six months
following a “change in control,” he will be entitled to receive the
following benefits: (i) severance pay equal to 300% of his base salary
immediately prior to the termination date (here, $450,000); (ii) a pro
rata unpaid annual incentive award payable for the year in which
termination occurs, based on actual performance; (iii) the continuation of
any welfare benefit programs for 12 months; and (iv) the immediate vesting
of all unvested restricted shares. All payments would be made in a lump
sum payment following Mr. Scardino’s departure, except for the severance
pay which would be paid in 24 equal monthly payments, the welfare benefits
which would be paid over the 12-month period and the pro rata unpaid
annual incentive award which would be paid at the time annual incentive
payments are generally paid to
employees.
|
(4)
|
Upon
Mr. Scardino’s death, his estate will be entitled to receive: (i) a pro
rata unpaid annual incentive award payable for the year in which the death
occurs, assuming target performance would have been achieved; and (ii) the
immediate vesting of all unvested restricted shares. All payments would be
made in a lump sum payment following Mr. Scardino’s
departure.
|
(5)
|
The
entire incentive for 2009 is shown here as this table illustrates the
effect of such a termination at the end of the year on December 31, 2009
and thus, no pro-ration has been applied. In addition, the incentive
assumes that that it would be paid based on the target performance
level.
|
(6)
|
The
value of unvested restricted shares is illustrated here by measuring the
value of the number of shares payable under unvested awards using the
closing share price on December 31, 2009
($0.34).
|
Post-Termination
and Change of Control Benefits
Mr.
Taylor, Chief Financial Officer(1)
|
|
Executive
Benefits and Payments Upon Termination
|
|
Termination
without
Cause
or for
Good
Reason(2)
|
|
|
|
|
|
|
|
Severance
Pay
|
|
$
|
275,000
|
|
|
$
|
550,000
|
|
|
$
|
—
|
|
Prorated
Annual Incentive Award(5)
|
|
|
137,500
|
|
|
|
137,500
|
|
|
|
137,500
|
|
Welfare
Benefit Programs
|
|
|
43,467
|
|
|
|
28,488
|
|
|
|
—
|
|
Vesting
of Restricted Share Awards(6)
|
|
|
10,065
|
|
|
|
10,065
|
|
|
|
10,065
|
|
Total
Compensation
|
|
$
|
466,032
|
|
|
$
|
726,053
|
|
|
$
|
147,565
|
|
(1)
|
On
November 24, 2009, we entered into an employment agreement with Mr.
Taylor, which operated retroactively with an effective date of May 5,
2009, and supersedes an employment agreement between us and Mr. Taylor,
dated as of January 1, 2007. The benefits and amounts in the table above
are based on the agreement that was effective May 5,
2009.
|
(2)
|
If
Mr. Taylor’s employment agreement is terminated by us without “cause” or
if Mr. Taylor terminates his employment for “good reason,” he will be
entitled to receive the following benefits: (i) severance pay equal to
100% of his base salary immediately prior to the termination date (here,
$275,000); (ii) a pro rata unpaid annual incentive award payable for the
year in which termination occurs, based on actual performance; (iii) the
continuation of any welfare benefit programs for 18 months; and (iv) the
immediate vesting of all unvested restricted shares. All payments would be
made in a lump sum payment following Mr. Taylor’s departure, except for
the severance pay which would be paid in 12 equal monthly payments, the
welfare benefits which would be paid over the 18-month period and the pro
rata unpaid annual incentive award which would be paid at the time annual
incentive payments are generally paid to
employees.
|
(3)
|
If
Mr. Taylor’s employment is terminated by us without “cause” or by Mr.
Taylor for “good reason” upon the occurrence of or within six months
following a “change in control,” he will be entitled to receive the
following benefits: (i) severance pay equal to 200% of his base salary
immediately prior to the termination date (here, $275,000); (ii) a pro
rata unpaid annual incentive award payable for the year in which
termination occurs, based on actual performance; (iii) the continuation of
any welfare benefit programs for 12 months; and (iv) the immediate vesting
of all unvested restricted shares. All payments would be made in a lump
sum payment following Mr. Taylor’s departure, except for the severance pay
which would be paid in 24 equal monthly payments, the welfare benefits
which would be paid over the 12-month period and the pro rata unpaid
annual incentive award which would be paid at the time annual incentive
payments are generally paid to
employees.
|
(4)
|
Upon
Mr. Taylor’s death, his estate will be entitled to receive: (i) a pro rata
unpaid annual incentive award payable for the year in which the death
occurs, assuming target performance would have been achieved; and (ii) the
immediate vesting of all unvested restricted shares. All payments would be
made in a lump sum payment following Mr. Taylor’s
departure.
|
(5)
|
The
entire incentive for 2009 is shown here as this table illustrates the
effect of such a termination at the end of the year on December 31, 2009
and thus, no pro-ration has been applied. In addition, the incentive
assumes that that it would be paid based on the target performance
level.
|
(6)
|
The
value of unvested restricted shares is illustrated here by measuring the
value of the number of shares payable under unvested awards using the
closing share price on December 31, 2009
($0.34).
|
Post-Termination
and Change of Control Benefits
Mr.
Viglotti, General Counsel & Secretary
|
|
Executive
Benefits and Payments Upon Termination
|
|
Termination
without Cause or for Good Reason, Change-in-Control, or Non-Renewal prior
to Retirement(1)
|
|
|
|
|
|
|
|
Severance
Pay
|
|
$
|
450,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Prorated
Annual Incentive Award(4)
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Welfare
Benefit Programs
|
|
|
28,488
|
|
|
|
19,122
|
|
|
|
97,846
|
|
Vesting
of Restricted Stock Awards(5)
|
|
|
2,348
|
|
|
|
2,348
|
|
|
|
2,348
|
|
Total
Compensation
|
|
$
|
630,836
|
|
|
$
|
171,470
|
|
|
$
|
250,194
|
|
(1)
|
If
we terminate Mr. Viglotti’s employment agreement without “cause” or if Mr.
Viglotti terminates his employment for “good reason,” he will be entitled
to receive: (i) severance pay equal to the sum of (A) his base salary
immediately prior to the termination date (here, $300,000) and (B) the
higher of (x) the annual incentive opportunity for the year in which the
termination occurs assuming target performance would have been achieved
(here, $150,000) and (y) the average annual incentive payment received
over the prior two years (here, $0); (ii) a pro rata unpaid annual
incentive award payable for the year in which termination occurs, assuming
target performance would have been achieved; (iii) the continuation of any
welfare benefit programs for 12 months; and (iv) the immediate vesting of
all unvested restricted shares. The amounts in this column also reflect
“change-in-control” payments which are the amounts Mr. Viglotti would
receive upon a termination by us without “cause” or a termination by Mr.
Viglotti for “good reason” that occurs within the two-year period
following a “change of control.” In addition, if we choose not to renew
Mr. Viglotti’s employment agreement and the term of the agreement expires
before Mr. Viglotti’s 62nd birthday, such non-renewal shall be treated as
a termination by us without “cause.” All payments would be made in a lump
sum payment following Mr. Viglotti’s departure, except for the welfare
benefits which would be paid over the 12-month
period.
|
(2)
|
Upon
Mr.Viglotti’s death, his estate will be entitled to receive: (i) a pro
rata unpaid annual incentive award payable for the year in which his death
occurs assuming target performance would have been achieved; (ii) the
continuation of any welfare benefit programs for 12 months; and (iii) the
immediate vesting of all unvested restricted shares. All payments would be
made in a lump sum payment to Mr. Viglotti’s estate, except for the
welfare benefits which would be paid over the 12-month
period.
|
(3)
|
Upon
Mr. Viglotti’s retirement at or after age 62, he will be entitled receive:
(i) a pro rata unpaid annual incentive award payable for the year in which
termination occurs, assuming target performance would have been achieved;
and (ii) the continuation of any welfare benefit programs for him and his
spouse for the longer of twelve months or his 65th birthday. In addition,
if Mr. Viglotti retires at or after age 65, he will be entitled to
receive, under our 2005 Long-Term Incentive Plan, the immediate vesting of
all unvested restricted shares. The table above assumes a retirement age
at or after age 65. All payments would be made in a lump sum payment
following Mr. Viglotti’s retirement, except for the welfare benefits which
would be paid over the specified period of
time.
|
(4)
|
The
entire incentive for 2009 is shown here as this table illustrates the
effect of such a termination at the end of the year on December 31, 2009
and thus, no pro-ration has been
applied.
|
(5)
|
The
value of unvested restricted shares is illustrated here by measuring the
value of the number of shares payable under unvested awards using the
closing share price on December 31, 2009
($0.34).
|
Post-Termination
and Change of Control Benefits
Mr.
Walczyk, Chief Operating Officer(1)
|
|
Executive
Benefits and Payments Upon Termination
|
|
Termination
without Cause or for Good Reason, or
Change-in-Control(2)
|
|
|
|
|
|
|
|
Severance
Pay
|
|
$
|
450,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Prorated
Annual Incentive Award(5)
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
—
|
|
Welfare
Benefit Programs
|
|
|
28,488
|
|
|
|
—
|
|
|
|
—
|
|
Vesting
of Restricted Share Awards(6)
|
|
|
2,348
|
|
|
|
2,348
|
|
|
|
2,348
|
|
Total
Compensation
|
|
$
|
630,836
|
|
|
$
|
152,348
|
|
|
$
|
2,348
|
|
(1)
|
On
December 30, 2009, we entered into a new employment agreement with Mr.
Walczyk, which is effective January 1, 2010, and superseded the employment
agreement between us and Mr. Walczyk, dated as of January 1, 2007. The
benefits and amounts in the table above are based on the agreement dated
as of January 1, 2007, which was effective as of December 31, 2009. The
severance payments under the new employment agreement are substantially
similar, except where noted below.
|
(2)
|
If
Mr. Walczyk’s employment agreement is terminated by us without “cause” or
if Mr. Walczyk terminates his employment for “good reason,” he would have
been entitled to receive the following benefits: (i) severance pay equal
to the sum of (A) his base salary immediately prior to the termination
date (here, $300,000) and (B) the annual incentive opportunity for the
year in which the termination occurs assuming target performance would
have been achieved (here, $150,000); (ii) a pro rata unpaid annual
incentive award payable for the year in which termination occurs, assuming
target performance would have been achieved; (iii) the continuation of any
welfare benefit programs for 12 months; and (iv) the immediate vesting of
all unvested restricted shares. All payments would be made in a lump sum
payment following Mr. Walczyk’s departure, except for the welfare benefits
which would be paid over the 12-month
period.
|
Under his
new agreement, Mr. Walczyk will be entitled to receive the following benefits:
(i) severance pay equal to 100% of his base salary immediately prior to the
termination date; (ii) a pro rata unpaid annual incentive award payable for the
year in which termination occurs, based on actual performance; (iii) the
continuation of any welfare benefit programs for 18 months; and (iv) the
immediate vesting of all unvested restricted shares. All payments would be made
in a lump sum payment following Mr. Walczyk’s departure, except for the
severance pay which would be paid in 12 equal monthly payments, the welfare
benefits which would be paid over the 12-month period and the pro rata unpaid
annual incentive award which would be paid at the time annual incentive payments
are generally paid to employees.
In
addition, under his new agreement, if Mr. Walczyk’s employment is terminated by
us without “cause” or by Mr. Walczyk for “good reason” upon the occurrence of or
within six months following a “change in control,” he will be entitled to
receive the following benefits: (i) severance pay equal to 200% of his base
salary immediately prior to the termination date (here, $300,000); (ii) a pro
rata unpaid annual incentive award payable for the year in which termination
occurs, based on actual performance; (iii) the continuation of any welfare
benefit programs for 12 months; and (iv) the immediate vesting of all unvested
restricted shares. All payments would be made in a lump sum payment following
Mr. Walczyk’s departure, except for the severance pay which would be paid in 24
equal monthly payments, the welfare benefits which would be paid over the
12-month period and the pro rata unpaid annual incentive award which would be
paid at the time annual incentive payments are generally paid to
employees.
(3)
|
Upon
Mr. Walczyk’s death, his estate would be entitled to receive: (i) a pro
rata unpaid annual incentive award payable for the year in which
termination occurs, assuming target performance would have been achieved;
and (ii) the immediate vesting of all unvested restricted shares. All
payments would be made in a lump sum payment to Mr. Walczyk’s
estate.
|
(4)
|
Upon
Mr. Walczyk’s retirement at or after age 65, he will be entitled to
receive, under our 2005 Long-Term Incentive Plan, the immediate vesting of
all unvested restricted shares.
|
(5)
|
The
entire incentive for 2009 is shown here as this table illustrates the
effect of such a termination at the end of the year on December 31, 2009
and thus, no pro-ration has been
applied.
|
(6)
|
The
value of unvested restricted shares is illustrated here by measuring the
value of the number of shares payable under unvested awards using the
closing share price on December 31, 2009
($0.34).
|
Post-Termination
and Change of Control Benefits
Robert
V. Polansky, Chief Marketing Officer(1)
|
|
Executive
Benefits and Payments Upon Termination
|
|
Termination
without Cause or for Good Reason(2)
|
|
|
|
|
|
|
|
Severance
Pay
|
|
$
|
350,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Prorated
Annual Incentive Award(5)
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
—
|
|
Welfare
Benefit Programs
|
|
|
28,488
|
|
|
|
—
|
|
|
|
—
|
|
Vesting
of Restricted Share Awards(6)
|
|
|
—
|
|
|
|
3,913
|
|
|
|
3,913
|
|
Total
Compensation
|
|
$
|
478,488
|
|
|
$
|
103,913
|
|
|
$
|
3,913
|
|
(1)
|
On
November 20, 2009, we and Mr. Polansky mutually agreed that his employment
agreement would expire by its terms effective January 1, 2010. The
benefits and amounts in the table above are based on his prior employment
agreement, which was terminated effective as of December 31,
2009.
|
(2)
|
If
Mr. Polansky’s employment agreement was terminated by us without “cause”
or if Mr. Polansky terminated his employment for “good reason,” he would
have been entitled to receive the following benefits: (i) severance pay
equal to the sum of (A) his base salary immediately prior to the
termination date (here, $250,000) and (B) the annual incentive opportunity
for the year in which the termination occurred assuming target performance
would have been achieved (here, $100,000); (ii) a pro rata unpaid annual
incentive award payable for the year in which termination occurred,
assuming target performance would have been achieved; and (iii) the
continuation of any welfare benefit programs for 12 months. All payments
would have been made in a lump sum payment following Mr. Polansky’s
departure, except for the welfare benefits which would have been paid over
the 12-month period.
|
(3)
|
Upon
Mr. Polansky’s death, his estate would have been entitled to receive: (i)
a pro rata unpaid annual incentive award payable for the year in which the
death occurred, assuming target performance would have been achieved; and
(ii) the immediate vesting of all unvested restricted shares. All payments
would have been made in a lump sum
payment.
|
(4)
|
Upon
Mr. Polansky’s retirement at or after age 65, he will be entitled to
receive, under our 2005 Long-Term Incentive Plan, the immediate vesting of
all unvested restricted shares.
|
(5)
|
The
entire incentive for 2009 is shown here as this table illustrates the
effect of such a termination at the end of the year on December 31, 2009
and thus, no pro-ration has been
applied.
|
(6)
|
The
value of unvested restricted shares is illustrated here by measuring the
value of the number of shares payable under unvested awards using the
closing share price on December 31, 2009
($0.34).
|
Change-In-Control
Payments on Restricted Shares
. Under the terms of our grant document, all
restrictions on unvested restricted share awards issued to our executives will
immediately lapse upon a change-in-control. A change-in-control for this purpose
occurs where:
|
·
|
A
person or group acquires beneficial ownership, directly or indirectly, of
our securities representing 40% or more of the combined voting power in
the election of directors of our then-outstanding securities or of any
successor to us;
|
|
·
|
The
members of our Board when our 2005 Long-Term Incentive Plan was adopted or
who were appointed thereafter by at least two-thirds of the Board at the
time of the appointment no longer constitute two-thirds of the
Board;
|
|
·
|
We
complete a merger, consolidation or amalgamation wherein our voting
securities immediately prior thereto do not constitute at least 60% of the
combined voting securities after the merger, consolidation or
amalgamation; or
|
|
·
|
Our
shareholders approve a plan of complete liquidation or winding-up or an
agreement for the sale or disposition of all or substantially all of our
assets.
|
The
estimated payment amounts are reflected in the tables above, assuming a
change-in-control on December 31, 2009.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member
of our Board’s Compensation Committee has served as one of our officers or
employees at any time. None of our executive officers serve as a member of the
compensation committee of any other company that has an executive officer
serving as a member of our Board of Directors. None of our executive officers
serve as a member of the board of directors of any other company that has an
executive officer serving as a member of our Board’s Compensation
Committee.
RELATED
PARTY TRANSACTIONS
Our
Related Party Transactions
During
2009, we conducted business with Hickey-Finn and Company, Inc. (Hickey-Finn), an
insurance broker whose owners include Daniel G. Hickey, Sr., one of our
directors, an existing shareholder and the father of Daniel G. Hickey, Jr., who
served as our chief executive officer and chairman of the Board during 2009.
David M. Birsner, another of our directors and an existing shareholder, is also
an employee of Hickey-Finn. We pay broker commissions to Hickey-Finn for
business placed with Majestic, our primary insurance company. For the year ended
December 31, 2009, we paid Hickey-Finn $88,919 as commissions for placing
business with Majestic. Mr. Hickey, Sr.’s corresponding interest in these
transactions, without regard to profit or loss, was approximately
$44,460.
Effective
March 13, 2009, Mr. Hickey, Jr. resigned as a director and officer, and his
employment agreement was terminated pursuant to the mutual agreement of the
parties. We entered into a separation agreement with Mr. Hickey, Jr. under which
we agreed to:
|
·
|
pay
him a total of $3,300,000 in two payments of $1,500,000 each and one
payment of $300,000, all of which payments are subject to Mr. Hickey’s
continued compliance with the restrictive covenants described
below;
|
|
·
|
immediately
vest and distribute 46,040 unvested shares of restricted shares that were
previously granted to Mr. Hickey, Jr. on January 16, 2008;
and
|
|
·
|
continue
paying his welfare benefits to which he was entitled under his employment
agreement for a period of three
years.
|
The
separation agreement prohibits Mr. Hickey, Jr. from competing with us in the
California self-insured workers compensation market until March 13, 2012 and
from soliciting our employees, customers, brokers or agents for a period ending
on March 13, 2011. In addition, the separation agreement provides that Mr.
Hickey, Jr. shall cooperate reasonably with us and assist us in any litigation
until March 13, 2012.
Our
Related Party Review, Approval or Ratification Process
Under its
charter, the Audit Committee is responsible for reviewing and approving the
terms and conditions of all related party transactions. The Audit Committee
recognizes that related party transactions present a heightened risk of
conflicts of interest and improper valuation (or at least the perception
thereof) and therefore adopted a written policy concerning all related party
transactions involving CRM Holdings and subsidiaries. The policy applies to any
transactions involving an amount greater than $5,000 between us and any
executive officer or director, shareholder owning greater than five percent of
our outstanding shares, a person who is an immediate family member of an
executive officer or director or shareholder owning greater than five percent of
our outstanding shares, or an entity which is owned or controlled by any of
these individuals. Under the policy, any related party transaction will be
consummated or continued only if:
|
·
|
the
Audit Committee approves or ratifies the transaction in accordance with
the guidelines set forth in the policy and if the transaction is on terms
comparable to those that could be obtained in arm’s length dealings with
an unrelated third party; or
|
|
·
|
the
transaction is approved by the disinterested members of the Board of
Directors; or
|
|
·
|
the
transaction involves compensation approved by the Compensation
Committee.
|
SHARE
OWNERSHIP INFORMATION
Principal
Shareholders Table
The
following table sets forth the total number and percentage of our voting common
shares beneficially owned on March 3, 2010 by: (1) each person known to us to be
the beneficial owner of more than 5% of any class of our outstanding voting
common shares; (2) each director; (3) each of our Named Executive Officers; and
(4) all executive officers and directors as a group.
|
|
Shares
Beneficially Owned
|
|
|
|
|
|
Wells
Fargo &
Company
420
Montgomery Street
San
Francisco, CA 94104
|
|
1,979,893
|
(4)
|
|
12.0
|
Daniel
G. Hickey,
Jr.
70
Pond Hills Court
Pleasant
Valley, New York 12569
|
|
1,925,220
|
(5)
|
|
9.3(5)
|
Mendon
Capital Advisors
Corp
150
Allens Creek Road
Rochester,
NY 14618
|
|
1,611,730
|
(6)
|
|
9.8
|
Whitebox
Advisors,
LLC
3033
Excelsior Boulevard, Suite 300
Minneapolis,
MN 55416
|
|
1,233,603
|
(7)
|
|
7.5
|
Burnham
Asset Management Corp
Burnham
Securities
Inc.
1325
Avenue of the Americas
New
York, NY 10019
|
|
1,069,931
|
(8)
|
|
6.5
|
James
J.
Scardino
|
|
46,360
|
|
|
*
|
Joseph
F. Taylor
|
|
26,414
|
|
|
*
|
Louis
J.
Viglotti
|
|
54,225
|
|
|
*
|
Chester
J. Walczyk
|
|
68,991
|
|
|
*
|
Robert
V.
Polansky
|
|
41,962
|
|
|
*
|
David
M.
Birsner
|
|
301,471
|
|
|
1.8
|
Daniel
G. Hickey, Sr.
|
|
1,771,237
|
|
|
10.7
|
Keith
S.
Hynes
|
|
31,114
|
|
|
*
|
Charles
I. Johnston
|
|
11,705
|
|
|
*
|
Philip
J. Magnarella
|
|
10,416
|
|
|
*
|
Salvatore
A. Patafio
|
|
17,316
|
|
|
*
|
Louis
Rosner
|
|
15,991
|
|
|
*
|
Named
Executive Officers and Directors as a group
|
|
2,363,473
|
|
|
14.4(9)
|
(1)
|
Unless
otherwise stated, the address of each of the persons in the table is c/o
CRM Holdings Ltd., FB Perry Building, 40 Church Street, P.O. Box HM 2062,
Hamilton HM HX, Bermuda.
|
(2)
|
Does
not include the issuance of restricted common shares to certain of our
executive officers and non-employee directors that will vest in either two
or three equal annual installments, beginning on the first anniversary of
the respective grant dates. Such restricted common shares are not deemed
to be outstanding under the laws of Bermuda until they vest. The amounts
of shares granted are set forth in greater detail in the sections entitled
“Compensation Discussion & Analysis,” “Executive Compensation – 2008
Outstanding Equity Awards at Fiscal Year End” and “The Board and Board
Committees – Director
Compensation.”
|
(3)
|
Computed
on the basis of 16,518,833 common shares outstanding as of March 3, 2009.
This amount does not include grants of restricted shares to certain of our
employees and non-employee directors or 395,000 Class B non-voting chares.
Our Bye-Laws reduce the total voting power of any shareholder owning,
directly or indirectly, beneficially or otherwise, as described in our
Bye-Laws, 9.9% or more of the common shares to less than 9.9% of the total
voting power of our common shares. As a result of the application of our
Bye-Laws, the combined voting power of each of Wells Fargo & Company
and Daniel G. Hickey, Sr. is limited to less than 9.9%, which results in
the increase of the voting power of other shareholders. Pursuant to our
Bye-Laws, the voting power of other shareholders, in aggregate, is
increased by the same number of votes held by Wells Fargo & Company
and Daniel G. Hickey, Sr. that are subject to the voting limitation. Such
increase applies to each of the other shareholders in proportion to its
voting power as determined on any applicable record date, provided that
such increase will be limited to the extent necessary to avoid causing any
shareholder to have 9.9% or more voting
power.
|
(4)
|
Based
upon most recently available Schedule 13G/A filed with the SEC on January
22, 2009, includes 1,979,893 shares held by a group, consisting of Wells
Fargo & Company and certain of its subsidiaries and Wells Capital
Management Incorporated. The address of Wells Fargo & Company and its
subsidiaries is 420 Montgomery Street, San Francisco, California 94104 and
the address for Wells Capital Management Incorporated is 525 Market
Street, San Francisco, California
94105.
|
(5)
|
Mr.
Hickey, Jr.’s share holdings include 395,000 Class B shares that are
exchangeable at Mr. Hickey, Jr.’s option to common shares, unless (a) the
Board reasonably determines that such exchange of all or any part of the
Class B shares may cause adverse tax consequences or (b) the common shares
held by Mr. Hickey, Jr. after such an exchange would not have voting power
greater than the common shares held by Mr. Hickey, Jr. before such an
exchange. In accordance with our Bye-Laws, upon such a conversion, Mr.
Hickey, Jr.’s voting percentage would be reduced to 9.9%. The percentage
of shares owned by Mr. Hickey, Jr. shown in table excludes the Class B
shares as Mr. Hickey, Jr. has not elected to exchange such
shares.
|
(6)
|
Based
upon most recently available Schedule 13G/A filed with the SEC on February
16, 2010. The address of Mendon Capital Advisors Corp. is 150 Allens Creek
Road, Rochester, New York 14618.
|
(7)
|
Based
upon most recently available Schedule 13G/A filed with the SEC on February
8, 2010, includes 1,233,603 shares held by a group, consisting of Whitebox
Advisors, LLC and certain affiliated entities. The address of Whitebox
Advisors, LLC and its affiliated entities is 3033 Excelsior Boulevard,
Suite 300 Minneapolis, MN 55416.
|
(8)
|
Based
upon most recently available Schedule 13G filed with the SEC on February
16, 2009, includes 1,069,931 shares held by a Burnham Asset Management and
Burnham Securities Inc. The address of Burnham Asset Management and
Burnham Securities Inc. is 1325 Avenue of the Americas, New York, NY
10019.
|
(9)
|
The
amount shown reflects the total shares beneficially owned by our executive
officers and directors as a group and does not take into account any
possible reductions of voting power under our Bye-Laws, as discussed in
note 3 directly above. Assuming Mr. Hickey, Sr.’s total voting power is
reduced to 9.9%, then the total combined voting power of our executive
officers and directors as a group would be
13.6%.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, as well as beneficial owners of 10% or more of our outstanding common
shares, to file initial reports of ownership and reports of changes in ownership
with the SEC. Based solely on our review of the copies of the forms received by
us, or written representations from our executive officers and directors, we
believe that during fiscal 2009 all of our executive officers and directors and
beneficial owners of 10% or more of our outstanding common shares filed the
required reports under Section 16(a) on a timely basis, except for the Form 4
report filed by Joseph F. Taylor on May 12, 2009, which was submitted late due
to the unavailability of SEC EDGAR codes for Mr. Taylor.
PROPOSAL
NO. 2
ELECTION
OF DIRECTOR DESIGNEES OF TWIN BRIDGES (BERMUDA) LTD.
Pursuant
to Bye-Law 154, the Board of Twin Bridges, our wholly-owned Bermuda-based
reinsurance subsidiary, must be comprised of persons (1) a majority of whom are
directors of CRM Holdings and (2) who have been elected as director designees by
our shareholders (collectively referred to as the Twin Bridges Directors). If
elected, the proposed Twin Bridges Directors will hold office until their
successors are duly elected and qualified at the 2011 Annual General Meeting or,
if earlier, their death, resignation or removal.
Your
approval of the proposed Twin Bridges Directors shall constitute a direction to
us to cause us to vote CRM Holdings’ shares at the Twin Bridges Annual General
Meeting to ensure that Twin Bridges’ Board is comprised of the proposed Twin
Bridges Directors. Proxies cannot be voted for a greater number of persons than
the proposed Twin Bridges Directors named. Each of the proposed Twin Bridges
Directors is a director of the CRM Holdings and does not receive any additional
fees or payments for serving on the Twin Bridges Board. If any of the proposed
Twin Bridges Directors should become unavailable for election for any presently
unforeseen reason, the persons named in the accompanying proxy card have the
right to use their discretion to vote for a substitute nominee to be determined
by our Board. The election of each of the proposed Twin Bridges Directors
requires the affirmative vote of a majority of the votes cast at the Annual
General Meeting.
The
approval of this proposal requires the affirmative vote of a majority of the
votes cast at the Annual General Meeting, provided there is a
quorum.
Nominees
for Election of Twin Bridges Director:
The
following persons constitute the Twin Bridges Directors:
Name(1)
|
Age
|
Director of Twin Bridges
since:
|
David
M.
Birsner
|
42
|
September
2005
|
Daniel
G. Hickey,
Sr.
|
65
|
September
2005
|
Keith
S.
Hynes
|
57
|
November
2005
|
Charles
I.
Johnston
|
55
|
May
2006
|
Philip
J.
Magnarella
|
72
|
September
2005
|
Salvatore
A.
Patafio
|
65
|
September
2005
|
Louis
Rosner,
Esq.
|
61
|
September
2005
|
James
J.
Scardino
|
56
|
May
2009
|
(1)
|
The
biographical information for the nominees is described earlier in this
Proxy Statement under the section entitled “Proposal No. 1 – Election of
Directors.”
|
Board
of Directors’ Recommendation
OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THE TWIN
BRIDGES DIRECTORS. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY
OTHERWISE IN THEIR PROXIES.
PROPOSAL
NO. 3.
APPROVAL
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND
AUTHORIZATION OF THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO
SET THE FEES FOR THE INDEPENDENT AUDITORS
Under
Bermuda law, our shareholders have the responsibility to appoint our auditor and
independent registered public accounting firm to hold office until the close of
the next annual general meeting and to authorize the Audit Committee of the
Board of Directors to set the auditors’ remuneration.
The Audit
Committee of the Board has recommended to the shareholders to appoint Ernst
& Young LLP (Ernst & Young) to serve as our independent registered
public accounting firm for the fiscal year ended December 31, 2010. We have been
advised by Ernst & Young that it is a registered public accounting firm with
the Public Company Accounting Oversight Board (the PCAOB) and complies with the
auditing, quality control and independence standards and rules of the PCAOB and
the Securities and Exchange Commission. Johnson Lambert & Co. LLP (Johnson
Lambert) served as our independent registered public accounting firm prior to
2009. Ernst & Young was engaged effective as of the close of our Annual
General Meeting held on May 5, 2009 and audited our financial statements for the
fiscal year ended December 31, 2009. Johnson Lambert’s report on the financial
statements for the fiscal year ended December 31, 2008 did not contain an
adverse opinion or a disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principles. The change in independent
registered public accounting firms was not the result of any disagreement with
Johnson Lambert. Johnson Lambert was dismissed by recommendation of our Audit
Committee. Our Audit Committee made the decision to recommend the change of
independent accountants at its meeting on March 3, 2009, acting under authority
delegated to it by our Board of Directors.
An Ernst
& Young representative is expected to attend the Annual General Meeting. The
representative will have the opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate shareholder
questions.
The
approval of this proposal requires the affirmative vote of a majority of the
votes cast at the Annual General Meeting, provided there is a quorum. If the
shareholders do not approve this appointment by the affirmative vote of a
majority of shares present in person or represented by proxy at the meeting,
another independent registered public accounting firm will be considered by our
Board of Directors.
Board
of Directors’ Recommendation
OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
Independent
Registered Public Accountants’ Fees
The
aggregate fees billed for professional services by Ernst & Young and Johnson
Lambert & Co. in 2009 and 2008, respectively, for the following services
were:
|
|
|
|
|
|
|
Audit
Fees(1)
|
|
$
|
1,298,000
|
|
|
$
|
1,393,455
|
|
Audit-Related
Fees(2)
|
|
|
31,000
|
|
|
|
9,800
|
|
Tax
Fees(3)
|
|
|
175,698
|
|
|
|
—
|
|
All
Other
Fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
1,504,698
|
|
|
$
|
1,403,255
|
|
(1)
|
“Audit
Fees” includes fees that we pay to our auditors for the audit of our
annual financial statements included in our annual report on Form 10-K and
review of quarterly financial statements included in our quarterly reports
on Form 10-Q, and for the audit of our internal control over financial
reporting and for services that are normally provided by the auditor in
connection with statutory and regulatory filings or engagements, including
the audit work required for statutory audits for Majestic and Twin
Bridges.
|
(2)
|
“Audit-related
fees” includes fees for assurance and related services that are reasonably
related to the performance of the audit or review of our financial
statements and internal controls over financial reporting, including the
work related to the consolidated audit of CRM USA Holdings Inc. and its
subsidiaries to fulfill requirements related to debt covenants and the
actuarial opinions for Majestic and Twin
Bridges.
|
(3)
|
“Tax
Fees” comprise fees billed for tax return assistance and preparation, tax
examination assistance, tax strategy and any other tax
services.
|
Pre-Approval
Policy for Services of the Independent Registered Public Accounting
Firm
Our Audit
Committee has a policy of approving the engagement of the independent registered
accounting firm to perform all audit and non-audit services on behalf of CRM
Holdings. The Audit Committee did not rely on the waiver from the pre-approval
requirement available under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X with respect to any of the services provided by the independent auditor. The
Audit Committee has determined that the provision of services covered by Ernst
& Young’s fees was compatible with maintaining the principal accountant’s
independence.
In 2009,
the percentage of fees (other than audit fees) billed for professional services
that were approved by the Audit Committee was 100%.
Audit
Committee Report
The Audit
Committee has been appointed by the Board of Directors to assist the Board of
Directors in fulfilling its responsibility to oversee the financial affairs,
risk management, accounting and financial reporting processes and audits of the
financial statements of CRM Holdings. The Committee operates under a written
charter adopted by the Board of Directors and reviewed annually by the
Committee. The Committee has furnished the following report for
2009.
The
Committee has reviewed and discussed the Company’s consolidated audited
financial statements as of and for the year ended December 31, 2009 with
management and the independent registered public accounting firm. The Committee
has discussed with the independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 114, The Auditor’s Communication with
those Charged with Governance, as currently in effect.
The Audit
Committee has received the written disclosures and the letter from the
independent accountant required by the applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountant’s
communications with the audit committee concerning independence, and has
discussed with the independent accountant the independent accountant’s
independence.
Based on
the Committee’s reviews and discussions referred to above, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company’s annual report on Form 10-K for the year
ended December 31, 2009 for filing with the Securities and Exchange
Commission.
|
Audit
Committee
|
|
Charles I. Johnston,
Chairman
|
|
Keith
S. Hynes
|
|
Salvatore A.
Patafio
|
PROPOSAL
NO. 4.
CHANGE
OF NAME FROM CRM HOLDINGS, LTD. TO MAJESTIC CAPITAL, LTD.
On March
3, 2009, the Board approved a resolution (attached hereto as Appendix A) for
shareholder approval at the meeting to change our name from “CRM Holdings, Ltd.”
to “Majestic Capital, Ltd.”
We
believe that the corporate name change will better reflect our corporate
identity. The current name of “CRM Holdings” reflects the business of our
operating subsidiaries, Compensation Risk Managers, LLC and Compensation Risk
Managers of California, LLC, which provided group management and third party
administration services to self-insured groups in New York and California. Our
self-insured group operations in New York were discontinued as of September 8,
2008, and we have only one active group under management in
California.
We
acquired Majestic Insurance Company in November 2006. Following the acquisition
and the closure of our self-insured group operations, revenue from Majestic and
its primary insurance products soon constituted substantially all of our
revenues. Consequently, our business at this point is almost entirely focused on
our primary insurance segment which includes the underwriting of workers’
compensation insurance products offered through Majestic. Therefore, we believe
that the name “Majestic Capital, Ltd.” better reflects our current business and
strategy.
The
change of our name to “Majestic Capital, Ltd.” will not by itself affect in any
way the validity of currently outstanding share certificates or the trading of
our securities. Our shareholders will not be required to surrender or exchange
any of our share certificates that they currently hold. Shareholders with
certificated shares may continue to hold their existing certificates or receive
without charge new certificates reflecting the name change upon tendering the
old certificates to our transfer agent.
If the
shareholders approve the change to our name, we intend to apply for a change to
our NASDAQ ticker symbol from “CRMH” to “MAJC”.
The
approval of this proposal requires the affirmative vote of a majority of the
votes cast at the Annual General Meeting, provided there is a
quorum.
Board
of Directors’ Recommendation
OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE CHANGE OF CRM HOLDINGS
NAME FROM CRM HOLDINGS, LTD. TO MAJESTIC CAPITAL, LTD.
PROPOSAL
NO. 5.
APPROVAL
OF AMENDED AND RESTATED BYE-LAWS
Shareholders
are being asked to consider and approve the adoption of Amended and Restated
Bye-Laws.
With a
view to modernizing the Companies Act 1981 (the Companies Act) to take into
account various company law reform initiatives in various jurisdictions, the
Companies Amendment Act 2006 (the Amendment Act), which came into force on
December 29, 2006, made a number of important changes to Bermuda’s primary
company legislation. The Board of Directors has approved the Amended and
Restated Bye-laws (the Amended Bye-Laws) in light of the changes to the
Companies Act which incorporate the following principal changes to our existing
Bye-Laws (the Bye-Laws). In addition to the changes arising from the Amendment
Act, the Board is proposing certain other amendments to the Bye-Laws as set
forth below.
Under
Section 153 of our Bye-Laws, any amendment to our Bye-Laws (excluding amendments
to Bye-Laws 143-150 which relate to indemnification) requires a majority of the
votes cast at an annual general meeting, provided there is a quorum. If this
proposal is not approved at the Annual General Meeting, our current Bye-laws
will continue to govern our corporate actions.
Electronic
Delivery of Documents
The
Amendment Act makes it possible for a Bermuda company to deliver an “electronic
record” of documents to its shareholders and others via electronic mode such as
e-mail or website postings. Previously we were required to deliver a hard copy
of any such documents. The proposed Amended Bye-laws, if approved, will permit
us to take advantage of the SEC’s “notice and access” rules to post notices of
shareholder meetings and proxy statements and other documents to be sent by
electronic means. These mechanisms could help us save printing and postage costs
and may be found to be more convenient for certain of our
shareholders.
Treasury
Shares
The
Amendment Act makes it possible for a Bermuda company to acquire its own shares,
to be held as treasury shares in lieu of cancellation. Treasury shares generally
represent shares that were once traded in the market but which have since been
reacquired by the issuing company and are available for retirement or later
reissuance. Treasury shares are considered to be issued but not outstanding,
cannot be voted and accrue no dividends. Under the Amendment Act, a company
continues to be able to purchase its own shares for cancellation so long as its
constitutional documents so permit. The proposed Amended Bye-Laws, if approved,
will permit the Company to hold reacquired shares in treasury rather than
canceling them following a repurchase.
Execution
of Instruments without Seal
The
Amendment Act makes it possible for a Bermuda company to execute deeds and other
instruments without a seal using the signature of an authorized person.
Previously the execution of any such documents required a corporate seal. The
proposed Amended Bye-Laws, if approved, will permit us to take advantage of this
flexibility to execute documents without a seal by allowing any director,
corporate secretary or other person authorized by the Board of Directors to sign
instruments on behalf of the Company.
Flexibility
in Titles and Identities of Officers
The
Amendment Act removes the requirement for a Bermuda company to appoint a
President/Vice President or Chairman/Deputy Chairman and also eliminates the
requirement that officers be directors. The proposed Amended Bye-Laws, if
approved, will permit us to take advantage of this flexibility.
Directors’
Authority
The
Amendment Act clarifies the position regarding the scope of the board of
directors’ authority. Prior to the enactment of the Amendment Act, there was
doubt as to whether a board of directors’ authority was proscribed in certain
circumstances (e.g. in transactions relating to the disposal of all of the
company’s assets) and required shareholder approval. The Amendment Act removes
any doubt about the scope of directors’ authority in relation to the
shareholders, by providing that directors can exercise all of the powers of the
company except those powers that are required by the Companies Act or the
bye-laws to be exercised by the shareholders. The current Bye-Laws include a
non-exhaustive list of the powers of the company which the Board may exercise.
The proposed Amended Bye-Laws, if approved, will reflect the wording of the
Amendment Act to provide that the Board may exercise all the powers of the
Company except those that are required by the Act or the Bye-Laws to be
exercised by shareholders.
Size
of the Board
Our
Bye-Laws currently provide that the size our Board of Directors shall be not
less than 2 nor more than 20 directors, with the exact number to be determined
from time to time by a vote of the shareholders. If the shareholders have not
voted, then the size of our Board will be fixed at 9 directors. The proposed
Amended Bye-Laws, if approved, will change the authority to set the exact size
of our Board from the shareholders to our Board of Directors.
Capitalization
of Profits
Our
Bye-Laws currently provide that any amount standing to the credit of a share
premium account may only be applied in crediting as fully paid shares of the
same class as that from which the relevant share premium was derived. The
proposed Amended Bye-Laws, if approved, will remove the restriction that the
amount must be credited to the same class of shares and will allow a credit of a
share premium account to be applied to any class of shares.
Poll
Voting
Our
Bye-Laws currently provide that matters to be considered at an annual general
meeting will be voted on by a show of hands unless poll voting is demanded by
the chairman of the meeting. The proposed Amended Bye-Laws, if approved, will
conform our Bye-Laws to our practice of using poll voting at annual general
meetings, by providing that all items put to the vote at an annual general
meeting will be decided on a poll.
Name
Change
As
discussed above in Proposal No. 4, we are proposing to change the name of the
CRM Holdings, Ltd. to Majestic Capital, Ltd. The proposed Amended Bye-Laws, if
approved, will effect the change of our name in our Bye-Laws.
Text
of the Proposed Amended and Restated Bye-laws
The full
text of the proposed Amended and Restated Bye-laws, with the proposed changes
reflected therein, is attached to this proxy statement as
Appendix B
. The
summaries of the amendments are qualified in their entirety by reference to the
text set forth in
Appendix B
, which
text is hereby incorporated herein by reference.
Board
of Directors’ Recommendation
OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE
APPROVAL OF THE AMENDED
AND RESTATED BYE-LAWS.
PROPOSAL
NO. 6.
APPROVE
AND AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE SHARE SPLIT OF OUR
COMMON AND CLASS B SHARES
We are
requesting shareholder approval to authorize the Board of Directors, in its
discretion, to effect a reverse share split of our common and Class B shares
within a range of 1-for-5 shares to 1-for-10 shares, at any time prior to
November 5, 2010.
Under
Section 46(1) of the Companies Act and Section 46 of our Bye-Laws, we may, from
time to time, by shareholder vote consolidate and divide all or any of our share
capital into shares of larger par value than our existing shares. Shareholder
approval of this proposal gives the Board of Directors, in its sole discretion,
the ability to implement a reverse share split of our common and Class B Shares
within a range of 1-for-5 shares to 1-for-10 shares at any time prior to
November 5, 2010.
Under
Section 3(2)(a) of our Bye-Laws, shareholder approval of this proposal, followed
by a subsequent decision by the Board of Directors to implement a reverse share
split of our common shares within a range of 1-for-5 to 1-for-10 shares will
result in the automatic implementation of the same reverse share split to our
Class B shares.
However,
notwithstanding shareholder approval of this proposal, the Board may, in its
sole discretion, determine not to effect, and abandon, the reverse share split
without further action by shareholders. Except for adjustments that may result
from the treatment of fractional shares as described below, each shareholder
will hold the same percentage of common shares outstanding immediately following
the reverse share split as that shareholder held immediately before the reverse
share split.
Purposes
of Reverse Share Split
The
primary purpose of the reverse share split is to increase the per share trading
price of our common shares. We believe a reverse share split will increase the
price of our common shares to satisfy the Nasdaq $1.00 minimum bid price
requirement, and thus help the continued listing of our common shares on the
Nasdaq. However, there can be no assurance that the reverse share split, if
implemented, will have the desired effect of sufficiently raising the common
share price. The effect of a reverse share split upon the market price of the
common shares cannot be predicted with any certainty. The market price of the
common shares may vary based on other factors that are unrelated to the number
of shares outstanding, including our historical and anticipated performance. We
also cannot assure you that the common shares will not be delisted due to a
failure to meet other continued listing requirements even if after the reverse
share split the market price per share of the common shares remains in excess of
$1.00. If a delisting from NASDAQ were to occur, we may seek to have the common
shares traded on the OTC Bulletin Board or in the “pink sheets.” These
alternative markets are generally considered to be less efficient and liquid
than the Nasdaq stock market, where our shares are now listed.
NASDAQ
Listing
The Board
of Directors’ primary objective in proposing the reverse share split is to raise
the per share trading price of our common shares to better enable us to maintain
the listing of our common shares on NASDAQ. Our common shares are currently
listed on the NASDAQ Global Select Market. On November 10, 2009, we received
notice from the NASDAQ Stock Market stating that for 30 consecutive business
days, the bid price of our common shares had closed below the minimum $1.00 per
share requirement for continued inclusion on the NASDAQ Global Select Market
under Marketplace Rule 5450(a)(1). The bid price of our common shares has
remained below the minimum $1.00 per share since November 10, 2009.
We have
until May 10, 2010 to regain compliance with the minimum closing bid price
requirement. To regain compliance, the closing bid price of our common shares
must meet or exceed $1.00 per share for at least ten consecutive business days.
However, under NASDAQ rules, NASDAQ may, in its discretion, require us to
maintain a bid price of at least $1.00 per share for a period in excess of 10
consecutive business days, but generally not more than 20 consecutive business
days, before determining that we have demonstrated an ability to maintain
long-term compliance with the minimum bid price requirement.
If we do
not regain compliance with the minimum bid price rule by May 10, 2010, Nasdaq
will provide notice to us that our common shares will be delisted. At that time,
we may appeal Nasdaq’s delisting determination to a Nasdaq Listing
Qualifications Panel. Alternatively, we may apply to transfer the listing of our
common shares to the NASDAQ Capital Market if we satisfy all criteria for
initial listing on the NASDAQ Capital Market, other than compliance with the
minimum bid price requirement. If such application to the NASDAQ Capital Market
is approved, then we may be eligible for an additional 180 day grace
period.
The
reverse share split is intended to raise the bid price of the common shares to
satisfy the $1.00 minimum bid price requirement. However, there can be no
assurance that the reverse share split, if implemented, will have the desired
effect of sufficiently raising the common share price. The effect of a reverse
share split upon the market price of the common shares cannot be predicted with
any certainty. The market price of the common shares may vary based on other
factors that are unrelated to the number of shares outstanding, including our
future performance. We also cannot assure you that the common shares will not be
delisted due to a failure to meet other continued listing requirements even if
after the reverse share split the market price per share of the common shares
remains in excess of $1.00. If a delisting from NASDAQ were to occur, we may
seek to have the common shares traded on the OTC Bulletin Board or in the “pink
sheets.” These alternative markets are generally considered to be less efficient
and liquid than the Nasdaq stock market, where our shares are now
listed.
A
delisting from NASDAQ could also significantly impact the transferability and
issuance of our common shares under Bermuda law. Specific permission is required
from the Bermuda Monetary Authority, pursuant to the provisions of the Exchange
Control Act 1972 and related regulations, for all issuances and transfers of
securities of Bermuda companies, other than in cases where the Bermuda Monetary
Authority has granted a general permission. The Bermuda Monetary Authority has
advised that where any equity securities, which would include our common shares,
of a Bermuda company are listed on an appointed stock exchange, general
permission is given for the issue and subsequent transfer of any securities of a
company from and/or to a non-resident, for as long as any equities securities of
such company remain so listed. The Nasdaq Global Select Market is deemed to be
an appointed stock exchange under Bermuda law. However, the OTC Bulletin Board
and the “pink sheets” are not considered to be appointed stock exchanges.
Consequently, if our common shares are delisted from the Nasdaq and are traded
on the OTC Bulletin Board or in the “pink sheets,” we would no longer qualify
for the Bermuda Monetary Authority’s grant of general permission. As
such, the transfer and issuance of our common shares would subject to specific
permission of the Bermuda Monetary Authority under the Exchange Control Act
1972.
Even if
the closing bid price of the common shares satisfies the minimum closing bid
price rule prior to the Annual General Meeting or the expiration of additional
grace period as a result of a change to the NASDAQ Capital Market, we may still
effect the reverse share split if shareholders approve this proposal and the
Board of Directors determines that effecting the reverse share split would be in
the best interests of the Company and our shareholders.
Capital
Formation and Ability to Use Form S-3
We
believe that the failure to effect the reverse share split could impede any
future efforts by us to raise capital. We may need to raise additional capital
from time to time and may elect to do so through the issuance of equity
securities. If our shares are delisted from the NASDAQ stock market, we may find
it more difficult to raise capital, even if the shares trade on the OTC Bulletin
Board or pink sheets. Further, if our common shares are delisted from NASDAQ, we
will be ineligible to use SEC Form S-3 to register additional shares of our
common shares in certain circumstances or for resale by others. This will make
it more difficult and more expensive for us to register any additional
securities, which may adversely affect our ability to raise additional
funds.
Anticipated
Effects of Reverse Share Split
Effect
on the Market Price of the Common Shares
Although
we expect that the reverse share split will result in an increase in the market
price of our common shares, the reverse share split may not increase the market
price of our common shares in proportion to the reduction in the number of
shares of common shares outstanding or result in a permanent increase in the
market price. For example, based on the closing price of our common shares on
March 3, 2010 of $0.51 per share, if the shareholders approve, and the Board of
Directors implements, a 1-for-10 reverse share split, there can be no assurance
that the post-split market price of the common shares would be $5.10 (10 times
this current price) per share or greater. The market price is dependent upon
many factors, including our performance, prospects and other factors. If the
reverse share split is accomplished and the market price of our common shares
declines, the percentage decline as an absolute number and as a percentage of
our overall market capitalization may be greater than would occur in the absence
of a reverse share split. In many cases, the market price of a company’s shares
declines after a reverse shares split.
Effect
on the Market for the Common Shares
If we are
able to maintain the listing of our common shares on NASDAQ, we would not suffer
the potential loss of liquidity resulting from delisting. Although we believe
that a higher share price may help generate investor interest, there can be no
assurance that the reverse share split will result in a per share price that
will attract institutional investors or investment funds or that the share price
will satisfy the investing guidelines of institutional investors or investment
funds. In addition, the reduced number of outstanding common shares resulting
from the reverse share split will decrease significantly the number of common
shares available for purchase in the market. As a result, the trading liquidity
of the common shares may be adversely affected by the reverse share
split.
Effect
on Outstanding Shares
Currently,
we are authorized to issue up to a total of 50,000,000 shares of common shares,
of which 16,518,833 shares were outstanding as of March 3, 2010. In addition, we
have 395,000 shares of Class B shares outstanding as of March 3, 2010. The
following table contains approximate information relating to the common and
Class B Shares under the proposed reverse share split ratios, without giving
effect to any adjustments for fractional shares of common shares, as of March 3,
2010:
Ratio
of Reverse Share Split
|
|
Approximate
Percentage
Reduction
in
Outstanding
Shares
|
|
Approximate
Outstanding
Common
Shares
After
Reverse
Stock
Split
|
|
Approximate
Outstanding
Class
B Shares
After
Reverse
Stock
Split
|
1-for-5
|
|
80%
|
|
3,303,767
|
|
79,000
|
1-for-6
|
|
83%
|
|
2,753,139
|
|
65,833
|
1-for-7
|
|
86%
|
|
2,359,833
|
|
56,429
|
1-for-8
|
|
88%
|
|
2,064,854
|
|
49,375
|
1-for-9
|
|
89%
|
|
1,835,426
|
|
43,889
|
1-for-10
|
|
90%
|
|
1,651,883
|
|
39,500
|
The
reverse share split will result in a corresponding change to the par value of
our common and Class B shares. The par value of our common and Class B shares
will change from $0.01 to within a rage of $0.05 to $0.10, depending on the
reverse share split ratio selected by the Board of Directors.
Effect
on Outstanding Share Awards
The
reverse share split, when implemented, will affect our outstanding restricted
share awards. Our 2005 Long-Term Incentive Plan (the Plan) includes provisions
for appropriate adjustments to the number of shares of common shares covered by
the Plan and to grants of share-based awards under the Plan. If shareholders
approve the reverse share split and Board implements it, an outstanding
restricted share award of shares of common shares would thereafter evidence the
right to receive a number of common shares consistent with the reverse share
split ratio.
Effect
on Existing Shareholders; Fractional Shares
The
number of common shares held by each shareholder will be reduced as a result of
the reverse share split. For example, if the Board effects a 1-for-10 reverse
share split, a shareholder holding 10,000 common shares before the reverse share
split would hold 1,000 common shares, with a par value of $0.10 per share,
immediately after the reverse share split.
We will
not issue fractional shares of common shares. Where a shareholder would have
been entitled to a fractional share, we will round up fractional shares to the
next whole share. Each shareholder’s proportionate ownership of outstanding of
common shares would remain the same, except for minor differences resulting from
the rounding up of fractional shares. A reverse share split may leave certain
shareholders with one or more “odd lots,” which are shares holdings in amounts
of fewer than 100 common shares. These odd lots may be more difficult to sell
than common shares in even multiples of 100. Shareholders selling odd lots
created by the reverse share split may incur increased brokerage commissions in
selling such shares.
Effect
on the Company
We expect
our business and operations to continue as they are currently being conducted
and the reverse share split is not anticipated to have any effect upon the
conduct of our business. We expect to incur expenses of approximately $5,000 to
effect the reverse share split.
Effect
on Registration under the Securities Exchange Act of 1934
Our
common shares are currently registered under Section 12(b) of the Securities
Exchange Act of 1934, and we are subject to the periodic reporting and other
requirements of the Securities Exchange Act of 1934. The proposed reverse share
split will not affect the registration of the common shares under the Securities
Exchange Act of 1934 or our periodic reporting requirements. If the proposed
reverse share split is implemented, we currently expect that the common shares
will continue to be traded on the NASDAQ stock market, provided that we meet the
continued listing requirements (although NASDAQ would likely add the letter “D”
to the end of the trading symbol for a period of 20 trading days to indicate
that the reverse share split has occurred).
Accounting
Effects
Net
earnings/loss per share and book value per share will be increased as a result
of the reverse share split because there will be fewer shares of common shares
outstanding, although the reverse share split will have no effect on our
aggregate earnings or book value. Appropriate adjustments will be made to the
shareholders equity account on our balance sheet to reflect the decrease in
issued and outstanding shares.
Exchange
of Certificates
Shareholders
holding shares in certificate form will be sent a transmittal letter by the
transfer agent after the effectiveness of the reverse share split. The letter of
transmittal will contain instructions on how a shareholder should surrender its,
his or her certificate(s) to the transfer agent in exchange for certificates
representing the appropriate number of whole shares post-reverse share split. No
new certificates will be issued to a shareholder until such shareholder has
surrendered all old certificates, together with a properly completed and
executed letter of transmittal, to the transfer agent. No shareholder will be
required to pay a transfer or other fee to exchange his, her or its old
certificates for new certificates registered in the same name.
Upon
surrendering all old certificates together with a properly completed and
executed letter of transmittal, shareholders will receive a new certificate(s)
representing the number of whole common shares or Class B shares which they are
entitled as a result of the reverse share split. Until surrendered, we will deem
outstanding old certificates held by shareholders to represent the number of
whole shares of post-reverse share split common shares or Class B shares to
which these shareholders are entitled.
If an old
certificate has a restrictive legend on the back of the old certificate, the new
certificate will be issued with the same restrictive legend that is on the back
of the old certificate. Any shareholder whose old certificate has been lost,
destroyed or stolen will be entitled to a new certificate only after complying
with the requirements that the Company and the transfer agent customarily apply
in connection with lost, stolen or destroyed certificates.
Shareholders
who hold un-certificated shares, either as direct or beneficial owners, will
have their holdings electronically adjusted by the transfer agent (and, for
beneficial owners, by their brokers or banks that hold in “street name” for
their benefit, as the case may be) to give effect to the reverse share
split.
Upon the
reverse share split, we intend to treat common shares held by shareholders in
“street name,” that is, through a bank, broker or other nominee, in the same
manner as shareholders whose common shares are registered in their names. Banks,
brokers or other nominees will be asked to effect the reverse share split for
their beneficial holders holding the common shares in “street name.” However,
these banks, brokers or other nominees may have different procedures than
registered shareholders for processing the reverse share split. If a shareholder
holds shares of common shares with a bank, broker or other nominee and has any
questions in this regard, the shareholder is encouraged to contact the
shareholder’s bank, broker or other nominee.
Shareholders
should not destroy any shares certificate(s) and should not submit any shares
certificate(s) until requested to do so.
United
States Federal Income Tax Consequences
The
following summary of certain United States federal income tax consequences of
the reverse share split is based on current law, including the Internal Revenue
Code of 1986, as amended, and is for general information only. The tax
consequences of the reverse share split to a shareholder may vary depending upon
the particular facts and circumstances of such shareholder. In
addition, the discussion below does not address all the tax consequences that
may apply to a particular shareholder. For example, the discussion does not
address United States state and local tax consequences and non-United States tax
consequences of the reverse shares split. The summary does not address the tax
consequences to shareholders that are subject to special tax rules, such as
banks, insurance companies, regulated investment companies, personal holding
companies, non-United States entities, individuals who are nonresident aliens of
the United States, broker-dealers and tax-exempt entities. Accordingly, each
shareholder should consult his, her or its tax advisor to determine the
particular tax consequences to him, her or it of the reverse share split,
including the application and effect of United States federal, state, local
and/or non-United States income tax and other laws. The following summary
assumes that shares of common shares are held as “capital assets” within the
meaning of the Internal Revenue Code of 1986, as amended.
Generally,
the reverse share split should not result in the recognition of gain or loss for
federal income tax purposes. The aggregate adjusted basis of the post-reverse
share split common shares held by a shareholder will be the same as the
aggregate adjusted basis of pre-reverse share split common shares exchanged
therefor. The adjusted basis for each post split share will be the aggregate
adjusted basis of the pre-reverse share split common shares divided by the
number of post-reverse share split common shares held by such shareholder. The
holding period of the post-reverse share split common shares will include the
shareholder’s holding period for the pre-reverse share split common shares
exchanged therefor.
Board
of Directors Discretion
Although
the Board of Directors requests shareholder approval of the proposed reverse
share split, the Board reserves the authority to decide, in its discretion, to
abandon or delay the reverse share split after such vote and before the
effectiveness of the reverse share split. For example, the Board may decide in
its discretion to abandon or delay the reverse share split if we are in
compliance with the NASDAQ Global Select Market continued listing requirements
at the time of the Annual General Meeting. Further, the Board may decide in its
discretion to abandon or delay the revere share split if we are approved for
listing on the NASDAQ Capital Select Market and are entitled to an additional
180-day grace period to regain compliance with the continued listing
requirements. If the Board fails to effect the reverse share split on or before
November 5, 2010, shareholder approval again would be required prior to
implementing any subsequent reverse share split.
In
determining the ratio of the reverse stock split, the Board will assess numerous
factors including but not limited to analysis of our most recent financial
results as well as general economic conditions, and will place emphasis on the
closing price of our common shares on the days immediately preceding the day on
which the reverse share split is implemented. The judgment of the Board as to
whether to implement the reverse share split, or the ratio if implemented, shall
be conclusive.
No
Dissenters Rights
The
holders of common shares will have no dissenters’ rights of appraisal under
Bermuda law, the Memorandum of Association or the Bye-Laws with respect to the
proposed reverse share split.
Approval
Required
The
approval of this proposal requires the affirmative vote of a majority of the
votes cast at the Annual General Meeting, provided there is a
quorum.
Board
of Directors’ Recommendation
OUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF A REVERSE
SHARE SPLIT WITHIN A RANGE OF 1-FOR-5 SHARES TO 1-FOR-10 SHARES AT ANY TIME
PRIOR TO NOVEMBER 5, 2010, AND THE AUTHORITY FOR THE BOARD OF DIRECTORS TO
EFFECT SUCH SHARE SPLIT IN ITS DISCRETION.
OTHER
MATTERS
Shareholder
Proposals
To be
considered for inclusion in next year’s proxy statement, shareholder proposals
should be received at our principal executive offices no later than the close of
business on December 1, 2010. Proposals should be addressed to: Louis J.
Viglotti, Esq., General Counsel and Secretary, PO Box HM 2062, Hamilton HM HX,
Bermuda. The proposal should comply in all respects with the rules and
regulations of the Securities and Exchange Commission and our
Bye-Laws.
If a
shareholder would like to nominate one or more individuals for election as a
director at the 2011 Annual General Meeting, written notice of the proposal must
be received at our registered office no earlier than November 1, 2010 nor later
than December 1, 2010. Any notice for a director nomination shall include the
information described above under the section entitled “The Board and Board
Committees – Nominating and Corporate Governance Committee.”
Future
Electronic Delivery of Documents to Our Shareholders
We
are pleased to offer electronic delivery of documents to our shareholders. This
initiative is intended to make future shareholder communications more convenient
and timely for you, provide benefits for our environment and reduce our
costs.
Electronic
Access to Shareholder
This
initiative provides our shareholders with the ability to access electronically
the following important company documents quickly and easily:
|
·
|
annual
report, including financial
statements;
|
|
·
|
quarterly
reports, including financial
statements;
|
|
·
|
notice
of future shareholder meetings; and
|
|
·
|
proxy
circular and proxy statement and proxy-related
materials.
|
While we
believe that many shareholders prefer electronic access, we understand that this
approach may not be accessible or suitable for everyone. Accordingly, we
continue to provide paper copies of our documents for those shareholders who
prefer documents in paper format. If this is your preference, you do not need to
do anything further to continue to receive our documents.
How
to Enroll for Electronic Access of Documents
Please
visit our website, www.crmholdingsltd.bm, for an opportunity to enroll for
electronic delivery of proxy related documents and other shareholder information
as they become available. Enter “News and Events” under the “Shareholder
Services” link. Enrollment is easy. Select the documents which you would like to
receive electronically and you will be prompted to enter your name and email
address. You will receive an email confirming receipt of your online
registration. This will authorize us to notify you by e-mail as these mailings
become available on the Internet, so you can view them online, eliminating the
mailing of paper copies to your home.
Your
enrollment for electronic access will remain in effect until you cancel it. You
may cancel your enrollment or change your email address at any time by accessing
our website at www.crmholdingsltd.bm. You will see a link to unsubscribe at the
bottom of the “News and Events” page of the “Shareholder Services” link. We hope
that you will take advantage of this online service.
APPENDIX
A
RESOLVED:
That the
name of CRM Holdings, Ltd. be changed from “CRM HOLDINGS, LTD.” to “MAJESTIC
CAPITAL, LTD.”
AMENDED
AND RESTATED BYE-LAWS
of
CRM HOLDINGS,
LTD.
MAJESTIC
CAPITAL, LTD.
Amended
and Restated as of May 5, 2010
I
N D E X
BYE-LAW
|
SUBJECT
|
PAGE
|
|
|
|
1
|
INTERPRETATION
|
1
|
2
|
REGISTERED
OFFICE
|
3
|
3-4
|
SHARE
RIGHTS
|
3
|
5
|
EXCHANGE
OF CLASS B SHARES
|
6
|
6,
7
|
MODIFICATION
OF RIGHTS
|
6
|
8-11
|
SHARES
|
7
|
12-15
|
CERTIFICATES
|
7
|
16-19
|
LIEN
|
8
|
20-25
|
CALLS
ON SHARES
|
9
|
26-32
|
FORFEITURE
OF SHARES
|
10
|
33,34
|
REGISTER
OF SHAREHOLDERS
|
10
11
|
35
|
REGISTER
OF DIRECTORS AND OFFICERS
|
11
|
36-38
|
TRANSFER
OF SHARES
|
11
|
39-42
|
TRANSMISSION
OF SHARES
|
12
|
43-45
|
INCREASE
OF CAPITAL
|
13
|
46,
47
|
ALTERATION
OF CAPITAL
|
13
|
48,
49
|
REDUCTION
OF CAPITAL
|
13
14
|
50
|
GENERAL
MEETINGS AND WRITTEN RESOLUTIONS
|
14
|
51-54
|
NOTICE
OF GENERAL MEETINGS
|
14
|
55-61
|
PROCEEDINGS
AT GENERAL MEETINGS
|
15
|
62-65
|
VOTES
OF SHAREHOLDERS
|
15
16
|
66
|
SHAREHOLDER
DISCLOSURE
|
17
|
67-78
|
VOTING
PROCEDURES
|
18
19
|
79-85
|
PROXIES
AND CORPORATE REPRESENTATIVES
|
20
|
86-89
|
APPOINTMENT
AND REMOVAL OF DIRECTORS
|
21
|
90
|
RESIGNATION
OF DISQUALIFICATION OF DIRECTORS
|
23
22
|
91-93
|
ALTERNATE
DIRECTORS
|
23
|
94
|
DIRECTORS’
FEES AND ADDITIONAL REMUNERATION AND EXPENSES
|
23
|
95
|
DIRECTORS’
INTERESTS
|
24
23
|
96-100
|
POWERS
AND DUTIES OF THE BOARD
|
24
|
101-103
|
DELEGATION
OF THE BOARD’S POWERS
|
25
|
104-112
|
PROCEEDINGS
OF THE BOARD
|
26
25
|
113
|
OFFICERS
|
27
26
|
114
|
MINUTES
|
27
|
115,
116
|
SECRETARY
AND RESIDENT REPRESENTATIVE
|
27
|
117
|
THE
SEAL
|
28
27
|
118-124
|
DIVIDENDS
AND OTHER PAYMENTS
|
28
|
125
|
RESERVES
|
29
|
126,
127
|
CAPITALISATION
OF PROFITS
|
29
|
128-130
|
RECORD
DATES
|
30
29
|
131-133
|
ACCOUNTING
RECORDS
|
30
|
134
|
AUDIT
|
31
30
|
135-137
|
SERVICE
OF NOTICES AND OTHER DOCUMENTS
|
31
30
|
138-141
|
UNTRACED
SHAREHOLDERS
|
31
32
|
142
|
WINDING
UP
|
32
|
143-150
|
INDEMNITY
& INSURANCE
|
32
|
151
|
AMALGAMATION
|
34
|
152
|
CONTINUATION
|
34
|
153
|
ALTERATION
OF BYE-LAWS
|
34
|
154
|
CERTAIN
SUBSIDIARIES
|
34
|
AMENDED
AND RESTATED BYE - LAWS
of
CRM HOLDINGS,
LTD.
MAJESTIC
CAPITAL, LTD.
Amended
and Restated as of May 5, 2010
INTERPRETATION
1.
|
(1)
|
In
these Bye-Laws unless the context otherwise
requires:
|
“
Affiliate
” means, with respect
to any specified person, a person that directly or indirectly controls, is
controlled by or is under common control with such person. For the
purpose of this definition, the term “control” means the power to direct the
management of an entity, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlled” and
“controlling” have meanings correlative to the foregoing.
“
Alternate Director
” means an
Alternate Director appointed in accordance with Bye-Law 91.
“
Bermuda
” means the Islands of
Bermuda.
“
Board
” means the board of
Directors of the Company or the Directors present at a meeting of Directors at
which there is a quorum.
“
Business Day
” means any day
except a Saturday, Sunday or other day on which banks in any of Hamilton,
Bermuda, or New York, New York are authorised or obligated by law or executive
order to close.
“
Class B Shares
” shall mean the
class B shares, par value US$0.01 per share, of the Company.
“
Code
” means the United States
Internal Revenue Code of 1986, as amended, or any United States federal statute
then in effect that has replaced such statute, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such replacement United States federal
statute.
“
Common Shares
” shall mean the
common shares, par value US$0.01 per share, of the Company.
“
Companies Acts
” means every
Bermuda statute from time to time in force concerning companies insofar as the
same applies to the Company.
“
Company
” means the company
incorporated in Bermuda under the name of CRM Holdings, Ltd. on 7 September
2005.
2005,
and whose name was subsequently changed to Majestic Capital, Ltd. on May 5,
2010.
“
Confidential Information
”
shall have meaning given to such term in Bye-Law 66(2).
“
Control Group
” means, with
respect to any person, all Shares that confer the right to vote and directly
owned by such person and all Shares that confer the right to vote and directly
owned by each other Shareholder any of whose Shares that confer the
right to vote and are included in the Controlled Shares of such
person.
“
Controlled Shares
” in
reference to any person means all Shares that confer the right to vote and that
such person is deemed to own directly, indirectly (within the meaning of Section
958(a) of the Code) or, in the case of any U.S. Person, constructively (within
the meaning of Section 958(b) of the Code).
“
Designated Companies
” shall
have the meaning given such term in Bye-Law 154.
“
Designated Company Directors
”
shall have the meaning given such term in Bye-Law 154.
“
Director
” means such person or
persons as shall be appointed to the Board from time to time pursuant to these
Bye-Laws.
“
Exchange Act
” means the United
States Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
Exchange Request
” shall have
the meaning given such term in Bye-Law 5(1).
“
Exchanging Shareholder
” shall
have the meaning given such term in Bye-Law 3(2).
“
Indemnified Person
” means any
Director, Officer, Resident Representative, member of a committee duly
constituted under these Bye-Laws and any liquidator, manager or trustee for the
time being acting in relation to the affairs of the Company, and his heirs,
executors and administrators;
“
Meeting Date
” shall have the
meaning given such term in Bye-Law 129.
“
Memorandum
” means the
Memorandum of Association of the Company in its present form or as from time to
time amended.
“
Officer
” means a person
appointed by the Board pursuant to these Bye-Laws and shall not include an
auditor of the Company.
“
Options
” means options to
purchase Shares, including options to purchase Shares that may be granted to
certain directors, officers and employees of the Company.
“
Paid up
” means paid up or
credited as paid up.
“
Record Date
” shall have the
meaning given such term in Bye-Law 129.
“
Record Date Holder
” shall have
the meaning given such term in Bye-Law 129.
“
Register
” means the Register
of Shareholders of the Company.
“
Registered Office
” means the
registered office for the time being of the Company.
“
Related Group
” means a group
of Shareholders that are investment vehicles and are under common control or
management.
“
Relevant Shares
” shall have
the meaning given such term in Bye-Law 129.
“
Removed Company Directors
”
share the meaning given such term in Bye-Law 154.
“
Resident Representative
” means
(if any) the individual (or, if permitted in accordance with the Companies Acts,
the company) appointed to perform the duties of resident representative set out
in the Companies Acts and includes any assistant or deputy resident
representative appointed by the Board to perform any of the duties of the
resident representative.
“
Resolution
” means a resolution
of the Shareholders or, where required, of a separate class or separate classes
of Shareholders, adopted either in general meeting or by written resolution, in
accordance with the provisions of these Bye-Laws.
“
Seal
” means the common seal of
the Company and includes any authorised duplicate thereof.
“
Secretary
” includes a
temporary or assistant or deputy Secretary and any person appointed by the Board
to perform any of the duties of the Secretary.
“
Service
” shall have the
meaning given such term in Bye-Law 66(2).
“
Shareholder
” means a
shareholder or member of the Company, provided that for the purposes of Bye-Laws
143-149 it shall also include any holder of notes, debentures or bonds issued by
the Company.
“
Shares
” means any shares in
the share capital of the Company and includes a fraction of a
share.
“
Share Purchase Rights
” means
any options, warrants or other securities or rights to subscribe to or
exercisable for the purchase of Shares, whether or not immediately
exercisable.
“
these Bye-Laws
” means these
Amended and Restated Bye-Laws in their present form or as from time to time
amended.
“
Transfer
” when used with
respect to Shares, includes granting security interests in Shares, pledging
Shares, or otherwise transferring or disposing of any interest in
Shares.
“
Undesignated Shares
” means
shares which (i) have not been designated, by either the Board or Shareholders,
and (2) have not been issued by the Board.
“
United States
” means the
United States of America and dependent territories or any part
thereof.
“
U.S. Person
” means a “United
States person” as defined in Section 957(c) of the Code.
“
9.9% Shareholder
” means a
person that owns Shares that confer the right to vote and (within the meaning of
Section 958 (a) of the Code) owns or is deemed to own Controlled Shares which
confer votes in excess of 9.9% (or such other percentage as determined under
Bye-Law 63(3)) of the votes conferred by all of the issued and outstanding
Shares that confer the right to vote.
|
(2)
|
For
the purposes of these Bye-Laws a corporation shall be deemed to be present
in person if its representative duly authorised pursuant to the Companies
Acts is present;
|
|
(3)
|
Words
importing only the singular number include the plural number and vice
versa;
|
|
(4)
|
Words
importing only the masculine gender include the feminine and neuter
genders respectively;
|
|
(5)
|
Words
importing persons include any individual, partnership, corporation,
limited liability company, joint venture, joint stock company, trust,
unincorporated organization, government (or an agency or political
subdivision thereof) or other
entity;
|
|
(6)
|
A
reference to writing shall include typewriting, printing, lithography,
photography, telecopy and
other modes of
representing or reproducing words in a legible and non-transitory
form
electronic
record
;
|
|
(7)
|
Any
words or expressions defined in the Companies Acts in force at the date
when these Bye-Laws or any part thereof are adopted shall bear the same
meaning in these Bye-Laws or such part (as the case may
be).
|
REGISTERED
OFFICE
2.
|
The
Registered Office shall be at such place in Bermuda as the Board shall
from time to time appoint.
|
SHARE
RIGHTS
The
Common Shares shall, subject to the other provisions of these Bye-Laws, entitle
the holders thereof to the following rights:
(a) as
regards dividends:
after
making all necessary provisions, where relevant, for payment of any preferred
dividend in respect of any preference shares in the Company then outstanding,
the Company shall apply any profits or reserves which the Board resolves to
distribute in paying such profits or reserves to the holder of the Common Shares
in respect of their holding of such shares pari passu and pro rata to the number
of Common Shares held by each of them;
(b) as
regards capital:
on a
return of assets on liquidation, reduction of capital or otherwise, the holders
of the Common Shares shall be entitled to be paid the surplus assets of the
Company remaining after payment of its liabilities (subject to the rights of
holders of any preferred shares in the Company then in issue having preferred
rights on the return of capital) in respect of their holdings of Common Shares
pari passu and pro rata to the number of Common Shares held by each of
them;
(c) as
regards voting in general meetings:
the
holders of the Common Shares shall be entitled to receive notice of, and to
attend and vote at, general meetings of the Company; subject to the provisions
of Bye-Laws 62 and 63, every holder of Common Shares present in person or by
proxy shall on a poll have one vote for each Common Share held by
him.
(2)
Class B Shares
|
(a)
|
All
Class B Shares shall have all of the rights of, and shall be treated
identically in all respects with the Common Shares (including with respect
to dividends and other distributions, whether of cash or other property
(including securities), share splits, subdivisions and combinations,
reorganizations, reclassifications, amalgamations, mergers,
consolidations, liquidations, distributions or the like or the granting of
Share Purchase Rights), except that they shall carry no voting rights
other than such voting rights as may be required from time to time by the
Companies Acts, and these Bye-Laws.
|
|
(b)
|
At
any time and from time to time, any holder of Class B Shares (an
“Exchanging Shareholder”) may exchange all or any portion of its Class B
Shares for Common Shares on a one-for-one basis in accordance with the
procedures set forth in Bye-Law 5, unless (i) the Board reasonably
determines that such exchange of all or any part of such Class B Shares
may cause adverse tax consequences, determined after giving effect to the
reduction in voting power pursuant to the provisions of Bye-Law 63, to the
Company, any of its subsidiaries or any U.S. Person as to which the Shares
held by such Shareholder constitute Controlled Shares or (ii) in the case
of Class B Shares, the Common Shares held by such holder after such an
exchange would not have voting power greater than the Common Shares, if
any, held by such holder before such an exchange (after giving effect to
any reduction in voting power imposed in accordance with Bye-Law
63). The Board may elect to accept only a portion of the total
Class B Shares requested to be exchanged if such exchange is acceptable to
the Exchanging Shareholder and if the Board reasonably determines that the
exchange of a greater amount may cause adverse tax consequences to the
Company, any of its subsidiaries or any U.S. Person as to which the Shares
held by such Shareholder constitute Controlled Shares. In the
event that the Board declines to accept all or a portion of the total
Class B Shares requested to be exchanged by multiple Shareholders, the
Board will use its best efforts to treat similarly situated Shareholders
equitably (to the extent possible under the
circumstances).
|
(3)
Undesignated
Shares
The
rights attaching to the Undesignated Shares, subject to these Bye-Laws generally
and to Bye-Law 3(4) in particular, shall be as follows:
|
(a)
|
each
Undesignated Share shall have attached to it such preferred, deferred,
qualified or other special rights, privileges and conditions and be
subject to such restrictions, whether in regard to dividend, return of
capital, redemption, conversion into Common Shares or voting or otherwise,
as the Board may determine on or before its
allotment;
|
|
(b)
|
the
Board may allot the Undesignated Shares in more than one series and, if it
does so, may name and designate each series in such manner as it deems
appropriate to reflect the particular rights and restrictions attached to
that series, which may differ in all or any respects from any other series
of Undesignated Shares;
|
|
(c)
|
the
particular rights and restrictions attached to any Undesignated Shares
shall be recorded in a resolution of the Board. The Board may
at any time before the allotment of any Undesignated Share by further
resolution in any way amend such rights and restrictions or vary or revoke
its designation. A copy of any such resolution or amending
resolution for the time being in force shall be annexed as an appendix to
(but shall not form part of) these Bye-Laws;
and
|
|
(d)
|
the
Board shall not attach to any Undesignated Share any rights or
restrictions which would alter or abrogate any of the special rights
attached to any other class of series of shares for the time being in
issue without such sanction as is required for any alteration or
abrogation of such rights, unless expressly authorised to do so by the
rights attaching to or by the terms of issue of such
shares.
|
|
(4)
|
Without
limiting the foregoing and subject to the Companies Acts, the Company may
issue preference shares (including any preference shares created pursuant
to Bye-Law 3(3)) which:
|
|
(a)
|
are
liable to be redeemed on the happening of a specified event or events or
on a given date or dates and/or;
|
|
(b)
|
are
liable to be redeemed at the option of the Company and/or, if authorised
by the Memorandum, at the option of the
holder.
|
|
(5)
|
The
terms of any redeemable preference shares (including any redeemable
preference shares created pursuant to Bye-Law 3(3) and 3(4)) may provide
for the whole or any part of the amount due on redemption to be paid or
satisfied otherwise than in cash, to the extent permitted by the Companies
Acts.
|
|
(6)
|
Subject
to the foregoing and to any special rights conferred on the holders of any
Share or class of Shares, any Share in the Company may be issued with or
have attached thereto such preferred, deferred, qualified or other special
rights or such restrictions, whether in regard to dividend, voting, return
of capital or otherwise, as the Company may by Resolution determine or, if
there has not been any such determination or so far as the same shall not
make specific provision, as the Board may
determine.
|
4.
|
(1)
|
The
Board may, at its discretion and without the sanction of a Resolution,
authorise the purchase by the Company of its own Shares, of any class, at
any price (whether at par or above or below par), and any Shares to be so
purchased may be selected in any manner, upon such terms as the Board may
in its discretion determine PROVIDED ALWAYS that such purchase is effected
in accordance with the provisions of the Companies Acts. To the
extent permitted by the Companies Acts, the whole or any part of the
amount payable on any such purchase may be paid or satisfied otherwise
than in cash.
|
|
(2)
|
The
Board may, at its discretion and without the sanction of a Resolution,
authorise the acquisition by the Company of its own shares, to be held as
treasury shares, upon such terms as the Board may in its discretion
determine, provided always that such acquisition is effected in accordance
with the provisions of the Companies Acts. The Company shall be entered in
the Register as a Shareholder in respect of the shares held by the Company
as treasury shares and shall be a Shareholder of the Company but subject
always to the provisions of the Companies Acts and for the avoidance of
doubt the Company shall not exercise any rights and shall not enjoy or
participate in any of the rights attaching to those shares save as
expressly provided for in the Companies
Acts.
|
EXCHANGE
OF CLASS B SHARES
5.
|
(1)
|
In
order to exchange Class B Shares, an Exchanging Shareholder shall deliver
to the Company a written request (an “Exchange Request”) and share
certificate(s) representing the Class B Shares to be
exchanged. The Board shall determine whether to accept the
Exchange Request within ten (10) Business Days of receipt of such
request. If the Board elects to reject the Exchange Request
which it may do only if it reasonably determines that the exchange may
cause adverse tax consequences as determined in subsection Bye-Law
3(2)(b)(i), or if the circumstances described under subsection Bye-Law
3(2)(b)(ii) are applicable, the Company will return the certificates
promptly. The Board may delegate the decision whether to accept
the Exchange Request to a committee of the Board, an Officer or other
persons.
|
|
(2)
|
Notwithstanding
any other provision hereof, if an exchange of Class B Shares is to be made
in connection with any public offering of the Common Shares or in
connection with any transfer of Shares approval of which is required
pursuant to Bye-Laws 36 through 38, at the election of the Exchanging
Shareholder the exchange of Class B Shares may be conditioned upon the
consummation of such public offering or transfer (with such exchange to
occur simultaneously therewith).
|
|
(3)
|
Within
five (5) Business Days after an Exchange Request is accepted by the Board
(or simultaneously with a public offering or other transfer if made in
connection therewith), the Company shall deliver to the Exchanging
Shareholder (or, if applicable, to its
transferee):
|
|
(a)
|
a
certificate representing the Common Shares into which the number of Class
B Shares accepted for exchange have been exchanged;
and
|
|
(b)
|
a
certificate representing the Class B Shares, if any, that were represented
by the certificate delivered to the Company but were not
exchanged.
|
|
(4)
|
The
issuance of certificates for Common Shares upon any exchange of Class B
Shares shall be made without charge to the Exchanging Shareholders for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exchange. The Common Shares into which
such Class B Shares shall have been exchanged shall be validly issued and
fully paid.
|
MODIFICATION
OF RIGHTS
6.
|
Subject
to the Companies Acts, all or any of the special rights for the time being
attached to any class of Shares for the time being issued may from time to
time (whether or not the Company is being wound up) be altered or
abrogated with the consent in writing of the holders of not less than
seventy-five percent (75%) of the issued Shares of that class or with the
sanction of a resolution passed at a separate general meeting of the
holders of such Shares voting in person or by proxy. To any
such separate general meeting, all the provisions of these Bye-Laws as to
general meetings of the Company shall mutatis mutandis apply, but so that
the necessary quorum shall be two or more persons holding or representing
by proxy more than fifty percent (50%) of the aggregate voting power of
the Shares of the relevant class, that every holder of Shares of the
relevant class shall be entitled on a poll to one vote for every such
Share held by him (subject to any adjustments made to the voting power of
the Shares of any Shareholder pursuant to Bye-Law 63) and that any holder
of Shares of the relevant class present in person or by proxy may demand a
poll; PROVIDED, HOWEVER, that if the Company or a class of
Shareholders shall have only one Shareholder, one Shareholder present in
person or by proxy shall constitute the necessary
quorum.
|
7.
|
For
the purpose of this Bye-Law, unless otherwise expressly provided by the
rights attaching to or the terms of issue of such Shares or class of
Shares, such rights or terms, as the case may be, shall not be deemed to
be altered or abrogated by:
|
|
(1)
|
the
creation or issue of further Shares ranking pari passu
therewith;
|
|
(2)
|
the
creation or issue for full value (as determined by the Board) of further
Shares ranking as regards participation in the profits or assets of the
Company;
|
|
(3)
|
the
purchase or redemption by the Company of any of its own Shares;
or
|
|
(4)
|
the
creation or issue for full value (as determined by the Board) of further
Shares in priority to them.
|
SHARES
8.
|
Subject
to the provisions of these Bye-Laws, the unissued Shares of the Company
(whether forming part of the original capital or any increased capital)
shall be at the disposal of the Board, which may offer, allot, grant
Options over or otherwise dispose of them to such persons, at such times
and for such consideration and upon such terms and conditions as the Board
may determine.
Subject to the provisions of these Bye-Laws, any shares of the Company
held by the Company as treasury shares shall be at the disposal of the
Board, which may hold all or any of the shares, dispose of or transfer all
or any of the shares for cash or other consideration, or cancel all or any
of the shares.
|
9.
|
The
Board may in connection with the issue of any Shares exercise all powers
of paying commission and brokerage conferred or permitted by law. Subject
to the provisions of the Companies Acts, any such commission or brokerage
may be satisfied by the payment of cash or by the allotment of fully or
partly paid Shares or partly in one way and partly in the
other.
|
10.
|
Shares
may be issued in fractional denominations and in such event the Company
shall deal with such fractions to the same extent as its whole shares, so
that a Share in a fractional denomination shall have, in proportion to the
fraction of a whole share that it represents, all the rights of a whole
Share, including (but without limiting the generality of the foregoing)
the right to vote (subject to any adjustments made pursuant to Bye-Law
63), to receive dividends and distributions and to participate in a
winding-up.
|
11.
|
Except
as ordered by a court of competent jurisdiction or as required by law, no
person shall be recognised by the Company as holding any Share upon trust
and the Company shall not be bound by or required in any way to recognise
(even when having notice thereof) any equitable, contingent, future or
partial interest in any Share or in any fractional part of a Share or
(except only as otherwise provided in these Bye-Laws, or by law) any other
right in respect of any Share except an absolute right to the entirety
thereof in the registered holder.
|
CERTIFICATES
12.
|
No
share certificates shall be issued by the Company unless, in respect of a
class of Shares, the Board has either for all or for some holders of such
Shares (who may be determined in such manner as the Board thinks fit)
determined that the holder of such Shares may be entitled to share
certificates. The preparation, issue and delivery of
certificates shall be governed by the Companies Acts. In the
case of a Share held jointly by several persons, delivery of a certificate
to one of several joint holders shall be sufficient delivery to
all.
|
13.
|
If
a share certificate is defaced, lost or destroyed it may be replaced
without fee but on such terms (if any) as to evidence and indemnity and to
payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board may
think fit and, in case of defacement, on delivery of the old certificate
to the Company.
|
14.
|
All
certificates for share or loan capital or other securities of the Company
(other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for
the time being relating thereto otherwise provide, be in such form as the
Board may determine and issued under the Seal
or signed by a Director, the Secretary or any person authorized by the
Board for that purpose
. The Board may by resolution determine,
either generally or in any particular case, that any signatures on any
such certificates need not be autographic but may be affixed to such
certificates by some mechanical means or may be printed thereon or that
such certificates need not be signed by any persons, and may determine
that a representation of the Seal may be printed on any such certificates.
If any person holding an office in the Company who has signed, or whose
facsimile signature has been used on any certificate, ceases for any
reason to hold his office, such certificate may nevertheless be issued as
though that person had not ceased to hold such
office.
|
15.
|
Nothing
in these Bye-Laws shall prevent title to any securities of the Company
from being evidenced and/or transferred without a written instrument in
accordance with regulations made from time to time in this regard under
the Companies Acts, and (i) the Board shall have power to implement any
arrangements which it may think fit for such evidencing and/or transfer
which accord with those regulations and (ii) any such transfer shall be
subject to the applicable provisions of Bye-Law
36.
|
LIEN
16.
|
The
Company shall have a first and paramount lien on every Share (not being a
fully paid Share) for all monies, whether presently payable or not, called
or payable, at a date fixed by or in accordance with the terms of issue of
such Share in respect of such Share, and the Company shall also have a
first and paramount lien on every Share (other than a fully paid Share)
standing registered in the name of a Shareholder, whether singly or
jointly with any other person, for all the debts and liabilities of such
Shareholder or his estate to the Company, whether the same shall have been
incurred before or after notice to the Company of any interest of any
person other than such Shareholder, and whether the time for the payment
or discharge of the same shall have actually arrived or not, and
notwithstanding that the same are joint debts or liabilities of such
Shareholder or his estate and any other person, whether a Shareholder or
not. The Company’s lien on a Share shall extend to all
dividends payable thereon. The Board may at any time, either
generally or in any particular case, waive any lien that has arisen or
declare any Share to be wholly or in part exempt from the provisions of
this Bye-Law.
|
17.
|
The
Company may sell, in such manner as the Board may think fit, any Share on
which the Company has a lien but no sale shall be made unless some sum in
respect of which the lien exists is presently payable nor until the
expiration of fourteen (14) days after a notice in writing, stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the
holder for the time being of the
Share.
|
18.
|
The
net proceeds of sale by the Company of any Shares on which it has a lien
shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is
presently payable, and any residue shall (subject to a like lien for debts
or liabilities not presently payable as existed upon the Share prior to
the sale) be paid to the person who was the holder of the Share
immediately before such sale. For giving effect to any such
sale the Board may authorise some person to transfer the Share sold to the
purchaser thereof. The purchaser shall be registered as the
holder of the Share and he shall not be bound to see to the application of
the purchase money, nor shall his title to the Share be affected by any
irregularity or invalidity in the proceedings relating to the
sale.
|
19.
|
(1)
|
Whenever
any law for the time being of any country, state or place imposes or
purports to impose any immediate or future or possible liability upon the
Company to make any payment or empowers any government or taxing authority
or government official to require the Company to make any payment in
respect of any Shares registered in any of the Company’s registers as held
either jointly or solely by any Shareholder or in respect of any
dividends, bonuses or other monies due or payable or accruing due or which
may become due or payable to such Shareholder by the Company on or in
respect of any shares registered as aforesaid or for or on account or in
respect of any Shareholder and whether in consequence
of:
|
|
(a)
|
the
death of such Shareholder;
|
|
(b)
|
the
non-payment of any income tax or other tax by such
Shareholder;
|
|
(c)
|
the
non-payment of any estate, probate, succession, death, stamp, or other
duty by the executor or administrator of such Shareholder or by or out of
his estate; or
|
|
(d)
|
any
other act or thing;
|
in every
such case (except to the extent that the rights conferred upon holders of any
class of Shares render the Company liable to make additional payments in respect
of sums withheld on account of the foregoing):
|
(i)
|
the
Company shall be fully indemnified by such Shareholder or his executor or
administrator from all liability;
|
|
(ii)
|
the
Company shall have a lien upon all dividends and other monies payable in
respect of the Shares registered in any of the Company’s registers as held
either jointly or solely by such Shareholder for all monies paid or
payable by the Company in respect of such shares or in respect of any
dividends or other monies as aforesaid thereon or for or on account or in
respect of such Shareholder under or in consequence of any such law
together with interest thereon (at a rate not exceeding that permissible
under the Interest and Credit Charges (Regulation) Act 1975 of Bermuda)
from the date of payment to the date of repayment and may deduct or set
off against such dividends or other monies payable as aforesaid any monies
paid or payable by the Company as aforesaid together with interest as
aforesaid;
|
|
(iii)
|
the
Company may recover as a debt due from such Shareholder or his executor or
administrator wherever constituted any monies paid by the Company under or
in consequence of any such law and interest thereon at the rate and for
the period aforesaid in excess of any dividends or other monies as
aforesaid then due or payable by the Company;
and
|
|
(iv)
|
the
Company may, if any such money is paid or payable by it under any such law
as aforesaid, refuse to register a transfer of any shares by any such
Shareholder or his executor or administrator until such money and interest
as aforesaid is set off or deducted as aforesaid, or in case the same
exceeds the amount of any such dividends or other monies as aforesaid then
due or payable by the Company, until such excess is paid to the
Company.
|
|
(2)
|
Subject
to the rights conferred upon the holders of any class of shares, nothing
herein contained shall prejudice or affect any right or remedy which any
law may confer or purport to confer on the Company and as between the
Company and every such Shareholder as aforesaid, his estate
representative, executor, administrator and estate wheresoever constituted
or situate, any right or remedy which such law shall confer or purport to
confer on the Company shall be enforceable by the
Company.
|
CALLS
ON SHARES
20.
|
The
Board may from time to time make calls upon the Shareholders
(for
the avoidance of doubt excluding the Company in respect of any nil or
partly paid shares held by the Company as treasury shares)
in
respect of any monies unpaid on their Shares (whether on account of the
par value of the Shares or by way of premium) and not by the terms of
issue thereof made payable at a date fixed by or in accordance with such
terms of issue, and each Shareholder shall (subject to the Company serving
upon him at least fourteen (14) days’ notice specifying the time or times
and place of payment) pay to the Company at the time or times and place so
specified the amount called on his Shares. A call may be
revoked or postponed as the Board may
determine.
|
21.
|
A
call may be made payable by instalments and shall be deemed to have been
made at the time when the resolution of the Board authorising the call was
passed.
|
22.
|
The
joint holders of a Share shall be jointly and severally liable to pay all
calls in respect thereof.
|
23.
|
If
a sum called in respect of the Share shall not be paid before or on the
day appointed for payment thereof the person from whom the sum is due
shall pay interest on the sum from the day appointed for the payment
thereof to the time of actual payment at such rate as the Board may
determine, but the Board shall be at liberty to waive payment of such
interest wholly or in part.
|
24.
|
Any
sum which, by the terms of issue of a Share, becomes payable on allotment
or at any date fixed by or in accordance with such terms of issue, whether
on account of the nominal amount of the Share or by way of premium, shall
for all the purposes of these Bye-Laws be deemed to be a call duly made,
notified and payable on the date on which, by the terms of issue, the same
becomes payable and, in case of non-payment, all the relevant provisions
of these Bye-Laws as to payment of interest, forfeiture or otherwise shall
apply as if such sum had become payable by virtue of a call duly made and
notified.
|
25.
|
The
Board may on the issue of Shares differentiate between the allottees or
holders as to the amount of calls to be paid and the times of
payment.
|
FORFEITURE
OF SHARES
26.
|
If
a Shareholder fails to pay any call or instalment of a call on the day
appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or instalment remains unpaid serve a
notice on him requiring payment of so much of the call or instalment as is
unpaid, together with any interest which may have
accrued.
|
27.
|
The
notice shall name a further day (not being less than fourteen (14) days
from the date of the notice) on or before which, and the place where, the
payment required by the notice is to be made and shall state that, in the
event of non-payment on or before the day and at the place appointed, the
Shares in respect of which such call is made or instalment is payable will
be liable to be forfeited. The Board may accept the surrender
of any Share liable to be forfeited hereunder and, in such case,
references in these Bye-Laws to forfeiture shall include
surrender.
|
28.
|
If
the requirements of any such notice as aforesaid are not complied with,
any Share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or instalments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board
to that effect. Such forfeiture shall include all dividends
declared in respect of the forfeited Shares and not actually paid before
the forfeiture.
|
29.
|
When
any Share has been forfeited, notice of the forfeiture shall be served
upon the person who was before forfeiture the holder of the Share; but no
forfeiture shall be in any manner invalidated by any omission or neglect
to give such notice as aforesaid.
|
30.
|
A
forfeited Share shall be deemed to be the property of the Company and may
be sold, re-offered or otherwise disposed of either to the person who was,
before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit,
and at any time before a sale, re-allotment or disposition the forfeiture
may be cancelled on such terms as the Board may think
fit.
|
31.
|
A
person whose Shares have been forfeited shall thereupon cease to be a
Shareholder in respect of the forfeited Shares but shall, notwithstanding
the forfeiture, remain liable to pay to the Company all monies which at
the date of forfeiture were presently payable by him to the Company in
respect of the Shares with interest thereon at such rate as the Board may
determine from the date of forfeiture until payment, and the Company may
enforce payment without being under any obligation to make any allowance
for the value of the Shares
forfeited.
|
32.
|
An
affidavit in writing that the deponent is a Director of the Company or the
Secretary and that a Share has been duly forfeited on the date stated in
the affidavit shall be conclusive evidence of the facts therein stated as
against all persons claiming to be entitled to the Share. The
Company may receive the consideration (if any) given for the Share on the
sale, re-allotment or disposition thereof and the Board may authorise some
person to transfer the Share to the person to whom the same is sold,
re-allotted or disposed of, and he shall thereupon be registered as the
holder of the Share and shall not be bound to see to the application of
the purchase money (if any) nor shall his title to the Share be affected
by any irregularity or invalidity in the proceedings relating to the
forfeiture, sale, re-allotment or disposal of the
Share.
|
REGISTER
OF SHAREHOLDERS
33.
|
The
Register shall be kept at the Registered Office or at such other place in
Bermuda as the Board may from time to time direct, in the manner
prescribed by the Companies Acts. Subject to the provisions of
the Companies Acts, the Company may keep one or more branch registers in
any place, and the Board may make, amend and revoke any resolutions as it
may think fit respecting the keeping of such registers. The
Board may authorize any share on the Register to be included in a branch
register or any share registered on a branch register to be registered on
another branch register, provided that at all times the Register is
maintained in accordance with the Companies
Acts.
|
34.
|
The
Register or any branch register may be closed at such times and for such
period as the Board may from time to time decide, subject to the Companies
Acts. Except during such time as it is closed, the Register and each
branch register shall be open to inspection in the manner prescribed by
the Companies Acts between 10:00 a.m. and 5:00 p.m. (or between such other
times as the Board from time to time determines) on every working
day. Unless the Board so determines, no Shareholder or
intending Shareholder shall be entitled to have entered in the Register or
any branch register any indication of any trust or any equitable,
contingent, future or partial interest in any Share or in any fractional
part of a Share and if any such entry exists or is permitted by the Board
it shall not be deemed to abrogate any of the provisions of Bye-Law
11.
|
REGISTER
OF DIRECTORS AND OFFICERS
35.
|
The
Secretary shall establish and maintain a register of the Directors and
Officers of the Company as required by the Companies Acts. The
register of Directors and Officers shall be open to inspection in the
manner prescribed by the Companies Acts between 10:00 a.m. and 5.00 p.m.
on every working day.
|
TRANSFER
OF SHARES
36.
|
(1)
|
Subject
to the Companies Acts and to such of the restrictions contained in these
Bye-Laws as may be applicable, including, without limitation, the
provisions of this Bye-Law, any Shareholder may transfer all or any of his
Shares by an instrument of transfer in the usual common form, or in any
other form or by any other method permissible under applicable law, in
either case as may be approved by the Board. No such instrument
shall be required on the redemption of a Share or on the purchase by the
Company of a Share.
|
|
(2)
|
The
instrument of transfer of a Share shall be signed by or on behalf of the
transferor and, where any Share is not fully-paid, the
transferee.
|
|
(3)
|
The
Board may, in its absolute discretion and without assigning any reason
therefor, decline to register any transfer of any Share which is not a
fully paid Share.
|
|
(4)
|
The
Board may refuse to recognise an instrument of transfer unless the
instrument of transfer is duly stamped (if required by law) and lodged
with the Company, at such place as the Board shall appoint for the
purpose, accompanied by the certificate for the Shares to which it relates
and such other evidence as the Board may reasonably require to show the
right of the transferor to make the
transfer.
|
|
(5)
|
The
Board may refuse to recognise an instrument of transfer unless the
instrument of transfer is in respect of only one class of
Share.
|
|
(6)
|
The
Board may decline to register any transfer unless the instrument of
transfer is in favour of less than five persons
jointly.
|
|
(7)
|
The
Board may also decline to register any transfer unless it is satisfied
that all applicable consents, authorisations, permissions or approvals of
any governmental body or agency in Bermuda or any other applicable
jurisdiction required to be obtained under relevant law prior to such
transfer have been obtained.
|
|
(8)
|
All
instruments of transfer when registered may be retained by the
Company.
|
|
(9)
|
The
Board may also decline to register any transfer if the result of the
transfer will make a Shareholder hold more than 9.9% of the Common Shares
of the Company.
|
|
(10)
|
The
Company may, in special circumstances, charge a fee for registering any
transfer, probate, letters of administration, certificate of death or
marriage, power of attorney, stop notice, order of court or other
instrument relating to or affecting the title to any Share, or otherwise
making an entry in the Register relating to any
Share.
|
|
(11)
|
Subject
to any directions of the Board from time to time in force, the Secretary
may exercise the powers and discretions of the Board under this Bye-Law
and under Bye-Law 37.
|
37.
|
If
the Board declines to register a transfer it shall, within thirty (30)
days after the date on which the notice or instrument of transfer was
delivered to the Board, send to the transferee notice of such
refusal.
|
38.
|
The
transferor of a Share shall be deemed to remain the holder of the Share
until the name of the transferee is entered in the Register in respect
thereof. Any purported transfer of any Share in contravention
of any of the restrictions on transfer contained in these Bye-Laws shall
be void and of no effect and shall not be entered in the
Register.
|
TRANSMISSION
OF SHARES
39.
|
In
the case of the death of a Shareholder, the survivor or survivors, where
the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as
having any title to his Shares; but nothing herein contained shall release
the estate of a deceased holder (whether the sole or joint) from any
liability in respect of any Share held by him solely or jointly with other
persons. For the purpose of this Bye-Law, estate representative
means the person to whom probate or letters of administration has or have
been granted in Bermuda or, failing any such person, such other person as
the Board may in its absolute discretion determine to be the person
recognised by the Company for the purpose of this Bye-Law. For
greater certainty, where two or more persons are registered as joint
holders of a Share or Shares, then in the event of the death of any joint
holder or holders the remaining joint holder or holders shall be
absolutely entitled to the said Share or Shares and the Company shall
recognise no claim in respect of the estate of any joint holder except in
the case of the last survivor of such joint
holders.
|
40.
|
Any
person becoming entitled to a Share in consequence of the death of a
Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time
to time be required by the Board as to his entitlement, either be
registered himself as the holder of the Share or elect to have some person
nominated by him registered as the transferee thereof. If the
person so becoming entitled elects to be registered himself, he shall
deliver or send to the Company a notice in writing signed by him stating
that he so elects. If he shall elect to have his nominee
registered, he shall signify his election by signing an instrument of
transfer of such Share in favour of his nominee. All the
limitations, restrictions and provisions of these Bye-Laws relating to the
right to transfer and the registration of transfer of Shares shall be
applicable to any such notice or instrument of transfer as aforesaid as if
the death of the Shareholder or other event giving rise to the
transmission had not occurred and the notice or instrument of transfer was
an instrument of transfer signed by such
Shareholder.
|
41.
|
A
person becoming entitled to a Share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board
as to his entitlement) be entitled to receive and may give a discharge for
any dividends or other monies payable in respect of the Share, but he
shall not be entitled in respect of the Share to receive notices of or to
attend or vote at general meetings of the Company or, save as aforesaid,
to exercise in respect of the Share any of the rights or privileges of a
Shareholder until he shall have become registered as the holder
thereof. The Board may at any time give notice requiring such
person to elect either to be registered himself or to transfer the Share
and, if the notice is not complied with within sixty days, the Board may
thereafter withhold payment of all dividends and other monies payable in
respect of the Shares until the requirements of the notice have been
complied with.
|
42.
|
Subject
to any directions of the Board from time to time in force, the Secretary
may exercise the powers and discretions of the Board under Bye-Laws 39
through 41.
|
INCREASE
OF CAPITAL
43.
|
The
Company may from time to time increase its capital by such sum to be
divided into Shares of such par value as the Company by Resolution shall
prescribe and in any manner permitted by the Companies
Acts.
|
44.
|
The
Company may, by the Resolution increasing the capital, direct that the new
Shares or any of them shall be offered in the first instance either at par
or at a premium or (subject to the provisions of the Companies Acts) at a
discount to all the holders for the time being of Shares of any class or
classes in proportion to the number of such Shares held by them
respectively or make any other provision as to the issue of the new
Shares.
|
45.
|
The
new Shares shall be subject to all the provisions of these Bye-Laws with
reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
|
ALTERATION
OF CAPITAL
46.
|
The
Company may from time to time by Resolution and in any manner permitted by
the Companies Acts:
|
|
(1)
|
divide
its Shares into several classes and attach thereto respectively any
preferential, deferred, qualified or special rights, privileges or
conditions;
|
|
(2)
|
consolidate
and divide all or any of its share capital into Shares of larger par value
than its existing Shares;
|
|
(3)
|
sub-divide
its Shares or any of them into Shares of smaller par value than is fixed
by the Memorandum, so, however, that in the sub-division the proportion
between the amount paid and the amount, if any, unpaid on each reduced
Share shall be the same as it was in the case of the Share from which the
reduced Share is derived;
|
|
(4)
|
make
provision for the issue and allotment of Shares which do not carry any
voting rights;
|
|
(5)
|
cancel
Shares which, at the date of the passing of the Resolution in that behalf,
have not been taken or agreed to be taken by any person, and diminish the
amount of its share capital by the amount of the Shares so cancelled;
and
|
|
(6)
|
change
the currency denomination of its share
capital.
|
Where any
difficulty arises in regard to any division, consolidation, or sub-division
under this Bye-Law, the Board may settle the same as it thinks expedient and, in
particular, may arrange for the sale of the Shares representing fractions and
the distribution of the net proceeds of sale in due proportion amongst the
Shareholders who would have been entitled to the fractions, and for this purpose
the Board may authorise some person to transfer the Shares representing
fractions to the purchaser thereof, who shall not be bound to see to the
application of the purchase money nor shall his title to the Shares be affected
by any irregularity or invalidity in the proceedings relating to the
sale.
47.
|
Subject
to the Companies Acts and to any confirmation or consent required by law
or these Bye-Laws, the Company may by Resolution from time to time convert
any preference Shares into redeemable preference
Shares.
|
REDUCTION
OF CAPITAL
48.
|
Subject
to the Companies Acts, the Memorandum and any confirmation or consent
required by law or these Bye-Laws, the Company may from time to time by
Resolution authorise the reduction of its issued share capital or any
share premium account in any
manner.
|
49.
|
In
relation to any such reduction, the Company may by Resolution determine
the terms upon which such reduction is to be effected including, in the
case of a reduction of part only of a class of Shares, those Shares to be
affected.
|
GENERAL
MEETINGS AND WRITTEN RESOLUTIONS
|
50.
|
(1)
|
The
Board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Companies Acts
at such times and places as the Board shall appoint. The Board,
the Chairman or Deputy Chairman of the Company may, whenever it or he
thinks fit, and shall, when required by the Companies Acts, convene
general meetings other than annual general meetings which shall be called
special general meetings.
|
|
(2)
|
Except
in the case of the removal of auditors or Directors, anything which may be
done by Resolution in general meeting may, without a meeting and without
any previous notice being required, be done by Resolution in writing,
signed by all of the Shareholders or any class thereof or their proxies,
or in the case of a Shareholder that is a corporation (whether or not a
company within the meaning of the Companies Acts) by its representative on
behalf of such Shareholder, being all of the Shareholders of the Company
or any class thereof who at the date of the Resolution in writing would be
entitled to attend a meeting and vote on the Resolution. Such
Resolution in writing may be signed in as many counterparts as may be
necessary.
|
|
(3)
|
For
the purposes of this Bye-Law, the date of the Resolution in writing is the
date when the Resolution is signed by, or on behalf of, the last
Shareholder to sign and any reference in any enactment to the date of
passing of a Resolution is, in relation to a Resolution in writing made in
accordance with this Bye-Law, a reference to such
date.
|
|
(4)
|
A
Resolution in writing made in accordance with this Bye-Law is as valid as
if it had been passed by the Company in general meeting or, if applicable,
by a meeting of the relevant class of Shareholders of the Company, as the
case may be. A Resolution in writing made in accordance with
this Bye-Law shall constitute minutes for the purposes of the Companies
Acts and these Bye-Laws.
|
NOTICE
OF GENERAL MEETINGS
51.
|
An
annual general meeting shall be called by not less than ten (10) days’
notice in writing and a special general meeting shall be called by not
less than ten (10) days’ notice in writing. The notice shall be
exclusive of the day on which it is served or deemed to be served and of
the day for which it is given, and shall specify the place, day and time
of the meeting, and, the nature of the business to be
considered. Notice of every general meeting shall be given in
any manner permitted by these Bye-Laws to all Shareholders other than such
as, under the provisions of these Bye-Laws or the terms of issue of the
Shares they hold, are not entitled to receive such notice from the
Company, and every Director and to any Resident Representative who or
which has delivered a written notice upon the Registered Office requiring
that such notice be sent to him or
it.
|
Notwithstanding
that a meeting of the Company is called by shorter notice than that specified in
this Bye-Law, it shall be deemed to have been duly called if it is so
agreed:
|
(a)
|
in
the case of a meeting called as an annual general meeting, by all the
Shareholders entitled to attend and vote
thereat;
|
|
(b)
|
in
the case of any other meeting, by a majority in number of the Shareholders
having the right to attend and vote at the meeting, being a majority
together holding not less than ninety-five percent (95%) in nominal value
of the Shares giving that right.
|
52.
|
A
Shareholder present, either in person or by proxy, at any meeting of the
Company or of the holders of any class of Shares of the Company present in
person or by proxy shall be deemed to have received notice of the meeting
and, where requisite, of the purposes for which it was
called.
|
53.
|
The
accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission
to send such instrument of proxy to, or the non-receipt of notice of a
meeting or such instrument of proxy by, any person entitled to receive
such notice shall not invalidate the proceedings at that
meeting.
|
54.
|
The
Board may cancel or postpone a meeting of the Shareholders after it has
been convened and notice of such cancellation or postponement shall be
served in accordance with these Bye-Laws upon all Shareholders entitled to
notice of the meeting so cancelled or postponed setting out, where the
meeting is postponed to a specific date, notice of the new meeting in
accordance with this Bye-Law.
|
PROCEEDINGS
AT GENERAL MEETINGS
55.
|
No
business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a chairman which
shall not be treated as part of the business of the
meeting. Save as otherwise provided by these Bye-Laws, at least
four Shareholders present in person or by proxy and representing more than
fifty percent (50%) of the aggregate voting power of the Company shall be
a quorum for all purposes; PROVIDED, HOWEVER, that if the Company or a
class of Shareholders shall have only one Shareholder, one Shareholder
present in person or by proxy shall constitute the necessary
quorum.
|
56.
|
If
within fifteen (15) minutes (or such longer time as the chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present in person or by proxy, the meeting, if convened on
the requisition of Shareholders, shall be dissolved. In any
other case, it shall stand adjourned to such other day and such other time
and place as the chairman of the meeting may determine. The
Company shall give not less than ten (10) days’ notice of any meeting
adjourned through want of a quorum.
|
57.
|
A
meeting of the Shareholders or any class thereof may be held by means of
such telephone, electronic or other communication facilities (including,
without limiting the generality of the foregoing by telephone or by video
conferencing) as permit all persons participating in the meeting to
communicate with each other simultaneously and instantaneously and
participation in such a meeting shall constitute presence in person at
such meeting.
|
58.
|
Each
Director, and upon giving the notice referred to in Bye-Law 51, and the
Resident Representative, if any, shall be entitled to attend and speak at
any general meeting of the Company.
|
59.
|
The
Chairman (or
President) or, in his absence, the Deputy Chairman (or Vice-President)
shall
Board
may choose one of their number to
preside as chairman at every
general meeting. If there is no such
Chairman or Deputy
Chairman (or President or Vice-President)
chairman
,
or if at any meeting the
Chairman or Deputy
Chairman (or President or Vice-President)
chairman
is not present within five (5) minutes after the time appointed for
holding the meeting, or is not willing to act as chairman, the Directors
present shall choose one of their number to act or if only one Director is
present he shall preside as chairman if willing to act. If no
Director is present, or if each of the Directors present declines to take
the chair, the persons present and entitled to vote on a poll shall elect
one of their number to be chairman.
|
60.
|
The
chairman of the meeting may, with the consent by Resolution of any meeting
at which a quorum is present (and shall if so directed by the meeting),
adjourn the meeting from time to time and from place to place but no
business shall be transacted at any adjourned meeting except business
which might lawfully have been transacted at the meeting from which the
adjournment took place. When a meeting is adjourned for three
months or more, notice of the adjourned meeting shall be given as in the
case of an original meeting.
|
61.
|
Save
as expressly provided by these Bye-Laws, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an
adjourned meeting.
|
VOTES
OF SHAREHOLDERS
62.
|
Subject
to the provisions of Bye-Laws 63 and 64, and subject to any rights and
restrictions for the time being attached to any class or classes of
Shares, every Shareholder and every person representing a Shareholder by
proxy shall have one vote for each Share carrying the right to vote on the
matter in question of which he or the person represented by proxy is shown
in the Register as the holder. All matters in these Bye-Laws
that are subject to a vote or approval of Shareholders shall be based upon
the voting power of such Shareholders’ Shares as determined pursuant to
Bye-Laws 62 through 65. For the avoidance of doubt, in applying
the provisions of these Bye-Laws, a Share may carry a fraction of a
vote.
|
|
63.
|
(1)
|
If,
as a result of giving effect to the provisions of Bye-Law 62 or otherwise,
the votes conferred by the Controlled Shares of any person would otherwise
cause such person to be treated as a 9.9% Shareholder, the votes conferred
by the Shares of such person's Control Group are hereby reduced (and shall
be automatically reduced in the future) by whatever amount is necessary so
that after any such reduction the votes conferred by the Controlled Shares
of such person shall not exceed 9.9% (or such other percentage as
determined under Bye-Law 63(4)) of the total voting power of all of the
Shares entitled to vote on the matter in
question.
|
|
(2)
|
When
determining the number of Controlled Shares of each of Mr. Daniel G.
Hickey, Sr and Mr. Daniel G.Hickey, Jr., the Company will not take into
effect (a) the Shares held by Mr. Daniel G. Hickey, Sr. when ascertaining
the number of Controlled Shares held by Mr. Daniel G. Hickey, Jr., and (b)
the Shares held by Mr. Daniel G. Hickey, Jr. when ascertaining the number
of Controlled Shares held by Mr. Daniel G. Hickey,
Sr.
|
|
(3)
|
Subject
to this Bye-Law 63(3), the reduction in votes pursuant to Bye-Law 63(1)
shall be determined as follows:
|
|
(a)
|
Beginning
with the Control Group of the person whose Controlled Shares have the
largest number of votes and continuing, as required, with the Control
Group of each person whose Controlled Shares successively have a smaller
number of votes (after giving effect to prior reductions), the reduction
in votes conferred by the Shares of a Control Group shall be effected
proportionately among all the Shares of such Control Group in accordance
with the relative voting power of such
Shares.
|
|
(b)
|
After
all required reductions to Shares of Control Groups are effected pursuant
to subparagraph (a), the amount of any reduction in the votes of the
Shares held by each Shareholder effected by application of subparagraph
(a) above shall be (i) reallocated among and conferred on the Shares held
directly by such Shareholder, proportionately in accordance with the
reduction in voting power of such Shares pursuant to subparagraph (a)
above, to the extent that so doing does not cause any person to be treated
as a 9.9% Shareholder and (ii) the amount of any remaining reduction in
votes shall then be allocated and conferred proportionately among the
Shares held directly by all other Shareholders in accordance with the
relative voting power of such Shares; provided, however, that no Shares
shall be conferred votes to the extent that so doing shall cause any
person to be treated as a 9.9%
Shareholder.
|
(4) Upon
written notification by a Shareholder to the Board,
|
(a)
|
such
Shareholder shall be entitled to direct that the Board (i) treat it
(and/or any specified Affiliate to whom Shares owned by such Shareholder
could be attributed pursuant to Section 958(a) of the Code) as a U.S.
Person, and/or (ii) treat it, together with other related Shareholders so
designated by such Shareholder, as one person for purposes of determining
such Shareholder's Control Group;
or
|
|
(b)
|
the
number of votes conferred by the total number of Shares held by such
Shareholder shall be reduced to that percentage of the total voting power
of the Company, as so designated by such Shareholder (subject to
acceptance of such reduction by the Board in its sole discretion) so that
(and to the extent that) such Shareholder may satisfy any applicable
insurance or other regulatory requirement (including tax regulatory) or
voting threshold or limitation that may be applicable to such
Shareholder.
|
|
(5)
|
If,
after giving effect to the provisions of Bye-Laws 63(1) and (2), the votes
conferred by the Shares directly held by any Related Group would otherwise
represent more than 9.9% of the votes conferred by all of the issued and
outstanding Shares, the votes conferred by such Shares are hereby reduced
(and shall be automatically reduced in the future) proportionately among
all the Shares directly held by such Related Group in accordance with the
relative voting power of such Shares, by whatever amount is necessary so
that after any such reduction the votes conferred by the Shares directly
held by such Related Group shall not exceed 9.9% of the votes conferred by
all of the issued and outstanding Shares. The amount of any
reduction in votes pursuant to this Bye-Law 63(5) shall then be allocated
and conferred proportionately among the Shares held directly by all
Shareholders who are not in such Related Group in accordance with the
relative voting power of such Shares; provided, however, that no Shares
shall be conferred votes to the extent that so doing shall cause any
person to be treated as a 9.9%
Shareholder.
|
|
(6)
|
Notwithstanding
anything to the contrary in this Bye-Law 63, the votes conferred by the
Controlled Shares of any Shareholder shall not exceed such amount as would
result in any U.S. Person that owns Shares of the Company
(within the meaning of Section 958(a) of the Code) being treated as owning
(within the meaning of Section 958 of the Code) more than 9.9% (or such
lower percentage designated by a Shareholder pursuant to Bye-Law provision
63(4) hereof) of the aggregate voting power of the votes conferred by all
the Shares of the Company entitled to vote on a particular matter in
question.
|
|
(7)
|
The
Board shall implement the foregoing in the manner set forth in this
Bye-Law. In addition to any other provision of this Bye-Law 63,
any Shares shall not carry rights to vote or shall have reduced voting
rights to the extent that the Board reasonably determines in good faith
that it is necessary that such Shares should not carry the right to vote
or shall have reduced voting rights in order to avoid adverse tax
consequences or materially adverse legal or regulatory treatment to the
Company, any subsidiary of the Company or any Shareholder or its
Affiliates; provided, that the Board will use reasonable efforts to
exercise such discretion equally among similarly situated Shareholders to
the extent possible under the circumstances and provided further, that the
Board shall reallocate the amount of any reduction in vote in the manner
described in Bye-Law 63(3)(b).
|
64.
|
The
determination by the Board, made in good faith, upon the written advice of
counsel, as to any adjustments to voting power of any Share made pursuant
to Bye-Law 63 shall be final and
binding.
|
65.
|
Prior
to any vote being cast on a resolution proposed at a meeting, the Board of
Directors shall notify the Shareholders of the voting power conferred by
their Shares at such meeting determined in accordance with Bye-Laws 62 and
63 hereof.
|
SHAREHOLDER
DISCLOSURE
66.
|
(1)
|
Subject
to the provisions of this Bye-Law 66, the Company shall have the authority
to request from any Shareholder, and such Shareholder shall provide to the
Company, such information as the Company may reasonably request for the
purpose of (i) determining whether any Shareholder's voting rights are to
be adjusted pursuant to Bye-Law 63, (ii) determining whether the Company
would realize any income that would be included in the income of any
Shareholder (or any interest holder, whether direct or indirect, of any
Shareholder) by operation of Section 953(c) of the Code and (iii)
determining whether the Company or any of its subsidiaries would be
entitled to the benefits of a tax
treaty.
|
|
(2)
|
Any
information provided by each Shareholder to the Company pursuant to this
Bye-Law 66 shall be deemed "confidential information" (the "Confidential
Information") and shall be used by the Company solely for the purposes
contemplated by this Bye-Law (except as may be required otherwise by
applicable law or regulation). The Company shall hold such
Confidential Information in strict confidence and shall not disclose any
Confidential Information that it receives, except (i) to the Internal
Revenue Service (the "Service") if and to the extent the Confidential
Information is required by the Service, (ii) to any outside legal counsel
or accounting firm engaged by the Company to make determinations regarding
the relevant Bye-Laws (iii) to officers and employees of the Company or
its Affiliates, subject to Bye-Law 66(3), or (iv) as otherwise required by
law or regulation.
|
|
(3)
|
The
Company shall take all measures practicable to ensure the continued
confidentiality of the Confidential Information and shall grant the
persons referred to in Bye-law 66(2)(ii) and (iii) above access to the
Confidential Information only to the extent necessary to allow them to
assist the Company in any analysis required by Bye-Law 63, to determine
whether the Company would realize any income that would be included in the
income of any Shareholder (or any interest holder, whether direct or
indirect, of any Shareholder) by operation of Section 953(c) of the Code
or to determine whether the Company or any of its subsidiaries would be
entitled to the benefits of a tax treaty. Prior to granting
access to the Confidential Information to such persons, the Company shall
inform them of its confidential nature and of the provisions of this
Bye-Law and shall require them to abide by all the provisions
hereof. The Company shall not disclose the Confidential
Information to any Director (other than a Director that is also either the
Chief Executive Officer, Chairman, Deputy Chairman, President or
Vice-President, except as required by law or regulation, upon request to
the Company). For the avoidance of doubt, the Company shall be
permitted to disclose to the Shareholders and others the relative voting
percentages of the Shareholders after application of Bye-Law
63. At the written request of a Shareholder, the Confidential
Information of such Shareholder shall be destroyed or returned to such
Shareholder after the later to occur of (i) such Shareholder no longer
being a Shareholder or (ii) the expiration of the applicable statute of
limitations with respect to any Confidential Information obtained for
purposes of engaging in any tax related
analysis.
|
|
(4)
|
The
Company shall (i) notify a Shareholder immediately of the existence, terms
and circumstances surrounding any request made to the Company to disclose
any Confidential Information provided by or with respect to such
Shareholder and, prior to such disclosure, shall permit such Shareholder a
reasonable period of time to seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Bye-Law, and
(ii) if, in the absence of a protective order, such disclosure is required
in the opinion of counsel to the Company, the Company shall make such
disclosure without liability hereunder, provided that the Company shall
furnish only that portion of the Confidential Information which is legally
required, shall give such Shareholder notice of the information to be
disclosed as far in advance of its disclosure as practicable and, upon the
request of such Shareholder and at its expense, shall use best efforts to
ensure that confidential treatment will be accorded to all such disclosed
information.
|
|
(5)
|
If
a Shareholder fails to respond to a request for information from the
Company pursuant to this Bye-Law or submits incomplete or inaccurate
information in response to such a request, the Company may in its
reasonable discretion (after considering the circumstances described in
any response to the request by the Shareholder and providing such
Shareholder with a cure period of such length, if any, as the Company in
its reasonable discretion shall determine to be reasonable under the
circumstances) determine that such Shareholder's Shares shall carry no or
reduced, as the case may be, voting rights until otherwise determined by
the Company in its reasonable
discretion.
|
|
(6)
|
The
Board may rely exclusively on the analysis, deliberation, reports and
other communications of those persons specified in (i)-(iii) of Bye-Law
66(2) above with respect to the collection, disclosure or use of the
Confidential Information, including, but not limited to determining
whether the Company would realize any income that would be included in the
income of any Shareholder (or any interest holder, whether direct or
indirect, of any Shareholder) by operation of Section 953(c) of the Code,
implementing Bye-Law 63, or determining whether the Company or any of its
subsidiaries would be entitled to the benefits of a tax
treaty.
|
VOTING
PROCEDURES
67.
|
Save
where a greater majority is required by the Companies Acts or these
Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes
cast.
|
68.
|
Subject
to any rights or restrictions for the time being lawfully attached to any
class of Shares and subject to the provisions of these Bye-Laws including
any adjustments made to the voting power of the Shares of any Shareholder
pursuant to Bye-Law 63, at any general meeting, a Resolution put to the
vote of the meeting shall be decided on a
show of hands
unless (before or on the declaration of the result of the show of hands or
on the withdrawal of any other demand for a poll) a poll is demanded
by:
poll.
|
|
(1)
|
the chairman of the
meeting; or
|
|
(2)
|
at least three (3)
Shareholders holding Shares conferring the right to vote at such meeting
present in person or represented by proxy;
or
|
|
(3)
|
any Shareholder or
Shareholders present in person or represented by proxy and holding between
them not less than one tenth (1/10) of the total voting rights of all the
Shareholders having the right to vote at such meeting;
or
|
|
(4)
|
a Shareholder or
Shareholders present in person or represented by proxy holding Shares
conferring the right to vote at such meeting, being Shares on which an
aggregate sum has been paid up equal to not less than one tenth (1/10) of
the total sum paid up on all such Shares conferring such
right.
|
The demand for a poll may
be withdrawn by the person or any of the persons making it at any time prior to
the declaration of the result. Unless a poll is so demanded and the
demand is not withdrawn, a declaration by the chairman that a Resolution has, on
a show of hands, been carried or carried unanimously or by a particular majority
or not carried by a particular majority or lost shall be final and conclusive,
and an entry to that effect in the minute book of the Company shall be
conclusive evidence of the fact without proof of the number or proportion of
votes recorded for or against such Resolution.
69.
|
If a poll is duly
demanded, the
The
result of the poll shall be deemed to be the Resolution of the meeting at
which the poll is demanded.
|
70.
|
A
poll
demanded
Resolution
on the election of a chairman, or on a question of adjournment, shall be
taken forthwith.
A poll
demanded on any other question shall be taken in such manner and either
forthwith or at such time later (being not later than three months after
the date of the demand) and place as the chairman shall direct and he may
appoint scrutineers (who need not be Shareholders). It shall
not be necessary (unless the chairman otherwise directs) for notice to be
given of a poll.
|
71.
|
The
demand for a
poll shall not prevent the continuance of a meeting for the transaction of
any business other than the question on which the poll has been demanded
and it may be withdrawn at any time before the close of the meeting or the
taking of the poll, whichever is the earlier.
Board
may, before any meeting of the Shareholders, determine the manner in which
the poll is to be taken and the manner in which the votes are to be
counted, which may include provision for votes to be cast by electronic
means by persons present in person or by proxy at the meeting, for the
appointment of scrutineers and for fixing a time and place for declaring
the results of the poll. To the extent not so determined by the Board,
such matters shall be determined by the chairman of the meeting. A person
appointed to act as a scrutineer need not be a
Shareholder.
|
72.
|
On
a poll, votes may be cast either personally or by
proxy.
|
73.
|
A
person entitled to more than one vote on a poll need not use all his votes
or cast all the votes he uses in the same
way.
|
74.
|
In
the case of an equality of votes at a general meeting
, whether on a show
of hands or on a poll,
the chairman of such meeting shall not be
entitled to a second or casting vote and the Resolution shall
fail.
|
75.
|
In
the case of joint holders of a Share, the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of
the votes of the other joint holders, and for this purpose seniority shall
be determined by the order in which the names stand in the Register in
respect of the joint holding.
|
76.
|
A
Shareholder who is a patient for any purpose of any statute or applicable
law relating to mental health or in respect of whom an order has been made
by any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote,
whether on a show of hands or on a poll, by his receiver, committee,
curator bonis or other person in the nature of a receiver, committee or
curator bonis appointed by such Court and such receiver, committee,
curator bonis or other person may vote on a poll by proxy, and may
otherwise act and be treated as such Shareholder for the purpose of
general meetings.
|
77.
|
No
Shareholder shall, unless the Board otherwise determines, be entitled to
vote at any general meeting unless all calls or other sums presently
payable by him in respect of Shares in the Company have been
paid.
|
|
(1)
|
any
objection shall be raised to the qualification of any voter;
or,
|
|
(2)
|
any
votes have been counted which ought not to have been counted or which
might have been rejected; or,
|
|
(3)
|
any
votes are not counted which ought to have been
counted,
|
the
objection or error shall not vitiate the decision of the meeting or adjourned
meeting on any Resolution unless the same is raised or pointed out at the
meeting or, as the case may be, the adjourned meeting at which the vote objected
to is given or tendered or at which the error occurs. Any objection
or error shall be referred to the chairman of the meeting and shall only vitiate
the decision of the meeting on any Resolution if the chairman decides that the
same may have affected the decision of the meeting. The decision of
the chairman on such matters shall be final and conclusive.
PROXIES
AND CORPORATE REPRESENTATIVES
79.
|
A
Shareholder may appoint one or more persons as his proxy, with or without
the power of substitution, to represent him and vote on his behalf in
respect of all or some of his shares conferring the right to vote at any
general meeting (including an adjourned meeting). A proxy need not be a
Shareholder.
|
80.
|
The
instrument appointing a proxy or corporate representative shall be in
writing executed by the appointor or his attorney authorised by him in
writing or, if the appointor is a corporation, either under its seal or
executed by an officer, attorney or other person authorised to sign the
same.
|
81.
|
Any
Shareholder may appoint a proxy or (if a corporation) representative for a
specific general meeting, and adjournments thereof, or may appoint a
standing proxy or (if a corporation) representative, by serving on the
Company at the Registered Office, or at such place or places as the Board
may otherwise specify for the purpose, a proxy or (if a corporation) an
authorisation. Any standing proxy or authorisation shall be
valid for all general meetings and adjournments thereof or Resolutions in
writing, as the case may be, until notice of revocation is received at the
Registered Office or at such place or places as the Board may otherwise
specify for the purpose. Where a standing proxy or
authorisation exists, its operation shall be deemed to have been suspended
at any general meeting or adjournment thereof at which the Shareholder is
present or in respect to which the Shareholder has specially appointed a
proxy or representative. The Board may from time to time require such
evidence as it shall deem necessary as to the due execution and continuing
validity of any standing proxy or authorisation and the operation of any
such standing proxy or authorisation shall be deemed to be suspended until
such time as the Board determines that it has received the requested
evidence or other evidence satisfactory to
it.
|
82.
|
Subject
to Bye-Law 81, the instrument appointing a proxy or corporate
representative, as the case may be, together with such other evidence as
to its due execution as the Board may from time to time require, shall be
delivered at the Registered Office (or at such place as may be specified
in the notice convening the meeting or in any notice of any adjournment
or, in either case or the case of a written Resolution, in any document
sent therewith) by such date and time specified in the notice prior to the
holding of the relevant meeting or adjourned meeting at which the person
named in the instrument proposes to vote or, in the case of a poll taken
subsequently to the date of a meeting or adjourned meeting, before the
time appointed for the taking of the poll, or, in the case of a written
Resolution, prior to the effective date of the written Resolution and in
default the instrument of proxy or authorisation, as the case may be,
shall not be treated as valid.
|
83.
|
Instruments
of proxy or authorisation, as the case may be, shall be in any common form
or in such other form as the Board may approve and the Board may, if it
thinks fit, send out with the notice of any meeting or any written
Resolution forms of instruments of proxy or authorisation, as the case may
be, for use at that meeting or in connection with that written
Resolution. The instrument of proxy or authorisation, as the
case may be, shall be deemed to confer authority to demand or join in
demanding a poll and to vote on any amendment of a written Resolution or
amendment of a Resolution put to the meeting for which it is given as the
proxy thinks fit. The instrument of proxy or authorisation, as
the case may be, shall unless the contrary is stated therein be valid as
well for any adjournment of the meeting as for the meeting to which it
relates.
|
84.
|
A
vote given in accordance with the terms of an instrument of proxy or
authorisation, as the case may be, shall be valid notwithstanding the
previous death or unsoundness of mind of the principal, or revocation of
the instrument of proxy or authorisation, as the case may be, or of the
authority, provided that no intimation in writing of such death,
unsoundness of mind or revocation shall have been received by the Company
at the Registered Office (or such other place as may be specified for the
delivery of instruments of proxy or authorisation, as the case may be, in
the notice convening the meeting or other documents sent therewith) one
hour at least before the commencement of the meeting or adjourned meeting,
or the taking of the poll, or the day before the effective date of any
written Resolution at which the instrument of proxy or authorisation, as
the case may be, is used.
|
85.
|
Subject
to the Companies Acts, the Board may at its discretion waive any of the
provisions of these Bye-Laws related to proxies or authorisations, as the
case may be, and, in particular, may accept such verbal or other
assurances as it thinks fit as to the right of any person to attend, speak
and vote on behalf of any Shareholder at general meetings or to sign
written Resolutions.
|
APPOINTMENT
AND REMOVAL OF DIRECTORS
86.
|
(1)
|
The
number of Directors constituting the Board shall be not less than two (2)
nor more than twenty (20), the exact number to be determined from time to
time by the
Company by
Resolution
Board
;
PROVIDED, HOWEVER, that if no such
Resolution
resolution
shall be in effect the number of Directors shall be nine
(9).
|
|
(2)
|
The
Board shall be divided into three classes, with the term of the office of
one class expiring each year. Each class shall consist, as nearly as
possible, of one-third of the total number of Directors constituting the
entire Board. There is no distinction in the voting or other powers and
authorities of Directors of different classes; the classifications are
solely for the purposes of the retirement by rotation provisions set out
in this Bye-Law 86. All Directors will be designated as either
Class I, Class II or Class III Directors. The Board shall from
time to time by resolution determine the respective numbers of Class I
Directors, Class II Directors and Class III
Directors.
|
|
(3)
|
Each
Class I Director shall (unless his office is vacated in accordance with
these Bye-Laws) serve until the conclusion of the annual general meeting
of the Company held in the calendar year 2006 and subsequently shall
(unless his office is vacated in accordance with these Bye-Laws) serve for
three-year terms, each concluding at the third annual general meeting
after the Class I Directors together were last appointed or
re-appointed.
|
|
(4)
|
Each
Class II Director shall (unless his office is vacated in accordance with
these Bye-Laws) serve until the conclusion of the annual general meeting
of the Company held in the calendar year 2007 and subsequently shall
(unless his office is vacated in accordance with these Bye-Laws) serve for
three-year terms, each concluding at the third annual general meeting
after the Class II Directors together were last appointed or
re-appointed.
|
|
(5)
|
Each
Class III Director shall (unless his office is vacated in accordance with
these Bye-Laws) serve until the conclusion of the annual general meeting
of the Company held in the calendar year 2008 and subsequently shall
(unless his office is vacated in accordance with these Bye-Laws) serve for
three-year terms, each concluding at the third annual general meeting
after the Class III Directors together were last appointed or
re-appointed.
|
|
(6)
|
If
the number of Directors is altered
by Resolution
pursuant to this Bye-Law,
such
Resolution
the
Board
shall apportion any increase or decrease among the classes so
as to maintain the number of Directors in each class as equal as possible,
but in no case shall a decrease in the number of Directors shorten the
term of any incumbent Director. All Directors, upon election or
appointment (except upon election at an annual general meeting), must
provide written acceptance of their appointment, in such form as the Board
may think fit, by notice in writing to the Registered Office within thirty
days of their appointment.
|
|
(7)
|
Upon
resignation or termination of office of any Director, if a new Director
shall be appointed to the Board he will be designated to fill the vacancy
arising and shall, for the purposes of these Bye-Laws, constitute a member
of the class of Directors represented by the person that he
replaces.
|
87.
|
The
Company may by Resolution increase the maximum number of
Directors. Any vacancies in the Board not filled by the
Shareholders at a general meeting of the Shareholders shall be deemed
casual vacancies for the purposes of these Bye-Laws. Without
prejudice to the power of the Company by Resolution in pursuance of any of
the provisions of these Bye-Laws to elect any person to be a Director, the
Board, so long as a quorum of Directors remains in office, shall have
power at any time and from time to time to appoint any individual to be a
Director so as to fill a casual vacancy. A Director so
appointed shall fill the vacancy arising and shall, for the purposes of
these Bye-Laws, constitute a member of the class of Directors represented
by the person that he replaces and shall hold office for the balance of
the term of such vacant Board position or until such Director’s successor
is elected or appointed or such Director’s office is otherwise
vacated.
|
88.
|
The
Company may in a special general meeting called for that purpose remove a
Director provided notice of any such meeting shall be served upon the
Director concerned not less than fourteen (14) days before the meeting and
he shall be entitled to be heard at that meeting. Notice of
every general meeting shall be given in any manner permitted by Bye-Law
135. Any vacancy created by the removal of a Director at a
special general meeting may be filled at the Meeting by the election of
another Director in his place or, in the absence of any such election, by
the Board. A Director so elected or appointed shall hold office
for the balance of the term of such vacant Board position or until such
Director’s successor is elected or appointed or such Director’s office is
otherwise vacated.
|
89.
|
If
a Shareholder desires to nominate one or more individuals for election as
Directors at any general meeting duly called for the election of
Directors, written notice of such Shareholder’s intent to make such a
nomination must be received by the Company at the Registered Office (or at
such other place or places as the Board may otherwise specify from time to
time for this purpose) not less than 120 days nor more than 150 days
before the first anniversary of the date of the notice convening the
Company’s annual general meeting of shareholders for the prior
year. Such notice shall set forth (i) the name and address, as
it appears in the Register, of the Shareholder who intends to make such
nomination; (ii) a representation that the Shareholder is a holder of
record of Shares entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to make such nomination; (iii) the class
and number of Shares which are held by the Shareholder; (iv) the name and
address of each individual to be nominated; (v) a description of all
arrangements or understandings between the Shareholder and any such
nominee and any other person or persons (naming such person or persons)
pursuant to which such nomination is to be made by the Shareholder; (vi) a
description of all material personal and business relationships between
the Shareholder and any such nominee during the preceding ten (10) years;
(vii) such other information regarding any such nominee that would be
required to be included in a proxy statement filed pursuant to Regulation
14A under the Exchange Act, whether or not the Company is then subject to
such Regulation; (viii) the consent of any such nominee to serve as a
Director, if so elected; and (ix) the certification of any such nominee as
to the accuracy and completeness of the information set forth in such
notice. The Company will send copies of such notice to all
Shareholders with the notice of the annual general meeting at which
Directors will be elected. The chairman of such meeting shall,
if the facts reasonably warrant, refuse to acknowledge a nomination that
is not made in compliance with the procedure specified in this Bye-Law,
and any such nomination not properly brought before the meeting shall not
be considered.
|
RESIGNATION
OF DISQUALIFICATION OF DIRECTORS
90.
|
The
office of a Director shall be vacated upon the happening of any of the
following events:
|
|
(1)
|
if
he resigns his office by notice in writing delivered to the Registered
Office or tendered at a meeting of the
Board;
|
|
(2)
|
if
he becomes of unsound mind or a patient for any purpose of any statute or
applicable law relating to mental health and the Board resolves that his
office is vacated;
|
|
(3)
|
if
he becomes bankrupt under the laws of any country or compounds with his
creditors;
|
|
(4)
|
if
he is prohibited by law from being a
Director;
|
|
(5)
|
if
he ceases to be a Director by virtue of the Companies Acts or is removed
from office pursuant to these Bye-Laws;
and
|
|
(6)
|
if
(a) he has been absent for more than six consecutive months without
permission of the Board, from meetings of the Board held during that
period, (b) his Alternate Director (if any) did not during such period
attend in his stead and (c) the Board resolves that his office be
vacated.
|
ALTERNATE
DIRECTORS
91.
|
A
Director may appoint and remove his own Alternate Director. Any
appointment or removal of an Alternate Director by a Director shall be
effected by delivery of a written notice of appointment or removal to the
Secretary at the Registered Office, signed by such Director, and such
notice shall be effective immediately upon receipt or any later date
specified in that notice. Any Alternate Director may be removed
by resolution of the Board. Subject as aforesaid, the office of
Alternate Director shall continue until the next annual election of
Directors or, if earlier, the date on which the relevant Director ceases
to be a Director. An Alternate Director may also be a Director
in his own right and may act as alternate to more than one
Director.
|
92.
|
An
Alternate Director shall be entitled to receive notices of all meetings of
Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally
present, and generally to perform all the functions of any Director to
whom he is alternate in his
absence.
|
93.
|
Every
person acting as an Alternate Director shall (except as regards powers to
appoint an alternate and remuneration) be subject in all respects to the
provisions of these Bye-Laws relating to Directors and shall alone be
responsible to the Company for his acts and defaults and shall not be
deemed to be the agent of or for any Director for whom he is
alternate. An Alternate Director may be paid expenses and shall
be entitled to be indemnified by the Company to the same extent mutatis
mutandis as if he were a Director. Every person acting as an
Alternate Director shall have one vote for each Director for whom he acts
as alternate (in addition to his own vote if he is also a
Director). The signature of an Alternate Director to any
resolution in writing of the Board or a committee of the Board shall,
unless the terms of his appointment provides to the contrary, be as
effective as the signature of the Director or Directors to whom he is
alternate.
|
DIRECTORS’
FEES AND ADDITIONAL REMUNERATION AND EXPENSES
94.
|
The
amount, if any, of Directors’ fees shall from time to time be determined
by the Company by Resolution or in the absence of such determination, by
the Board unless otherwise determined to the contrary, such fees shall be
deemed to accrue from day to day. Each Director may be paid his reasonable
travel, hotel and incidental expenses in attending and returning from
meetings of the Board or committees constituted pursuant to these Bye-Laws
or general meetings and shall be paid all expenses properly and reasonably
incurred by him in the conduct of the Company’s business or in the
discharge of his duties as a Director. Any Director who, by
request, goes or resides abroad for any purposes of the Company or who
performs services which in the opinion of the Board go beyond the ordinary
duties of a Director may be paid such extra remuneration (whether by way
of salary, commission, participation in profits or otherwise) as the Board
may determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other
Bye-Law.
|
DIRECTORS’
INTERESTS
95.
|
(1)
|
A
Director may hold any other office or place of profit with the Company
(except that of auditor) in conjunction with his office of Director for
such period and upon such terms as the Board may determine, and may be
paid such extra remuneration therefor (whether by way of salary,
commission, participation in profits or otherwise) as the Board may
determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other
Bye-Law.
|
|
(2)
|
A
Director may act by himself or his firm in a professional capacity for the
Company (otherwise than as auditor) and he or his firm shall be entitled
to remuneration for professional services as if he were not a
Director.
|
|
(3)
|
Subject
to the provisions of the Companies Acts, a Director may notwithstanding
his office be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested; and be a director or other officer of, or employed by, or a
party to any transaction or arrangement with, or otherwise interested in,
any body corporate promoted by the Company or in which the Company is
interested. The Board may also cause the voting power conferred
by the shares in any other company (except to the extent provided in
Bye-Law 154 with respect to a Designated Company) held or owned by the
Company to be exercised in such manner in all respects as it thinks fit,
including the exercise thereof in favour of any resolution appointing the
Directors or any of them to be directors or officers of such other
company, or voting or providing for the payment of remuneration to the
directors or officers of such other
company.
|
|
(4)
|
So
long as, where it is necessary, he declares the nature of his interest at
the first opportunity at a meeting of the Board or by writing to the
Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefit which
he derives from any office or employment to which these Bye-Laws allow him
to be appointed or from any transaction or arrangement in which these
Bye-Laws allow him to be interested, and no such transaction or
arrangement shall be liable to be avoided on the ground of any interest or
benefit.
|
|
(5)
|
Subject
to the Companies Acts and any further disclosure required thereby, a
general notice to the Directors by a Director or Officer declaring that he
is a director or officer or has an interest in a person and is to be
regarded as interested in any transaction or arrangement made with that
person, shall be a sufficient declaration of interest in relation to any
transaction or arrangement so made.
|
POWERS
AND DUTIES OF THE BOARD
96.
|
Subject
to the provisions of the Companies Acts and these Bye-Laws, the Board
shall manage the business of the Company and may pay all expenses incurred
in promoting and incorporating the Company and may exercise all the powers
of the Company. No alteration of these Bye-Laws and no such
direction shall invalidate any prior act of the Board which would have
been valid if that alteration had not been made or that direction had not
been given. The powers given by this Bye-Law shall not be
limited by any special power given to the Board by these Bye-Laws and a
meeting of the Board at which a quorum is present shall be competent to
exercise all the powers, authorities and discretions for the time being
vested in or exercisable by the
Board.
|
97.
|
The
Board may exercise all the powers of the Company
to:
except
those powers that are required by the Companies Acts or these Bye-Laws to
be exercised by the
Shareholders.
|
|
(1)
|
sell, transfer,
assign or dispose of all or any part of the undertaking, property and
assets (present and future) of the
Company;
|
|
(2)
|
borrow money and to
mortgage or charge all or any part of the undertaking, property and assets
(present and future) and uncalled capital of the Company and to issue
debentures; and
|
|
(3)
|
other securities,
whether outright or as collateral security for any debt, liability or
obligation of the Company or of any other
persons.
|
98.
|
All
cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts
for money paid to the Company shall be signed, drawn, accepted, endorsed
or otherwise executed, as the case may be, in such manner as the Board
shall from time to time by resolution
determine.
|
99.
|
The
Board on behalf of the Company may provide benefits, whether by the
payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has
been a subsidiary or Affiliate of the Company or a predecessor in the
business of the Company or of any such subsidiary or Affiliate, and to any
member of his family or any person who is or was dependent on him, and may
contribute to any fund and pay premiums for the purchase or provision of
any such gratuity, pension or other benefit, or for the insurance of any
such person.
|
100.
|
The
Board may from time to time appoint one or more of its body to be a
managing director, joint managing director or an assistant managing
director or to hold any other employment or executive office with the
Company for such period and upon such terms as the Board may determine and
may revoke or terminate any such appointments. Any such
revocation or termination as aforesaid shall be without prejudice to any
claim for damages that such Director may have against the Company or the
Company may have against such Director for any breach of any contract of
service between him and the Company which may be involved in such
revocation or termination. Any person so appointed shall receive such
remuneration (if any) (whether by way of salary, commission, participation
in profits or otherwise) as the Board may determine, and either in
addition to or in lieu of his remuneration as a
Director.
|
DELEGATION
OF THE BOARD’S POWERS
101.
|
The
Board may by power of attorney appoint any company, firm or person or any
fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or attorneys of the Company for such
purposes and with such powers, authorities and discretions (not exceeding
those vested in or exercisable by the Board under these Bye-Laws) and for
such period and subject to such conditions as it may think fit, and any
such power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney and of such attorney
as the Board may think fit, and may also authorise any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested
in him. Such attorney may, if so authorised
under
by
the
Seal
power
of attorney
, execute any deed
or instrument
under the personal seal of such attorney, with the same effect as the
affixation of the Seal
,
instrument or other document on behalf of the
Company
.
|
102.
|
The
Board may entrust to and confer upon any Director, Officer or, without
prejudice to the provisions of Bye-Law 103, other person any of the
powers, authorities and discretions exercisable by it upon such terms and
conditions with such restrictions as it thinks fit, and either
collaterally with, or to the exclusion of, its own powers, authorities and
discretions, and may from time to time revoke or vary all or any of such
powers, authorities and discretions but no person dealing in good faith
and without notice of such revocation or variation shall be affected
thereby.
|
103.
|
When
required under the requirements from time to time of any stock exchange on
which the Shares of the Company are listed, the Board shall appoint an
Audit Committee, Compensation Committee, and Nominating and Corporate
Governance Committee in accordance with the requirements of such stock
exchange. The Board may also delegate any of its powers, authorities and
discretions to any other committees, consisting of such person or persons
(whether a member or members of its body or not) as it thinks
fit. Any committee so formed shall, in the exercise of the
powers, authorities and discretions so delegated, and in conducting its
proceedings conform to any regulations which may be imposed upon it by the
Board. If no regulations are imposed by the Board the
proceedings of a committee with two (2) or more members shall be, as far
as is practicable, governed by the Bye-Laws regulating the proceedings of
the Board.
|
PROCEEDINGS
OF THE BOARD
104.
|
The
Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit, unless otherwise required by these
Bye-Laws. Questions arising at any meeting shall be determined by a
majority of votes. In the case of an equality of votes the
motion shall be deemed to have been lost. A Director may, and
the Secretary on the requisition of a Director shall, at any time summon a
meeting of the Board.
|
105.
|
Notice
of a meeting of the Board may be given to a Director in any manner
permitted by these Bye-Laws. A Director may retrospectively
waive the requirement for notice of any meeting by consenting in writing
to the business conducted at the
meeting.
|
106.
|
(1)
|
The
quorum necessary for the transaction of the business of the Board may be
fixed by the Board and, unless so fixed at any other number, shall be a
majority of Directors in office from time to time and in no event shall be
less than two (2) Directors. Any Director who ceases to be a
Director at a meeting of the Board may continue to be present and to act
as a Director and be counted in the quorum until the termination of the
meeting if no other Director objects and if otherwise a quorum of
Directors would not be present.
|
|
(2)
|
A
Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Acts and these Bye-Laws with regard to disclosure of his
interest shall be entitled to vote in respect of any contract, transaction
or arrangement in which he is so interested, and he shall be taken into
account in ascertaining whether a quorum is present, but the resolution
with respect to the contract, transaction or arrangement will fail unless
it is approved by a majority of the disinterested Directors voting on the
resolution.
|
|
(3)
|
The
Resident Representative shall, upon delivering written notice of an
address for the purposes of receipt of notice, to the Registered Office,
be entitled to receive notice of, attend and be heard at, and to receive
minutes of all meetings of the
Board.
|
107.
|
So
long as a quorum of Directors remains in office, the continuing Directors
may act notwithstanding any vacancy in the Board but, if no such quorum
remains, the continuing Directors or a sole continuing Director may act
only for the purpose of calling a general
meeting.
|
108.
|
The
Chairman (or
President) or, in his absence, the Deputy Chairman (or Vice-President),
shall
Board
may choose one of their number to
preside as chairman at every
meeting of the Board. If
there
is no such chairman, or if
at any meeting the
Chairman or Deputy
Chairman (or the President or Vice-President)
chairman
is not present within five (5) minutes after the time appointed for
holding the meeting, or is not willing to act as chairman, the Directors
present may choose one of their number to be chairman of the
meeting.
|
109.
|
The
meetings and proceedings of any committee consisting of two (2) or more
members shall be governed by the provisions contained in these Bye-Laws
for regulating the meetings and proceedings of the Board so far as the
same are applicable and are not superseded by any regulations imposed by
the Board.
|
110.
|
A
resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board (or by an Alternate
Director, as provided for in these Bye-Laws) or by all the members of a
committee for the time being shall be as valid and effectual as a
resolution passed at a meeting of the Board or, as the case may be, of
such committee duly called and constituted. Such resolution may
be contained in one document or in several documents in the like form each
signed by one or more of the Directors or members of the committee
concerned.
|
111.
|
A
meeting of the Board or a committee appointed by the Board may be held by
means of such telephone, electronic or other communication facilities
(including without limiting the generality of the foregoing by telephone
or by video conferencing) as permit all persons participating in the
meeting to communicate with each other simultaneously and instantaneously
and participation in such a meeting shall constitute presence in person at
such meeting.
|
112.
|
All
acts done by the Board or by any committee or by any person acting as a
Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards
discovered that there was some defect in the appointment of any member of
the Board or such committee or person acting as aforesaid or that they or
any of them were disqualified or had vacated their office, be as valid as
if every such person had been duly appointed and was qualified and had
continued to be a Director, member of such committee or person so
authorised.
|
OFFICERS
113.
|
(1)
|
The
Officers of the Company
must include
either a President and a Vice-President or a Chairman and a Deputy
Chairman who must
,
who may or may not
be Directors
and shall be
elected by the Board as soon as possible after the statutory meeting and
shall serve for such term as the Board may determine, or in the absence of
such determination, until the termination of the next Annual General
Meeting following their appointment. In addition, the Board may
appoint any person whether or not he is a Director to hold such office as
the Board may from time to time determine.
,
may be appointed by the Board at any time.
Any person
elected or
appointed pursuant to this Bye-Law shall hold office for such period and
upon such terms as the Board may determine and the Board may revoke or
terminate any such
election or
appointment. Any such revocation or termination shall be
without prejudice to any claim for damages that such Officer may have
against the Company or the Company may have against such Officer for any
breach of any contract of service between him and the Company which may be
involved in such revocation or termination. Save as provided in
the Companies Acts or these Bye-Laws, the powers and duties of the
Officers of the Company shall be such (if any) as are determined from time
to time by the Board.
|
|
(2)
|
The
provisions of these Bye-Laws as to resignation and disqualification of
Directors shall mutatis mutandis apply to the resignation and
disqualification of Officers.
|
MINUTES
114.
|
The
Board shall cause minutes to be made and books kept for the purpose of
recording:
|
|
(1)
|
all
appointments of Officers made by the
Board;
|
|
(2)
|
the
names of the Directors and other persons (if any) present at each meeting
of the Board and of any committee;
and
|
|
(3)
|
of
all proceedings at meetings of the Company, of the holders of any class of
Shares in the Company, of the Board and of committees appointed by the
Board or the Shareholders.
|
Shareholders
shall only be entitled to see the Register of Directors and Officers, the
Register, the financial information provided for in Bye-Law 132 and the minutes
of meetings of the Shareholders of the Company.
SECRETARY
AND RESIDENT REPRESENTATIVE
115.
|
The
Secretary (including one or more deputy or assistant secretaries) and, if
required, the Resident Representative, shall be appointed by the Board at
such remuneration (if any) and upon such terms as it may think fit and any
Secretary and Resident Representative so appointed may be removed by the
Board. The duties of the Secretary and the duties of the
Resident Representative shall be those prescribed by the Companies Acts
together with such other duties as shall from time to time be prescribed
by the Board.
|
116.
|
A
provision of the Companies Acts or these Bye-Laws requiring or authorising
a thing to be done by or to a Director and the Secretary shall not be
satisfied by its being done by or to the same person acting both as
Director and as, or in the place of, the
Secretary.
|
THE
SEAL
117.
|
(1)
|
The
Seal
Board
may authorise the production of a common seal of the Company and one or
more duplicate common seals of the Company, which
shall consist of
a circular device with the name of the Company around the outer margin
thereof and the country and year of registration in Bermuda across the
centre thereof.
Should the Seal not
have been received at the Registered Office in such form at the date of
adoption of this Bye-Law then, pending such receipt, any document
requiring to be sealed with the Seal shall be sealed by affixing a red
wafer seal to the document with the name of the Company, and the country
and year of registration in Bermuda type written across the centre
thereof.
|
|
(2)
|
The Board may
authorise the production of one or more duplicate
Seals.
|
|
(2)
|
Any
document required to be under seal or executed as a deed on behalf of the
Company may be:
|
|
(a)
|
executed
under Seal in accordance with these Bye-Laws;
or
|
|
(b)
|
signed
or executed by any person authorised by the Board for that purpose,
without the use of the Seal.
|
|
(3)
|
The
Board shall provide for the custody of every Seal. A Seal shall
only be used by authority of the Board or of a committee constituted by
the Board. Subject to these Bye-Laws, any instrument to which a
Seal is affixed shall be attested by the signature
of;
|
(a)
two (2)
Directors
a
Director
; or
(b) the
Secretary
and one
Director
; or
(c) any
one person authorised by the Board for that purpose
;
provided that the
Secretary or a Director may affix a Seal over his signature alone to
authenticate copies of these Bye-Laws, the minutes of any meeting or any other
documents requiring authentication
.
DIVIDENDS
AND OTHER PAYMENTS
118.
|
The
Board may from time to time declare dividends, or distributions out of
contributed surplus, to be paid to the Shareholders according to their
rights and interests including such interim dividends as appear to the
Board to be justified by the position of the Company. The
Board, in its discretion, may determine that any dividend shall be paid in
cash or shall be satisfied, subject to Bye-Law 126, in paying up in full
Shares in the Company to be issued to the Shareholders credited as fully
paid or partly paid or partly in one way and partly the
other. The Board may also pay any fixed cash dividend which is
payable on any Shares of the Company half yearly or on such other dates,
whenever the position of the Company, in the opinion of the Board,
justifies such payment.
|
119.
|
Except
insofar as the rights attaching to, or the terms of issue of, any Share
otherwise provide:
|
|
(1)
|
all
dividends, or distributions out of contributed surplus, may be declared
and paid according to the amounts paid up on the Shares in respect of
which the dividend or distribution is paid, and an amount paid up on a
Share in advance of calls may be treated for the purpose of this Bye-Law
as paid-up on the Share;
|
|
(2)
|
dividends,
or distributions out of contributed surplus, may be apportioned and paid
pro rata according to the amounts paid-up on the Shares during any portion
or portions of the period in respect of which the dividend or distribution
is paid.
|
120.
|
The
Board may deduct from any dividend, distribution or other monies payable
to a Shareholder by the Company on or in respect of any Shares all sums of
money (if any) presently payable by him to the Company on account of calls
or otherwise in respect of Shares of the
Company.
|
121.
|
No
dividend, distribution or other monies payable by the Company on or in
respect of any Share shall bear interest against the
Company.
|
122.
|
Any
dividend, distribution or interest, or part thereof payable in
cash, or any other sum payable in cash to the holder of Shares
may be paid by cheque or warrant sent through the post or by courier
addressed to the holder at his address in the Register or, in the case of
joint holders, addressed to the holder whose name stands first in the
Register in respect of the Shares at his registered address as appearing
in the Register or addressed to such person at such address as the holder
or joint holders may in writing direct. Every such cheque or
warrant shall, unless the holder or joint holders otherwise direct, be
made payable to the order of the holder or, in the case of joint holders,
to the order of the holder whose name stands first in the Register in
respect of such Shares, and shall be sent at his or their risk and payment
of the cheque or warrant by the bank on which it is drawn shall constitute
a good discharge to the Company. Any one of two or more joint holders may
give effectual receipts for any dividends, distributions or other monies
payable or property distributable in respect of the Shares held by such
joint holders.
|
123.
|
Any
dividend or distribution out of contributed surplus unclaimed for a period
of six (6) years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the
payment by the Board of any unclaimed dividend, distribution, interest or
other sum payable on or in respect of the Share into a separate account
shall not constitute the Company a trustee in respect
thereof.
|
124.
|
The
Board may also, in addition to its other powers, direct payment or
satisfaction of any dividend, or distribution out of contributed surplus,
wholly or in part by the distribution of specific assets, and in
particular of paid-up shares or debentures of any other company, and where
any difficulty arises in regard to such distribution or dividend the Board
may settle it as it thinks expedient, and in particular, may authorise any
person to sell and transfer any fractions or may ignore fractions
altogether, and may fix the value for distribution or dividend purposes of
any such specific assets and may determine that cash payments shall be
made to any Shareholders upon the footing of the values so fixed in order
to secure equality of distribution and may vest any such specific assets
in trustees as may seem expedient to the Board PROVIDED that such dividend
or distribution may not be satisfied by the distribution of any partly
paid shares or debentures of any company without the sanction of a
Resolution.
|
RESERVES
125.
|
The
Board may, before declaring any dividend, or distribution out of
contributed surplus, set aside such sums as it thinks proper as reserves
which shall, at the discretion of the Board, be applicable for any purpose
of the Company and pending such application may, also at such discretion,
either be employed in the business of the Company or be invested in such
investments as the Board may from time to time think fit. The
Board may also without placing the same to reserve carry forward any sums
which it may think it prudent not to
distribute.
|
CAPITALISATION
OF PROFITS
126.
|
The
Board may, from time to time resolve to capitalise all or any part of any
amount for the time being standing to the credit of any reserve or fund
which is available for distribution or to the credit of any share premium
account and accordingly that such amount be set free for distribution
amongst the Shareholders or any class of Shareholders who would be
entitled thereto if distributed by way of dividend and in the same
proportions, on the footing that the same be not paid in cash but be
applied either in or towards paying up amounts for the time being unpaid
on any Shares in the Company held by such Shareholders respectively or in
payment up in full of unissued Shares, debentures or other obligations of
the Company, to be allotted and distributed credited as fully paid amongst
such Shareholders, or partly in one way and partly in the other, PROVIDED
that for the purpose of this Bye-Law, a share premium account may be
applied only in paying up of unissued Shares to be issued to such
Shareholders credited as fully paid
.
and PROVIDED,
FURTHER, that any sum standing to the credit of a share premium account
may only be applied in crediting as fully paid Shares of the same class as
that from which the relevant share premium was
derived.
|
127.
|
Where
any difficulty arises in regard to any distribution under the last
preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any
fractions or may resolve that the distribution should be as nearly as may
be practicable in the correct proportion but not exactly so or may ignore
fractions altogether, and may determine that cash payments should be made
to any Shareholders in order to adjust the rights of all parties, as may
seem expedient to the Board. The Board may appoint any person
to sign on behalf of the persons entitled to participate in the
distribution any contract necessary or desirable for giving effect thereto
and such appointment shall be effective and binding upon the
Shareholders.
|
RECORD
DATES
128.
|
Notwithstanding
any other provisions of these Bye-Laws, the Company may by Resolution or
the Board may fix any date as the record date for any dividend,
distribution, allotment or issue and for the purpose of identifying the
persons entitled to receive notices of general meetings and to vote at any
general meeting. Any such record date may be on or at any time
before or after any date on which such dividend, distribution, allotment
or issue is declared, paid or made or such notice is
despatched.
|
129.
|
In
relation to any general meeting of the Company or of any class of
Shareholder or to any adjourned meeting or any poll taken at a meeting or
adjourned meeting of which notice is given, the Board may specify in the
notice of meeting or adjourned meeting or in any document sent to
Shareholders by or on behalf of the Board in relation to the meeting, a
time and date (a “Record Date”) prior to the date fixed for the meeting
(the “Meeting Date”) and, notwithstanding any provision in these Bye-Laws
to the contrary, in such case:
|
|
(1)
|
each
person entered in the Register at the Record Date as a Shareholder, or a
Shareholder of the relevant class (a “Record Date Holder”) shall be
entitled to attend and to vote at the relevant meeting and to exercise all
of the rights or privileges of a Shareholder, or a Shareholder of the
relevant class (in each case subject to Bye-Law 63), in relation to that
meeting in respect of the Shares, or the Shares of the relevant class,
registered in his name at the Record
Date;
|
|
(2)
|
as
regards any Shares, or Shares of the relevant class, which are registered
in the name of a Record Date Holder at the record date but are not so
registered at the meeting date (“Relevant Shares”), each holder of any
Relevant Shares at the meeting date shall be deemed to have irrevocably
appointed that Record Date Holder as his proxy for the purpose of
attending and voting in respect of those relevant Shares at the relevant
meeting (with power to appoint, or to authorise the appointment of, some
other person as proxy), in such manner as the Record Date Holder in his
absolute discretion may determine;
and
|
|
(3)
|
accordingly,
except through his proxy pursuant to paragraph (2) of this Bye-Law, a
holder of Relevant Shares at the meeting date shall not be entitled to
attend or to vote at the relevant meeting, or to exercise any of the
rights or privileges of a Shareholder, or a Shareholder of the relevant
class, in respect of the Relevant Shares at that
meeting.
|
130.
|
The
entry of the name of a person in the Register as a Record Date Holder
shall be sufficient evidence of his appointment as proxy in respect of any
Relevant Share for the purposes of this paragraph, but all the provisions
of these Bye-Laws relating to the execution and deposit of an instrument
appointing a proxy or any ancillary matter (including the Board’s powers
and discretions relevant to such matter) shall apply to any instrument
appointing any person other than the Record Date Holder as proxy in
respect of any Relevant Share.
|
ACCOUNTING
RECORDS
131.
|
The
Board shall cause to be kept accounting records sufficient to give a true
and fair view of the state of the Company’s affairs and to show and
explain its transactions, in accordance with the Companies
Acts.
|
132.
|
The
records of account shall be kept at the Registered Office or at such other
place or places as the Board thinks fit, and shall at all times be open to
inspection by the Directors: PROVIDED that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of
the Company in Bermuda such records as will enable the Directors to
ascertain with reasonable accuracy the financial position of the Company
at the end of each three (3) month period. No Shareholder
(other than an Officer) shall have any right to inspect any accounting
record or book or document of the Company except as conferred by law or
authorised by the Board, or by
Resolution.
|
133.
|
A
copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is
to be laid before the Company in general meeting, together with a copy of
the auditors’ report, shall be sent to each person entitled thereto in
accordance with the requirements of the Companies
Acts.
|
AUDIT
134.
|
Save
and to the extent that an audit is waived in the manner permitted by the
Companies Acts, auditors shall be appointed and their duties regulated in
accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may
from time to time determine.
|
SERVICE
OF NOTICES AND OTHER DOCUMENTS
135.
|
Service
Of Notices And Other
Documents
|
|
135.
(1)
Any notice or other document (including
a Share
but
not limited to a share
certificate
and
,
any notice of a general meeting of the Company
) may
be
,
any instrument of proxy and any document to be sent in accordance with
Bye-Law 135) may be sent to,
served on or delivered to any
Shareholder by the Company
either
:
|
|
(b)
|
by
sending it through the post (by airmail where applicable) in a pre-paid
letter addressed to such Shareholder at his address as appearing in the
Register
or
;
|
|
(c)
|
by
sending it by courier to or leaving it at
such
registered
the
Shareholder’s
address
appearing in the Register;
|
|
(d)
|
by
,
or
where
applicable, by sending it by email
,
or
facsimile or other mode of representing or reproducing words in
a legible and non-transitory form
or
by sending an electronic record of it by electronic means, in each case
to an address
or number
supplied by such Shareholder for the
purpose of the
receipt of notices or documents.
purposes
of communication in such manner;
or
|
|
(e)
|
by
publication of an electronic record of it on a website and notification of
such publication (which shall include the address of the website, the
place on the website where the document may be found, and how the document
may be accessed on the website) by any of the methods set out in
paragraphs (a), (b), (c) or (d) of this Bye-Law, in accordance with the
Companies Acts.
|
In the
case of joint holders of a
Share
share
,
service or delivery of any notice or other document on or to one of the joint
holders shall for all purposes be deemed as sufficient service on or delivery to
all the joint holders.
|
(2)
|
Any
notice or other document
, if sent by
personal delivery,
shall be deemed to have been served
or delivered
on
or delivered to any Shareholder by the
Company:
|
|
(a)
|
if
sent by personal delivery,
at the time of delivery
, or
;
|
|
(b)
|
if
sent by post,
shall
be deemed to have been served or delivered
forty-eight (48) hours
after it was put in the post
, or
;
|
|
(c)
|
if
sent by courier or facsimile, twenty-four (24) hours after sending
, or
;
|
|
(d)
|
if
sent by email
or other mode of representing or reproducing words in a legible and
non-transitory form or as an electronic record by electronic means
,
twelve (12) hours after sending
;
or
|
|
(e)
|
if
published as an electronic record on a website, at the time that the
notification of such publication shall be deemed to have been delivered to
such Shareholder,
|
and in
proving such service or delivery, it shall be sufficient to prove that the
notice or document was properly addressed and stamped and put in the post,
published
on a website in accordance with the Companies Acts and the provisions of these
Bye-Laws, or
sent by courier, facsimile
or
,
email
or as an electronic record by electronic means
, as the case may be
,
in accordance with these Bye-Laws.
Each
Shareholder and each person becoming a Shareholder subsequent to the adoption of
these Bye-Laws, by virtue of its holding or its acquisition and continued
holding of a share, as applicable, shall be deemed to have acknowledged and
agreed that any notice or other document (excluding a share certificate) may be
provided by the Company by way of accessing them on a website instead of being
provided by other means
.
136.
|
Any
notice or other document delivered, sent or given to a Shareholder in any
manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred,
and whether or not the Company has notice of the death or bankruptcy or
other event, be deemed to have been duly served or delivered in respect of
any Share registered in the name of such Shareholder as sole or joint
holder unless his name shall, at the time of the service or delivery of
the notice or document, have been removed from the Register as the holder
of the Share, and such service or delivery shall for all purposes be
deemed as sufficient service or delivery of such notice or document on all
persons interested (whether jointly with or as claiming through or under
him) in the Share.
|
137.
|
Save
as otherwise provided, the provisions of these Bye-Laws as to service of
notices and other documents on the Shareholders shall mutatis mutandis
apply to service or delivery of notices and other documents to the Company
or any Director, Alternate Director or Resident Representative pursuant to
these Bye-Laws.
|
UNTRACED
SHAREHOLDERS
138.
|
The
Company shall be entitled to sell, at the best price reasonably
obtainable, the Shares of a Shareholder or the Shares to which a person is
entitled by virtue of transmission on death, bankruptcy, or otherwise by
operation of law if and provided
that:
|
|
(1)
|
during
a period of six (6) years, no dividend in respect of those Shares has been
claimed and at least three (3) cash dividends have become payable on the
Share in question;
|
|
(2)
|
on
or after expiry of that period of six (6) years, the Company has inserted
an advertisement in a newspaper circulating in the area of the last
registered address at which service of notices upon the Shareholder or
person entitled by transmission may be effected in accordance with these
Bye-Laws and in a national newspaper published in the relevant country,
giving notice of its intention to sell such
Shares;
|
|
(3)
|
during
that period of six (6) years and the period of three (3) months following
the publication of such advertisement, the Company has not received any
communication from such Shareholder or person entitled by transmission;
and
|
|
(4)
|
if
so required by the rules of any securities exchange upon which the shares
in question are listed for the time being, notice has been given to that
exchange of the Company’s intention to make such
sale.
|
139.
|
If
during any six (6) year period referred to Bye-Law 138(1) above, further
Shares have been issued in right of those held at the beginning of such
period or of any previously issued during such period and all the other
requirements of this Bye-Law (other than the requirement that they be in
issue for six (6) years) have been satisfied in regard to the further
Shares, the Company may also sell the further
Shares.
|
140.
|
To
give effect to any such sale, the Board may authorise some person to
execute an instrument of transfer of the Shares sold to, or in accordance
with the directions of, the purchaser and an instrument of transfer
executed by that person shall be as effective as if it had been executed
by the holder of, or person entitled by transmission to, the
Shares. The transferee shall not be bound to see to the
application of the purchase money, nor shall his title to the Shares be
affected by any irregularity in, or invalidity of, the proceedings in
reference to the sale.
|
141.
|
The
net proceeds of sale shall belong to the Company which shall be obliged to
account to the former Shareholder or other person previously entitled as
aforesaid for an amount equal to such proceeds and shall enter the name of
such former Shareholder or other person in the books of the Company as a
creditor for such amount. No trust shall be created in respect
of the debt, no interest shall be payable in respect of the same and the
Company shall not be required to account for any money earned on the net
proceeds, which may be employed in the business of the Company or invested
in such investments as the Board from time to time thinks
fit.
|
WINDING
UP
142.
|
If
the Company shall be wound up, the liquidator may, with the sanction of a
Resolution of the Company and any other sanction required by the Companies
Acts, divide amongst the Shareholders in specie or kind the whole or any
part of the assets of the Company (whether they shall consist of property
of the same kind or not) and may for such purposes set such values as he
deems fair upon any property to be divided as aforesaid and may determine
how such division shall be carried out as between the Shareholders or
different classes of Shareholders. The liquidator may, with the
like sanction, vest the whole or any part of such assets in trustees upon
such trust for the benefit of the contributories as the liquidator, with
the like sanction, shall think fit, but so that no Shareholder shall be
compelled to accept any shares or other assets upon which there is any
liability.
|
INDEMNITY
& INSURANCE
143.
|
Subject
to the proviso below, an Indemnified Person shall be indemnified and held
harmless out of the assets of the Company against all actions, costs,
charges, liabilities, loss, damage or expense to the full extent permitted
by law (including but not limited to liabilities under contract, tort,
fiduciary duties and statute or any applicable foreign law or regulation
and all reasonable legal and other costs and expenses properly payable)
incurred or suffered by him by or by reason of any act done, conceived in
or omitted in the conduct of the Company’s business or in the discharge of
his duties and the indemnity contained in this Bye-Law shall extend to any
Indemnified Person acting in any office or trust in the reasonable belief
that he has been appointed or elected to such office or trust
notwithstanding any defect in such appointment or election PROVIDED ALWAYS
that the indemnity contained in this Bye-Law shall not extend to any
matter which would render it void pursuant to the Companies
Acts.
|
144.
|
No
Indemnified Person shall be liable to the Company for the acts, neglects,
defaults or omission of any other Indemnified Person PROVIDED ALWAYS that
the indemnity contained in this Bye-Law shall not extend to any matter
which would render it void pursuant to the Companies
Acts.
|
145.
|
Every
Indemnified Person shall be indemnified out of the assets of the Company
against all liabilities incurred by him by or by reason of any act done,
conceived in or omitted in the conduct of the Company’s business or in the
discharge of his duties, in defending any proceedings, whether civil or
criminal, in which judgment is given in his favour, or in which he is
acquitted, or in connection with any application under the Companies Acts
in which relief from liability is granted to him by the
court.
|
146.
|
To
the extent that any Indemnified Person is entitled to claim an indemnity
pursuant to these Bye-Laws in respect of amounts paid or discharged by
him, the relative indemnity shall take effect as an obligation of the
Company to reimburse the person making such payment or effecting such
discharge.
|
147.
|
Each
Shareholder and the Company agree to waive any claim or right of action he
or it may at any time have, whether individually or by or in the right of
the Company, against any Indemnified Person on account of any action taken
by such Indemnified Person or the failure of such Indemnified Person to
take any action in the performance of his duties with or for the Company
PROVIDED HOWEVER that such waiver shall not apply to any claim or right of
action which would render the waiver void pursuant to the Companies Acts
and shall not apply to any claims or rights of action arising out of the
fraud or dishonesty of such Indemnified Person or to recover any gain,
personal profit or advantage to which such Indemnified Person is not
legally entitled.
|
148.
|
Subject
to the Companies Acts, expenses incurred in defending any civil or
criminal action or proceeding for which indemnification is required
pursuant to these Bye-Laws shall be paid by the Company in advance of the
final disposition of such action or proceeding (including any cost or
expense incurred in obtaining such advance or indemnification) upon
receipt of an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall ultimately be determined that the
Indemnified Person is not entitled to be indemnified pursuant to these
Bye-Laws; PROVIDED THAT no monies shall be paid hereunder
unless payment of the same shall be authorised in the specific case upon a
determination that indemnification of the Director or Officer would be
proper in the circumstances because he has met the standard of conduct
which would entitle him to the indemnification thereby provided and such
determination shall be made:
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(1)
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by
the Board, by a majority vote at a meeting duly constituted by a quorum of
Directors not party to the proceedings or matter with regard to which the
indemnification is, or would be, claimed;
or
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(2)
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in
the case such a meeting cannot be constituted by lack of a disinterested
quorum, by independent legal counsel in a written opinion;
or
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(3)
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by
a majority vote of the Shareholders (after giving effect to any
adjustments to the voting power imposed pursuant to Bye-Law
63).
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Each
Shareholder of the Company, by virtue of its acquisition and continued holding
of a Share, shall be deemed to have acknowledged and agreed that the advances of
funds may be made by the Company as aforesaid, and when made by the Company
under this Bye-Law are made to meet expenditures incurred for the purpose of
enabling such Indemnified Person to properly perform his or her duties to the
Company.
149.
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The
purpose of Bye-laws 143-148 as a whole is to provide the broadest
indemnity allowable at law, and to the extent any indemnification
hereunder is prohibited, unenforceable or not authorized under applicable
law, it is the intent of these Bye-Laws that such indemnification be
interpreted as broadly as possible without invalidating the remaining
provisions hereof. Specifically, to the extent prohibited by
Bermuda law, these Bye-laws shall not result in indemnification of any
person, including an Indemnified Person, to the extent he engaged in fraud
or dishonesty.
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150.
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Without
prejudice to the provisions of Bye-Laws 143-150 the Board shall have the
power to purchase and maintain insurance for or for the benefit of any
Indemnified Person or any persons who are or were at any time Directors,
Officers, employees of the Company, or of any other company which is its
holding company or in which the Company or such holding company has any
interest whether direct or indirect or which is in any way allied to or
associated with the Company, or of any subsidiary undertaking of the
Company or any such other company, or who are or were at any time trustees
of any pension fund in which employees of the Company or any such other
company or subsidiary undertaking are interested, including (without
prejudice to the generality of the foregoing) insurance against any
liability incurred by such persons in respect of any act or omission in
the actual or purported execution or discharge of their duties or in the
exercise or purported exercise of their powers or otherwise in relation to
their duties, powers or offices in relation to the Company or any such
other company, subsidiary undertaking or pension
fund.
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AMALGAMATION
151.
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Any
Resolution proposed for consideration at any general meeting to approve
the amalgamation of the Company with any other company, wherever
incorporated, shall require the approval of a simple majority of votes
cast at such meeting and the quorum for such meeting shall be that
required in Bye-Law 55 and a poll may be demanded in respect of such
Resolution in accordance with the provisions of Bye-Law
68.
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CONTINUATION
152.
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Subject
to the Companies Acts, the Board may approve the discontinuation of the
Company in Bermuda and the continuation of the Company in a jurisdiction
outside Bermuda. The Board, having resolved to approve the
discontinuation of the Company, may further resolve not to proceed with
any application to discontinue the Company in Bermuda or may vary such
application as it sees fit.
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ALTERATION
OF BYE-LAWS
153.
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(1)
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These
Bye-Laws may be revoked or amended by the Board, which may from time to
time revoke or amend them in any way by a resolution of the Board passed
by a majority of the Directors then in office and eligible to vote on that
resolution, but no such revocation or amendment shall be operative unless
and until it is approved at a subsequent general meeting of the Company by
the Shareholders (a) by Resolution passed by a majority of votes cast
(after giving effect to any adjustments to voting power imposed pursuant
to Bye-Law 63) whenever it is proposed by the Board to repeal, alter or
amend any of the Bye-Laws except Bye-Laws 143 150 or (b) by Resolution of
eighty five percent (85%) of the total votes cast (after giving effect to
any adjustments to voting power imposed pursuant to Bye-Law 63) whenever
it is proposed by the Board to repeal, alter or amend Bye-Laws 143-150 or
adopt any provision inconsistent
therewith.
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(2)
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Any
repeal, alteration or amendment of Bye-Laws 143-150 or adoption of any
provision inconsistent therewith shall not adversely affect any rights to
indemnification and to the advancement of expenses thereunder existing at
the time of such repeal, alteration, amendment or adoption with respect to
any acts or omissions occurring immediately prior to such repeal,
alteration, amendment or adoption.
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CERTAIN
SUBSIDIARIES
154.
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(1)
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With
respect to any subsidiary of the Company that is not a U.S. corporation or
that is not treated as a pass-through or disregarded entity for U.S.
federal income tax purposes (unless such disregarded entity owns, directly
or indirectly, any subsidiary that is organized under the laws of a
jurisdiction outside of the United States that is treated as a corporation
for U.S. federal income tax purposes) (together, the "Designated
Companies"), subject to any applicable mandatory law of the relevant
jurisdiction (i) the board of directors of each such Designated Company
shall consist of the persons, a majority of whom are Directors of the
Company, who have been elected as director designees with
respect to such Designated Company by the Shareholders of the Company
("Designated Company Directors") in a general meeting of the Shareholders
by Resolution, which Resolution directs the Company to vote its shares in
such Designated Company to ensure that the board of directors of such
Designated Company consists of the Designated Company Directors designated
with respect to such Designated Company, and (ii) the Shareholders of the
Company in a general meeting may designate the persons to be removed as
directors of any Designated Company (the "Removed Company Directors") by
resolution, which Resolution directs the Company to vote its shares in the
Designated Company to effect the removal of the Removed Company Directors
from the board of directors of the applicable Designated Company, subject
to the requirement that a majority of the directors of each Designated
Company are Directors of the
Company.
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(2)
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Notwithstanding
the general authority of the Board set out in Bye-Law 95(3), the Company
shall vote all shares owned by the Company in each Designated Company (i)
to elect the Designated Company Directors with respect to each Designated
Company as the directors of such Designated Company and to remove the
Removed Company Directors with respect to each Designated Company as
directors of such Designated Company and (ii) to ensure that the
constitutional documents of such Designated Company require such
Designated Company Directors to be elected and such Removed Company
Directors to be removed as provided in this Bye-Law. The Board and the
Company shall ensure that the constitutional documents of each such
Designated Company shall effectuate or implement this Bye-Law and, subject
to any applicable mandatory law of the relevant jurisdiction, contain a
provision substantially similar to this Bye-Law 154 governing the
election, appointment and removal of its direct subsidiaries'
directors. The Company shall also enter into agreements with
each such Designated Company to effectuate or implement this Bye-Law and
take such other actions as are necessary to effectuate or implement this
Bye-Law.
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******
***
36
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