Document:

Exhibit 10.1

 

EXECUTION VERSION

 

AMENDED AND RESTATED

 

INVESTMENT AGREEMENT

 

dated as of August 4, 2016

 

by and among

 

THE BANK OF N.T. BUTTERFIELD & SON LIMITED,

 

CARLYLE GLOBAL FINANCIAL SERVICES PARTNERS, L.P.

 

and

 

CGFSP COINVESTMENT L.P.

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    
	
 
    
	
RESERVED
    
	
 
    
	
ARTICLE II
    
	
 
    
	
REPRESENTATIONS AND WARRANTIES
    
	
 
    	
 
    	
 
    
	
2.1
    	
Representations and   Warranties of the Company
    	
1
    
	
2.2
    	
Representations and   Warranties of Purchaser
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    
	
 
    
	
COVENANTS
    
	
 
    	
 
    	
 
    
	
3.1
    	
Reserved
    	
2
    
	
3.2
    	
Access, Information   and Confidentiality
    	
2
    
	
3.3
    	
Reserved
    	
3
    
	
3.4
    	
Reserved
    	
3
    
	
3.5
    	
Tax Covenants
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    
	
 
    
	
ADDITIONAL AGREEMENTS
    
	
 
    	
 
    	
 
    
	
4.1
    	
Reserved
    	
4
    
	
4.2
    	
Transfer Restrictions
    	
4
    
	
4.3
    	
Governance Matters
    	
4
    
	
4.4
    	
Legend
    	
6
    
	
4.5
    	
Certain Transactions
    	
6
    
	
4.6
    	
Indemnity
    	
6
    
	
4.7
    	
Reserved
    	
9
    
	
4.8
    	
Reserved
    	
9
    
	
4.9
    	
Reserved
    	
9
    
	
4.10
    	
Reserved
    	
9
    
	
4.11
    	
Reserved
    	
9
    
	
4.12
    	
Reserved
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    
	
 
    
	
INDIVIDUAL PURCHASERS
    
	
 
    	
 
    	
 
    
	
5.1
    	
Individual Purchasers
    	
9
    

 

i

 

	
ARTICLE VI
    
	
 
    
	
MISCELLANEOUS
    
	
 
    	
 
    	
 
    
	
6.1
    	
Survival
    	
9
    
	
6.2
    	
Expenses
    	
9
    
	
6.3
    	
Amendment; Waiver
    	
9
    
	
6.4
    	
Counterparts and   Facsimile
    	
10
    
	
6.5
    	
Governing Law; Submission   to Jurisdiction
    	
10
    
	
6.6
    	
WAIVER OF JURY TRIAL
    	
10
    
	
6.7
    	
Notices
    	
10
    
	
6.8
    	
Entire Agreement, Etc.
    	
11
    
	
6.9
    	
Interpretation; Other   Definitions
    	
12
    
	
6.10
    	
Captions
    	
13
    
	
6.11
    	
Severability
    	
13
    
	
6.12
    	
No Third-Party   Beneficiaries
    	
14
    
	
6.13
    	
Public Announcements
    	
14
    
	
6.14
    	
Specific Performance
    	
14
    
	
6.15
    	
Effectiveness and   Termination
    	
14
    

 

INDEX OF DEFINED TERMS

 

	
Term
    	
 
    	
Location of Definition
    
	
Affiliate
    	
 
    	
6.9(a)
    
	
Agreement
    	
 
    	
Preamble
    
	
Board of Directors
    	
 
    	
2.1
    
	
Board Representative
    	
 
    	
4.3(a)
    
	
BSX
    	
 
    	
Recitals
    
	
business day
    	
 
    	
6.9(e)
    
	
Code
    	
 
    	
6.9(f)
    
	
Common Shares
    	
 
    	
Recitals
    
	
Company
    	
 
    	
Preamble
    
	
Company Subsidiary
    	
 
    	
6.9(g)
    
	
De Minimis Claim
    	
 
    	
4.6(e)
    
	
Effective Date
    	
 
    	
6.15
    
	
Exchange Act
    	
 
    	
6.9(j)
    
	
Governance Committee
    	
 
    	
4.3(b)
    
	
Governmental Entity
    	
 
    	
6.9(h)
    
	
Indemnified Party
    	
 
    	
4.6(c)
    
	
Indemnifying Party
    	
 
    	
4.6(c)
    
	
Individual Purchaser
    	
 
    	
Preamble
    
	
Information
    	
 
    	
3.2(b)
    
	
Law
    	
 
    	
6.9(i)
    
	
Losses
    	
 
    	
4.6(a)
    
	
Original Agreement
    	
 
    	
Recitals
    

 

ii

 

	
Ownership Limit Restriction
    	
 
    	
4.2
    
	
Person
    	
 
    	
6.9(j)
    
	
PFIC
    	
 
    	
3.5(a)
    
	
Purchase Price
    	
 
    	
6.9(k)
    
	
Purchaser
    	
 
    	
Preamble
    
	
Registration Statement
    	
 
    	
Recitals
    
	
Securities Act
    	
 
    	
6.9(l)
    
	
Subsidiary
    	
 
    	
6.9(n)
    
	
Tax
    	
 
    	
6.9(o)
    
	
Taxing Authority
    	
 
    	
6.9(p)
    
	
Termination Date
    	
 
    	
6.15
    
	
Testing Quarter
    	
 
    	
3.5(e)
    
	
Threshold Amount
    	
 
    	
4.6(e)
    
	
Transfer
    	
 
    	
6.9(q)
    
	
Voting Securities
    	
 
    	
6.9(r)
    

 

iii

 

AMENDED AND RESTATED INVESTMENT AGREEMENT, dated as of August 4, 2016 (this “Agreement”), by and among The Bank of N.T. Butterfield & Son Limited, a body corporate incorporated under the Laws of Bermuda (the “Company”), Carlyle Global Financial Services Partners L.P., a Cayman Islands exempted limited partnership, and CGFSP Coinvestment L.P., a Cayman exempted limited partnership (each, an “Individual Purchaser” and, collectively, the “Purchaser”).

 

RECITALS:

 

A.                                    Original Agreement.  The parties hereto entered into that certain Investment Agreement dated as of March 2, 2010 (the “Original Agreement”) in connection with Purchaser’s subscription, together with certain other investors for newly issued ordinary shares, par value BD$0.01 per share, of the Company (the “Common Shares”) and certain preference shares of the Company that have since been converted to Common Shares.

 

B.                                    BSX Waiver.  Prior to the date of the Original Agreement, the Bermuda Stock Exchange (the “BSX”) provided written confirmation to the Company that it had waived Regulation 6.21(2) of BSX Listing Regulations Section IIA — Domestic Issuers — Main Board — Equity Securities with respect to the Investments based on a determination by the Audit Committee of the need for such waiver.

 

C.                                    NYSE Listing.  The Company is in the process of listing its Common Shares on the New York Stock Exchange and, contingent on the declaration of effectiveness by the Securities and Exchange Commission of the Registration Statement on Form F-1, filed on August 4, 2016 relating to the Common Shares (as amended, the “Registration Statement”), the parties hereto desire to amend and restate the Original Agreement on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree that the Original Agreement shall be amended and restated on the Effective Date as follows:

 

ARTICLE I

 

RESERVED

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

 

2.1                               Representations and Warranties of the Company.  The Company represents and warrants to Purchaser, that (a) the Company has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, (b) the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company (the “Board of Directors”) and (c) this Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by Purchaser, is a valid and binding obligation of the Company enforceable against the Company in accordance with its

 

 

terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

 

2.2                               Representations and Warranties of Purchaser.  Purchaser hereby represents and warrants to the Company, that (a) Purchaser has the corporate or other power and authority to enter into this Agreement and to carry out its obligations hereunder, (b) the execution, delivery and performance of this Agreement by Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by Purchaser’s board of directors, general partner or managing members, as the case may be, and no further approval or authorization by any of its partners or other equity owners, as the case may be, is required and (c) this Agreement has been duly and validly executed and delivered by Purchaser and assuming due authorization, execution and delivery by the Company, is a valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

 

ARTICLE III

 

COVENANTS

 

3.1                               Reserved.

 

3.2                               Access, Information and Confidentiality.

 

(a)                                 From the date hereof until the date when the Common Shares held by Purchaser represent less than 5% of the outstanding Common Shares, the Company will permit Purchaser to visit and inspect, at Purchaser’s expense, the properties of the Company and the Company Subsidiaries, to examine the corporate books and to discuss the affairs, finances and accounts of the Company and the Company Subsidiaries with the principal officers of the Company, all upon reasonable notice and at such reasonable times and as often as Purchaser may reasonably request.  Any investigation pursuant to this Section 3.2 shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Company, and nothing herein shall require the Company or any Company Subsidiary to disclose any information to the extent (i) prohibited by applicable law or regulation, (ii) that the Company reasonably believes such information to be competitively sensitive proprietary information (except to the extent Purchaser provides assurances reasonably acceptable to the Company that such information shall not be used by Purchaser or its Affiliates to compete with the Company and Company Subsidiaries), or (iii) that such disclosure would reasonably be expected to cause a violation of any agreement to which the Company or any Company Subsidiary is a party or would cause a risk of a loss of privilege to the Company or any Company Subsidiary (provided that the Company shall use commercially reasonable efforts to make appropriate substitute disclosure arrangements under circumstances where the restrictions in this clause (iii) apply).

 

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(b)                                 Each party to this Agreement will hold, and will cause its respective Affiliates and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a regulatory authority is necessary or appropriate in connection with any necessary regulatory approval or unless disclosure is required by judicial or administrative process or by other requirement of law or the applicable requirements of any regulatory agency or relevant stock exchange, all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a non-confidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, other consultants and advisors.

 

3.3                               Reserved.

 

3.4                               Reserved.

 

3.5                               Tax Covenants.

 

(a)                                 The Company shall use commercially reasonable efforts to conduct its affairs in a manner such that it is not treated as a “passive foreign investment company” (“PFIC”) within the meaning of section 1297 of the Code, taking into account proposed Treasury regulation section 1.1296-4 (or subsequent applicable guidance).

 

(b)                                 The Company shall (i) determine within 30 days after the end of each taxable year whether the Company or any of its Subsidiaries was a PFIC with respect to such taxable year and (ii) notify Purchaser of such determination within such 30-day period.

 

(c)                                  The Company shall, upon the request of Purchaser, promptly furnish to Purchaser such information as may be requested and reasonably necessary to enable Purchaser or any of its direct or indirect owners to comply with any applicable tax reporting and withholding requirements with respect to the acquisition, ownership, or disposition of, and income attributable to, the Common Shares held by Purchaser, including reasonably necessary information relating to the status or potential status of the Company or any Subsidiary as a CFC or PFIC (including any information Purchaser may request to permit it (or any of its direct or indirect owners) to file a protective statement under Treasury regulation section 1.1295-3 with respect to the Company or any Subsidiary).

 

(d)                                 Commencing with the first taxable year for which the Company is determined to be a PFIC (pursuant to clause (b) above or otherwise), the Company shall, within 60 days after the end of each taxable year, furnish to Purchaser any other information and documents necessary to permit Purchaser (or any of its direct or indirect owners) to make and maintain an election to treat the Company (and any of its Subsidiaries determined to be a PFIC) as a “qualified electing fund” under section 1295 of the Code, including an annual information statement consistent with the requirements set forth in Treasury regulation section 1.1295-1.

 

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(e)                                  Upon the request of Purchaser, the Company shall provide within 30 days after the end of each fiscal quarter (“Testing Quarter”) Purchaser with a written report (including reasonable backup information) regarding:

 

(1)                                 the amount of gross income and “passive income” (within the meaning of section 1297 of the Code, taking into account proposed Treasury regulation section 1.1296-4 (or subsequent application guidance)) generated by the Company; and

 

(2)                                 the average values of the Company’s total assets and those assets that produce passive income or are held for the production of such passive income, determined as of the end of each quarterly period during the taxable year to which such Testing Quarter belongs and otherwise in accordance with section 1297 of the Code and proposed Treasury regulation section 1.1296-4.

 

(f)                                   Upon the request of Purchaser, the Company shall submit a request for a ruling by the U.S. Internal Revenue Service with respect to one or more issues relating to the Company’s potential status as a PFIC.

 

ARTICLE IV

 

ADDITIONAL AGREEMENTS

 

4.1                               Reserved.

 

4.2                               Transfer Restrictions.  At no time may Purchaser Transfer any of the Common Shares in one or more transactions to any person or group if, to the knowledge of Purchaser, such person or group and their respective Affiliates would collectively own 10% or more of the outstanding voting power of the Company or 10% or more of any class of Voting Securities (the “Ownership Limit Restriction”); provided, however, that the Ownership Limit Restriction shall not apply to ordinary trades that occur on the principal securities exchange or quotation service on which the Common Shares are then listed or quoted and which trades are, to the knowledge of Purchaser, not for the purpose of changing or influencing control of the Company or in connection with or as a participant in any transaction having that purpose or effect.

 

4.3                               Governance Matters.  (a)  Until the date when the Common Shares held by Purchaser represent less than 10% of the outstanding Common Shares, the Board of Directors shall nominate two persons designated by Purchaser (each such person or any successor designated by Purchaser, a “Board Representative”) for election to the Board of Directors by the shareholders at each annual general meeting of the Company at which such Board Representatives are subject to re-election, subject to satisfaction of all legal requirements regarding service as a director of the Company, including the fiduciary duties of the Board of Directors and requirements regarding service as a director of the Company.  If Purchaser no longer holds the minimum number of Common Shares specified in the prior sentence, but the Common Shares held by Purchaser represent 5% or more of the outstanding Common Shares, until the date when the Common Shares held by Purchaser represent less than 5% of the outstanding Common Shares, the Board of Directors shall nominate for election to the Board of Directors by the shareholders only one Board Representative at each annual general meeting of

 

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the Company at which such Board Representative is subject to re-election, subject to satisfaction of all legal requirements regarding service as a director of the Company, including the fiduciary duties of the Board of Directors and requirements regarding service as a director of the Company, and, at the written request of the Board of Directors, Purchaser shall use all reasonable best efforts to cause its other Board Representative to resign from the Board of Directors as promptly as possible.  If Purchaser no longer holds the minimum number of Common Shares specified in the prior sentence, Purchaser will have no further rights under Sections 4.3(a) through 4.3(e) and, at the written request of the Board of Directors, shall use all reasonable best efforts to cause all of its Board Representatives to resign from the Board of Directors as promptly as possible thereafter.

 

(b)                                 The Board Representatives (including any successor nominees) duly selected in accordance with Section 4.3(a) shall, subject to applicable law, including without limitation the fiduciary duties of the Board of Directors, be included in the Company’s and the Board of Directors’ governance committee’s (“Governance Committee”) slate of director nominees to serve on the Board of Directors.  The Company shall use its reasonable best efforts to have the Board Representatives elected as directors of the Company and the Company shall solicit proxies for each such person to the same extent as it does for any of its other nominees to the Board of Directors.

 

(c)                                  Subject to Section 4.3(a), Purchaser shall have the power to designate the Board Representatives’ replacements upon the death, resignation, retirement, disqualification or removal from office of such directors, subject to satisfaction of all legal and governance requirements regarding service as a director of the Company.  The Board of Directors will promptly take all action reasonably required to fill the vacancies resulting therefrom with such persons (including such persons, subject to applicable law, including the fiduciary duties of the Board of Directors, being included in the Company’s and the Governance Committee’s slate of director nominees to serve on the Board of Directors, using all reasonable best efforts to have such persons elected as directors of the Company and the Company soliciting proxies for such persons to the same extent as it does for any of its other nominees to the Board of Directors).

 

(d)                                 The Board Representatives shall be entitled to the same compensation, exculpation, insurance and indemnification in connection with their roles as directors as the other members of the Board of Directors, and the Board Representatives shall be entitled to reimbursement for documented, reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors or any committees thereof, to the same extent as the other members of the Board of Directors.  The Company shall notify the Board Representatives of all regular and special meetings of the Board of Directors and shall notify the Board Representatives of all regular and special meetings of any committee of the Board of Directors of which the Board Representatives are members.  The Company shall provide the Board Representatives with copies of all notices, minutes, consents and other materials provided to all other members of the Board of Directors (and committees thereof) concurrently as such materials are provided to the other members.

 

(e)                                  To the extent requested by Purchaser, the Company shall cause one Board Representative of Purchaser’s choosing to be appointed to any and all committees and subcommittees of the Board of Directors.

 

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4.4                               Legend.  (a)  Purchaser agrees that the coding of Securities subject to this Agreement will bear a legend substantially to the following effect:

 

(1)                                 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

 

(2)                                 THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN AN AMENDED AND RESTATED INVESTMENT AGREEMENT, DATED AS OF AUGUST 4, 2016, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER.

 

(b)                                 Upon request of Purchaser, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state laws, the Company shall promptly cause clause (1) of the legend to be removed from the coding of Securities to be Transferred in accordance with the terms of this Agreement and clause (2) of the legend shall be removed upon the expiration of such transfer and other restrictions set forth in this Agreement.  Purchaser acknowledges that the Securities have not been registered under the Securities Act or under any state securities laws and agrees that it will not sell or otherwise dispose of any of the Securities, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

 

4.5                               Certain Transactions.  The Company will not amalgamate, merge or consolidate into, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party, as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company.

 

4.6                               Indemnity.  (a)  The Company agrees to indemnify and hold harmless Purchaser and its Affiliates and each of their respective officers, directors, partners, members and employees, and each person who controls Purchaser within the meaning of the Exchange Act and the rules and regulations promulgated thereunder, to the fullest extent lawful, from and against any and all actions, suits, claims, proceedings, costs, losses, liabilities, damages, expenses (including reasonable attorneys’ fees and disbursements), amounts paid in settlement and other costs (collectively, “Losses”) arising out of or resulting from (1) any inaccuracy in or breach of the Company’s representations or warranties in this Agreement or in Section 2.2(a) (Organization and Authority), (b) (Capitalization), (d) (Authorization) and (e) (Governmental Consents) of the Original Agreement (in each case as and when made), (2) the Company’s breach of agreements or covenants made by the Company in the Original Agreement or this Agreement, or (3) any action, suit, claim, proceeding or investigation by any Governmental Entity or shareholder of the Company relating to the Original Agreement or this Agreement or

 

6

 

the transactions contemplated hereby or thereby (other than any Losses to the extent attributable to the acts, errors or omissions on the part of Purchaser or any other Indemnified Party).

 

(b)                                 Purchaser agrees to indemnify and hold harmless each of the Company and its Affiliates and each of their officers, directors, partners, members and employees, and each person who controls the Company within the meaning of the Exchange Act and the rules and regulations promulgated thereunder, to the fullest extent lawful, from and against any and all Losses arising out of or resulting from (1) any inaccuracy in or breach of Purchaser’s representations or warranties in this Agreement or (2) Purchaser’s breach of agreements or covenants made by Purchaser in the Original Agreement or this Agreement.

 

(c)                                  A party entitled to indemnification hereunder (each, an “Indemnified Party”) shall give written notice to the party indemnifying it (the “Indemnifying Party”) of any claim with respect to which it seeks indemnification promptly after the discovery by such Indemnified Party of any matters giving rise to a claim for indemnification; provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 4.6 unless and to the extent that the Indemnifying Party shall have been actually prejudiced by the failure of such Indemnified Party to so notify such party.  Such notice shall describe in reasonable detail such claim.  In case any such action, suit, claim or proceeding is brought against an Indemnified Party, the Indemnified Party shall be entitled to hire, at its own expense, separate counsel and participate in the defense thereof; provided, however, that the Indemnifying Party shall be entitled to assume and conduct the defense thereof, unless the counsel to the Indemnified Party advises such Indemnifying Party in writing that such claim involves a conflict of interest (other than one of a monetary nature) or differing defenses that would reasonably be expected to make it inappropriate for the same counsel to represent both the Indemnifying Party and the Indemnified Party, in which case the Indemnified Party shall be entitled to retain its own counsel at the cost and expense of the Indemnifying Party (except that the Indemnifying Party shall only be liable for the legal fees and expenses of one law firm for all Indemnified Parties, taken together with respect to any single action or group of related actions).  If the Indemnifying Party assumes the defense of any claim, all Indemnified Parties shall thereafter deliver to the Indemnifying Party copies of all notices and documents (including court papers) received by the Indemnified Party relating to the claim, and each Indemnified Party shall cooperate in the defense or prosecution of such claim.  Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  The Indemnifying Party shall not be liable for any settlement of any action, suit, claim or proceeding effected without its written consent; provided, however, that the Indemnifying Party shall not unreasonably withhold or delay its consent.  The Indemnifying Party further agrees that it will not, without the Indemnified Party’s prior written consent (which shall not be unreasonably withheld or delayed), settle or compromise any claim or consent to entry of any judgment in respect thereof in any pending or threatened action, suit, claim or proceeding in respect of which indemnification has been sought hereunder unless such settlement or compromise includes an unconditional release of such Indemnified Party from all liability arising out of such action, suit, claim or proceeding.

 

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(d)                                 For purposes of the indemnity contained in Section 4.6(a)(1) and Section 4.6(b)(1), all qualifications and limitations set forth in the parties’ representations and warranties in this Agreement or the Original Agreement as to “materiality,” “Material Adverse Effect” and words of similar import, shall be disregarded in determining whether there has been any inaccuracy in or breach of any representations and warranties in the Original Agreement or this Agreement, as applicable, or in determining the amount of Losses resulting from any such inaccuracy or breach.

 

(e)                                  The Company shall not be required to indemnify the Indemnified Parties pursuant to Section 4.6(a)(1), (1) with respect to any claim for indemnification if the amount of Losses with respect to such claim (including a series of related claims) are less than $50,000 (any claim involving Losses less than such amount being referred to as a “De Minimis Claim”) and (2) unless and until the aggregate amount of all Losses incurred with respect to all claims (other than De Minimis Claims) pursuant to Section 4.6(a)(1) exceed 2% of the Purchase Price (the “Threshold Amount”), in which event the Company shall be responsible for only the amount of such Losses in excess of the Threshold Amount.  Purchaser shall not be required to indemnify the Indemnified Parties pursuant to Section 4.6(b)(1), (A) with respect to any De Minimis Claim and (B) unless and until the aggregate amount of all Losses incurred with respect to all claims (other than De Minimis Claims) pursuant to Section 4.6(b)(1) exceed the Threshold Amount, in which event Purchaser shall be responsible for only the amount of such Losses in excess of the Threshold Amount.  The cumulative indemnification obligation of (1) the Company to Purchaser and all of the Indemnified Parties affiliated with (or whose claims are permitted by virtue of their relationship with) Purchaser or (2) Purchaser to the Company and the Indemnified Parties affiliated with (or whose claims are permitted by virtue of their relationship with the) Company, in each case for inaccuracies in or breaches of representations and warranties in this Agreement or the Original Agreement, shall in no event exceed 15% of the Purchase Price.  Notwithstanding the foregoing, the limitations set forth in this paragraph 4.6(e) will not apply in relation to any Losses attributable to any inaccuracy in or breach of the representations and warranties set forth in Section 2.2(b) (Capitalization) of the Original Agreement.

 

(f)                                   Reserved.

 

(g)                                  The indemnity provided for in this Section 4.6 shall be the sole and exclusive monetary remedy of Indemnified Parties for any inaccuracy of any representation or warranty or any other breach of any covenant or agreement contained in this Agreement or the Original Agreement; provided that nothing herein shall limit in any way any such party’s remedies in respect of fraud by any other party in connection with the transactions contemplated hereby.  No party to this Agreement (or any of its Affiliates) shall, in any event, be liable or otherwise responsible to any other party (or any of its Affiliates) for any consequential or punitive damages of such other party (or any of its Affiliates) arising out of or relating to this Agreement or the Original Agreement or the performance or breach hereof or thereof.

 

(h)                                 No investigation of the Company by Purchaser, or by the Company of Purchaser, whether prior to or after the date hereof shall limit any Indemnified Party’s exercise of any right hereunder or be deemed to be a waiver of any such right.

 

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(i)                                     Any indemnification payments pursuant to this Section 4.6 shall be treated as an adjustment to the Purchase Price for the Purchased Shares for applicable Tax purposes, unless a different treatment is required by applicable law.

 

4.7                               Reserved.

 

4.8                               Reserved

 

4.9                               Reserved.

 

4.10                        Reserved.

 

4.11                        Reserved.

 

4.12                        Reserved.

 

ARTICLE V

 

INDIVIDUAL PURCHASERS

 

5.1                               Individual Purchasers.  The rights of Purchaser under this Agreement shall be exercisable pro rata on the part of the Individual Purchasers based on their respective investments as set forth on Schedule I to the Original Agreement.  The obligations of each Purchaser under this Agreement shall be deemed to be allocated severally among the Individual Purchasers pro rata based on their respective investments as set forth in Schedule I to the Original Agreement.

 

ARTICLE VI

 

MISCELLANEOUS

 

6.1                               Survival.  Each of the representations and warranties set forth in this Agreement and Section 2.2(a), (b), (d) and (e) of the Original Agreement, will survive indefinitely.  No other representations and warranties set forth in the Original Agreement shall survive execution of this Agreement.

 

6.2                               Expenses.  Except as provided for in that certain letter agreement, dated as of January 26, 2010, by and among the Company, Purchaser and the Other Lead Investor, and except for stamp and other transfer taxes, charges and assessments in respect to the issuance of the Common Shares and other securities, the conversion of certain securities and the repurchase of certain securities as contemplated by the Original Agreement, which will be paid and borne by the Company, each of the parties will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated pursuant to this Agreement.

 

6.3                               Amendment; Waiver.  No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by an officer of a duly authorized representative of such party.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any

 

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single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  No waiver of any party to this Agreement, as the case may be, will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

6.4                               Counterparts and Facsimile.  For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.  Executed signature pages to this Agreement may be delivered by facsimile and such facsimiles will be deemed as sufficient as if actual signature pages had been delivered.

 

6.5                               Governing Law; Submission to Jurisdiction.  This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.  The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state and federal courts located in the Borough of Manhattan, State of New York for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby.  The parties hereby agree (i) that in the event of any such action, suit or proceeding, such parties will consent and submit to personal jurisdiction in any such court described in the foregoing sentence and to service of process upon them in accordance with the rules and statutes governing service of process (it being understood that nothing in this section shall be deemed to prevent any party from seeking to remove any action to a federal court in New York, New York); (ii) to waive to the full extent permitted by law any objection that they may now or hereafter have to the venue of any such litigation, proceeding or action in any such court or that any such litigation, proceeding or action was brought in an inconvenient forum; (iii) to designate, appoint and direct CT Corporation System as its authorized agent to receive on its behalf service of any and all process and documents in any legal proceeding in the State of New York; (iv) to notify the other parties to this Agreement immediately if such agent shall refuse to act, or be prevented from acting, as agent and, in such event, promptly to designate another agent in the City of New York, satisfactory to the Company and Purchaser, to serve in place of such agent and deliver to the other party written evidence of such substitute agent’s acceptance of such designation; (v) that as an alternative method of service to service of process in any legal proceeding by mailing of copies thereof to such party at its address set forth in Section 6.7 for communications to such party; (vi) that any service made as provided herein shall be effective and binding service in every respect; and (vii) that nothing herein shall affect the rights of any party to effect service of process in any other manner permitted by law.

 

6.6                               WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

6.7                               Notices.  Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by telecopy or facsimile, upon confirmation of receipt,

 

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(b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, airmail postage prepaid.  All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

 

(a)                                 If to Purchaser to it at:

 

c/o The Carlyle Group

520 Madison Avenue

New York, NY 10022

Attn: Jim Burr

Telephone: (212) 813-4727

Fax: (212) 813-4727

 

with a copy to (which copy alone shall not constitute notice):

 

Mayer Brown LLP
 1221 Avenue of the Americas
 New York, New York 10020
 Attn:  James B. Carlson and Reb D. Wheeler
 Telephone:  (212) 506-2500
 Fax:  (212) 262-1910

 

(b)                                 If to the Company to:

 

The Bank of N.T. Butterfield & Son Limited

65 Front Street

Hamilton, HM 12

Bermuda
 Attn:  General Counsel

Telephone: (441) 278-5808

Fax: (441) 295-1220

 

with a copy to (which copy alone shall not constitute notice):

 

Wachtell, Lipton, Rosen & Katz
 51 West 52nd Street
 New York, New York 10019
 Attn: Edward J. Lee
 Telephone: (212) 403-1000
 Fax: (212) 403-2000

 

6.8                               Entire Agreement, Etc.  (a) Subject to the terms hereof, including Section 6.15, this Agreement (including any exhibits, schedules and disclosure schedules delivered in connection with the Original Agreement or this Agreement) and any other agreement between the parties entered into in connection herewith constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral,

 

11

 

among the parties, with respect to the subject matter hereof; and (b) this Agreement will not be assignable by operation of law or otherwise (any attempted assignment in contravention hereof being null and void); provided that Purchaser may assign its rights and obligations under this Agreement to any transferee who is (i) an Affiliate of Purchaser under common control with Purchaser’s ultimate parent, general partner or investment advisor, (ii) a limited partner or shareholder of Purchaser, or (iii) a Person that shares a common investment adviser with Purchaser, but in each case only if the transferee agrees in writing for the benefit of the Company (with a copy thereof to be furnished to the Company) to be bound by the terms of this Agreement (any such transferee shall be included in the term “Purchaser”); provided, further, that no such assignment shall relieve Purchaser of its obligations hereunder.

 

6.9                               Interpretation; Other Definitions.  Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa, and references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time.  All article, section, paragraph or clause references not attributed to a particular document shall be references to such parts of this Agreement, and all exhibit, annex and schedule references not attributed to a particular document shall be references to such exhibits, annexes and schedules to this Agreement.  In addition, the following terms are ascribed the following meanings:

 

(a)                                 the term “Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities by contract or otherwise;

 

(b)                                 the word “or” is not exclusive;

 

(c)                                  the words “including,” “includes,” “included” and “include” are deemed to be followed by the words “without limitation”; and

 

(d)                                 the terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;

 

(e)                                  “business day” means any day other than a Saturday, a Sunday or any day on which the banking institutions in the City of New York, New York or Hamilton, Bermuda are authorized or required by Law or executive order to be closed;

 

(f)                                   “Code” means the U.S. Internal Revenue Code of 1986, as amended;

 

(g)                                  “Company Subsidiary” means any Subsidiary of the Company;

 

(h)                                 “Governmental Entity” means any court, administrative agency or commission or other governmental or regulatory authority or instrumentality, or any applicable industry self-regulatory organizations;

 

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(i)                                     “Law” means any statute, law, ordinance, rule or regulation (domestic or foreign) issued, promulgated or entered into by or with any Governmental Entity;

 

(j)                                    “Person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization or other entity or group (as such term is defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”));

 

(k)                                 “Purchase Price” means the amount specified for such Individual Purchaser on Schedule I to the Original Agreement;

 

(l)                                     “Securities Act” means the Securities Act of 1933, as amended;

 

(m)                             Reserved;

 

(n)                                 “Subsidiary” means any corporation, partnership, joint venture, limited liability company, trust, estate or other Person of which (or in which), directly or indirectly, more than 50% of (i) the issued and outstanding shares or capital stock or other securities having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time shares or capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the interest in the capital or profits of such partnership, joint venture or limited liability company or other Person or (iii) the beneficial interest in such trust or estate, is at the time owned by such first Person, or by such first Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries;

 

(o)                                 “Tax” means any and all federal, state, local, foreign or other taxes of any kind, and other assessments of a similar nature (whether imposed directly or through withholding), including any interest, additions to tax and penalties applicable thereto imposed by a Taxing Authority;

 

(p)                                 “Taxing Authority” means, with respect to any Tax, the Governmental Entity that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such Governmental Entity;

 

(q)                                 “Transfer” means to transfer, sell, pledge or otherwise dispose of;

 

(r)                                    “Voting Securities” means at any time securities of the Company that are then entitled to vote generally in the election of directors; and

 

(s)                                   capitalized terms used herein that are not defined shall have the meanings set forth in the Original Agreement.

 

6.10                        Captions.  The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

 

6.11                        Severability.  If any provision of this Agreement or the application thereof to any person (including the officers and directors the parties hereto) or circumstance is determined by a

 

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court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

 

6.12                        No Third-Party Beneficiaries.  Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto, any benefit right or remedies, except that the provisions of Section 4.6 shall inure to the benefit of the persons referred to in that Section.

 

6.13                        Public Announcements.  Subject to each party’s disclosure obligations imposed by law or regulation or the rules of any stock exchange upon which its securities are listed, each of the parties hereto will cooperate with each other in the development and distribution of all news releases and other public information disclosures and any other required disclosures with respect to this Agreement, the Original Agreement and any of the transactions contemplated by this Agreement and the Original Agreement, and neither the Company nor Purchaser will make any such news release or public disclosure or any other required disclosure without first consulting with the other, and, in each case, also receiving the other’s consent (which shall not be unreasonably withheld or delayed) and each party shall coordinate with the party whose consent is required with respect to any such news release or public disclosure.

 

6.14                        Specific Performance.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled to seek specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

 

6.15                        Effectiveness and Termination.  This Agreement shall become effective upon the declaration of effectiveness by the Securities and Exchange Commission of the Registration Statement (the “Effective Date”).  If the Securities and Exchange Commission does not declare the Registration Statement Effective on or prior to December 31, 2016 (the “Termination Date”), this Agreement shall be automatically terminated on such Termination Date and shall be null and void, and the Original Agreement shall remain in full force and effect in accordance with its terms.

 

* * *

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.

 

	
 
    	
THE   BANK OF N.T. BUTTERFIELD & SON LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ A. Shaun Morris
    
	
 
    	
 
    	
Name: 
    	
A. Shaun Morris
    
	
 
    	
 
    	
Title: 
    	
General Counsel
    

 

 

	
 
    	
CARLYLE   GLOBAL FINANCIAL SERVICES PARTNERS, L.P.
    
	
 
    	
 
    
	
 
    	
By: TCG Financial Services, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By: Carlyle Financial Services, Ltd., its general partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ James F. Burr
    
	
 
    	
Name:
    	
James F. Burr
    
	
 
    	
Title:
    	
Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CGFSP   COINVESTMENT, L.P.
    
	
 
    	
 
    
	
 
    	
By: TCG Financial Services, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By: Carlyle Financial Services, Ltd., its general partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ James F. Burr
    
	
 
    	
Name:
    	
James F. Burr
    
	
 
    	
Title:
    	
Managing DirectorExhibit 10.2

 

THE BANK OF N.T. BUTTERFIELD & SON LIMITED

 

2010 OMNIBUS SHARE INCENTIVE PLAN

 

Section 1.                  General Purpose of Plan; Definitions.

 

The name of this plan is the Bank of N.T. Butterfield & Son Limited (the “Company”) 2010 Omnibus Share Incentive Plan (the “Plan”). The Plan was approved and adopted by the Board on 26 April 2010 (the “Effective Date”). The purpose of the Plan is to enable the Company to attract and retain highly qualified personnel who will contribute to the Company’s success and to provide incentives to Participants that are linked directly to increases in shareholder value and will therefore inure to the benefit of all shareholders of the Company. This Plan is intended to satisfy all of the requirements of Rule 701 of the Securities Act of 1933, as amended.

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

(a)                   “Administrator” means the Board, or if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 2 below.

 

(b)                   “Award” means any award granted under the Plan.

 

(c)                    “Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions applicable to the Award.

 

(d)                   “Board” means the Board of Directors of the Company.

 

(e)                    “Cause” means (i) the willful and continued failure of the Participant to substantially perform his or her duties (other than any such failure resulting from the Participant’s incapacity due to physical or mental illness or any such failure subsequent to the Participant being delivered a notice of termination without Cause by the Company or delivering a notice of termination for Good Reason to the Company) after a written demand for substantial performance is delivered to the Participant by a senior officer of the Company which specifically identifies the manner in which the Company believes that the Participant has not substantially performed his duties; (ii) the Participant’s fraud or dishonesty; or (iii) the plea of guilty or nolo contendere by the Participant to (or conviction of the Participant for the commission of) any felony or any other serious crime involving moral turpitude. For the avoidance of doubt, Cause shall not include the Participant’s failure to renew his or her applicable work permit.

 

(f)                     “Carlyle Group” means Carlyle Global Financial Services Partners, L.P. and CGFSP Coinvestment L.P.

 

(g)                    “Code” means the United States Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

 

 

(h)                   “Committee” means the Human Resources and Compensation Committee or any committee the Board may appoint to administer the Plan. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee.

 

(i)                       “Common Shares” means the ordinary shares, par value BD$.01 per share (as may be amended from time to time), of the Company.

 

(j)                      “Company” means The Bank of N.T. Butterfield & Son Limited, a Bermuda corporation (or any successor corporation).

 

(k)                   “Disability” means the Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company or any Parent or Subsidiary (where applicable).

 

(1)                   “Eligible Recipient” means an officer or employee of the Company or of any Parent or Subsidiary.

 

(m)               “Exercise Price” means the per Share price at which (i) a Participant holding an Award of Options may purchase Shares issuable with respect to such Award of Options or (ii) a Participant holding an Award of Share Appreciation Rights may exercise the right to receive the SAR Spread, if any.

 

(n)                   “Fair Market Value” shall mean, with respect to Common Shares or other property, the fair market value of such Common Shares or other property determined by such methods or procedures as shall be established from time to time by the Administrator. Unless otherwise determined by the Administrator in good faith, the per share Fair Market Value of Common Shares as of a particular date shall mean (i) the closing price per share of Common Shares on the Bermuda Stock Exchange, for the last preceding date on which there was a sale of such Common Shares on such exchange, or (ii) the closing price per share of Common Shares on an international securities exchange on which the Common Shares are traded, for the last preceding date on which there was a sale of such Common Shares on such exchange, or (iii) if the Common Shares are then traded in an over-the-counter market, the average of the closing bid and asked prices for the Common Shares in such over-the-counter market for the last preceding date on which there was a sale of such Common Shares in such market, or (iv) if the Common Shares are not then listed on the Bermuda Stock Exchange or an international securities exchange or traded in an over-the-counter market, such value as the Administrator, in its sole discretion, shall determine.

 

(o)                   “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships of the Participant.

 

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(p)                   “New Investors” means any of (i) Canadian Imperial Bank of Commerce, (ii) Carlyle Global Financial Services Partners, LP and CGFSP Coinvestment LP (considered collectively), (iii) Ithan Creek Master Investors (Cayman) L.P. and Ithan Creek Master Investment Partnership (Cayman) II, L.P. (considered collectively), (iv) Wellcome Trust Investments 2 Unlimited, or (v) Rosebowl Western, Ltd. and Rosebowl Western, L.L.C. (considered collectively).

 

(q)                   “Option” means an option to purchase Shares granted pursuant to Section 6 of the Plan.

 

(r)                      “Other Share-Based Awards” means Awards, other than Options, Restricted Shares, Restricted Share Units or Share Appreciation Rights, that are denominated in, valued in whole or in part by reference to, or otherwise based on or related to, Common Shares, including but not limited to performance units or dividend equivalents, each of which may be subject to the attainment of performance goals or a period of continued employment or other terms and conditions as permitted under the Plan.

 

(s)                     “Parent” means any company (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations in the chain (other than the Company) owns shares possessing 50% or more of the combined voting power of all classes of shares in one of the other corporations in the chain.

 

(t)                      “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority in Section 2 of the Plan, to receive an Award.

 

(u)                   “Purchaser” shall have the meaning given under the Investment Agreement by and between the Company and Canadian Imperial Bank of Commerce, dated as of 2 March 2010 and the Investment Agreement by and among the Company, Carlyle Global Financial Services Partners, L.P. and CGFSP Coinvestment L.P., dated as of 2 March 2010.

 

(v)                   “Purchase Price” means the per-Share price, if any, at which a Participant awarded Restricted Shares may purchase such Restricted Shares.

 

(w)                 “Restricted Shares” means Shares subject to certain restrictions granted pursuant to Section 7 of the Plan.

 

(x)                   “Restricted Share Unit” or “RSU” means the right, granted pursuant to Section 7 of the Plan, to receive a number of Shares (or an amount in cash equal to the Fair Market Value thereof) equal to the number of RSUs that are released from the Restricted Period as of such date.

 

(y)                   “SAR Spread” means the amount equal to the excess, if any, of (i) the aggregate Fair Market Value, as of the date a SAR or portion thereof is exercised, of the Shares subject to such SAR or such portion thereof, over (ii) the aggregate Exercise Price of such SAR or such portion thereof.

 

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(z)                    “Shares” means Common Shares reserved for issuance under the Plan, as adjusted pursuant to Sections 3 or 4 of the Plan, and any successor security.

 

(aa)            “Share Appreciation Right” or “SAR” means the right, granted pursuant to Section 8 of the Plan, to receive an amount equal to the SAR Spread, if any, as of the date such SAR or portion thereof is exercised.

 

(bb)            “Subsidiary” means any company (other than the Company) in an unbroken chain of companies beginning with the Company, if each of the companies (other than the last company) in the unbroken chain owns shares possessing fifty percent (50%) or more of the total combined voting power of all classes of shares in one of the other companies in the chain.

 

Section 2.                  Administration.

 

The Plan shall be administered by the Board or, at the Board’s sole discretion, by the Committee, which shall be appointed by the Board and shall serve at the direction of the Board. Pursuant to the terms of the Plan, the Board or the Committee, as the case may be, shall serve as the Administrator and shall have the power and authority:

 

(a)                   to select those Eligible Recipients who shall be Participants;

 

(b)                   to determine whether and the extent to which Awards are to be granted to Participants under the Plan;

 

(c)                    to determine the number of Shares to be covered by or subject to each Award granted under the Plan;

 

(d)                   to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted under the Plan; and

 

(e)                    to determine the terms and conditions, not inconsistent with the terms of the Plan, that shall govern all written instruments evidencing Awards granted under the Plan, including Award Agreements.

 

The Administrator shall have the authority, in its sole discretion, to: adopt, alter, and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto); and otherwise supervise the administration of the Plan. All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants.

 

Section 3.                       Shares Reserved.

 

Subject to Section 4 of the Plan, the total number of Common Shares initially reserved and available for the issuance under the Plan shall be 29,250,000 Common Shares

 

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which shall be issued in the form of non-qualified share Options (the “Initial Options Pool”). The number of shares comprising the Initial Option Pool equals approximately 5% of the Company’s fully diluted Common Shares (585,103,112 Shares) as of the Effective Date.

 

To the extent that (i) an Option or SAR expires or is otherwise cancelled, surrendered, exchanged or terminated without being exercised, or (ii) any Shares issuable with respect to or subject to any Award are cancelled, surrendered, exchanged or terminated, such Shares shall again be available for issuance in connection with future Awards granted under the Plan.

 

Section 4.                       Corporate Transactions.

 

In the event of any amalgamation, merger, consolidation, combination, reorganization, recapitalization, reclassification, extraordinary cash dividend, bonus share issue dividend, share subdivision, reverse share subdivision, stock split, reverse stock split, or other change in corporate structure (a “Corporate Transaction”), the Administrator shall make an equitable substitution or proportionate adjustment in (i) the aggregate number of Shares reserved for issuance under the Plan, and (ii) the kind, number, and Exercise Price of Shares (or other cash or property) issuable with respect to outstanding Options and SARs granted under the Plan, and (iii) the kind, number, and Purchase Price, if any, of Shares subject to any other outstanding Awards granted under the Plan.

 

Section 5.                       Eligibility.

 

The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Recipients. The Administrator shall have the authority to grant Awards under the Plan to the Eligible Recipients.

 

Section 6.                       Options.

 

Options may be granted alone or in addition to other Awards granted under the Plan. Any Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of each Option need not be the same with respect to each Participant. Participants who are granted Options shall enter into an Award Agreement with the Company, in such form as the Administrator shall determine, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option. More than one Option may be granted to the same Participant and be outstanding concurrently under the Plan.

 

Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:

 

(a)              Option Exercise Price. The Exercise Price of Shares issuable with respect to an Option shall be determined by the Administrator in its sole discretion at or after the

 

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date of grant, provided, however, that, to the extent required to avoid the imposition of taxes under Section 409A of the Code for a specific Award, such Exercise Price for that specific Award shall not be less than 100% of the Fair Market Value on the date of grant.

 

(b)                   Option Term. The term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten (10) years after the date such Option is granted.

 

(c)                    Exercisability. Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after the time of grant. The Administrator may provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine, all in its sole discretion.

 

(d)                   Method of Exercise. Subject to Sections 6(c) and 9, Options may be exercised in whole or in part at any time during the Option term, by giving written notice of exercise to the Administrator specifying the number of Shares underlying the Option to be exercised by means of a net-settlement basis pursuant to which the Company shall withhold the number of Shares underlying the Option sufficient to cover the Exercise Price or by means of a cashless exercise procedure established by the Administrator.

 

(e)                    Shareholder Rights. A Participant shall generally have the rights to dividends and any other rights of a shareholder with respect to the Shares subject to the Option only after the Participant has given written notice of exercise.

 

(f)                     Non-Transferability of Options. Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will, or by the laws of descent and distribution, or as otherwise permitted by the Administrator.

 

(g)                    Initial Option Pool. The Initial Options Pool (29,250,000 Common Shares) shall be awarded to Participants under 2010 Share Option Agreements as agreed in Section 4.11 of the Company’s Investment Agreements dated 2 March 2010 between the Company and the New Investors. The Exercise Price of each Option granted to Participants on the Effective Date shall equal $1.21 but, where required in order to avoid adverse U.S. tax consequences, the Exercise Price of each Option shall not be less than that required by Section 409A of the Code. The Exercise Price of each Option granted to future Participants after the Effective Date shall equal the closing price per share of Common Shares on the Bermuda Stock Exchange, for the last preceding date on which there was a sale of such Common Shares on such exchange. Awards granted from the Initial Options Pool shall be composed of Options vesting based on continued service only and Options vesting based on continued service and performance, in equal proportions. The term of each Option under a 2010 Share Option Agreement shall be 10 years after the date such Option is granted.

 

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Section 7.                  Restricted Shares, Restricted Share Units and Other Share-Based Awards.

 

Awards of Restricted Shares or RSUs may be granted either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, awards of Restricted Shares or RSUs shall be made; the number of Shares to be awarded with respect to an Award of Restricted Shares or upon settlement of RSUs; the Purchase Price, if any, to be paid by the Participant for the acquisition of Restricted Shares; and the Restricted Period (as defined in Section 7(b)) applicable to an Award of Restricted Shares or an Award of RSUs. The provisions of Awards of Restricted Shares or of Awards of RSUs need not be the same with respect to each Participant. An Award of Restricted Shares or RSUs shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator shall impose and shall be evidenced by an Award Agreement. In the sole discretion of the Administrator, loans may be made to Participants in connection with the purchase of Restricted Shares under substantially the same terms and conditions as provided in Section 6(d) of the Plan with respect to the exercise of Options. In the sole discretion of the Administrator, Awards of unrestricted Shares may also be granted under the Plan, and shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator shall impose and shall be evidenced by an Award Agreement.

 

(a)                   Share Certificates. Subject to Section 7(b) below, with respect to each Participant who is granted an Award of Restricted Shares, the Company shall either (i) issue a share certificate in respect of such Award of Restricted Shares, which certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to any such Award of Restricted Shares; or (ii) enter such Award of Restricted Shares in book entry form, such method as determined by the Administrator in its sole discretion. The Company may require that the share certificates evidencing Restricted Shares granted under the Plan be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of Restricted Shares, the Participant shall have delivered a share transfer form, endorsed in blank, relating to the Shares covered by such Award of Restricted Shares.

 

(b)                   Restrictions and Conditions Applicable to Restricted Shares and RSUs. An Award of Restricted Shares or RSUs granted pursuant to this Section 7 shall be subject to the following restrictions and conditions:

 

(i)                                     The Purchase Price of Shares purchasable under an Award of Restricted Shares shall be determined by the Administrator in its sole discretion at the time of grant.

 

(ii)                                  Subject to the provisions of the Plan and the Award Agreement governing any such Award of Restricted Shares or RSUs, during such period as may be set by the Administrator commencing on the date of grant of the Award, the Participant shall not be permitted to sell, transfer, pledge, or assign such Shares of Restricted Shares or such RSUs (such period, the “Restricted Period”); provided, however, that the Administrator may, in its sole discretion, provide for the lapse of such

 

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restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion.

 

(iii)                                    Subject to paragraph (b) of Section 14 and/or unless otherwise provided in an Award Agreement, a Participant awarded Restricted Shares under the Plan generally shall have the rights of a shareholder of the Company with respect to such Restricted Shares during the Restricted Period including the right to vote and the right to receive dividends. Unless otherwise provided in an Award Agreement, a Participant awarded RSUs will have no rights of a shareholder until Shares are issued to the Participant upon vesting and settlement of the Award of RSUs.

 

(c)                    Settlement of Restricted Shares Units. Unless the Award Agreement provides otherwise, following the lapse of any applicable Restricted Period of an Award of RSUs, the Participant awarded such RSUs shall be entitled to receive (i) one Share for each RSU that has been released from the Restricted Period, (ii) a cash payment equal to the aggregate Fair Market Value of such RSUs or (iii) a combination of (i) and (ii) as determined by the Administrator in its sole discretion.

 

(d)                   Other Share-Based Awards. The Administrator is authorized to grant Awards to Participants in the form of Other Share-Based Awards, as deemed by the Administrator to be consistent with the purposes of the Plan. The Administrator shall determine the terms and conditions of such Awards, consistent with the terms of the Plan, at the date of grant or thereafter, including where applicable performance goals and performance periods, if any. Shares or other securities or property delivered pursuant to an Award in the nature of a purchase right granted under this Section 7(d) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, Common Shares, other Awards, notes or other property, as the Administrator shall determine, subject to any required corporate action.

 

Section 8.                  Share Appreciation Rights.

 

(a)                   Grant of Share Appreciation Rights. Awards of Share Appreciation Rights may be granted either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the Eligible Recipients to whom and the time or times at which Awards of SARs shall be made. A SAR shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator shall impose and shall be evidenced by an Award Agreement.

 

(b)                   Terms and Conditions Applicable to SARs.

 

(i)                  A SAR shall: (x) have a term set by the Administrator; (y) be exercisable in such installments as the Administrator may determine; and (z) cover such number of Shares as the Administrator may determine.

 

(ii)               A SAR shall entitle the Participant to exercise all or a specified portion of the SAR (to the extent then exercisable pursuant to its terms) and to

 

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receive from the Company the SAR Spread with respect thereto, subject to any limitations the Administrator may impose.

 

(c)                    Payment and Limitations on Exercise.

 

(i)                  Payment of the amounts determined under Section 8(b) above shall be in cash, in Shares (based on the Fair Market Value as of the date the SAR is exercised), or a combination of both, as determined by the Administrator in its sole discretion.

 

(ii)               Participants awarded SARs may be required to comply with any timing or other restrictions with respect to the settlement or exercise of a SAR, including a window-period limitation, as may be imposed in the discretion of the Administrator.

 

Section 9.                  Termination of Employment or Service.

 

Except as otherwise set forth in the Participant’s Award Agreement, if a Participant’s employment with the Company or to any Subsidiary or Parent terminates by reason of his or her death, Disability or for any other reason, an Award granted to such Participant may (if an Option or SAR) thereafter be exercised to the extent such Award is vested, to the extent provided in the Award Agreement evidencing such Award, or as otherwise determined by the Administrator, but in no event shall the exercise period be less than ninety (90) days (or six (6) months in the event of termination by reason of death or Disability) following termination of employment. If, after termination of employment, the Participant does not exercise his or her Award within the time specified by the Administrator, the Award shall terminate, and the Shares issuable with respect to such Award shall revert to the Plan.

 

Section 10.           Shareholders Agreement.

 

Shares issued in connection with the grant or settlement of an Award, or upon exercise of an Option, shall be subject to the shareholders agreement, if any, as determined by the Administrator from time to time. If a Participant is not party to any such shareholders agreement, then the Company may, as a condition to the issuance, settlement, or exercise of an Award, require such Participant to become party to the shareholders agreement or such portions thereof as the Administrator determines.

 

Section 11.           Amendment and Termination.

 

The Board may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation that would materially impair the rights of a Participant under any Award granted or Award Agreement in effect under the Plan shall be made without such Participant’s consent.

 

The Administrator may amend the terms of any Award granted under the Plan, prospectively or retroactively, but, subject to Section 4 of the Plan, no such amendment shall

 

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impair the rights of any Participant without his or her consent. Notwithstanding the previous sentence, the Administrator reserves the right to amend the terms of any Award or Award Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code.

 

Section 12.           Unfunded Status of Plan.

 

The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.

 

Section 13.           General Provisions.

 

(a)                   Shares shall not be issued pursuant to the exercise or settlement of any Award granted under the Plan unless the exercise or settlement of such Award and the issuance and delivery of such Shares pursuant to such Award shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the requirements of any stock exchange upon which the Common Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

(b)                   The Administrator may require each person acquiring Shares granted under the Plan to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof. Any certificates for Shares delivered under the Plan shall be subject to executed share transfer forms and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Shares is then listed, and any applicable laws. The certificates for such Shares may include the legend set forth below, or any other legend that the Administrator deems appropriate to reflect any restrictions on transfer for such Shares.

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.”

 

(c)                    Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued employment with or service to the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or

 

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any Subsidiary or Parent to terminate the employment or service of any Eligible Recipient at any time.

 

(d)                   Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of the Participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such Award. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes or other duties or charges from any payment of any kind otherwise due to the Participant.

 

(e)                    No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

 

Section 14.           Governing Law.

 

The Plan and all agreements entered into under the Plan shall be construed in accordance with and governed under Bermuda law.

 

Section 15.           Term of Plan.

 

The Plan shall be effective as of the Effective Date. No Award shall be granted pursuant to the Plan on or after the tenth (10th) anniversary of the Effective Date, but Awards granted under the Plan prior to the Effective Date may extend beyond the Effective Date pursuant to the terms of the Award as provided for under the Plan and the terms of the applicable Award Agreement.

 

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