Registration
No. 333-
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
Flagstone
Reinsurance Holdings Limited
(Exact
name of Registrant as
specified in its Charter)
|
Bermuda
|
6331
|
98-0481623
|
(State
or other jurisdiction of incorporation or
organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer Identification Number)
|
Crawford
House
23
Church Street
Hamilton
HM 11
Bermuda
(441)
278-4300
(Address,
including zip code, and telephone number, including area code, of
Registrant’s
principal executive office)
CT
Corporation System
111 Eighth
Avenue, 13th Floor
New
York, New York 10011
(212)
590-9331
(Name,
address, including zip code, and telephone number, including area
code,
of agent
for service)
Copy
to:
Ronald
Cami, Esq.
Cravath,
Swaine & Moore LLP
Worldwide
Plaza
825
Eighth Avenue
New
York, New York 10019
(212)
474-1000
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box. £
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. ý
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the initial offering. £
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. £
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act,
check the following box. £
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. £
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. £
CALCULATION
OF REGISTRATION FEE
|
Title
of Each Class of
Securities
to be Registered
|
Amount
to be Registered (1)
|
Proposed
Maximum
Offering
Price Per Unit (2)
|
Proposed
Maximum
Aggregate
Offering Price (2)(3)
|
Amount
of
Registration
Fee (3)
|
|
|
|
|
|
|
|
Primary
Offering
|
|
|
|
|
|
Common
Shares (4)
|
|
|
|
|
|
Preferred
Shares (5)
|
|
|
|
|
|
Debt
Securities (6)
|
|
|
|
|
|
Total
Primary Offering
|
|
|
$200,000,000
|
$7,860.00
|
|
Secondary
Offering
|
|
|
|
|
|
Common Shares (7)
|
71,547,891
|
|
$708,324,121
|
$27,837.14
|
|
Total
|
|
|
$908,324,121
|
$35,697.14
|
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(1)
|
There
are being registered an indeterminate number of securities as shall have
an aggregate offering price not to exceed $200,000,000. In
addition, up to 71,547,891 Common Shares may be sold from time to time
pursuant to this Registration Statement by the selling
shareholders. This Registration Statement shall also cover any
additional securities to be offered or issued from stock splits, stock
dividends, recapitalizations or similar transactions. The
securities covered by this Registration Statement may be sold separately,
together or as units with other securities registered under this
Registration Statement.
|
|
(2)
|
With
respect to the primary offering and pursuant to General Instruction II.D
of Form S-3, the amount of securities to be registered for each class of
securities, the proposed maximum offering price per unit for each class of
securities and the proposed maximum aggregate offering price of each class
of securities are not specified.
|
|
(3)
|
With
respect to the primary offering, the proposed maximum aggregate offering
price has been estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(o) of the rules and regulations
under the Securities Act. With respect to Common Shares to be
offered for resale by the selling shareholders in the secondary offering,
the proposed maximum aggregate offering price has been estimated solely
for the purpose of calculating the registration fee pursuant to
Rule 457(c) of the rules and regulations under the Securities Act
based on the average of the high and low prices reported for the Common
Shares as reported by the New York Stock Exchange on December 19,
2008.
|
|
(4)
|
With
respect to the primary offering and subject to note (1), this Registration
Statement covers such an indeterminate amount of Common Shares (with
accompanying purchase rights, if any) as may be sold, from time to time,
at indeterminate prices, by the Registrant and such indeterminate number
of Common Shares as may, from time to time, be issued upon conversion or
exchange of other securities, including any Preferred Shares and Debt
Securities, in each case if applicable, registered hereunder, to the
extent any such securities are, by their terms, convertible or
exchangeable for Common Shares.
|
|
(5)
|
With
respect to the primary offering and subject to note (1), this Registration
Statement covers such an indeterminate number of Preferred Shares (with
accompanying purchase rights, if any) as may be sold from time to time at
indeterminate prices by the
Registrant.
|
|
(6)
|
With
respect to the primary offering and subject to note (1), this Registration
Statement covers such an indeterminate amount of Debt Securities, which
may be senior or subordinated, as may be sold from time to time at
indeterminate prices by the Registrant. If any Debt Securities
are issued at an original issue discount, then the offering price shall be
in such greater principal amount as shall result in an aggregate initial
offering price not to exceed
$200,000,000.
|
|
(7)
|
With
respect to the secondary offering and subject to note (1), this
Registration Statement covers an aggregate of 71,547,891 Common Shares of
the Registrant that may be sold from time to time by the selling
shareholders.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is
not complete and may be changed. These securities may not be sold
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell nor
does it seek an offer to buy in any jurisdiction where the offer or sale is not
permitted.
SUBJECT
TO COMPLETION, DATED DECEMBER 24, 2008
PROSPECTUS
FLAGSTONE
REINSURANCE HOLDINGS LIMITED
$200,000,000
Common
Shares
Preferred
Shares
Debt
Securities
__________________
71,547,891
Common Shares Offered by
the
Selling Shareholders
We may
offer and sell to the public from time to time, in one or more series or
issuances:
|
|
●
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Senior
or Subordinated Debt Securities.
|
The
aggregate initial offering price of the securities of Flagstone Reinsurance
Holdings Limited (the “Company”) that we will offer for sale pursuant to this
prospectus and any prospectus supplement will not exceed
$200,000,000. When we offer securities pursuant to this prospectus,
we will provide specific terms of the offering and material tax considerations
pertaining to an investment in the securities in supplements to this
prospectus. The securities offered by this prospectus and any
prospectus supplement may be offered directly to investors or to or through
underwriters, dealers or other agents on a continuous or delayed
basis. See “Plan of Distribution.” If any underwriters or
dealers are involved in the sale of any securities offered by this prospectus
and any prospectus supplement, their names, and any applicable purchase price,
fee, commission or discount arrangement between or among them, will be set
forth, or will be calculable from the information set forth, in the applicable
prospectus supplement.
Investing
in our securities involves risks. You should read this prospectus,
including the risk factors incorporated herein by reference on page 2, and any
prospectus supplement carefully before you invest. The prospectus
supplement applicable to each type or series of securities we offer may contain
a discussion of additional risks applicable to an investment in us and the
particular type of securities we are offering under the prospectus
supplement.
In
addition, the selling shareholders may sell up to a total of
71,547,891 Common Shares from time to time under this prospectus and any
prospectus supplement. In the prospectus supplement relating to any
sales by the selling shareholders, we will identify the number of Common Shares
that the selling shareholders will be offering for sale. We will not
receive any of the proceeds from the sale of our Common Shares by the selling
shareholders. We have paid the fees and expenses incident to the
registration of the Common Shares.
Our
Common Shares are listed on the New York Stock Exchange under the trading
symbol “FSR.” Other than for our Common Shares, there is no market for the other
securities we may offer.
None of
the Securities and Exchange Commission, any state securities body, the Registrar
of Companies in Bermuda or the Bermuda Monetary Authority (the “BMA”) has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
THIS
PROSPECTUS MAY NOT BE USED TO OFFER OR SELL ANY SECURITIES UNLESS ACCOMPANIED BY
A PROSPECTUS SUPPLEMENT.
The date
of this prospectus is
[ ],
2008.
Securities
may be offered or sold in Bermuda only in compliance with the provisions of the
Investment Business Act of 2003, which regulates the sale of securities in
Bermuda. In addition, the BMA must approve all issuances and transfers of a
Bermuda exempted company. The BMA has given its general consent under
the Exchange Control Act 1972 (and its related regulations) for the issue and
transfer of our Common Shares to and between non-residents of Bermuda for
exchange control purposes, provided our shares remain listed on an appointed
stock exchange, which includes the New York Stock Exchange. This
general consent would cease to apply if our Common Shares were to cease to be so
listed on the New York Stock Exchange, or any other appointed stock exchange,
and in such event specific consent would be required from the BMA for all issues
or transfers of our Common Shares subject to certain exceptions. Persons
resident in Bermuda may require the prior approval of the BMA in order to
acquire Common Shares.
This
prospectus and the accompanying prospectus supplements will be filed with the
Registrar of Companies in Bermuda in accordance with Bermuda law.
No
dealer, salesperson or other person is authorized to give any information or to
represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This
prospectus is an offer to sell only the securities offered hereby, but only
under circumstances and in jurisdictions where it is lawful to do
so. The information contained in this prospectus is current only as
of the date on the front cover.
This
prospectus is part of a Registration Statement (the “Registration Statement”)
utilizing the “shelf” registration process that we have filed with the
Securities and Exchange Commission (the “SEC”), which registers the distribution
of the securities offered under this prospectus. The Registration
Statement, including the attached exhibits and schedules, contains additional
relevant information about the Company and the securities. The
Registration Statement can be read at the SEC’s website (www.sec.gov) or at the
offices mentioned under the heading “Where You Can Find More
Information.”
Under
this Registration Statement, we may offer, as described in this prospectus and
any prospectus supplement(s), from time to time, up to $200,000,000 of
securities. The selling shareholders may, from time to time, sell up
to 71,547,891 Common Shares in one or more offerings.
This
prospectus provides you with a general description of the securities we and the
selling shareholders may offer. Each time we or the selling
shareholders sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any
prospectus supplement, together with additional information described in this
prospectus under the heading “Where You Can Find More Information.”
In this
prospectus, unless the context otherwise requires or unless the prospectus
supplement otherwise indicates, (i) the “Company,” “Flagstone,” “we,” “us,” and
“our” refer to Flagstone Reinsurance Holdings Limited and/or its subsidiaries,
including Flagstone Réassurance Suisse SA, its wholly-owned Switzerland
reinsurance company, Island Heritage Holdings Limited, its Cayman-based
insurance company, and any other direct or indirect subsidiary; (ii) “Flagstone
Suisse” refers to Flagstone Réassurance Suisse SA and its wholly-owned
subsidiaries, including its Bermuda branch; (iii) “Island Heritage” refers to
Island Heritage Holdings Limited and its subsidiaries; (iv) “Common Shares”
refers to common shares of the Company, par value $0.01 per share;
(v) ”Preferred Shares” refers to preferred shares of the Company, par value
$0.01 per share; (vi) “Debt Securities” refers to the debt securities of the
Company that may be offered and sold pursuant to the registration statement to
which this prospectus relates; and (vii) “securities” refers collectively to the
Common Shares, the Preferred Shares and the Debt
Securities. References in this prospectus to “dollars” or “$” are to
the lawful currency of the United States of America, unless the context
otherwise requires.
You
should rely only on the information contained in this prospectus or incorporated
by reference in this prospectus. We have not authorized anyone to
provide you with different information. The distribution of this
prospectus and sale of the securities in certain jurisdictions may be restricted
by law. Persons in possession of this prospectus are required to
inform themselves about and observe any such restrictions. We are
only offering the securities in states where offers are
permitted. You should assume that the information appearing in this
prospectus is accurate as of the date on the front cover of this prospectus
only. Our business, financial condition, results of operations and
prospects may have changed since that date.
Flagstone,
a global insurance and reinsurance holding company, was incorporated under the
laws of Bermuda in October 2005 and commenced operations in December
2005. The Company is currently organized into two business
segments: Reinsurance and Insurance. Through our
Reinsurance segment, we write primarily property, property catastrophe and
short-tail specialty and casualty reinsurance. Through our Insurance
segment, we write property insurance for homes, condominiums and office
buildings in the Caribbean region. We diversify our risks across
business lines by risk zones, each of which combines a geographic zone with one
or more types of peril (for example, Texas Windstorm). The majority
of our reinsurance contracts contain loss limitation provisions such as fixed
monetary limits to our exposure and per event caps. We specialize in
underwriting where sufficient data exists to analyze effectively the risk/return
profile, and where we are subject to legal systems we deem reasonably fair and
reliable.
Our
largest business is providing property catastrophe reinsurance coverage to a
broad range of select insurance companies, primarily on an excess of loss
basis. These policies provide coverage for claims arising from major
natural catastrophes, such as hurricanes and earthquakes, in excess of a
specified loss. We also provide coverage for claims arising from
other natural and man-made catastrophes such as winter storms, freezes, floods,
fires and tornados. Our specialty lines, which represent a growing
proportion of our business, cover such risks as aviation, energy, accident and
health, satellite, marine and workers’ compensation catastrophe.
We
measure our financial success through long-term growth in diluted book value per
share plus accumulated dividends measured over intervals of three years, which
we believe is the most appropriate measure of the Company’s performance, a
measure that focuses on the return provided to the Company’s common
shareholders. Diluted book value per share is obtained by dividing
shareholders’ equity by the number of Common Shares and Common Share equivalents
outstanding. We believe that prudent management of our underwriting
risks, relative to our capital base, together with effective investment of our
capital and premium income, will achieve our financial goals and deliver
attractive risk-adjusted returns for our shareholders.
Our principal executive offices are
located at Crawford House, 23 Church Street, Hamilton HM 11,
Bermuda. Our telephone number is (441) 278-4300. We
maintain a website at http://www.flagstonere.bm where general information about us is
available. We are not incorporating the contents of the website into
this prospectus.
For
further information regarding Flagstone, including financial information, you
should refer to our recent filings with the SEC. See “Where You Can
Find More Information.”
An
investment in our securities involves risks. Before making an
investment decision, you should carefully consider the risks described in our
filings with the SEC referred to under the heading “Where You Can Find More
Information,” and the risks discussed in the section entitled “Risk Factors”
incorporated by reference herein from our Annual Report on Form 10-K for the
year ended December 31, 2007, as revised in our Current Report on Form 8-K,
filed December 19, 2008, and from our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008, as
updated by annual, quarterly and other reports and documents we file with the
SEC after the date of this prospectus. Additional risk factors may be
included in a prospectus supplement relating to a particular series or offering
of securities.
This
prospectus contains, and the Company may from time to time make, written or oral
“forward-looking statements” within the meaning of the U.S. federal securities
laws, which are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. All forward-looking
statements rely on a number of assumptions concerning future events and are
subject to a number of uncertainties and other factors, many of which are
outside the Company’s control, which could cause actual results to differ
materially from such statements. In particular, statements using
words such as “may,” “should,” “estimate,” “expect,” “anticipate,” “intend,”
“believe,” “predict,” “potential,” or words of similar import generally involve
forward-looking statements.
Important
events and uncertainties that could cause the actual results to differ include,
but are not necessarily limited to: market conditions affecting the Company’s
Common Share price; the impact of the current unprecedented volatility in the
financial markets, including the duration of the crisis and the effectiveness of
governmental solutions; the weakening economy, including the impact on our
customers’ businesses; fluctuations in interest rates; the effects of corporate
bankruptcies on capital markets; the possibility of severe or unanticipated
losses from natural or man-made catastrophes; the effectiveness of our loss
limitation methods; our dependence on principal employees; the cyclical nature
of the reinsurance and insurance business; the levels of new and renewal
business achieved; opportunities to increase writings in our core property and
specialty reinsurance and insurance lines of business and in specific areas
of the casualty reinsurance market; the sensitivity of our business to financial
strength ratings established by independent rating agencies; the estimates
reported by cedents and brokers on pro-rata contracts and certain excess of
loss contracts where the deposit premium is not specified in the contract; the
inherent uncertainties of establishing reserves for loss and loss adjustment
expenses, our reliance on industry loss estimates and those generated by
modeling techniques; unanticipated adjustments to premium estimates; changes in
the availability, cost or quality of reinsurance or retrocessional coverage;
changes in general economic conditions; changes in governmental regulation or
tax laws in the jurisdictions where we conduct business; the amount and timing
of reinsurance recoverables and reimbursements we actually receive from our
reinsurers; the overall level of competition, and the related demand and supply
dynamics in our markets relating to growing capital levels in the
reinsurance and insurance industries; declining demand due to increased
retentions by cedents and other factors; the impact of terrorist activities on
the economy; and rating agency policies and practices.
These and
other events that could cause actual results to differ are discussed in more
detail from time to time in our filings with the SEC. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as required by U.S. federal securities laws. Investors are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made.
Unless we
state differently in a prospectus supplement, we expect to use the net proceeds
we receive from the sale of the securities offered by us pursuant to this
prospectus and the accompanying prospectus supplement(s) for general corporate
purposes, including repayment of borrowings, working capital, acquisitions and
stock repurchases.
The
selling shareholders will receive all of the proceeds from the resale of their
Common Shares pursuant to this prospectus.
The
following table sets forth our consolidated ratio of earnings to fixed
charges. The following table is derived from audited results for the
period October 4, 2005 (the date of the Company’s incorporation) through
December 31, 2005 and the fiscal years ended December 31, 2006 and 2007 and
the unaudited results for the nine-month period ended September 30,
2008.
|
|
|
Nine
months
ended
September
30, 2008(1)
|
|
|
Year
ended
December
31, 2007
|
|
|
Year
ended
December
31, 2006
|
|
|
Period
October
4, 2005
through
December
31, 2005 (2)
|
|
|
Ratio
of earnings to fixed charges
|
|
|
— |
|
|
|
11.65 |
|
|
|
32.87 |
|
|
|
— |
|
|
Deficiency
of earnings to fixed charges (in thousands)
|
|
$ |
(88,089
|
) |
|
|
— |
|
|
|
— |
|
|
$ |
(12,326 |
) |
|
(1)
|
For
the nine months ended September 30, 2008, earnings were insufficient to
cover fixed charges by $88.1 million. This was largely due to realized and
unrealized investment losses and losses incurred on hurricane activity
during the third quarter of 2008.
|
|
(2)
|
For
the period October 4, 2005 through December 31, 2005, earnings were
insufficient to cover fixed charges by $12.3 million. In connection
with the initial closing of the private placement for our Common Shares in
December 2005, the Company issued a Warrant to Haverford for its role
in these capital raising activities. The Warrant granted the holder the
right, at any time during the period commencing on December 1, 2010
and ending December 31, 2010, to purchase from the Company up to
12.0% of the issued share capital of the Company at the consummation of
the initial capital raising activities for the Company at an exercise
price of $14.00 per Common Share. The compensation expense based on the
fair value of the Warrant was $12.2 million at the initial closing of
the private placement, and is included in general and administrative
expenses and in additional paid-in capital in our consolidated financial
statements as at and for the period ended December 31,
2005.
|
The
following summarizes the material terms and provisions of the Common Shares and
Preferred Shares offered hereby. For the complete terms of our
shares, please refer to the Company’s Memorandum of Association (the “Memorandum
of Association”), which was filed as an exhibit to the Company’s Registration
Statement on Form S-1 (Registration No. 333-138182), as thereafter
amended and supplemented, including in the prospectus constituting part of such
registration statement filed pursuant to Rule 424(b) under the Securities
Act on March 30, 2007, the Company’s Bye-Laws (the “Bye-Laws”) and the
Amended and Restated Shareholders’ Agreement dated November 15, 2006 among
the Company and the shareholders named therein (the “Shareholders’ Agreement”),
each of which was filed as an exhibit to the Company’s Quarterly Report on
Form 10-Q with the SEC on August 9, 2007 and the Warrant dated
February 23, 2006, as amended (the “Warrant”), which was filed as an
exhibit to the Company’s Current Report on Form 8-K with the SEC on November
18, 2008. The Bermuda Companies Act of 1981, as amended, and
related regulations (referred to herein collectively as the “Companies Act”) may
also affect the terms of the Company’s shares.
General
The
Company’s Memorandum of Association authorizes the issuance of up to 150,000,000
shares, par value $0.01 per share. Subject to our Bye-Laws and
Bermuda law, our Board of Directors has the power to issue any of our shares as
it determines, including the issuance of any shares with preferred, deferred or
other special rights or restrictions. On December 22, 2008,
there were 84,703,378 Common Shares issued and outstanding and no Preferred
Shares outstanding. The following summary of our share capital is
qualified in its entirety by reference to the Memorandum of Association, the
Bye-Laws, the Shareholders’ Agreement and the Warrant.
Common
Shares
Liquidation
Rights
Holders
of our Common Shares have no pre-emptive, redemption, conversion or sinking fund
rights. In the event of our liquidation, dissolution or winding-up,
the holders of our Common Shares are entitled to share equally and ratably in
our assets, if any remain after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.
Voting
Rights
In
general, and except as provided below, shareholders have one vote for each
Common Share held by them and are entitled to vote at all meetings of
shareholders. However, if, and so long as, the Common Shares of a
shareholder are treated as “controlled shares” (generally, Common Shares held
directly, indirectly through non-U.S. entities or constructively through certain
relationships) of any U.S. Person (as defined in Section 7701(a)(30) of the
Internal Revenue Code of 1986, as amended (the “Code”)) and such controlled
shares constitute 9.9% or more of the votes conferred by the Company’s issued
shares, the voting rights with respect to the controlled shares of that U.S.
Person (a “9.9% U.S. Shareholder”) shall be limited to a voting power of less
than 9.9% under a formula specified in the Bye-Laws. The reduction in
votes is generally to be applied proportionately among all the “controlled
shares” of the 9.9% U.S. Shareholder; provided, however, that the
reduction shall first be effected by reducing the votes conferred on the Common
Shares held directly by such 9.9% U.S. Shareholder. The reduction in
the votes of the Common Shares held by a 9.9% U.S. Shareholder effected by the
foregoing shall be allocated proportionately among the Common Shares held by the
other shareholders so long as the allocation does not cause any U.S. Person to
become a 9.9% U.S. Shareholder. The formula is applied repeatedly
until the voting power of all 9.9% U.S. Shareholders has been reduced to
9.9%.
Thus, for
example, if following an offering three unrelated U.S. Persons were to own 21%,
16% and 14% of the Company’s outstanding Common Shares, respectively, the voting
power of each Common Share held by such U.S. Persons would be reduced by
approximately 52.86%, 38.13% and 29.29%, respectively, such that the Common
Shares owned by each U.S. Person, in the aggregate, would possess only 9.9% of
the voting power of the Company’s outstanding Common Shares. The
aggregate reduction in voting power of 21.3% (i.e.,
(21% + 16% + 14%) - (9.9% + 9.9%
+ 9.9%)) would then be allocated proportionately among the Common Shares
held by all of the other shareholders so long as such allocation would not cause
any other shareholder to become a 9.9% U.S. Shareholder. If the
reallocation of voting power to such other shareholders were to cause one of the
other shareholders to become a 9.9% U.S. Shareholder, such shareholder’s voting
rights would likewise be reduced to 9.9% and the reduction in voting power would
then be allocated proportionately among the Common Shares held by the
shareholders whose voting power would not already have been
reduced. The formula would be applied repeatedly until the voting
power of all 9.9% U.S. Shareholders has been reduced to 9.9%.
In
addition, the Board of Directors may limit a shareholder’s voting rights where
it deems it appropriate to do so to (i) avoid the existence of any 9.9%
U.S. Shareholder; and (ii) avoid certain adverse tax, legal or regulatory
consequences to the Company or any of the Company’s subsidiaries or any
shareholder or its affiliates. “Controlled shares” includes all
shares that a U.S. Person is deemed to own directly, indirectly or
constructively (within the meaning of Section 958 of the Code).
Under
these provisions, certain shareholders, such as the Lehman entities and the
Silver Creek entities, may have their voting rights limited to less than one
vote per share, while other shareholders may have their voting rights increased
to in excess of one vote per share. Moreover, these provisions could
have the effect of reducing the votes of certain shareholders who would not
otherwise be subject to the 9.9% limitation by virtue of their direct share
ownership. Our Bye-Laws provide that shareholders will be notified of
their voting interests prior to any vote to be taken by the
shareholders.
We are
authorized to require any shareholder to provide information as to that
shareholder’s beneficial share ownership, the names of persons having beneficial
ownership of the shareholder’s shares, relationships with other shareholders or
any other facts the directors may deem relevant to a determination of whether a
shareholder’s voting rights are to be reallocated pursuant to the
Bye-Laws. We may, in our reasonable discretion, reduce or disregard
the votes attached to shares of any holder failing to respond to such a request
or submitting incomplete or inaccurate information.
Under our
Bye-Laws, the boards of directors of our direct and indirect non-U.S.
subsidiaries that are not treated as pass-through or disregarded entities for
U.S. federal income tax purposes are to consist of persons who have been elected
by our shareholders (subject to the limitations on voting rights discussed
above) by resolution in a general shareholder meeting.
Shareholders’
Agreement
The
Company and certain shareholders who acquired our Common Shares prior to the
date of our initial public offering (the “Existing Shareholders”) are parties to
an Amended and Restated Shareholders’ Agreement. The Shareholders’
Agreement permits persons who hold at least five million of our Common
Shares to request registration for a public offering of Common
Shares. We have agreed to use our best efforts to cause the prompt
registration of such Common Shares, but may postpone the filing of a
registration statement in connection with such public offering for up to three
months from the date of the request if we determine in good faith that the
registration would reasonably be expected to have an adverse effect on any
proposal or plan by us or any of our subsidiaries to engage in any acquisition
of assets (other than in the ordinary course of business) or any stock purchase,
amalgamation, merger, consolidation, tender offer, reorganization, or similar
transaction or if an underwritten public offering is contemplated in which the
Common Shares proposed to be registered would be included. If the number of
Common Shares to be sold in the requested offering is limited by the managing
underwriter, then the number of Common Shares requested to be registered will be
allocated, pro rata, among the requesting shareholders. The Existing
Shareholders are currently entitled to request up to three such demand
registrations.
Additionally,
the Shareholders’ Agreement provides that, if at any time we propose to register
any of our Common Shares under the Securities Act, we will offer the Existing
Shareholders the opportunity, subject to certain conditions, to include their
Common Shares in such registration statement. We are generally
required to pay all expenses associated with any demand or “piggyback”
registrations.
Warrant
The
Company has granted to Haverford (Bermuda) Ltd (“Haverford”) a Warrant to
purchase Common Shares. The Warrant will be exercisable during the
month of December 2013. The Warrant entitles the holder to purchase
8,585,747 Common Shares (which equaled 12.0% of the issued share capital of the
Company through the completion of the private placement on February 23,
2006), at an exercise price of $14.80 per share (subject to adjustment for share
splits and similar events). Haverford may transfer the Warrant only
to certain of its affiliates.
Preferred Shares
From time to time, pursuant to our Bye-laws and Bermuda law, the Board of Directors has the power to issue preferred shares
on such terms and conditions as it may determine and having such voting rights, dividend rates,
return of capital or other
provisions as may be fixed
by the Board of
Directors without any
further shareholder approval. Such rights, preferences, powers and
limitations as may be established could also have the effect of delaying, deferring or
preventing an attempt to obtain control of
us. As of the
date of this prospectus, no Preferred Shares have been issued.
The Preferred Shares, upon issuance against full
consideration, will be fully paid and nonassessable. If we offer shares of a new series of
Preferred Shares, the
applicable prospectus supplement will describe the terms of the Preferred Shares offered by that prospectus supplement.
You should refer to the
Memorandum of Association,
the Bye-Laws and any
applicable Certificate of Designation, Preferences and Rights or similar
document or other governing instrument for complete information regarding the
terms of the class or series of Preferred Shares described in a prospectus
supplement.
A prospectus supplement will specify the
terms of a particular class or series of Preferred Shares as follows:
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the
number of shares to be issued and sold and the distinctive designation
thereof;
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the
dividend rights of the Preferred Shares, whether dividends will be
cumulative and, if so, from which date or dates and the relative rights or
priority, if any, of payment of dividends on Preferred Shares and any
limitations, restrictions or conditions on the payment of such
dividends;
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the
voting powers, if any, of the Preferred Shares, which may include the
right to vote, as a class or with other classes of share capital, to elect
one or more of our directors;
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the
terms and conditions (including the price or prices, which may vary under
different conditions and at different redemption dates), if any, upon
which all or any part of the Preferred Shares may be redeemed, at whose
option such a redemption may occur, and any limitations, restrictions or
conditions on such redemption;
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the
terms, if any, upon which the Preferred Shares will be convertible into or
exchangeable for our shares of any other class, classes or
series;
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the
relative amounts, and the relative rights or priority, if any, of payment
in respect of Preferred Shares, which the holders of the Preferred Shares
will be entitled to receive upon our liquidation, dissolution, winding up,
merger or sale of assets;
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the
terms, if any, of any purchase, retirement or sinking fund to be provided
for the Preferred Shares;
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a
discussion of certain U.S. federal income tax considerations and Bermuda
law considerations;
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the
restrictions, limitations and conditions, if any, upon the issuance of our
indebtedness or other actions we may
take; and
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any
other relative rights, preferences, limitations and powers not
inconsistent with applicable law, the Memorandum of Association or the
Bye-Laws.
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Restrictions
on Transfer of Shares or Warrants
Although
our Board of Directors may decline to register certain transfers of shares,
pursuant to our Bye-Laws, our Board of Directors is required to register in the
Company’s register of members any transfer settled on a stock exchange or
automated quotation system on which shares are listed or traded from time to
time. Except in connection with the settlement of trades or
transactions entered into through the facilities of a stock exchange or
automated quotation system on which the shares are listed or traded from time to
time, our Board of Directors may generally require any shareholder or any person
proposing to acquire the shares or warrants to provide the information required
under our Bye-Laws relating to the identity of the direct beneficial owner (as
defined under Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)). If any such shareholder or proposed acquiror
does not provide such information, or if the Board of Directors has reason to
believe that any certification or other information provided pursuant to any
such request is inaccurate or incomplete, the Board of Directors may decline to
register any transfer or to effect any issuance or purchase of shares or
warrants to which such request is related. Although these
restrictions on transfer will not interfere with the settlement of trades on the
New York Stock Exchange, we may decline to register transfers in accordance with
our Bye-Laws and Board of Directors resolutions after a settlement has taken
place.
The
restrictions on transfer and voting restrictions described above may have the
effect of delaying, deferring or preventing a change in control of the
Company.
Acquisition
of Shares by the Company
Under our
Bye-Laws and subject to Bermuda law, we have the option, but not the obligation,
to require a shareholder to sell to us at fair market value the minimum number
of shares which is necessary to avoid or cure any adverse tax consequences or
materially adverse legal or regulatory treatment to us, our subsidiaries or our
shareholders if our Board of Directors reasonably determines, in good faith,
that failure to exercise our option would result in such adverse consequences or
treatment. Upon notice from the Company, a shareholder will have 75
days to remedy such adverse consequences or treatment, including by selling the
shares to a third party, subject to any other restrictions on
transfer. If the shareholder does not remedy the adverse consequences
or treatment, we will have the option, but not the obligation, to purchase the
shares at fair market value, as determined by an independent valuation and
approved by the Board of Directors.
Dividends or Other
Distributions
On September 30, 2008, the
Company completed the restructuring of its global reinsurance operations by
merging its two wholly-owned subsidiaries, Flagstone Reinsurance Limited and
Flagstone Suisse, into one succeeding entity, Flagstone Suisse with its existing
Bermuda branch. The merger consolidated the Company’s underwriting capital into
one main operating entity. Bermuda law limits the maximum amount of
annual dividends or distributions that can be paid by Flagstone Suisse to the
Company and in certain cases requires the prior notification to, or the approval
of, the BMA. As a Bermuda Class 4 reinsurer, Flagstone Suisse may not pay
dividends in any financial year which would exceed 25% of its total statutory
capital and surplus, as shown on its statutory balance sheet in relation to the
previous financial year, unless at least seven days before payment of those
dividends, it files an affidavit with the BMA signed by at least two directors
and Flagstone Suisse’s principal representative, which states that in their
opinion, declaration of those dividends will not cause Flagstone Suisse to fail
to meet its prescribed solvency margin and liquidity ratio. Further,
Flagstone Suisse may not reduce by 15% or more its total statutory capital as
set out in its previous year’s financial statements, without the prior approval
of the BMA. Flagstone Suisse must also maintain, as a Class 4 Bermuda
reinsurer, paid-up share capital of $1.0 million and to meet a minimum solvency
margin equal to the greater of $100.0 million, 50% of net premiums written or
15% of the loss and LAE reserves.
Swiss law permits dividends to be
declared only after profits have been allocated to the reserves required by law
and to any reserves required by the articles of incorporation. The
articles of incorporation of Flagstone Suisse do not require any specific
reserves. Therefore, Flagstone Suisse must allocate any profits first
to the reserve required by Swiss law generally, and may pay as dividends only
the balance of the profits remaining after that allocation. In the case of
Flagstone Suisse, Swiss law requires that 20% of the company’s profits be
allocated to a “general reserve” until the reserve reaches 50% of its paid-in
share capital.
In addition, a Swiss reinsurance company
may pay a dividend only if, after payment of the dividend, it will continue to
comply with regulatory requirements regarding minimum capital, special reserves
and solvency requirements.
Island Heritage is domiciled in the
Cayman Islands and is subject to statutory minimum capital requirements under
its Class A Domestic License that may affect its ability to pay dividends to
us.
Bye-Laws
The
following is a summary of some of the other important provisions of our
Bye-Laws:
Our Board of Directors and Corporate
Action. Our Bye-Laws provide that the Board of Directors shall
consist at all times of no less than 10 and no more than 12 directors, divided
into 3 classes as nearly equal as possible, each of whom shall hold office for a
term determined by the shareholders or, in the absence of such determination,
for a three-year term. Shareholders may remove a director at a
special general meeting prior to the expiration of such director’s term but
without prejudice to any right such director may have to compensation or damages
from the Company, in respect of such removal. The reappointment of a
director requires the affirmative vote of shareholders holding at least a
majority of the total combined voting power of all of our issued and outstanding
shares at a special meeting of shareholders and such reappointment must leave
the composition of the Board of Directors in compliance with the requirements
regarding the nomination of Board of Directors members. A special
meeting of shareholders may be convened by the Executive Chairman, any two
directors, any director and the Secretary, or the Board of
Directors. Our Bye-Laws also provide that the Board of Directors
shall convene a special general meeting at the requisition of shareholders
holding at the date of the deposit of the requisition not less than 10% of the
total combined voting power of all of our issued and outstanding shares carrying
the right to vote at our general meetings.
Generally,
the affirmative vote of a majority of the directors present at any meeting at
which a quorum is present shall be required to authorize corporate
action. Corporate action may also be taken by a unanimous written
resolution of the Board of Directors without a meeting. A quorum
shall be no less than two directors.
Our
Bye-Laws require the affirmative vote of at least 75% of the directors then in
office to approve any of the following:
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any
amendment to the Bye-Laws or alteration to the Memorandum of Association
of the Company;
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the
consolidation, sub-division, conversion, reduction or cancellation of any
share capital of the Company;
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any
merger, consolidation, amalgamation, continuation or similar transaction
involving the Company, or any acquisition or disposition of a subsidiary
that constitutes greater than 10% of the Company’s book
value;
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except
for rights created under our Performance Share Unit Plan (the “PSU Plan”)
or our Restricted Share Unit Plan (the “RSU Plan”), the creation of any
option or right to subscribe or acquire, or convert any security into, any
share capital of the Company;
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any
increase in the maximum number of Common Shares which can be issued under
the PSU Plan or any material amendment or modification of the PSU Plan,
the RSU Plan or the Warrant;
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any
transaction or series of transactions with Haverford or its affiliates in
excess of $10 million in the aggregate, or any material modification or
amendment of the terms thereof; or
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any
resolution to voluntarily wind up or liquidate the
Company.
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Shareholder
Action. At any general meeting, two or more persons present in
person and representing more than 50% of the total combined voting power of all
of our issued and outstanding shares throughout the meeting shall constitute a
quorum for the transaction of business. In general, any action that
we may take by resolution in a general meeting may, without a meeting, be taken
by a resolution in writing signed by all of the shareholders entitled to attend
such meeting and vote on the resolution. In general, any question
proposed for the consideration of the shareholders at any general meeting shall
be decided by the affirmative votes of a majority of the votes cast in
accordance with the Bye-Laws.
Anti-Takeover
Effects of Certain Bye-Law Provisions
Our Bye-Laws contain provisions that may
entrench directors and make it more difficult for shareholders to replace
directors even if the shareholders consider it beneficial to do
so. In addition, these provisions could delay or prevent a change of
control that a shareholder might consider favorable. For example,
these provisions may prevent a shareholder from receiving the benefit from any
premium over the market price of our Common Shares offered by a bidder in a potential
takeover. The Board of Directors has the power to
appoint a chairman, a
deputy chairman, a secretary and such additional officers as the Board
may determine to perform such duties in the management, business and affairs of
the Company as may be delegated to them by the Board. Even in the absence of an attempt to
effect a change in management or a takeover attempt, these provisions may
adversely affect the prevailing market price of our Common Shares if they are viewed as discouraging
changes in management and takeover attempts in the future.
For example, our
Bye-Laws contain the
following provisions that could have such an effect:
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Election of our directors is
staggered, meaning that the members of only one of three classes of our
directors are elected each
year;
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Shareholders have limited ability
to remove directors;
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The
total voting power of any U.S. shareholder owning more than 9.9% of our
Common Shares will be reduced to 9.9% of the total voting power of our
Common Shares; and
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Our
directors may decline to record the transfer of any Common Share or warrants on
our share register if they believe that registration of the transfer is required
under any federal or state securities law or under the laws of any other
jurisdiction and the registration has not yet been effected.
Differences
in Corporate Law
The
Companies Act, which applies to us, differs in certain material respects from
laws generally applicable to United States corporations and their
shareholders. Set forth below is a summary of certain significant
provisions of the Companies Act (including modifications adopted pursuant to our
Bye-Laws) applicable to us which differ in certain respects from provisions of
the State of Delaware corporate law. Because the following statements
are summaries, they do not address all aspects of Bermuda law that may be
relevant to us and our shareholders.
Duties of
Directors. Under Bermuda law, at common law, members of a
board of directors owe a fiduciary due to the company to act in good faith and
in the best interests of the company in their dealings with or on behalf of the
company and exercise their powers and fulfill the duties of their office
honestly. This duty has four essential elements:
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a
duty to act in good faith in the best interests of the
company;
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a
duty not to make a personal profit from opportunities that arise from the
office of director;
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a
duty to avoid conflicts of interest;
and
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a
duty to exercise powers for the purpose for which such powers were
intended.
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The
Companies Act imposes a duty on directors and officers of a Bermuda
company:
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to
act honestly and in good faith with a view to the best interests of the
company; and
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to
exercise the care, diligence and skill that a reasonably prudent person
would exercise in comparable
circumstances.
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In
addition, the Companies Act imposes various duties on officers of a company with
respect to certain matters of management and administration of the
company.
The
Companies Act provides that in any proceedings for negligence, default, breach
of duty or breach of trust against any officer, if it appears to a court that
such officer is or may be liable in respect of the negligence, default, breach
of duty or breach of trust, but that he has acted honestly and reasonably, and
that, having regard to all the circumstances of the case, including those
connected with his appointment, he ought fairly to be excused for the
negligence, default, breach of duty or breach of trust, that court may relieve
him, either wholly or partly, from any liability on such terms as the court may
think fit. This provision has been interpreted to apply only to
actions brought by or on behalf of the company against such
officers. Our Bye-Laws, however, provide that shareholders waive all
claims or rights of action that they might have, individually or in our right,
against any of our directors or officers for any act or failure to act in the
performance of such director’s or officer’s duties, except with respect to any
fraud or dishonesty of such director or officer.
Under
Delaware law, the business and affairs of a corporation are managed by or under
the direction of its board of directors. In exercising their powers,
directors are charged with a fiduciary duty of care to protect the interests of
the corporation and a fiduciary duty of loyalty to act in the best interests of
its shareholders.
The duty
of care requires that directors act in an informed and deliberative manner and
inform themselves, prior to making a business decision, of all material
information reasonably available to them. The duty of care also
requires that directors exercise care in overseeing and investigating the
conduct of corporate employees. The duty of loyalty may be summarized
as the duty to act in good faith, not out of self-interest, and in a manner
which the director reasonably believes to be in the best interests of the
shareholders.
A party
challenging the propriety of a decision of a board of directors bears the burden
of rebutting the applicability of the presumptions afforded to directors by the
“business judgment rule.” If the presumption is not rebutted, the business
judgment rule attaches to protect the directors and their decisions, and their
business judgments will not be scrutinized by the court. Where,
however, the presumption is rebutted, the directors bear the burden of
demonstrating the entire fairness of the relevant
transaction. Notwithstanding the foregoing, Delaware courts subject
directors’ conduct to enhanced scrutiny in respect of defensive actions taken in
response to a threat to corporate control and approval of a transaction
resulting in a sale of control of the corporation.
Interested
Directors. Bermuda law provides that any transaction entered
into by the Company in which a director has an interest is not voidable by us
nor can such director be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at the first
opportunity at a meeting of directors, or in writing to the
directors. Under Delaware law, such transaction would not be voidable
if (1) the material facts as to such interested director’s relationship or
interests are disclosed or are known to the board of directors and the board in
good faith authorizes the transaction by the affirmative vote of a majority of
the disinterested directors, (2) such material facts are disclosed or are known
to the stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the majority of shares entitled
to vote thereon or (3) the transaction is fair as to the corporation as at the
time it is authorized, approved or ratified. Under Delaware law, such
interested director could be held liable for a transaction in which such
director derived an improper personal benefit.
Voting Rights and Quorum
Requirements. Under Bermuda law, the voting rights of our
shareholders are regulated by our Bye-Laws and, in certain circumstances, the
Companies Act. Our Bye-Laws specify that (except when there is only
one shareholder) two or more persons, present in person and representing in
person or by proxy a majority of the total combined voting power of all the
issued and outstanding shares of the Company, are required to form a quorum for
the transaction of business. Generally, any action or resolution
requiring approval of the shareholders may be passed by a simple majority
(subject to the limitation on voting rights described above under “—Voting
Rights”).
Any
individual who is a shareholder of the Company and who is present at a meeting
may vote in person, as may any corporate shareholder which is present by a duly
authorized representative. Our Bye-Laws also permit votes by proxy,
provided the instrument appointing the proxy, together with evidence of its due
execution, is satisfactory to our Board of Directors.
Under
Delaware law, unless otherwise provided in the company’s certificate of
incorporation, each stockholder is entitled to one vote for each share of stock
held by the stockholder. Delaware law provides that a majority of the
shares entitled to vote, present in person or represented by proxy, constitutes
a quorum at a meeting of stockholders. In matters other than the
election of directors, with the exception of special voting requirements related
to extraordinary transactions, the affirmative vote of a majority of shares
present in person or represented by proxy at the meeting and entitled to vote is
required for stockholder action, and the affirmative vote of a plurality of
shares is required for the election of directors.
Dividends. Bermuda
law does not permit payment of dividends or distributions of contributed surplus
by a company if there are reasonable grounds for believing that the company is
or would be, after the payment of dividends or distribution of contributed
surplus is made, unable to pay its liabilities as they become due, or the
realizable value of the company’s assets would be less, as a result of the
payment or distribution, than the aggregate of its liabilities and its issued
share capital and share premium accounts. The excess of the
consideration paid on issue of shares over the aggregate par value of such
shares must (except in certain limited circumstances) be credited to a share
premium account. Share premium may be distributed in certain limited
circumstances, for example to pay unissued shares which may be distributed to
shareholders in proportion to their holdings, but is otherwise subject to
limitation under Bermuda law. In addition, the ability of Flagstone
Suisse, a licensed Class 4 Bermuda reinsurer, to pay dividends is subject to
Bermuda insurance laws and regulatory constraints.
Under
Delaware law, subject to any restrictions contained in the company’s certificate
of incorporation, a company may pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which the dividend is
declared and for the preceding fiscal year. Delaware law also
provides that dividends may not be paid out of net profits if, after the payment
of the dividend, capital is less than the capital represented by the outstanding
stock of all classes having a preference upon the distribution of
assets.
Mergers and Similar
Arrangements. We may acquire the business of another Bermuda
exempted company or a company incorporated outside Bermuda when the business
purpose of such acquisition is consistent with the purposes for which our
Company was formed, as
set forth in our Memorandum of Association. We may, with the approval
of 75% of votes cast at a general meeting of our shareholders at which a quorum
is present, amalgamate with another Bermuda company or with a body incorporated
outside Bermuda. In the case of an amalgamation, a shareholder may
apply to a Bermuda court for a proper valuation of such shareholder’s shares if
such shareholder is not satisfied that fair value has been paid for such
shares. The court ordinarily would not disapprove the transaction on
that ground absent evidence of fraud or bad faith. Under Delaware
law, with certain exceptions, a merger, consolidation or sale of all or
substantially all the assets of a corporation must be approved by the board of
directors and a majority of the outstanding shares entitled to vote
thereon. Under Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under certain
circumstances, be entitled to appraisal rights pursuant to which such
stockholder may receive cash in the amount of the fair value of the shares held
by such stockholder (as determined by a court) in lieu of the consideration such
stockholder would otherwise receive in the transaction.
Takeovers. Bermuda
law provides that where an offer is made for shares of a company and, within
four months of the offer, the holders of not less than 90% of the shares which
are the subject of the offer accept such offer, the offeror may by notice
require the non-accepting shareholders to transfer their shares on the terms of
the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The test is one of
fairness to the body of shareholders and not to individual shareholders, and the
burden is on the dissenting shareholders to prove unfairness, not merely that
the scheme is open to criticism. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any stockholder
vote, may merge with any subsidiary of which it owns at least 90% of each class
of capital stock. Upon any such merger, dissenting stockholders of
the subsidiary would have appraisal rights.
Shareholders’
Suits. The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders under legislation or judicial precedent
in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of
Bermuda. However, the Bermuda courts ordinarily would be expected to
follow English case law precedent, which would permit a shareholder to commence
an action in our name to remedy a wrong done to us where the act complained of
is alleged to be beyond our corporate power or is illegal or would result in the
violation of our Memorandum of Association or Bye-Laws. Furthermore,
consideration would be given by the court to acts that are alleged to constitute
a fraud against the minority shareholders or where an act requires the approval
of a greater percentage of our shareholders than actually approved
it. The winning party in such an action generally would be able to
recover a portion of attorneys’ fees incurred in connection with such
action. Our Bye-Laws provide that shareholders waive all claims or
rights of action that they might have, individually or in our right, against any
of our directors or officers for any act or failure to act in the performance of
such director’s or officer’s duties, except with respect to any fraud or
dishonesty of such director or officer. Class actions and derivative
actions are generally available to stockholders under Delaware law for, among
other things, breach of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court generally
has discretion to permit the winning party to recover attorneys’ fees incurred
in connection with such action.
Indemnification of
Directors. Under the Companies Act and our Bye-Laws, we may
indemnify our directors, officers or any other person appointed to a board
committee in their capacity as such in respect of any loss arising or liability
attaching to them by virtue of any rule of law in respect of any action, damages
or expenses brought against or incurred by such person in or about the execution
of such person’s duty or supposed duty, or in such person’s respective office,
other than in respect of such person’s own fraud or dishonesty. We
may advance money to a director, officer or any other person appointed to a
board committee in their capacity as such for the costs, charges and expenses
incurred in defending any civil or criminal proceedings on condition they shall
be repaid if any allegation of fraud or dishonesty is proved against
them. Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in defense of an action, suit or proceeding by reason of such position if
(i) such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding,
such director or officer had no reasonable cause to believe his conduct was
unlawful.
Inspection of Corporate
Records. Members of the general public have the right to
inspect our public documents available at the office of the Registrar of
Companies in Bermuda and our registered office in Bermuda, which will include
our Memorandum of Association (including its objects and powers) and any
alteration to our Memorandum of Association and documents relating to any
increase or reduction of authorized capital. Our shareholders have
the additional right to inspect our Bye-Laws, minutes of general meetings and
financial statements, which must be presented to the annual general meeting of
shareholders. The register of our shareholders is also open to
inspection by shareholders and to members of the public without
charge. We are required to maintain our share register in Bermuda but
may establish a branch register outside of Bermuda. We are required
to keep at our registered office a register of our directors and officers which
is open for inspection by members of the public without
charge. Bermuda law does not, however, provide a general right for
shareholders to inspect or obtain copies of any other corporate
records. Delaware law permits any shareholder to inspect or obtain
copies of a corporation’s shareholder list and its other books and records for
any purpose reasonably related to such person’s interest as a
shareholder.
Shareholder
Proposals. The Companies Act provides that shareholders may,
as set forth below and at their own expense (unless a company otherwise
resolves), require a company to give notice of any resolution that the
shareholders can properly propose at the next annual general meeting and/or to
circulate a statement prepared by the requesting shareholders in respect of any
matter referred to in a proposed resolution or any business to be conducted at a
general meeting. The number of shareholders necessary for such a
requisition is either that number of shareholders representing at least 10% of
the total voting rights of all shareholders having a right to vote at the
meeting to which the requisition relates. Delaware law does not
include a provision restricting the manner in which nominations for directors
may be made by shareholders or the manner in which business may be brought
before a meeting.
Approval of Corporate Matters by
Written Consent. Our Bye-Laws provide that shareholders may
take action by written consent with 100% shareholders consent
required. Delaware law permits shareholders to take action by the
consent in writing by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting of stockholders.
Calling of Special Shareholders’
Meetings. Our Bye-Laws provide that a special general meeting
may be called by the Chairman, any two directors, any director and the
Secretary, the Board of Directors, or by the shareholders when requisitioned by
the holders of at least 10% of the paid up voting share capital of the Company
as provided by the Companies Act. Delaware law permits the board of
directors or any person who is authorized under a corporation’s certificate of
incorporation or by-laws to call a special meeting of shareholders.
Transfer
Agent and Registrar
The
transfer agent and registrar for the Common Shares is Mellon Shareowner
Services. The transfer agent and registrar for the Preferred Shares
will be set forth in the applicable prospectus supplement.
Listing
Our
Common Shares are listed on the New York Stock Exchange under the symbol
“FSR.” Other than for our Common Shares, there is no market for any
other shares we may offer.
We will
issue the Debt Securities under one or more indentures or indenture supplements
between us and the trustee identified in the applicable prospectus
supplement. Any indenture will be subject to, and governed by, the
Trust Indenture Act of 1939, as amended. The statements made in this
prospectus relating to any indentures and the Debt Securities to be issued under
the indenture(s) or supplemental indenture(s) are summaries of certain
anticipated provisions of the indenture(s) or supplemental indenture(s) and are
not complete. We will file a copy of the indenture(s) or supplemental
indenture(s) with the SEC at or before the time of the offering of the
applicable series of Debt Securities. You should refer to those
indenture(s) or supplemental indenture(s) for the complete terms of the Debt
Securities.
General
We may
issue Debt Securities that rank “senior” or “subordinated.” The Debt
Securities referred to as “senior securities” will be direct obligations of the
Company and will rank equally and ratably in right of payment with other
indebtedness of the Company that is not subordinated. We may issue
Debt Securities that will be subordinated in right of payment to the prior
payment in full of senior indebtedness, as defined in the applicable prospectus
supplement, and may rank equally and ratably with any other subordinated notes
and any other subordinated indebtedness. We refer to these Debt
Securities as “subordinated securities.”
The
Company may issue the Debt Securities under this prospectus up to an aggregate
principal amount of $200,000,000, in one or more series, in each case as we may
establish in one or more supplemental indenture(s). The Company need
not issue all Debt Securities of one series at the same time. Unless
we otherwise provide, we may reopen a series, without the consent of the holders
of such series, for issuances of additional securities of that
series.
Because we are a holding company, our
rights and the rights of our creditors (including the holders of our Debt Securities) and shareholders to participate in distributions by
certain of our subsidiaries upon that subsidiary’s liquidation or reorganization or
otherwise would be subject to the prior claims of that subsidiary’s creditors, except to the extent that
our creditor may have the benefit of a guarantee from our subsidiary or we may ourselves be a creditor with
recognized claims against that subsidiary. The rights of our creditors (including the holders of our Debt
Securities) to participate
in the distribution of shares owned by us in certain of our
subsidiaries, including our insurance subsidiaries, may also be subject to
approval by certain insurance regulatory authorities having jurisdiction over
such subsidiaries.
We
anticipate that any indenture will provide that the Company may, but need not,
designate more than one trustee under an indenture, each with respect to one or
more series of the Debt Securities. Any trustee under any indenture
may resign or be removed with respect to one or more series of the Debt
Securities, and the Company may appoint a successor trustee to act with respect
to that series.
The
applicable prospectus supplement will describe the specific terms relating to
the series of the Debt Securities the Company will offer, including, where
applicable, the following:
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the
title and series designation of the Debt Securities and whether they are
senior securities or subordinated
securities;
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the
ranking of the Debt Securities;
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the
aggregate principal amount of the Debt Securities, and any limit upon such
principal amount;
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the
percentage of the principal amount at which the Company will issue the
Debt Securities and, if other than the principal amount of the Debt
Securities, the portion of the principal amount of the Debt Securities
payable upon maturity of the Debt
Securities;
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if
convertible, the initial conversion price, the conversion period and any
other terms governing such
conversion;
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the
stated maturity date of the Debt
Securities;
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any
fixed, variable or pay-in-kind interest rate or rates per
annum;
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the
place where principal, premium, if any, and interest will be payable and
where the Debt Securities can be surrendered for
payment;
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any
rights affecting the transfer, exchange or conversion of the Debt
Securities;
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the
dates from which interest may accrue and any interest payment
dates;
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any
sinking fund requirements;
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any
provisions for redemption, including the redemption price and any
remarketing arrangements;
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whether
the Debt Securities are denominated or payable in United States dollars or
a foreign currency or units of two or more foreign
currencies;
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the
events of default and covenants of such Debt
Securities;
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whether
the Company will issue the Debt Securities in certificated or book-entry
form;
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whether
the Debt Securities will be in registered or bearer form and, if in
registered form, the denominations if other than in even multiples of
$1,000 and, if in bearer form, the denominations and terms and conditions
relating thereto;
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whether
the Company will issue any of the Debt Securities in permanent global form
and, if so, the terms and conditions, if any, upon which interests in the
global security may be exchanged, in whole or in part, for the individual
Debt Securities represented by the global
security;
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the
applicability, if any, of the defeasance and covenant defeasance
provisions described in this prospectus or any prospectus
supplement;
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whether
the Company will pay additional amounts on the Debt Securities in respect
of any tax, assessment or governmental charge and, if so, whether the
Company will have the option to redeem the Debt Securities instead of
making this payment;
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the
subordination provisions, if any, relating to the Debt
Securities;
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the
provision of annual and/or quarterly financial information to the holders
of the Debt Securities;
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a
discussion of certain U.S. federal income tax considerations and Bermuda
law considerations;
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the
remedies for holders of Debt
Securities;
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the
right to make any changes to the indenture(s) or the terms of the Debt
Securities by the Company and what approval, if any, will be required from
the holders of the Debt Securities;
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the
provisions for voting on any changes to the indenture(s) or the terms of
the Debt Securities;
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the
requirements for the Company to discharge, defease or covenant defease the
Debt Securities; and
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certain
restrictive covenants, if any, which may, among other things, limit the
ability of the Company to: (i) grant liens on our assets,
(ii) consolidate, merge or transfer property, (iii) make certain
types of payments, including dividends, (iv) incur or guarantee
additional debt, (v) sell assets or (vi) engage in certain lines of
business.
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The
Company may issue Debt Securities at less than the principal amount payable upon
maturity. We refer to these securities as “original issue discount
securities.” If material or applicable, we will describe in the
applicable prospectus supplement special U.S. federal income tax, accounting and
other considerations applicable to original issue discount
securities. The Company may also issue Debt Securities that are
guaranteed by one or more of its subsidiaries, in which case the Registration
Statement to which this prospectus relates will need to be amended to include
such guarantees prior to such offering.
Denominations,
Interest, Registration and Transfer
Unless
otherwise described in the applicable prospectus supplement, the Company will
issue the Debt Securities of any series that are registered securities in
denominations that are even multiples of $1,000, other than global securities,
which may be of any denomination.
Unless
otherwise specified in the applicable prospectus supplement, the Company will
pay the interest, principal and any premium at the corporate trust office of the
trustee. At the Company’s option, however, the Company may make
payment of interest by check mailed to the address of the person entitled to the
payment as it appears in the applicable register or by wire transfer of funds to
that person at an account maintained within the United States.
If the
Company does not punctually pay or duly provide for interest on any interest
payment date, the defaulted interest will be paid either:
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to
the person in whose name the Debt Security is registered at the close of
business on a special record date the applicable trustee will fix;
or
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in
any other lawful manner, all as the applicable indenture
describes.
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You may
exchange or transfer Debt Securities at the office of the applicable
trustee. The trustee acts as the Company’s agent for registering Debt
Securities in the names of holders and transferring Debt
Securities. The Company may change this appointment to another entity
or perform it itself. The entity performing the role of maintaining
the list of registered holders is called the “registrar.” It will
also perform transfers.
You will
not be required to pay a service charge to transfer or exchange Debt Securities,
but you may be required to pay for any tax or other governmental charge
associated with the exchange or transfer. The security registrar will
make the transfer or exchange only if it is satisfied with your proof of
ownership.
Global
Securities
If so set
forth in the applicable prospectus supplement, the Company may issue the Debt
Securities of a series in whole or in part in the form of one or more global
securities that will be deposited with a depository identified in the prospectus
supplement. The Company may issue global securities in either
registered or bearer form and in either temporary or permanent
form. The specific terms of the depository arrangement with respect
to any series of Debt Securities will be described in the prospectus
supplement.
We are
registering for resale Common Shares held by certain of our shareholders. The
Common Shares to be sold by the selling shareholders were acquired:
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by
certain of the selling shareholders on December 20, 2005 in a private
placement of 55,239,491 of our Common Shares prior to our initial public
offering;
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by
certain of the selling shareholders on February 1, 2006 in a private
placement of 14,798,400 of our Common Shares prior to our initial public
offering; and
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by
certain of our selling shareholders on February 23, 2006 in a private
placement of 1,510,000 of our Common Shares prior to our initial public
offering.
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The
prospectus supplement for any offering of our Common Shares by the selling
shareholders hereunder will include the following information:
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the
name of the each selling
shareholder;
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the
nature of any position, office or other material relationship which each
selling shareholder has had within the last three years with us or any of
our predecessors or affiliates;
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the
number of Common Shares held by each selling shareholder prior to the
offering;
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the
number of Common Shares to be offered for each selling shareholder’s
account; and
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the
number, and, if applicable, the percentage of Common Shares held by each
of the selling shareholders before and after the
offering.
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We and
the selling shareholders may sell the securities offered by this prospectus and
applicable prospectus supplements:
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through
underwriters or dealers;
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in
short or long transactions;
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directly
to purchasers; or
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through
a combination of any such methods of
sale.
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If
underwriters are used to sell securities, we and, if applicable, certain of our
selling shareholders, will enter into an underwriting agreement or similar
agreement with them at the time of the sale to them. In that
connection, underwriters may receive compensation from us or the selling
shareholders in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of the securities for whom they may act as
agent. Any such underwriter, dealer or agent may be deemed to be an
underwriter within the meaning of the Securities Act.
The
applicable prospectus supplement relating to the securities will set
forth:
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the
offering terms, including the name or names of any underwriters, dealers
or agents;
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the
purchase price of the securities being offered and the proceeds to us, if
any, from such sale;
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any
underwriting discounts, concessions, commissions and other items
constituting compensation to underwriters, dealers or
agents;
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any
initial public offering price;
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any
discounts or concessions allowed or reallowed or paid by underwriters or
dealers to other dealers;
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in
the case of the Debt Securities, the interest rate, maturity and
redemption provisions;
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details
regarding over-allotment options under which underwriters may purchase
additional securities from us, if
any;
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the
securities exchanges on which the securities may be listed, if any;
and
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any
other information we think is
important.
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If
underwriters or dealers are used in the sale, the securities will be acquired by
the underwriters or dealers for their own account and may be resold from time to
time in one or more transactions in accordance with the rules of the New York
Stock Exchange:
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at
a fixed price or prices that may be changed from time to
time;
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at
market prices prevailing at the time of
sale;
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at
prices related to such prevailing market prices;
or
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The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
such firms. Unless otherwise set forth in an applicable prospectus
supplement, the obligations of underwriters or dealers to purchase the
securities will be subject to certain conditions precedent and the underwriters
or dealers will be obligated to purchase all the securities if any are
purchased. Any public offering price and any discounts or concessions
allowed or reallowed or paid by underwriters or dealers to other dealers may be
changed from time to time.
The
selling shareholders and any broker-dealers or agents that are involved in
selling the securities may be deemed to be “underwriters” within the meaning of
the Securities Act in connection with such sales. In such event, any
commissions received by the underwriters and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We or the
selling shareholders may enter into hedging transactions with broker-dealers and
the broker-dealers may engage in short sales of the securities in the course of
hedging the positions they assume with us or the selling shareholders,
including, without limitation, in connection with distributions of the
securities by those broker-dealers. We or the selling shareholders
may enter into option or other transactions with broker-dealers that involve the
delivery of the securities offered hereby to the broker-dealers, who may then
resell or otherwise transfer those securities. We or the selling
shareholders may also loan or pledge the securities offered hereby to a
broker-dealer and the broker-dealer may sell the securities offered hereby so
loaned or upon a default may sell or otherwise transfer the pledged securities
offered hereby.
Securities
may be sold directly by us or the selling shareholders or through agents
designated by us or the selling shareholders from time to time. Any
agent involved in the offer or sale of the securities in respect of which this
prospectus and a prospectus supplement is delivered will be named, and any
commissions payable by us or the selling shareholders to such agent will be set
forth, in the prospectus supplement. Unless otherwise indicated in
the prospectus supplement, any such agent will be acting on a best efforts basis
for the period of its appointment.
If so
indicated in the prospectus supplement, we or the selling shareholders will
authorize underwriters, dealers or agents to solicit offers from certain
specified institutions to purchase securities from us or the selling
shareholders at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on a
specified date in the future. Such contracts will be subject to any
conditions set forth in the prospectus supplement and the prospectus supplement
will set forth the commissions payable for solicitation of such
contracts. Institutions to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and such
other institutions as may be approved by the Company or the selling
shareholders. The underwriters and other persons soliciting such
contracts will have no responsibility for the validity of such arrangements or
the performance of the Company or the selling shareholders or such institutions
thereunder.
Underwriters,
dealers and agents may be entitled under agreements entered into with us to be
indemnified by us against certain civil liabilities, including liabilities under
the Securities Act, or to contribution by us to payments which they may be
required to make. The terms and conditions of such indemnification
will be described in an applicable prospectus
supplement. Underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for, us in the ordinary course
of business, for which they receive compensation.
Any
underwriters to whom securities are sold by us or the selling shareholders for
public offering and sale may make a market in such securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to
the liquidity of the trading market for any securities.
Certain
persons participating in any offering of securities may engage in transactions
that stabilize, maintain or otherwise affect the price of the securities offered
in accordance with Regulation M under the Exchange Act. In connection
with any such offering, the underwriters or agents, as the case may be, may
purchase and sell securities in the open market. These transactions
may include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or
purchases for the purpose of preventing or retarding a decline in the market
price of the securities and syndicate short positions involve the sale by the
underwriters or agents, as the case may be, of a greater number of securities
than they are required to purchase from us or the selling shareholders, in the
offering. The underwriters may also impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers for the
securities sold for their account may be reclaimed by the syndicate if such
securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise
affect the market price of the securities, which may be higher than the price
that might otherwise prevail in the open market, and if commenced, may be
discontinued at any time. These transactions may be effected on the
New York Stock Exchange, in the over-the-counter market or
otherwise. These activities will be described in more detail in the
sections entitled “Plan of Distribution” or “Underwriting” in the applicable
prospectus supplement.
The
selling shareholders may also sell the Common Shares in one or more privately
negotiated transactions exempt from the registration requirements of the
Securities Act pursuant to Rule 144 under the Securities Act, Section 4(1) of
the Securities Act or other applicable exemptions, regardless of whether the
Common Shares are covered by the registration statement of which this prospectus
forms a part. Such sales, if any, will not form part of the plan of
distribution described in this prospectus. The selling shareholders
will act independently of us in making decisions with respect to the timing,
manner and size of each such sale.
Because
the selling shareholders may be deemed to be “underwriters” under the Securities
Act, the selling shareholders must deliver this prospectus and any prospectus
supplement in the manner required by the Securities Act.
Each
series of offered securities will be a new issue, other than the Common Shares
which are listed on the New York Stock Exchange. We may elect to list
any series of offered securities on an exchange, and in the case of the Common
Shares, on any additional exchange, but unless otherwise specified in the
applicable prospectus supplement, we shall not be obligated to do
so.
We file annual, quarterly and current
reports, proxy statements and other information with the SEC. Our SEC
filings are available to the public over the Internet at the SEC’s website at
http://www.sec.gov and our website at http://www.flagstonere.bm. We also furnish our
shareholders with annual reports containing consolidated financial statements
audited by an independent accounting firm. Our website is not
incorporated into or otherwise a part of this prospectus. You may
also read and copy any document we file with the SEC at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference room.
We are
“incorporating by reference” into this prospectus specific documents that we
file with the SEC, which means that we can disclose important information to you
by referring you to those documents that are considered part of this
prospectus. Information that we file subsequently with the SEC will
automatically update and supersede this information. We incorporate
by reference the documents listed below, and any future documents that we file
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), until all of the
securities offered hereby are sold. This prospectus is part of a
Registration Statement filed with the SEC.
We are
“incorporating by reference” into this prospectus the following documents filed
with the SEC (excluding any portions of such documents that have been
“furnished” but not “filed” for purposes of the Exchange Act):
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Annual
Report on Form 10-K filed on March 19,
2008;
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Quarterly
Report on Form 10-Q filed on May 7,
2008;
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Quarterly
Report on Form 10-Q filed on August 5,
2008;
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Quarterly
Report on Form 10-Q filed on November 7,
2008;
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Definitive
Proxy Statement on Schedule 14A filed on April 16,
2008;
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Current
Report on Form 8-K filed on February 20,
2008;
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Current
Report on Form 8-K filed on March 11,
2008;
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Current
Report on Form 8-K filed on April 28,
2008;
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Current
Report on Form 8-K filed on May 6,
2008;
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Current
Report on Form 8-K filed on August 6,
2008;
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Current
Report on Form 8-K filed on August 18,
2008;
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Current
Report on Form 8-K filed on August 19,
2008;
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Current
Report on Form 8-K filed on September 5,
2008;
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Current
Report on Form 8-K filed on September 22,
2008;
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Current
Report on Form 8-K filed on September 30,
2008;
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Current
Report on Form 8-K filed on October 1,
2008;
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Current
Report on Form 8-K filed on October 17,
2008;
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Current
Report on Form 8-K filed on November 5,
2008;
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Current
Report on Form 8-K filed on November 18,
2008;
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Current
Report on Form 8-K filed on November 21,
2008;
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Current
Report on Form 8-K filed on December 19, 2008;
and
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The
description of our share capital contained in our Registration Statement
on Form S-1 (Registration No. 333-138182), as thereafter amended or
supplemented, including in the prospectus constituting part of such
Registration Statement filed pursuant to Rule 424(b) under the
Securities Act on March 30,
2007.
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We will provide to each person,
including any beneficial owner, to whom a prospectus is delivered, upon written
or oral request and without charge, a copy of the documents referred to above
that we have incorporated in this prospectus by reference. You can
request copies of such documents if you call or write us at the following
address: Corporate Secretary, Flagstone Reinsurance Holdings Limited, Crawford
House, 23 Church Street, Hamilton HM 11, Bermuda, or you may visit our website
at http://www.flagstonere.bm, for copies of any such
document.
This
prospectus, any accompanying prospectus supplement or information incorporated
by reference herein or therein, contains summaries of certain agreements that we
have filed as exhibits to various SEC filings, as well as certain agreements
that we will enter into in connection with the offering of securities covered by
any particular accompanying prospectus supplement. The descriptions
of these agreements contained in this prospectus, any accompanying prospectus
supplement or information incorporated by reference herein or therein do not
purport to be complete and are subject to, or qualified in their entirety by
reference to, the definitive agreements. Copies of the definitive
agreements will be made available without charge to you by making a written or
oral request to us.
You
should rely only upon the information contained in this prospectus or in any
prospectus supplement or incorporated by reference in this prospectus or in any
prospectus supplement. We have not authorized anyone to provide you
with different information. You should not assume that the
information in this document is accurate as of any date other than that on the
front cover of this prospectus.
Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein,
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein or in any accompanying prospectus supplement,
modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified and superseded, to
constitute a part of this prospectus.
Certain
matters as to U.S. law with respect to the validity of certain of the offered
securities will be passed upon by Cravath, Swaine & Moore LLP, New York, New
York. Certain matters as to Bermuda law with respect to the
securities will be passed upon by Attride-Stirling & Woloniecki, Hamilton,
Bermuda. If the securities are being distributed in an underwritten
offering, certain legal matters will be passed upon for the underwriters by
counsel identified in the related prospectus supplement.
The
consolidated financial statements and related financial statement schedules,
incorporated in this prospectus by reference to the Company’s Current Report
on
Form 8-K
filed on December 19, 2008, have been audited by Deloitte & Touche, an
independent registered public accounting firm, as stated in their report, which
is incorporated herein by reference. Such financial statements and
financial statement schedules have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
SECURITIES
LAWS AND OTHER MATTERS
We are
organized under the laws of Bermuda. In addition, some of our
directors and officers reside outside the United States, and all or a
substantial portion of their assets and our assets are or may be located in
jurisdictions outside the United States. Therefore, it may be
difficult for investors to effect service of process within the United States
upon our non-U.S. directors and officers or to recover against our company, or
our non-U.S. directors and officers on judgments of U.S. courts, including
judgments predicated upon the civil liability provisions of the U.S. federal
securities laws. However, we may be served with process in the United
States with respect to actions against us arising out of or in connection with
violations of U.S. federal securities laws relating to offers and sales of
common shares made hereby by serving CT Corporation System, 111 Eighth Avenue,
New York, New York 10011, our U.S. agent irrevocably appointed for that
purpose.
We have
been advised by Attride-Stirling & Woloniecki, our Bermuda counsel, that
there is doubt as to whether the courts of Bermuda would enforce judgments of
U.S. courts obtained in actions against us or our directors and officers, as
well as the experts named herein, who reside outside the United States
predicated upon the civil liability provisions of the U.S. federal securities
laws or original actions brought in Bermuda against us or such persons
predicated solely upon U.S. federal securities laws. We have also been advised
by Attride-Stirling & Woloniecki that there is no treaty in effect between
the United States and Bermuda providing for such enforcement, and there are
grounds upon which Bermuda courts may not enforce judgments of U.S.
courts. Some remedies available under the laws of U.S. jurisdictions,
including some remedies available under the U.S. federal securities laws, may
not be allowed in Bermuda courts as contrary to that jurisdiction’s public
policy.
The BMA
has given its general consent under the Exchange Control Act 1972 (and its
related regulations) for the issue and transfer of our Common Shares to and
between non-residents of Bermuda for exchange control purposes, provided our
shares remain listed on an appointed stock exchange, which includes the New York
Stock Exchange. This general consent would cease to apply if our
Common Shares were to cease to be so listed on the New York Stock Exchange, or
any other appointed stock exchange, and in such event specific consent would be
required from the BMA for all issues or transfers of our Common Shares subject
to certain exceptions. Persons resident in Bermuda may require the
prior approval of the BMA in order to acquire Common Shares. In
addition, we will deliver a copy of this prospectus and the accompanying
prospectus supplements to the Registrar of Companies in Bermuda for filing
pursuant to the Companies Act. However, the BMA and Registrar of
Companies in Bermuda accept no responsibility for the financial soundness of any
proposal or for the correctness of any of the statements made or opinions
expressed in this prospectus.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
14. Other Expenses of Issuance and Distribution.
The
following are the estimated expenses to be incurred in connection with the
issuance and distribution of the securities registered under this Registration
Statement, other than underwriting discounts and commissions. All
amounts shown are estimates except for the SEC registration fee.
|
SEC
Registration
Fee
|
$
|
35,697.14
|
|
Legal
Fees
|
$
|
500,000.00
|
|
Accounting
Fees and
Expenses
|
$
|
150,000.00
|
|
Printing
and Engraving
Fees
|
$
|
100,000.00
|
|
Trustees’
Fees and
Expenses
|
$
|
30,000.00
|
|
Rating
Agency
Fees
|
$
|
300,000.00
|
|
Miscellaneous
Expenses
|
$
|
100,000.00
|
|
Total
Expenses
|
$
|
1,215,697.14
|
ITEM
15. Indemnification of Directors and Officers.
We are a
Bermuda exempted company. Section 98 of the Companies Act
provides generally that a Bermuda company may indemnify its directors, officers
and auditors against any liability which by virtue of any rule of law would
otherwise be imposed on them in respect of any negligence, default, breach of
duty or breach of trust, except in cases where such liability arises from fraud
or dishonesty of which such director, officer or auditor may be guilty in
relation to the company. Section 98 further provides that a
Bermuda company may indemnify its directors, officers and auditors against any
liability incurred by them in defending any proceedings, whether civil or
criminal, in which judgment is awarded in their favor or in which they are
acquitted or granted relief by the Supreme Court of Bermuda pursuant to
section 281 of the Companies Act.
We have
adopted provisions in our Bye-Laws that provide that we shall indemnify our
officers and directors in respect of their actions and omissions, except in
respect of their fraud or dishonesty. Our Bye-Laws provide that the
shareholders waive all claims or rights of action that they might have,
individually or in right of the Company, against any of the Company’s directors
or officers for any act or failure to act in the performance of such director’s
or officer’s duties, except in respect of any fraud or dishonesty of such
director or officer. Section 98A of the Companies Act permits us
to purchase and maintain insurance for the benefit of any officer or director in
respect of any loss or liability attaching to him in respect of any negligence,
default, breach of duty or breach of trust, whether or not we may otherwise
indemnify such officer or director. We have purchased and maintain a
directors’ and officers’ liability policy for such a purpose.
ITEM
16. Exhibits and Financial Statement Schedules.
(A) Exhibits
|
Exhibit
Number
|
Description
of Exhibit
|
|
*1.1
|
Form
of Underwriting Agreement.
|
|
**3.1
|
Memorandum
of Association (incorporated by reference to Exhibit 3.1 to Amendment
No. 1 to the registration statement of the Company on Form S-1 (file no.
333-138182) (the “Registration Statement”) filed December 8,
2006).
|
|
**3.2
|
Amended
and Restated Bye-laws (incorporated by reference to Exhibit 3.1 to
the Company’s Quarterly Report on Form 10-Q filed August 9,
2007).
|
|
**4.1
|
Warrant
dated February 23, 2006 (incorporated by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K dated November 18,
2008).
|
|
*4.2
|
Form
of Indenture for senior debt securities between the Company and one or
more banking institutions to be qualified as Trustee pursuant to Section
305(b)(2) of the Trust Indenture Act of 1939. The form or forms
of senior debt securities with respect to each particular offering will be
filed as an exhibit to the Current Report on Form 8-K and incorporated
herein by reference.
|
|
*4.3
|
Form
of Indenture for subordinated debt securities between the Company and one
or more banking institutions to be qualified as Trustee pursuant to
Section
305(b)(2) of the Trust Indenture Act of 1939. The form or forms
of subordinated debt securities with respect to each particular offering
will be
filed
as an exhibit to the Current Report on Form 8-K and incorporated herein by
reference.
|
|
***5.1
|
Opinion
of Attride-Stirling & Woloniecki.
|
|
***5.2
|
Opinion
of Cravath, Swaine & Moore LLP.
|
|
**10.1
|
Amended
and Restated Shareholders’ Agreement dated as of November 15, 2006 among
Flagstone Reinsurance Holdings Limited and the shareholders listed therein
(incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the
Registration Statement filed December 8, 2006).
|
|
***12.1
|
Statement
Regarding Calculation of Ratio of Earnings to Fixed
Charges.
|
|
***23.1
|
Consent
of Deloitte & Touche.
|
|
***23.2
|
Consent
of Attride-Stirling & Woloniecki (included in Exhibit
5.1).
|
|
***23.3
|
Consent
of Cravath, Swaine & Moore LLP (included in Exhibit
5.2).
|
|
***24.1
|
Powers
of Attorney of certain officers and directors (contained in the signature
page).
|
* To be
filed by amendment.
**
Incorporated by reference.
*** Filed
herewith.
ITEM
17. Undertakings
The
undersigned Registrant hereby undertakes:
(1) to
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
|
|
(i)
|
to
include any prospectus required by Section 10(a)(3) of the Securities
Act;
|
|
|
(ii)
|
to
reflect in the prospectus any acts or events arising after the effective
date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) under the Securities Act if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective Registration
Statement;
|
|
|
(iii)
|
to
include any material information with respect to the plan of distribution
not previously disclosed in this Registration Statement or any material
change to such information in this Registration
Statement;
|
provided, however, that
subparagraphs (i), (ii) and (iii) do not apply if the information required to be
included in a post-effective amendment by those subparagraphs is contained in
periodic reports filed with or furnished to the SEC by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) of the Securities Act that is
part of this Registration Statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act to any
purchaser:
|
|
(i)
|
Each
prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the Registration Statement as of the date the filed
prospectus was deemed part of and included in the Registration Statement;
and
|
|
|
(ii)
|
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a Registration Statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of
the Securities Act shall be deemed to be part of and included in the
Registration Statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the Registration Statement relating
to the securities in the Registration Statement to which that prospectus
relates, and the offering of such securities at that time shall be deemed
to be the initial bona
fide offering thereof, provided, however, that no statement made in
a Registration Statement or prospectus that is part of the Registration
Statement or made in a document incorporated or deemed incorporated by
reference into the Registration Statement or prospectus that is part of
the Registration Statement will, as to a purchaser with a time of contract
of sale prior to such effective date, supersede or modify any statement
that was made in the Registration Statement or prospectus that was part of
the Registration Statement or made in any such document immediately prior
to such effective date.
|
(5) That,
for the purpose of determining liability of the Registrant under the Securities
Act to any purchaser in the initial distribution of the securities, the
undersigned Registrant undertakes that in a primary offering of securities of
the undersigned Registrant pursuant to this Registration Statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
|
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned Registrant
relating to the offering required to be filed pursuant to Rule
424;
|
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned Registrant or used or referred to by the undersigned
Registrant;
|
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned Registrant or its
securities provided by or on behalf of the undersigned Registrant;
and
|
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned Registrant to the
purchaser.
|
(6) That,
for the purpose of determining any liability under the Securities Act, each
filing of the Registrant’s annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(7) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant,
pursuant to the provisions described under Item 15 or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(8) That:
(i) For
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective.
(ii) For
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(9) To
file an application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of section 310 of the Trust Indenture Act
(“Act”) in accordance with the rules and regulations prescribed by the
Securities and Exchange Commission under section 305(b)(2) of the
Act.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933 (the “Securities Act”), the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hamilton, Bermuda, on December 24,
2008.
|
FLAGSTONE
REINSURANCE HOLDINGS LIMITED
|
|
|
|
By:
|
|
|
|
/s/
Mark J. Byrne |
|
|
Name: Mark
J. Byrne
|
|
|
Title: Executive
Chairman
|
POWER
OF ATTORNEY
We, the
undersigned directors and officers of Flagstone Reinsurance Holdings Limited, do
hereby constitute and appoint Patrick Boisvert and William Fawcett, or any of
them, our true and lawful attorneys and agents, with full power of substitution,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
registrant to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments and any related registration statement pursuant to Rule 462(b) under
the Securities Act of 1933, as amended) hereto and we do hereby ratify and
confirm that said attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof.
Pursuant
to the requirements of the Securities Act, this Registration Statement has been
signed by the following persons in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Mark J.
Byrne
|
|
Executive
Chairman and Director
|
|
December
24, 2008
|
Name:
Mark J. Byrne
/s/ David A. Brown
|
|
Director
and Chief Executive Officer (Principal
Executive Officer)
|
|
December
24, 2008
|
Name:
David A. Brown
/s/ Patrick Boisvert
|
|
Chief
Financial Officer (Principal Financial
Officer and Principal Accounting
Officer)
|
|
December
24, 2008
|
|
Name:
Patrick Boisvert
/s/ Gary Black
|
|
Director
|
|
December
24, 2008
|
Name:
Gary Black
/s/ Peter Watson
|
|
Director
|
|
December
24, 2008
|
Name:
Peter Watson
/s/ Stephen Coley
|
|
Director
|
|
December
24, 2008
|
Name:
Stephen Coley
/s/ Thomas Dickson
|
|
Director
|
|
December
24, 2008
|
|
Name:
Thomas Dickson
/s/ Stewart Gross
|
|
Director
|
|
December
24, 2008
|
|
Name:
Stewart Gross
|
|
Director
|
|
December
24, 2008
|
|
Name:
E. Daniel James
|
|
Director
|
|
December
24, 2008
|
|
Name:
Tony Knap
/s/ Anthony Latham
|
|
Director
|
|
December
24, 2008
|
|
Name:
Anthony Latham
|
|
Director
|
|
December
24, 2008
|
|
Name:
Jan Spiering
/s/ Wray Thorn
|
|
Director
|
|
December
24, 2008
|
|
Name:
Wray Thorn
|
|
|
|
|
|
PUGLISI
& ASSOCIATES
Authorized
Representative in the United States
|
|
|
|
|
|
By:
|
/s/
Donald J. Puglisi
|
|
|
|
|
| |
Name:
Donald J. Puglisi
Title:
Managing Director
|
|
|
|
|
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
of Exhibit
|
|
*1.1
|
Form
of Underwriting Agreement.
|
|
**3.1
|
Memorandum
of Association (incorporated by reference to Exhibit 3.1 to Amendment
No. 1 to the registration statement of the Company on Form S-1 (file no.
333-138182) (the “Registration Statement”) filed December 8,
2006).
|
|
**3.2
|
Amended
and Restated Bye-laws (incorporated by reference to Exhibit 3.1 to
the Company’s Quarterly Report on Form 10-Q filed August 9,
2007).
|
|
**4.1
|
Warrant
dated February 23, 2006 (incorporated by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K dated November 18,
2008).
|
|
*4.2
|
Form
of Indenture for senior debt securities between the Company and one or
more banking institutions to be qualified as Trustee pursuant to Section
305(b)(2) of the Trust Indenture Act of 1939. The form or forms
of senior debt securities with respect to each particular offering will be
filed as an exhibit to the Current Report on Form 8-K and incorporated
herein by reference.
|
|
*4.3
|
Form
of Indenture for subordinated debt securities between the Company and one
or more banking institutions to be qualified as Trustee pursuant to
Section
305(b)(2) of the Trust Indenture Act of 1939. The form or forms
of subordinated debt securities with respect to each particular offering
will be
filed
as an exhibit to the Current Report on Form 8-K and incorporated herein by
reference.
|
|
***5.1
|
Opinion
of Attride-Stirling & Woloniecki.
|
|
***5.2
|
Opinion
of Cravath, Swaine & Moore LLP.
|
|
**10.1
|
Amended
and Restated Shareholders’ Agreement dated as of November 15, 2006 among
Flagstone Reinsurance Holdings Limited and the shareholders listed therein
(incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the
Registration Statement filed December 8, 2006).
|
|
***12.1
|
Statement
Regarding Calculation of Ratio of Earnings to Fixed
Charges.
|
|
***23.1
|
Consent
of Deloitte & Touche.
|
|
***23.2
|
Consent
of Attride-Stirling & Woloniecki (included in Exhibit
5.1).
|
|
***23.3
|
Consent
of Cravath, Swaine & Moore LLP (included in Exhibit
5.2).
|
|
***24.1
|
Powers
of Attorney of certain officers and directors (contained in the signature
page).
|
* To be
filed by amendment.
**
Incorporated by reference.
*** Filed
herewith.
II-8