Document:

ex1018.htm

Exhibit 10.18

FLAGSTONE RÉASURANCE SUISSE SA (BERMUDA BRANCH)

and

DAVID FLITMAN

_______________________________

EMPLOYMENT AGREEMENT

_______________________________

  

  

  

THIS AGREEMENT is made as of the 31st Day of March, 2009 between Flagstone Réassurance Suisse SA (Bermuda Branch), a Bermuda registered permit company whose principal office is situated at Crawford House, 23 Church Street, Hamilton HM 11, Bermuda (the “Company”); and  David Flitman of #4 Honey Hill Drive, Paget, PG04, Bermuda (the “Employee”).  This agreement supersedes any other previously dated agreements made between the Employee and the Company or any of its affiliates.

	
WHEREBY IT IS AGREED as follows:

	
1)

	
Definitions and Interpretation

Headings in this document do not affect interpretation and are for convenience only. In addition to the words and expressions hereinbefore defined the following words and expressions shall have the meanings hereinafter ascribed to them:

	
  

	
a)

	
“Affiliate” means a company which is a subsidiary of another company or 2 or more companies which are both subsidiaries of the same company or each of them is controlled by the same person.  For the purposes of this definition, "control", when used with respect to any company, means the power to direct the management and policies of such company, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing;

	
  

	
b)

	
“Bonus Payment Date” has the meaning set out in paragraph 6 of Schedule 1;

	
  

	
c)

	
“Business Day” means any day normally treated as a business day in Bermuda;

	
  

	
d)

	
“Cause” means:

	
  

	
(i)

	
a material breach by the Employee of any contract between the Employee and the Company;

	
  

	
(ii)

	
the wilful and continued failure or refusal by the Employee to perform any duties reasonably required by the Company, after notification by the Company of such failure or refusal, and failing to correct such behaviour within 20 days of such notification;

	
  

	
(iii)

	
commission by the Employee of a criminal offence or other offence of moral turpitude,

	
  

	
(iv)

	
perpetration by the Employee of a dishonest act or common law fraud against the Company or a client thereof;

	
  

	
(v)

	
the Employee wilfully engaging in misconduct which is materially injurious to the Company, including without limitation, the disclosure of any trade secrets, financial models, or computer software to persons outside the Company without the consent of the Company.

	
  

	
e)

	
“Commencement Date” has the meaning set out in paragraph 3 of Schedule 1;

  

  

  

 

	
  

	
f)

	
“Company Party” means the Company or its Affiliates

	
  

	
g)

	
“Employment” means the employment of the Employee pursuant to this Agreement;

	
  

	
h)

	
“Intellectual Property Rights” means rights in inventions, patents, trademarks, service marks, design rights (whether registrable or otherwise), trade and business names, copyrights (including rights in computer software), database rights and semiconductor topography rights (whether or not any of these is registered and including applications for registrations) and all rights or terms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world;

	
  

	
i)

	
“Person” means individual or entity

	
  

	
j)

	
“Staff Policy Manual” means such document or documents produced by the Company which set out the policies and procedures of the Company and which may be amended from time to time;

	
  

	
k)

	
“Termination Date” means the date on which the Employee’s employment with the Company ceases either for reason of the conclusion of the fixed term of the Employment or for reason of the termination of the Employment in accordance with the provisions of this Agreement.

	
2)

	
Appointment

	
  

	
a)

	
The Company hereby appoints the Employee and the Employee hereby accepts the position set out in paragraph 1 of Schedule 1 and shall have such responsibilities as the Company may from time to time direct.

	
  

	
b)

	
The foregoing appointment shall be subject to:-

	
  

	
i)

	
satisfactory reference/background checks conducted by or on behalf of the Company; and

	
  

	
ii)

	
where applicable, this appointment shall be subject to the grant and maintenance of appropriate work permits

	
  

	c)  	
The Employee may be expected from time to time to perform duties for and on behalf of other entities within the Flagstone group of Companies including but not limited to affiliates, subsidiaries, branches and any other entity that is controlled by, directly or indirectly, Flagstone Reinsurance Holdings Limited, for which the Employee may or may not receive additional remuneration.

  

  

  

	
3)

	
Duration of Appointment

The Employment shall be deemed to have commenced on the Commencement Date and shall continue unless terminated in accordance with the provisions of this Agreement.

	
4)

	
Place of Employment

The Employee’s place of employment is set out in paragraph 2 of Schedule 1.

	
5)

	
Compensation

	
  

	
a)

	
Salary, Benefits and Deductions from Salary

	
  

	
i)

	
The salary payable to the Employee shall be the sum as set out in paragraph 4 of Schedule 1, and shall be payable by equal monthly instalments in arrears on the last Business Day of each month.

	
  

	
ii)

	
The Company shall review the salary annually in December and the rate of salary may, at the Company’s sole discretion, be increased effective from the date of review.

	
  

	
iii)

	
The Company shall be required by law to deduct from the Employee’s salary the amounts set out in paragraph 5 of Schedule 1.

	
  

	
iv)

	
Employee shall have rights to personal use of Company aircraft to the extent set out in paragraph 9 of Schedule 1, provided that the Employee promptly shall reimburse the marginal cost to the Company of such use.  As used in the foregoing sentence, “marginal cost” means the variable operating costs to the Company of such use, including, but not limited to fuel costs, MSP, mileage, weather-monitoring costs, on-board catering and landing/ramp fees, but shall not include fixed costs which do not change based on usage, such as pilot salaries, the lease costs of the Company aircraft, and the cost of maintenance not related to trips.

	
  

	
b)

	
Bonus

	
  

	
i)

	
The Company may, but shall not be obliged to, pay an annual bonus in accordance with this paragraph 6 of Schedule 1.

	
  

	
ii)

	
Bonuses payable on the first Bonus Payment Date will be assessed on salary earned by the Employee since the Commencement Date and thereafter on salary earned since the last Bonus Payment Date.

  

  

  

 

	
  

	
iii)

	
The Company shall not be liable to pay any bonus to the Employee if the Termination Date occurs between Bonus Payment Dates.

	
  

	
c)

	
Severance

	
  

	
i)

	
If the Company terminates the Employee without Cause by providing a notice of termination as set forth in Clause 12 of this Agreement, the Company will pay the Employee, as severance:

	
  

	
a.

	
The salary payable to the Employee in the sum set out in paragraph 4 of Schedule 1 from the date the Company provided the Employee notice of termination until the expiration of the period set forth in paragraph 8 of Schedule 1 (without giving effect to the proviso therein) and (ii) a bonus calculated as follows: adding the sum of the bonuses paid to the Employee with respect to the three Bonus Payment Dates immediately preceding the notice of termination in accordance with paragraph 6 of Schedule 1 (or, if  less than three Bonus Payment Dates shall have transpired since the Commencement Date, the bonuses paid with respect to such lesser number of Bonus Payment Dates) and dividing by three or such lesser number of Bonus Payment Dates, as the case may be).

	
  

	
ii)

	
The Company will pay the Employee the severance payment specified in Clause (5)(C)(i) above 545 days after the notice of termination is delivered to the Employee, provided the Employee shall have complied (in the reasonable judgement of the Company) with the provisions set forth in Clause 16.

	
  

	
iii)

	
For the avoidance of doubt, the Severance payments described herein are separate from obligation of the Company to pay salary during the notice period

	
6)

	
Vacation

The Employee shall be entitled to paid vacation in accordance with paragraph 7 of Schedule 1, such vacation to be taken in accordance with the Staff Policy Manual.

  

  

  

	
7)

	
Amendments and Waivers

	
  

	
a)

	
No amendments to the provisions of this Agreement shall be effective unless in writing and signed by the parties hereto or their duly authorized representatives.

	
  

	
b)

	
All rights, remedies and powers conferred upon the parties hereto are cumulative and shall not be deemed or construed to be exclusive of any other rights, remedies or powers now or hereafter conferred upon the parties hereto or either of them by law or otherwise.

	
  

	
c)

	
Any failure at any time to insist upon or enforce any such right, remedy or power shall not be construed as a waiver thereof.

	
8)

	
Warranty

The Employee represents and warrants that he is not a party to any agreement, contract (whether of employment or otherwise) or understanding, which would in any way restrict or prohibit him from:

	
  

	
a)

	
Undertaking or performing any of the duties of the Employment in accordance with the terms and conditions of this Agreement; or

	
  

	
b)

	
Utilizing any materials which the Employee proposes to use in the course of his employment with the Company whether in hard copy or stored in an electronic storage device.

	
  

	 

	
9)

	
Covenants

	
  

	
a)

	
The Employee expressly covenants that all Intellectual Property Rights relating in any way to the business activities (or incidental to the use of company time and or property) of the Company or its Affiliates which may be discovered, invented, improved or developed by the Employee during his Employment with the Company, whether during regular office hours or otherwise and whosesoever discovered, invented, improved or developed will be the exclusive and sole property of the Company and its Affiliates.

	
  

	
b)

	
The Employee undertakes to disclose promptly to the Company and hereby assigns to the Company without further compensation, all rights, title and interest in the said discoveries, inventions, improvements and developments whether conceived and developed solely by the Employee or jointly with others and will on the request of the Company execute all documents and do all such things as may be requested by the Company or its Affiliates to confirm or perfect the rights title and interest in such property provided that the Company will bear all costs and expenses associated therewith.

  

  

  

 

10)           Notice

	
  

	
a)

	
Any notice required or authorized hereunder shall be in writing and may be served:

i)            by personal delivery; or

	
  

	
ii)

	
by facsimile with a telephone call to ensure receipt; or

	
  

	
iii)

	
by email with a receipt evidencing that the recipient has read the email.

	
  

	
b)

	
In proving service of any notice hereunder it shall be sufficient to prove:

	
  

	
i)

	
in the case of a notice delivered personally, that it was left at the address for notices herein or any substituted address;

	
  

	
ii)

	
in the case of a notice sent by facsimile, that it was properly transmitted to the last known facsimile number; and

	
  

	
iii)

	
in the case of a notice sent by email that the computer of the person sending the email message has generated a receipt evidencing that the recipient has read the email message.

	
  

	
c)

	
The address for service of notices on the Company is at its principal place of business.

	
  

	
d)

	
The address for service of notices on the Employee is at his residence on the records of the Company.

11)           Confidentiality

	
  

	
a)

	
The Employee shall not at any time during his employment (except as is necessary and proper in the course of his employment) or at any time after the Termination Date disclose to any person any information as to the practice, business dealings or affairs of the Employer, its affiliates or any of the Employer’s customers or clients or as to any other matters which may come to his knowledge by reason of his employment with the Company.

	
  

	
b)

	
The Employee shall at the time of executing this Agreement execute the undertaking of Secrecy attached in Schedule 2.

	
12)

	
Notice of Termination

Subject to Clause 13, this Agreement may be terminated in accordance with paragraph 8 of Schedule 1.  The Employee agrees that, if applicable, when a notice of termination is served, he will promptly offer his resignation from the Board of Directors of the Company, and all of the Company’s subsidiaries and Affiliates.

  

  

  

 

	
13)

	
Summary Dismissal for Cause

The Company reserves the right to summarily dismiss the Employee for Cause, in which case no further payments are due to the Employee except salary up until and including the Termination Date.

	
14)

	
Misuse of Company Property

	
  

	
a)

	
The Employee shall not use any of the Company’s property including, but not limited to computer equipment and software, for personal use except moderate use of the Internet and email by the Employee, which does not interfere with the performance of their duties, and which does not include the reading or viewing of offensive or illegal material.

	
  

	
b)

	
The Company reserves the right to read all paper and computer files of the Employee on premises and any information stored on any electronic device which is the property of the Company.

	
15)

	
Outside Employment

The Employee shall not be permitted to hold any outside directorships or employment without the written consent of the Company.

	
16)

	
Non Solicitation

	
  

	
a)

	
During the 545 days after the date a notice of termination is delivered (if terminated without Cause or voluntarily initiated by the Employee) or the 545 days after the date the Employee is summarily dismissed (if terminated for Cause), the Employee will not directly, or indirectly through another Person:

	
  

	
i)

	
Solicit any employee of the Company or another Company Party to leave the employ of a Company Party, or in any way interfere with the relationship between a Company Party, on the one hand, and any employee thereof, on the other hand; provided however that the general solicitation of third parties through the use of means generally available to the public, including the placement of advertisements in the newspaper, will not be deemed to violate the clause ; or

	
  

	
ii)

	
Hire any individual who was an employee of a Company Party until twelve months after such individual’s employment relationship has ended.

	
  

	
b)

	
If the Employee is employed by or a consultant to another Person, the Employee will procure the compliance of that Person with the provisions of this Clause 16.

  

  

  

	
17)

	
Staff Policy Manual

The Employee agrees to abide by the terms of the Company Staff Policy Manual as amended from time to time. The Company Staff Policy Manual shall be available to the Employee.

	
18)

	
Miscellaneous

This Agreement shall be subject to the additional terms set out in paragraph 9 of Schedule 1.

	
19)

	
Whole Agreement

This Agreement constitutes the whole agreement between the parties.  All other agreements (if any) for service between the Company and the Employee or any other member of the Group are hereby abrogated and superseded.

	
20)

	
Severability

In the event that any provision of the Agreement is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision will, as to such jurisdiction, be modified or restricted to the extent necessary to make such provisions valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision will, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the binding effect and enforceability of the remaining provisions of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, will not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions will not invalidate or render unenforceable such provision in any other jurisdiction.

  

  

  

21)           Law and Jurisdiction

	
  

	
a)

	
The terms of this Agreement shall be governed by and construed in accordance with the laws of the Islands of Bermuda.

	
  

	
b)

	
All disputes, controversies or claims arising out of, relating to, or in connection with, this contract, or breach, termination or validity thereof, shall be finally settled by arbitration.  The arbitration shall be conducted in accordance with the Bermuda International Conciliation and Arbitration Act 1993, except as same may be modified herein or by mutual agreement of the parties.  The seat of the arbitration shall be Bermuda, and it shall be conducted in the English language.  The arbitration shall be conducted by one arbitrator who shall be selected by BIBA (Bermuda International Business Association) in the event that the parties fail to agree.  The arbitral award shall be in writing, shall state reasons for the award, and be final and binding on the parties.  The award may include an award of costs, including reasonable attorneys’ fees and disbursements.  Judgment on the award may be entered by any court having jurisdiction thereof or having jurisdiction over the parties or their assets.

IN WITNESS WHEREOF the parties hereto have set their hands the date first above written.

	
Flagstone Réassurance Suisse SA (Bermuda Branch)

 

 

 

 

 

David Brown

Chief Executive Officer

	
 

 

 

 

 

 

David Flitman

  

  

  

	
Schedule 1

	
1.           Position:

	
Chief Actuary

	  	  
	
2.           Place of employment:

	
The Employee’s place of employment shall be at the Company’s office in Bermuda; however the Company may require the Employee, in the performance of his duties, to travel from Bermuda to such other places and for such times as is reasonably necessary for the proper discharge of the Employee’s duties.

	  	  
	
3.           Commencement Date:

	
1st January, 2009

(Group start date 1 March 06 – current work permit start date 20/Oct/06)

	  	  
	
4.           Salary:

	
USD $525,000 per annum.

	  	  
	
5.           Deductions from Salary:

	
a)   Social Insurance:  This is a government administered contributory pension scheme and the contributions are split evenly between the Company and the Employee.

b)   Payroll Tax:  The Company will withhold the maximum permissible under Bermuda law from the Employee’s salary, and the balance will be paid by the Company.

c)   Medical Insurance: The Company is required to provide you with Medical Insurance under a Bermuda-approved scheme. Half of the cost of this insurance will be withheld from the Employee’s salary.

 

  

  

  

	
6.           Bonus and Bonus Payment Date:

	
a)   The Employee may be paid a bonus of up to 60% of salary in accordance to Paragraph 5 section 1 - 3.

b)   The Bonus Payment date shall be in Q1 of each year commencing Q1, 2009

 

	
7.           Vacation:

	
The Employee will be entitled to 25 days vacation per annum.

	  	  
	
8.           Notice of Termination:

	
This Agreement may be terminated for any reason by either party giving 180 days advanced notice in writing to the other; however, the Company may, in its sole discretion, pay salary in lieu of notice of termination given by the Company.

	  	  
	
9.           Miscellaneous:

	
a.   Housing Subsidy

The Employee will be entitled to receive a Housing Subsidy of $120,000 per annum, to be paid in arrears in twelve equal monthly instalments.

b.   Use of Company Aircraft

The Employee will be entitled to use the Company aircraft for his personal use, subject to availability, provided that the Employee promptly shall reimburse the marginal cost to the Company of such use.

 

 

	
10.         Permitted Outside employment and directorships:

	
None.

  

  

  

	
Schedule 2

Undertaking of Secrecy

TO:           Flagstone Réassurance Suisse SA (Bermuda Branch)

I HEREBY UNDERTAKE THE FOLLOWING:-

	
1.

	
That during the course of my employment with Flagstone Réassurance Suisse SA (Bermuda Branch), I will keep secret the affairs and concerns of Flagstone Reinsurance Holdings Limited and all affiliates including Flagstone Réassurance Suisse SA (Bermuda Branch), (the “Company”), and the nature and particulars of the Company including, but not limited to its investors, clients, transactions, trading models and trading strategies, or the financial results or performance figures of the Company or any client or strategy that may come to my attention during the course of my employment with the Company (“Confidential Information”).

	
2.

	
That after my departure from the Company, I will not disclose to any person the affairs of the Company, including, but not limited to its investors, clients, transactions, trading models and trading strategies or the financial results or performance figures of the Company or any client or strategy that may come to my attention during the course of my employment with the Company.

	
3.

	
That upon my departure from the Company, I will not take with me any Confidential Information belonging to or concerning the Company, or its clients, whether in printed form or on any electronic storage device.

	
4.

	
In the event that I do have in my possession any Confidential Information following my departure from the Company, I undertake to deliver such information to the Company within 3 days of my departure.  If personal delivery of such information is either not possible or inconvenient, I undertake to contact the President of the Company and arrange a suitable method of disposal of such confidential information within three days of my departure.

I hereby acknowledge that any breach of this undertaking may result in my dismissal from the Company, and that my obligations under this undertaking continue after the termination of my employment with the Company.

	
Signature

 

	        

               
	  	  
	
Name

 

	
 

David Flitman

                                                                      

	  	  
	
Witness

 

	  

	  	  
	
Date

 

	  

	  	  

  

  

  

January 1, 2011

FAO:  David Flitman

Dear David,

Re:           Change of Bonus Cap

We are pleased to confirm that with effect from January 1 2011 your maximum discretionary bonus cap is being increased to 90%.

All other terms and conditions of your employment remain unchanged.

We look forward to your continued contribution to the success of the company.

Yours sincerely,

David A. Brown

Chief Executive Officerex1044.htm

  

Exhibit 10.44  

EXECUTION COPY

SHARE AND WARRANT PURCHASE AGREEMENT

 

 

SHARE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) dated as of December 8, 2010, among Limestone Business Limited, a limited company organized under the laws of the British Virgin Islands (“Limestone”), Haverford (Bermuda) Limited, a company organized under the laws of the Islands of Bermuda (“Haverford” and, together with Limestone, the “Shareholders”), Mark J. Byrne of Roughill, 6 Long Lane, Hamilton Parish, Bermuda (“Byrne”) and Flagstone (Bermuda) Holdings Limited, a company organized under the laws of the Islands of Bermuda (the “Company”).

 

WHEREAS the Company and Byrne are parties to a General Release and Settlement Agreement dated as of May 21, 2010 (the “Settlement Agreement”).

 

WHEREAS the Company desires to purchase from Limestone, and Limestone desires to sell to the Company, five million one hundred fifty five thousand one hundred fifty six (5,155,156) shares, par value $0.01 per share (the “Limestone Shares”), of Flagstone Reinsurance Holdings, SA, a company organized under the laws of Luxembourg, with registered office at 37, Val Saint-Andre, L-1128, Luxembourg with RCS Luxembourg Number B153214 (“Holdings”).

 

WHEREAS the Company desires to purchase from Haverford, and Haverford desires to sell to the Company, two million eight hundred forty nine thousand eight hundred sixty eight (2,849,868) shares, par value $0.01 per share (the “Haverford Shares” and, together with the Limestone Shares, the “Shares”), of Holdings.

 

WHEREAS the Company desires to purchase from Haverford, and Haverford desires to sell to the Company, the Amended and Restated Share Purchase Warrant dated as of June 25, 2010 (the “Haverford Warrant”), issued to Haverford and exercisable for seven million nine hundred fifty five thousand five hundred fifty three (7,955,553) shares, par value $0.01 per share, of Holdings.

 

WHEREAS Byrne wishes to resign as a member of the board of directors of Holdings (the “Board”).

 

NOW THEREFORE, each Shareholder, Byrne and the Company hereby agree, for receipt of good and valuable consideration, the sufficiency of which is acknowledged, as follows:

 

1. Purchase and Sale of the Shares.  On the terms and subject to the conditions of this Agreement, each Shareholder shall sell, transfer and deliver or cause to be sold, transferred and delivered to the Company, and the Company shall purchase from each Shareholder, its respective Shares at a price per share equal to $11.4823 (the “Shares Purchase Price”), payable as set forth below in Section 3.

 

2. Purchase and Sale of the Haverford Warrant.  On the terms and subject to the conditions of this Agreement, Haverford shall sell, transfer and deliver or cause to be sold, transferred and delivered to the Company, and the Company shall purchase from Haverford, the Haverford Warrant at a price equal to $13,500,000 (the “Warrant Purchase Price”), payable as set forth below in Section 3.

 

 

 

  

1

  

EXECUTION COPY

3. Closing.  a) The closing (the “Closing”) of the purchase and sale of the Shares and the Haverford Warrant shall be held at the offices of the Company, at 10:00 a.m., on the first business day following the satisfaction or waiver (by the Company) of the conditions set forth in Section 3(b).  The date on which the Closing shall occur is hereinafter referred to as the “Closing Date”.  At the Closing, (i) the Company shall pay to the Shareholders an amount equal to the Shares Purchase Price, pursuant to wire instructions that shall be delivered to the Company by the Shareholders no later than one business day prior to the Closing, (ii) each Shareholder shall deliver or cause to be delivered to the Company the certificates representing the Shares to the address specified in Section 17, or, if the Shares are held in book entry form, shall cause the Shares to be transferred to such account as the Company shall specify no later than one business day prior to the Closing, (iii) the Company shall pay to Haverford an amount equal to the Warrant Purchase Price, pursuant to wire instructions that shall be delivered to the Company by Haverford no later than one business day prior to the Closing and (iv) Haverford shall deliver or cause to be delivered to the Company the Haverford Warrant to the address specified in Section 17.

 

   b)  The obligations of the Company to consummate the transactions contemplated hereby are subject to the satisfaction or waiver (by the Company) of the following conditions:

 

	
(i)  

	
the Company shall have received confirmation from Holdings’ ratings agencies that Holdings’ current ratings have been affirmed and further that the current ratings will not be adversely affected by a reduction in capital of up to $106 million;

 

	
(ii)  

	
the Company and Holdings shall have received any required regulatory approvals for the consummation of the transactions contemplated herein;

 

	
(iii)  

	
the representation and warranties of the Shareholders and Byrne set forth in Section 4 shall be true and correct;

 

	
(iv)  

	
 Byrne shall have tendered a written resignation to the Board conditioned only on the consummation of the purchase of the Shares and the Haverford Warrant hereunder; and

 

	
(v)  

	
neither Byrne nor any Shareholder is in breach of any provision of this Agreement.

 

4. Representations and Warranties of the Shareholders and Byrne.  Each Shareholder and Byrne hereby represents and warrants to the Company, as applicable:

 

	
(a)  

	
Organization and Standing.  Limestone hereby represents and warrants that it is a limited company duly organized, validly existing and in good standing under the laws of the British Virgin Islands.  Haverford hereby represents and warrants that it is a company duly organized, validly existing and in good standing under the laws of the Islands of Bermuda.

 

	
(b)  

	
Authority.  Each Shareholder has full organization power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  This Agreement has been duly executed and delivered by each Shareholder and Byrne, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

 

	
(c)  

	
No Conflicts; Consents.  The execution and delivery of this Agreement by each Shareholder and Byrne does not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of or default under, or give rise to a right of termination, cancellation or

 

  

2

  

EXECUTION COPY

	
(d)  

	
acceleration of any obligation or to loss of a material benefit under, or result in the creation of any lien, claim, encumbrance, security interest, option, charge or restriction of any kind upon the Shares or the Haverford Warrant.  No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with any transnational, national, federal, state, provincial or local governmental, regulatory or administrative authority, department, court, agency or  official (a “Governmental Entity”) is required to be obtained or made by or with respect to either Shareholder or Byrne in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

	
(e)  

	
The Shares.  Each Shareholder has good and valid title to the Shares owned by it, and upon Closing of the transfer in accordance with Section 3 above, the Shares will be (i) free and clear of any liens, claims, encumbrances, security interests, options, charges and restrictions of any kind, and (ii) other than this Agreement, the Shares will not be subject to any voting trust agreement or other contract, agreement, arrangement, commitment or understanding, including any such agreement, arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend rights or disposition of the Shares.

 

	
(f)  

	
The Haverford Warrant.  Haverford has good and valid title to the Haverford Warrant and has not taken any activity to exercise it.  Upon Closing of the transfer in accordance with Section 3 above, the Haverford Warrant will be (i) free and clear of any liens, claims, encumbrances, security interests, options, charges and restrictions of any kind, and (ii) other than this Agreement, the Haverford Warrant will not be subject to any contract, agreement, arrangement, commitment or understanding, including any such agreement, arrangement, commitment or understanding restricting or otherwise relating to the disposition or cancellation of the Haverford Warrant.

 

	
(g)  

	
No Reliance.  Each Shareholder is, or has been advised on this matter by a person who is a sophisticated investor and has sufficient knowledge and experience in investing in securities to properly evaluate the merits of the transactions contemplated hereby.  Each Shareholder has independently, and without reliance upon the Company or any of its affiliates, and based on such information as it has deemed appropriate, made its own analysis and decision to sell the Shares pursuant to the terms hereof.

 

	
(h)  

	
Compliance with Settlement Agreement.  Byrne has complied with his duties under the Settlement Agreement through the date hereof in all material respects.

 

5. Representations and Warranties of the Company. The Company hereby represents and warrants to the Shareholders and Byrne, as applicable:

 

	
(a)  

	
Organization and Standing.  The Company is a company duly organized, validly existing and in good standing under the laws of the Islands of Bermuda.

 

	
(b)  

	
Authority.  The Company has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  All corporate acts and other proceedings required to be taken by the Company to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and properly taken.

 

  

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EXECUTION COPY

	
(c)  

	
This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms.

 

	
(d)  

	
No Conflicts; Consents.  The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof shall not, conflict with, or result in any violation of or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any lien, claim, encumbrance, security interest, option, charge or restriction of any kind upon any of the properties or assets of the Company.  Except as set forth in Section 3(b)(i), no material consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to the Company in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

	
(e)  

	
No Sale of Holdings.  As of the date of this Agreement, neither Holdings nor its directors or executive officers is engaged in any continuing material negotiations with respect to price and/or a letter of intent with any other person regarding a possible sale of Holdings, whether as a merger, sale of equity that would result in a change of control, or sale of substantially all assets.

 

	
(f)  

	
Compliance with Settlement Agreement.  The Company and Holdings have complied with their respective duties under the Settlement Agreement through the date hereof in all material respects.

 

6. Reasonable Best Efforts.  All parties hereto shall use their reasonable best efforts, and the Company shall cause Holdings to use its reasonable best efforts, to cause the conditions to Closing set forth in Section 3(b) to be satisfied, and the transactions contemplated hereby to be consummated, on or prior to December 30, 2010.

 

7. Standstill.  From the date of this Agreement until the third anniversary of the Closing Date (the “Restricted Period”), none of Limestone, Haverford, Byrne will, nor will any of them permit any of their respective affiliates to, and Byrne will not permit his spouse or children to, in any manner, directly or indirectly, (a) acquire, offer to acquire, agree to acquire or make any proposal to acquire, by purchase or otherwise, or become directly or indirectly the beneficial owner of, any securities, or direct or indirect rights to acquire any securities, of Holdings or any subsidiary of Holdings or of any successor to or person in control of Holdings, or any cash settled call options or other derivative securities or contracts or instruments in any way related to the price of shares of common stock of Holdings, or any assets or property of Holdings or any subsidiary of Holdings or of any such successor or controlling person; (b) make or in any way participate in any “solicitation” of “proxies” (as such terms are used in the rules of the Securities and Exchange Commission) to vote, or seek to advise or influence any person with respect to voting of, any voting securities of Holdings or any of its subsidiaries with respect to any matter, or call or seek to call a meeting of Holdings’ stockholders or initiate any stockholder proposal for action by Holdings’ stockholders, or make a request for a list of Holdings’ shareholders, or seek election to or to place a representative on the board of directors of Holdings or seek the removal of any director from the board of directors of Holdings; (c) make any announcement with respect to, or solicit or submit a proposal for, or offer of (with or without conditions) any merger, consolidation, business combination, tender or exchange offer, recapitalization, reorganization, purchase or license of a material 

 

  

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portion of the assets and properties of or other similar extraordinary transaction involving Holdings or any of its securities or subsidiaries; (d) form, join or in any way participate in a “partnership, limited partnership, syndicate or other group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to any securities of Holdings or any of its subsidiaries or otherwise in connection with any of the foregoing; (e) otherwise act, alone or in concert with others, to seek to control or influence the management, board of directors or policies of Holdings or any of its subsidiaries; (f) take any action that could reasonably be expected to require Holdings to make a public announcement regarding any of the events described in this paragraph; (g) request Holdings or any of its subsidiaries, officers, directors, employees or affiliates, directly or indirectly, to amend or waive any provision of this paragraph; (h) to contest the validity of this agreement or seek a release of the restrictions contained herein (whether by legal action or otherwise); (i) disclose (including without limitation the filing of any document or report with the Securities and Exchange Commission or any other governmental agency) any intention, plan or arrangement inconsistent with any of the foregoing; or (j) have any discussions or negotiations regarding or enter into any arrangements, understandings or agreements (whether written or oral) with, or advise, assist, encourage or direct any person to do, or to advise, assist, encourage or direct, any other person to do, any of the foregoing, or make any investment in any other person that engages, or offers or proposes to engage, in any of the foregoing, other than a passive investment below 5% of the total equity and voting power of such person made without knowledge that such person engages, or offers or proposes to engage, in any of the foregoing.  During the Restricted Period, Limestone, Haverford and Byrne shall promptly advise Holdings of any inquiry or proposal made to any of them, with a proposed price, with respect to any of the foregoing.  Notwithstanding any of the foregoing provisions of this Section 7, none of Limestone, Haverford or Byrne shall be prohibited from acquiring, either directly or indirectly, any securities of Holdings so long as the aggregate amount of Holdings’ securities held collectively by Limestone, Haverford, Byrne and his spouse and children, any of their affiliates and any other member of any “partnership, limited partnership, syndicate or other group” (as defined in Section 13(d)(3) of the Exchange Act) to which any of Limestone, Haverford or Byrne belongs, is less than 5% of the outstanding amount of any class or series of Holdings’ securities including, if applicable, on an “as converted” basis.

 

8. Resignation.  On the Closing Date, Byrne will resign as, and cease to be, a member of the Board of Directors of Holdings.

 

9. Publicity.  Upon execution and delivery of this Agreement, the Company shall procure that Holdings issue a press release in substantially the form attached as Exhibit A.

 

10. Waiver Under Settlement Agreement.  Byrne waives any breach by the Company of its obligations under the Settlement Agreement through the date hereof of which Byrne has actual knowledge.  The Company waives any breach by Byrne of his obligations under the Settlement Agreement through the date hereof of which Holdings’ Chief Executive Officer, Chief Financial Officer, General Counsel or Board of Directors in its capacity as such has actual knowledge.

 

11. Further Assurances.  From time to time, as and when requested by any party hereto, each other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement.

 

  

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12. Assignment.  This Agreement and the rights and obligations hereunder shall not be assignable or transferable by the Company, either Shareholder or Byrne (including by operation of law in connection with a merger, or sale of substantially all the assets of the Company) without the prior written consent of the other parties hereto; provided, however, that the Company may assign its right to purchase the Shares or the Haverford Warrant hereunder to a subsidiary of the Company without the prior written consent of either Shareholder or Byrne; provided further, however, that no assignment shall limit or affect the assignor’s obligations hereunder.  Any attempted assignment in violation of this Section 12 shall be void.

 

13. No Third-Party Beneficiaries.  This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder.

 

14. Termination.  Anything contained herein to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned (a) by any party at any time after January 31, 2011, if the Closing does not occur on or before January 31, 2011, (b) by Byrne and the Shareholders if the conditions set forth in Section 3(b)(i) or 3(b)(ii) have not been satisfied by December 30, 2010, or (c) by the mutual written consent of each Shareholder, Byrne and the Company.  If this Agreement is terminated and the transactions contemplated hereby are abandoned pursuant to this Section 14, this Agreement shall become void and of no further force or effect.  Notwithstanding any provision herein to the contrary, no party may terminate this Agreement if the failure to close is caused by the breach by such party of any of its obligations hereunder.

 

15. Expenses.  Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses.

 

16. Amendments.  No amendment, modification or waiver in respect of this Agreement shall be effective unless it shall be in writing and signed by both parties hereto.

 

17. Notices.  All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand, sent by email, or sent by reputable overnight courier service and shall be deemed given when so delivered by hand or sent by email, or one business day after sending if sent by overnight courier service), as follows:

 

	
if to the Company,

     Crawford House

     23 Church Street

     Hamilton  HM 11  Bermuda

     Attention:       William Fawcett

Director & General Counsel

Email: william.fawcett@flagstonere.com

 

	  

 

 

  

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if to Limestone, to them in care of

Maitland Services Limited

Falcon Cliff

Palace Road

Douglas

Isle of Man

IM2 4LB

Attention:             Julieanne Shimmin

Email: julieanne.shimmin@maitlandgroup.com

 

	  
	
if to Byrne or to Haverford, to them in care of

         Dermot Limited

         2nd Floor Goldie House

         Upper Church Street

         Douglas

         Isle of Man

         IM1 1EB

        Attention:  Alan Oates

Email:  AlanOates@dermotltd.info

 

	  

 

18. Interpretation.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

19. Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party.

 

20. Entire Agreement.  The Settlement Agreement shall survive the execution of this Agreement and this Agreement shall not be construed to amend, modify, supersede or terminate the Settlement Agreement, except that (a) Sections 3(b)(iv) and 8 of this Agreement supersede the phrase, “provided that Byrne will remain a member of the Board as a non-employee director” in Section 1 of the Settlement Agreement, (b) the last sentence of Section 1 of the Settlement Agreement shall be deleted and (c) Section 10 hereof shall solely constitute a wavier of the matters expressly set forth therein.  Except for the Settlement Agreement, this Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.  No party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein.

 

21. Severability.  If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.

 

22. Consent to Jurisdiction.  The Company, Byrne and each Shareholder irrevocably submit to the non-exclusive jurisdiction of the courts of Bermuda, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby.

 

  

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23. Governing Law.  This Agreement shall in all respects be interpreted, enforced and governed under the laws of Bermuda without regard to conflicts of laws principles or choice of law provisions that would cause the application of the law of any other jurisdiction.  It is the intention of the parties to this Agreement that the laws of the Bermuda shall govern the validity of this Agreement, the construction of its terms, the interpretation of the rights and duties of the parties, and its enforcement.

 

 

 

[SIGNATURE PAGES FOLLOW]

 

  

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

	
LIMESTONE BUSINESS LIMITED

 

by:  Solon Director Limited, as its Director

 

  by: /s/ Wyn Hughes

 

________________________

     Name:           Wyn Hughes

        Title:              Authorized Signatory

 

  by: /s/ Maria Patterson

 

________________________

     Name:           Maria Patterson

        Title:              Authorized Signatory

 

	  
	
HAVERFORD (BERMUDA) LIMITED

 

 

  by:

 

________________________

     Name:           Mark Byrne

        Title:              Director

 

  by:

 

________________________

     Name:

        Title:

	  
	
 

_________________________________

     Name:           Mark J. Byrne

 

 

	  
	
FLAGSTONE (BERMUDA) HOLDINGS LIMITED

 

  by: /s/ William F. Fawcett

 

________________________

     Name:           William F. Fawcett

     Title:              Director

	  

 

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