<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
Commission File Number 333-42749
AMERICAN SAFETY INSURANCE GROUP, LTD.
(Exact name of Registrant as specified in its charter)
Bermuda Not Applicable
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
44 Church Street
Hamilton HM HX, Bermuda
(Address, zip code of principal executive offices)
(441) 295-5688
(Registrant's telephone number, including area code)
------------
Indicate by check mark whether Registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
--- ---
The aggregate number of shares outstanding of Registrant's common stock, $.01
par value, on May 14, 1998 was 6,030,230.
<PAGE>
AMERICAN SAFETY INSURANCE GROUP, LTD.
FORM 10-Q
TABLE OF CONTENTS
-----------------
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements............................................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risks................................................... 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities and Use of Proceeds........................ 16
Item 3. Defaults Upon Senior Securities.................................. 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 16
Item 5. Other Information................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
American Safety Insurance Group, Ltd. and Subsidiaries
Consolidated Balance Sheets
December 31, March 31,
Assets 1997 1998
------ ----------- ------------
(unaudited)
Investments:
Securities available for sale, at fair value:
Fixed maturities $26,462,275 $57,433,410
Common stock 1,054,549 838,357
Short-term investments 1,823,830 2,039,221
----------- -----------
Total investments 29,340,654 60,310,988
Cash 2,768,831 4,059,426
Accrued investment and interest income 781,798 1,457,664
Notes receivable:
Related parties 580,000 580,000
Other 4,697,804 4,675,734
Premiums receivable 6,809,436 6,217,509
Commissions receivable 18,630 47,211
Ceded unearned premium 649,175 660,178
Reinsurance recoverable 778,975 820,138
Due from affiliate 288,951 240,513
Income tax recoverable 152,802 71,420
Deferred income taxes 209,795 243,620
Goodwill 270,010 265,567
Other assets 321,339 349,536
----------- -----------
Total assets $47,668,200 $79,999,504
=========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Unpaid losses and loss adjustment expenses $11,571,539 $12,390,410
Unearned premiums 2,331,579 3,213,573
Liability for deductible fees held 3,539,032 3,117,464
Reinsurance on paid loss and loss
adjustment expenses 256,085 45,388
Reinsurance deposits on retroactive
contract 537,500 455,472
Ceded premiums payable 5,990,907 4,883,015
Due to affiliate:
Ceded premiums payable 217,062 111,523
Reinsurance on paid loss and loss
adjustment expenses 41,085 4,667
Income tax payable - -
Accounts payable and accrued expenses 1,342,515 2,137,110
----------- -----------
Total liabilities 25,827,304 26,358,622
----------- -----------
Shareholders' equity:
Preferred stock, $0.01 par value; authorized
5,000,000 shares; no shares issued and
outstanding - -
Common stock, $0.01 par value; authorized
15,000,000 shares; issued and outstanding at
December 31, 1997, 2,925,230 shares, and at
March 31, 1998, 6,030,230 shares 29,252 60,302
Additional paid-in capital 2,751,789 33,558,256
Retained earnings 18,751,222 19,774,954
Other comprehensive income 308,633 247,370
----------- -----------
Total shareholders' equity 21,840,896 53,640,882
----------- -----------
Total liabilities and
shareholders' equity $47,668,200 $79,999,504
=========== ===========
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE>
American Safety Insurance Group, Ltd. and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
March 31,
------------------------
1997 1998
---- ----
Revenues:
Direct premiums earned $ 383,765 $1,038,024
Assumed premiums earned:
Affiliate 564,188 541,359
Nonaffiliates 1,044,237 1,539,456
---------- ----------
Total assumed premiums earned 1,608,425 2,080,815
---------- ----------
Ceded premiums earned:
Affiliate 238,635 715,593
Nonaffiliates 170,203 310,416
---------- ----------
Total ceded premiums earned 408,838 1,026,009
---------- ----------
Net premiums earned 1,583,352 2,092,830
---------- ----------
Net investment income 333,475 626,649
Interest on notes receivable 277,584 268,215
Brokerage commission income 617,314 384,041
Management fees from affiliate 124,101 170,749
Net realized gains (losses) 5,649 37,146
Other income 5,492 6,700
---------- ----------
Total revenues 2,946,967 3,586,330
---------- ----------
Expenses:
Losses and loss adjustment expenses incurred 1,012,779 1,335,177
Acquisition expenses 156,857 213,379
Other expenses 721,701 959,804
---------- ----------
Total expenses 1,891,337 2,508,360
---------- ----------
Earnings before income taxes 1,055,630 1,077,970
Income taxes 193,335 54,237
---------- ----------
Net earnings $ 862,295 $1,023,733
========== ==========
Net earnings per share:
Basic $ 0.30 $ 0.23
========== ==========
Diluted $ 0.29 $ 0.23
========== ==========
Common shares used in computing earnings per share:
Basic 2,872,830 4,429,730
========== ==========
Diluted 2,963,931 4,510,455
========== ==========
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE>
American Safety Insurance Group, Ltd. and Subsidiaries
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------
1997 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 862,295 $ 1,023,733
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Realized losses (gains) on sale of investments (5,649) (37,146)
Amortization of deferred acquisition costs 162,675 158,426
Change in:
Accrued investment and interest income 11,951 (675,866)
Premiums receivable (1,312,460) 591,927
Commissions receivable 1,896 (28,581)
Reinsurance recoverable and ceded unearned premiums (495,000) (52,166)
Due from affiliate 143,312 48,438
Income taxes 147,680 47,557
Unpaid losses and loss adjustment expenses 1,129,344 818,871
Unearned premiums 536,682 881,994
Liability for deductible fees held 1,290,410 (503,596)
Ceded premiums payable 996,614 (1,107,892)
Due to affiliate 58,971 (141,957)
Accounts payable and accrued expenses (1,219,554) 794,595
Other, net (244,780) (402,860)
----------- ------------
Net cash provided by operating activities 2,064,387 1,415,477
----------- ------------
Cash flow from investing activities:
Purchases of fixed maturities (5,555,848) (39,454,936)
Proceeds from maturity and redemption of fixed maturities 850,990 3,390,813
Proceeds from sale of fixed maturities 423,208 4,998,332
Proceeds from sale of common stock 241,432 304,140
Decrease (increase) in short-term investments (1,086,098) (215,391)
Increase in notes receivable - other 2,580,930 22,070
(Increase) decrease in notes receivable - related parties 70,000 -
Purchase of fixed assets, net (13,206) (7,427)
----------- ------------
Net cash used in investing activities (2,488,592) (30,962,399)
----------- ------------
Cash flow from financing activities:
Proceeds from sale of common stock - 30,837,517
----------- ------------
Net cash used in financing activities - 30,837,517
----------- ------------
Net increase (decrease) in cash (424,205) 1,290,595
Cash at beginning of period 3,271,957 2,768,831
----------- ------------
Cash at end of period $ 2,847,752 $ 4,059,426
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE>
American Safety Insurance Group, Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Earnings
(Unaudited)
Three months ended
March 31,
------------------------
1997 1998
---- ----
Net earnings $ 862,295 $1,023,733
Other comprehensive earnings before income taxes:
Unrealized gains (losses) on securities available
for sale (376,003) (104,996)
Reclassification adjustment for realized gains
included in net earnings 5,649 37,146
--------- ----------
Total other comprehensive earnings before taxes (370,354) (67,850)
Income tax expense related to items of
comprehensive income (45,555) (6,587)
--------- ----------
Other comprehensive earnings net of income taxes (324,799) (61,263)
--------- ----------
Total comprehensive earnings $ 537,496 $ 962,470
========= ==========
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE>
American Safety Insurance Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited interim consolidated financial statements of American
Safety Insurance Group, Ltd. ("American Safety") and its subsidiaries
(collectively, the "Company") are prepared in accordance with generally accepted
accounting principles in the United States and, in the opinion of management,
reflect all adjustments, consisting of normal recurring adjustments, considered
necessary for a fair presentation of the interim period presented. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates, based on the best
information available, in recording transactions resulting from business
operations. The balance sheet amounts that involve a greater extent of
accounting estimates and actuarial determinations subject to future changes are
the Company's liabilities for unpaid losses and loss adjustment expenses. As
additional information becomes available (or actual amounts are determinable),
the recorded estimates may be revised and reflected in operating results. While
management believes that the liability for unpaid losses and loss adjustment
expenses is adequate to cover the ultimate liability, such estimates may be more
or less than the amounts actually paid when claims are settled.
The results of operations for the three months ended March 31, 1998 may not be
indicative of the results that may be expected for the full year ending December
31, 1998. These unaudited interim consolidated financial statements and notes
should be read in conjunction with the financial statements and notes included
in the audited consolidated financial statements of American Safety and
subsidiaries for the year ended December 31, 1997.
The unaudited interim consolidated financial statements include the accounts of
American Safety and each of its subsidiaries. All significant intercompany
balances have been eliminated.
Note 2 - Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(Statement 130). Statement 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. The Company adopted Statement 130 effective
January 1, 1998. The primary component of the differences between net income
and comprehensive income for the Company is unrealized gains on securities.
Total comprehensive income for the three months ended March 31, 1997 was
$537,496 as compared to $962,470 for the three months ended March 31, 1998.
Note 3 - Nature of Operations
The following is a description of certain risks facing casualty insurers:
Legal/Regulatory Risk is the risk that changes in the legal or regulatory
environment in which an insurer operates which will create additional expenses
not anticipated by the insurer in pricing its products and beyond those recorded
in the financial statements. Regulatory initiatives designed to reduce insurer
profits or otherwise affecting the industry in which the Company operates, new
legal theories or insurance company insolvencies through guaranty fund
assessments, may create costs for the Company beyond those recorded in the
financial statements. The Company attempts to mitigate this risk
7
<PAGE>
by writing insurance business in several states, thereby spreading this risk
over a large geographic area.
Credit Risk is the risk that issuers of securities owned by the Company or
secured notes receivable will default or that other parties, including
reinsurers that have obligations to the insurer, will not pay or perform. The
Company attempts to mitigate this risk by adhering to a conservative investment
strategy, by obtaining sufficient collateral for secured note obligations and by
maintaining sound reinsurance, credit and collection policies.
Interest Rate Risk is the risk that interest rates will change and cause a
decrease in the value of an insurer's investments. The Company attempts to
mitigate this risk by attempting to match the maturities of its assets with the
expected payouts of its liabilities.
Note 4 - Investments
The amortized cost and estimated fair values of investments at December 31,
1997 and March 31, 1998 are as follows:
<TABLE>
<CAPTION>
Amount
Gross Gross at which
Amortized unrealized unrealized Estimated shown in the
cost gains losses fair value balance sheet
--------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1997:
Securities available for sale:
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $11,725,010 128,883 2,376 11,851,517 11,851,517
Obligations of states and political
subdivisions 4,782,325 220,175 -- 5,002,500 5,002,500
Corporate securities 6,545,888 51,986 13,508 6,584,366 6,584,366
Mortgage-backed securities 3,016,040 30,693 22,841 3,023,892 3,023,892
----------- ------- ------ ---------- ----------
Total fixed maturities 26,069,263 431,737 38,725 26,462,275 26,462,275
Equity investments - common stocks 1,045,493 12,688 3,632 1,054,549 1,054,549
----------- ------- ------ ---------- ----------
Total $27,114,756 444,425 42,357 27,516,824 27,516,824
=========== ======= ====== ========== ==========
March 31, 1998:
Securities available for sale:
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $31,834,943 36,646 -- 31,871,589 31,871,589
Obligations of states and political
subdivisions 4,775,623 199,249 -- 4,974,872 4,974,872
Corporate securities 10,104,474 47,176 29,633 10,122,017 10,122,017
Mortgage-backed securities 10,478,728 10,194 23,990 10,464,932 10,464,932
----------- ------- ------ ---------- ----------
Total fixed maturities 57,193,768 293,265 53,623 57,433,410 57,433,410
Equity investments - common stocks 752,704 85,653 -- 838,357 838,357
----------- ------- ------ ---------- ----------
Total $57,946,472 378,918 53,623 58,271,767 58,271,767
=========== ======= ====== ========== ==========
</TABLE>
Note 5 - Shareholder Matters
On January 29, 1998, the Company effectuated a 1,310-for-one share split and
increased its authorized capital to 15,000,000 common shares and 5,000,000
preferred shares in contemplation of the Company's initial public offering which
became effective February 12, 1998. All share and per share amounts have been
retroactively adjusted to effect this split.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
American Safety is a specialty insurance holding company which, through its
subsidiaries, develops, underwrites, manages and markets primary casualty
insurance and reinsurance programs in the alternative insurance market for (i)
environmental remediation risks; (ii) employee leasing and staffing industry
risks; and (iii) other specialty risks. The Company has demonstrated expertise
in developing specialty insurance coverages and custom designed risk management
programs not generally available in the standard insurance market.
The Company's specialty insurance programs include coverages for general
liability, pollution liability, professional liability, workers' compensation
and surety, as well as custom designed risk management programs (including
captive and rent-a-captive programs), for contractors, consultants and other
businesses and property owners who are involved with environmental remediation,
employee leasing and staffing, and other specialty risks. Through its U.S.
brokerage and management services subsidiaries, the Company also provides
specialized insurance program development, underwriting, risk placement,
reinsurance, program management, brokerage, loss control, claims administration
and marketing services.
The Company insures and places risks through its U.S. insurance subsidiary,
American Safety Casualty Insurance Company, as well as its non-subsidiary risk
retention group affiliate, American Safety Risk Retention Group, Inc., and
substantial unaffiliated insurance and reinsurance companies. The Company also
reinsures and places, through its Bermuda reinsurance subsidiary, American
Safety Reinsurance, Ltd., and substantial unaffiliated reinsurers, a portion of
the risk underwritten directly by its U.S. insurance subsidiary, American Safety
Casualty Insurance Company, its risk retention group affiliate and other
insurers. Substantially all of the reinsurance business that the Company
currently assumes is for primary insurance programs that the Company has
developed and underwritten. In January 1998, the Company formed American Safety
Reinsurance, Ltd., a Bermuda reinsurance subsidiary, and transferred a
substantial portion of its reinsurance business on a going forward basis to the
subsidiary.
The Company is able to select its roles as program developer, primary
underwriter, reinsurer, program manager and broker based on its assessment of
each risk profile. After determining its roles, the Company utilizes its
insurance and reinsurance subsidiaries, its insurance brokerage and management
services subsidiaries, and its risk retention group affiliate to generate risk
premium revenues, program management fees, insurance and reinsurance commissions
and investment income.
A.M. Best Company ("A.M. Best"), an independent nationally recognized insurance
rating service and publisher, has assigned a rating of "A (Excellent)" on a
group basis to American Safety, as well as its U.S. insurance subsidiary and its
non-subsidiary risk
9
<PAGE>
retention group affiliate. A.M. Best's ratings are an independent opinion of an
insurer's ability to meet its obligations to policyholders, which opinion is of
concern primarily to policyholders, insurance agents and brokers, and should not
be considered an investment recommendation.
The Company's financial position and results of operation are subject to change
based on various factors, including competitive conditions in the insurance
industry, unpredictable developments in loss trends, changes in loss reserves,
market acceptance of new coverages and enhancements, and changes in levels of
general business activity and economic conditions. The Company's reported
combined ratio for its insurance operations may not provide an indication of the
Company's overall profitability from insurance and reinsurance programs due to
the exclusion of fee and commission income and expenses generated in related
non-insurance subsidiaries.
Certain of the Company's insurance policies and reinsurance assumed, including
general and pollution liability policies covering environmental remediation
risks, as well as workers' compensation policies, may be subject to claims
brought years after an incident has occurred or the policy period had ended.
The Company maintains reserves to cover its estimated liability for losses and
loss adjustment expenses with respect to reported and unreported claims
incurred.
The Company has reviewed its internal business systems and believes that the
systems, primarily its computer system, will process date information accurately
and without interruption when required to process dates in the year 1999 and
beyond. The Company has not been required to expend significant resources to
address the year 2000 issue and does not anticipate any significant
expenditures.
Statements made in this Report that are not based on historical information are
deemed to be "forward-looking statements" under applicable federal securities
laws. Such forward-looking statements are based largely on current expectations
and assumptions of management and are subject to a number of risks and
uncertainties which could cause actual results to differ materially from those
contemplated, including, without limitation, competitive conditions in the
insurance industry, unpredictable developments in loss trends, changes in loss
reserves, market acceptance of new coverages and enhancements, and changes in
levels of general business activity and economic conditions.
10
<PAGE>
Results of Operations
The following table sets forth the Company's consolidated revenues:
<TABLE>
<CAPTION>
Percent
Increase
(Decrease)
--------------------------------
Three Months Ended March 31,
--------------------------------
1997 1998 1997
to 1998
--------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Net Premiums earned:
Reinsurance:
Workers' compensation................ $1,045 $1,464 40.1%
General liability from affiliate..... 451 441 (2.2)
------ ------
Total reinsurance............. 1,496 1,905 27.3
Primary insurance:
Surety............................... 87 188 116.1
------ ------
Total primary insurance....... 87 188 116.1
------ ------
Total net premiums earned 1,583 2,093 32.2
------ ------
Net investment income................... 333 627 88.3
Interest on notes receivable............ 278 268 (3.6)
Commission and fee income:
Brokerage commission income............. 617 384 (37.8)
Management fees from affiliate.......... 124 171 37.9
------ ------
Total commission and fee income...... 741 555 (25.1)
------ ------
Net realized gains (losses)............. 6 37 516.7
Other income............................ 6 6 --
------ ------
Total Revenues...... $2,947 $3,586 21.7%
====== ======
</TABLE>
11
<PAGE>
The following table sets forth the components of the Company's GAAP combined
ratio for the periods indicated:
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1997 1998
---- ----
<S> <C> <C>
Insurance operations:
Loss and loss adjustment expense ratio........... 63.4% 63.8%
Expense ratio.................................... 16.3 10.4
---- ----
Combined ratio................................ 79.7% 74.2%
==== ====
</TABLE>
Quarter Ended March 31, 1998 Compared to Quarter Ended March 31, 1997
Net Premiums Earned. Net premiums earned increased 32.2% from $1.6 million
in the quarter ended March 31, 1997 to $2.1 million in the quarter ended March
31, 1998. The principal factor accounting for the increase was the Company's
assumption in 1998 of workers' compensation reinsurance business from an
unaffiliated insurance carrier, which increased net premiums earned from
workers' compensation reinsurance by 40.1% from $1.0 million in the quarter
ended March 31, 1997 period to $1.46 million in the quarter ended March 31,
1998. This increase was a result of additional premiums from new insureds in
this line of business.
General liability reinsurance premiums remained substantially the same,
from $441,000 in the quarter ended March 31, 1997 to $451,000 in the quarter
ended March 31, 1998. In the Company's primary insurance business, net premiums
earned from the Company's U.S. insurance subsidiary's surety program increased
from $87,000 in the quarter ended March 31, 1997 to $188,000 in the quarter
ended March 31, 1998 as a result of new accounts written.
Net Investment Income. Net investment income increased 88.3% from $333,000
in the quarter ended March 31, 1997 to $627,000 in the quarter ended March 31,
1998 as a result of the investment of additional cash flows from insurance
operations and from investment of the Company's initial public offering
proceeds. The average annual pre-tax yield on investments was 6.6% in the
quarter ended March 31, 1997 and 5.6% in the quarter ended March 31, 1998. The
average annual after-tax yield on investments was 5.8% in the quarter ended
March 31, 1997 and 5.1% in the quarter ended March 31, 1998.
Interest from Notes Receivable. Interest from notes receivable decreased
3.61% from $278,000 in the quarter ended March 31, 1997 to $268,000 in the
quarter ended March 31, 1998.
Brokerage Commission Income. Income from insurance brokerage operations
decreased 37.8% from $617,000 in the quarter ended March 31, 1997 to $384,000 in
the
12
<PAGE>
quarter ended March 31, 1998 because the Company initiated a substantial
rent-a-captive program in January 1997 for an 18 month term.
Management Fees. Management fees increased 37.9% from $124,000 in the
quarter ended March 31, 1997 to $171,000 in the quarter ended March 31, 1998 as
a result of increased service levels provided by the Company to its risk
retention group affiliate.
Net Realized Gains. Net realized gains from the sale of investments
increased from $6,000 in the quarter ended March 31, 1997 to $37,000 in the
quarter ended March 31, 1998.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
increased 31.8% from $1.0 million in the quarter ended March 31, 1997 to $1.3
million in the quarter ended March 31, 1998 due to the 32.2% increase in net
premiums earned and a corresponding increase in reserves primarily due to the
increase in the workers' compensation line of business.
Acquisition Expenses. Policy acquisition expenses increased 36.0% from
$157,000 in the quarter ended March 31, 1997 to $213,000 in the quarter ended
March 31, 1998 as a result of increased premiums.
Other Expenses. Other expenses increased 33.0% from $722,000 in the
quarter ended March 31, 1997 to $960,000 in the quarter ended March 31, 1998 due
to salary and benefit increases and increased staffing required to handle new
and existing programs.
Income Taxes. Federal and state income taxes decreased from $193,000 in
the quarter ended March 31, 1997 to $54,000 in the quarter ended March 31, 1998
due to decreased taxable income in the Company's U.S. insurance subsidiary.
Liquidity and Capital Resources
The Company historically has met its cash requirements and financed its
growth principally through cash flows generated from operations. The Company's
primary sources of cash flow are proceeds from the sale or maturity of invested
assets, premiums earned, investment income, commission income and management
fees. The Company's short-term cash requirements are primarily for claims
payments, reinsurance premiums, commissions, salaries, employee benefits and
other operating expenses, and the purchase of investment securities, which have
historically been satisfied from operating cash flows. Due to the uncertainty
regarding settlement of unpaid claims, the long-term liquidity requirements of
the Company may vary, and the Company has attempted to structure its investment
portfolio to take into account the historical payout patterns. Management
believes that the Company's current cash flows are sufficient for its short-term
needs and the Company's invested assets are sufficient for its long-term needs.
The Company also purchases reinsurance to mitigate the effect of large claims.
13
<PAGE>
On a consolidated basis, net cash provided from operations was $2.1 million
for the quarter ended March 31, 1997 and $1.4 million for the quarter ended
March 31, 1998. The positive cash flows for both periods were primarily
attributable to net premiums written, net earnings, and increases in reserves
for unpaid losses. Because workers' compensation and general liability claims
may be paid over an extended period of time, the Company has established
relatively large loss reserves for such lines of business. The assets supporting
the Company's reserves continue to earn investment income until claims payments
are made.
Total assets increased from $47.7 million at December 31, 1997 to $80.0
million at March 31, 1997, primarily due to proceeds of the Company's initial
public offering in February 1998. Cash, invested assets and notes receivable
increased from $29.0 million at March 31, 1997 to $69.6 million at March 31,
1998.
American Safety is an insurance holding company whose principal assets are
its investment portfolio and its investment in the capital stock of its
subsidiaries. As an insurance holding company, American Safety's ability to pay
dividends to its shareholders will depend, to a significant degree on the
ability of the Company's subsidiaries to pay dividends to American Safety. The
jurisdictions in which the Company and its insurance and reinsurance
subsidiaries are domiciled place limitations on the amount of dividends or other
distributions payable by insurance companies in order to protect the solvency of
insurers. Management believes it has significant liquidity in the near term to
accomplish its business objectives.
As of March 31, 1998, the Company had no investments in derivative
financial instruments.
Income Taxes
American Safety is incorporated under the laws of Bermuda and, under
current Bermuda law, is not obligated to pay any taxes in Bermuda based upon
income or capital gains. American Safety has received an undertaking from the
Minister of Finance in Bermuda pursuant to the provisions of The Exempted
Undertakings Tax Protection Act 1966, which exempts American Safety and its
shareholders, other than shareholders ordinarily resident in Bermuda, from any
Bermuda taxes computed on profits, income or any capital asset, gain or
appreciation, or any tax in the nature of estate, duty or inheritance until
March 28, 2016. The Company, exclusive of its United States subsidiaries, does
not expect to be subject to direct United States income taxation. The Company's
U.S. subsidiaries are subject to taxation in the United States.
Inflation
Property and casualty insurance premiums are established before the amounts
of losses and loss adjustment expenses are known and therefore before the extent
by which inflation may affect such expenses is known. Consequently, the Company
attempts, in establishing its premiums, to anticipate the potential impact of
inflation. However, for
14
<PAGE>
competitive and regulatory reasons, the Company may be limited in raising its
premiums consistent with anticipated inflation, in which event the Company,
rather than its insureds, would absorb inflation costs. Inflation also affects
the rate of investment return on the Company's investment portfolio with a
corresponding effect on the Company's investment income.
Item 3. Quantitative and Qualitative Disclosures About Market Risks.
Not Applicable.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual general meeting of shareholders of the Company was held on
January 29, 1998 in Hamilton, Bermuda. Proxies for the meeting were
solicited by Board of Directors pursuant to applicable Bermuda law.
The individuals nominated by the Board of Directors were duly elected
by the shareholders and there was no solicitation in opposition to the
individuals so nominated. The shareholders also duly approved and
adopted new Bye-Laws, an amendment to the Memorandum of Association
regarding authorized share capital, a share split in contemplation of
the Company's initial public offering, an Incentive Stock Option Plan,
a Director Stock Award Plan, and appointed auditors.
Item 5. Other Information.
The Company filed a Form 8-A pursuant to Section 12(g) of the
Securities Exchange Act of 1934 on February 11, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this Report:
Exhibit No. Description
----------- -----------
3.2 Bye-Laws
11 Computation of Earnings Per Share
27 Financial Data Schedule
16
<PAGE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the period
covered by this Report.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 14th day of May 1998.
American Safety Insurance Group, Ltd.
By: /s/ Lloyd A. Fox
----------------------------------------
Lloyd A. Fox
President and Chief Executive Officer
By: /s/ Stephen F. Clarke
----------------------------------------
Stephen F. Clarke
Chief Financial Officer
(Principal Financial Officer)
18
<PAGE>
EXHIBIT 3.2
BYE-LAWS
OF
AMERICAN SAFETY INSURANCE GROUP, LTD.
<PAGE>
Exhibit 3.2
BYE-LAWS
OF
AMERICAN SAFETY INSURANCE GROUP LTD.
Bye-Law Page
- ------- ----
1 INTERPRETATION 1
2 SHARE CAPITAL 6
3 COMMON SHARES 6
4 AUTHORITY OF BOARD TO ISSUE AND DIVIDE
PREFERRED SHARES INTO DIFFERENT CLASSES 7
5 RESTRICTIONS ON CERTAIN "BUSINESS COMBINATIONS" 8
6 EMPLOYEE SHARE PURCHASE
AND COMPANY SHARE REPURCHASE 13
7 ALTERATION OF CAPITAL 14
8 WARRANTS 16
9 SHARE CERTIFICATES 17
10 REGISTER OF MEMBERS 18
11 INSPECTION OF REGISTER OF MEMBERS 19
12 RECORD DATES 19
13 TRANSFER OF SHARES 19
14 TRANSMISSION OF SHARES 21
15 UNTRACEABLE MEMBERS 22
16 GENERAL MEETINGS OF MEMBERS 23
17 NOTICE OF GENERAL MEETINGS 23
18 PROCEEDINGS AT GENERAL MEETINGS 25
19 INSPECTORS 26
20 VOTING AT GENERAL MEETINGS 26
21 PROXIES AND CORPORATE REPRESENTATION 30
22 NOMINATION AND REMOVAL OF DIRECTORS 32
23 ALTERNATE DIRECTORS 35
24 DIRECTORS' COMPENSATION 36
25 DIRECTORS' AND OFFICERS' INTERESTS 36
26 GENERAL POWERS OF THE BOARD OF DIRECTORS 38
<PAGE>
Bye-Law Page
- ------- ----
27 PROCEEDINGS OF THE BOARD OF DIRECTORS 40
28 OFFICERS 42
29 REGISTER OF DIRECTORS AND OFFICERS 44
30 MINUTES 44
31 SEAL 44
32 DESTRUCTION OF DOCUMENTS 45
33 DIVIDENDS AND OTHER DISTRIBUTIONS 46
34 CAPITALIZATION 51
35 SUBSCRIPTION RIGHTS RESERVE 52
36 ACCOUNTING RECORDS 54
37 AUDIT 54
38 NOTICES 56
39 WINDING UP 57
40 INDEMNITY 58
41 AMENDMENT OF BYE-LAWS 59
<PAGE>
INTERPRETATION
1. (1) In these Bye-Laws, unless the context otherwise requires, the words
standing in the first column of the following table shall bear the meaning set
opposite them respectively in the second column.
WORD MEANING
"Act" The Companies Act 1981 of Bermuda, as
amended from time to time.
"Affiliate" a Person that directly, or indirectly
through one or more intermediaries,
controls, or is controlled by, or is
under common control with, another
Person.
"Associate" a relationship with a Person in which (1)
any corporation or organization (other
than the Company or a majority-owned
Subsidiary of the Company) of which such
Person is an officer or a partner or he
is, directly or indirectly, the
beneficial owner of ten percent (10%) or
more of any class of equity securities;
(2) any trust or other estate in which
such Person has a substantial beneficial
interest or as to which such Person
serves as trustee or in a similar
fiduciary capacity; and (3) any relative
or spouse of such Person, or any relative
of such spouse, who has the same home as
such Person or who is a Director or
Officer of the Company or any of its
Subsidiaries.
"Auditor" the Auditor of the Company for the time
being and may include any individual or
partnership.
1
<PAGE>
"Bye-Laws" these Bye-Laws in their present form or
as supplemented or amended from time to
time.
"Board" or the the Board of Directors of the Company or
"Directors" or the the Directors (including Alternate
"Board of Directors" Directors) present at a meeting of
Directors at which a quorum is present.
"capital" the share capital from time to time of
the Company.
"clear days" in relation to the period of a Notice
that period excluding the day when the
Notice is given or deemed to be given and
the day for which it is given or on which
it is to take effect.
"Code" the Internal Revenue Code of 1986,
as amended, of the United States.
"Company" American Safety Insurance Group, Ltd.
"competent" a competent regulatory authority in the
regulatory jurisdiction or place where the shares of
authority" the Company are listed or quoted on a
stock exchange.
"Controlled Shares" in reference to any Person, other than
Frederick C. Treadway or Treadway
Associates, L.P. (including their
respective heirs, successors and
assigns), means (i) all shares of the
Company that such Person is deemed to own
directly, indirectly or by attribution
(within the meaning of Section 958 of the
Code) and (ii) all shares of the Company
directly, indirectly or beneficially
owned by such Person within the meaning
of Section 13(d) of the Exchange Act
(including any shares owned by a group of
Persons as so defined and including any
shares that would otherwise be excluded
by Section 13(d) of the Exchange Act).
2
<PAGE>
"Designated Stock a stock exchange which is an appointed
Exchange" stock exchange for the purposes of the
Act in respect of which the shares of the
Company are listed or quoted.
"dollars" and "$" dollars, the legal currency of the United
States.
"Exchange Act" the Securities Exchange Act of 1934, as
amended, of the United States.
"General Meeting" any meeting of the Members of the
Company. The General Meeting convened
once in every calendar year in compliance
with the Act, shall be known as the
"Annual General Meeting". Any General
Meeting other than an Annual General
Meeting, shall be known as a "Special
General Meeting".
"Maximum Percentage" with respect to any Person, other than
Frederick C. Treadway or Treadway
Associates, L.P. (including their
respective heirs, successors and
assigns), nine and one-half percent
(9.5%).
"Member" a duly registered holder from time to
time of the shares in the capital of the
Company.
"month" a calendar month.
"Notice" written notice unless otherwise
specifically stated and as further
defined in these Bye-Laws.
"Office" the registered office of the Company for
the time being.
"Officer" any individual appointed by the Board to
hold an office of the Company.
"paid up" paid up or credited as paid up.
3
<PAGE>
"Person" means any individual, general or limited
partnership, corporation, association,
trust, limited liability company or other
entity or organization, including a
government, a political subdivision or
agency or instrumentality thereof.
"Register" the principal register and, where
applicable, any branch register of
Members of the Company to be kept
pursuant to the provisions of the Act.
"Registration Office" in respect of any class of share capital
such place as the Board may from time to
time determine to keep a branch register
of Members in respect of that class of
share capital and where (except in cases
where the Board otherwise directs) the
transfers or other documents of title for
such class of share capital are to be
delivered for registration.
"Seal" common seal or any one or more duplicate
seals of the Company (including a
securities seal) for use in Bermuda or in
any place outside Bermuda.
"Secretary" any Person, firm or corporation appointed
by the Board to perform any of the duties
of secretary of the Company and includes
any assistant, deputy, temporary or
acting secretary.
"Securities Act" the Securities Act of 1933, as amended,
of the United States.
"shares" the Common Shares or Preferred Shares of
the Company, as the case may be.
4
<PAGE>
"Subsidiary" means any company in which the Company
owns, directly or indirectly, shares
representing at least fifty percent (50%)
of the voting power or fifty percent
(50%) of the value of such company.
"year" a calendar year.
(2) In these Bye-Laws, where not inconsistent with the context:
(a) words denoting the singular include the plural and vice versa;
(b) words denoting a gender include every gender;
(c) words importing Persons include companies, associations and bodies
of Persons whether corporate or not;
(d) the word:
(i) "may" shall be construed as permissive;
(ii) "shall" or "will" shall be construed as imperative;
(e) expressions referring to writing shall, unless the contrary
intention appears, be construed as including printing,
lithography, photography, facsimile, computer generated and other
modes of representing words or figures in a visible form;
(f) references to any act, ordinance, statute or statutory provision
shall be interpreted as relating to any statutory modification or
re-enactment thereof for the time being in force;
(g) unless otherwise provided herein words and expressions defined in
the Act shall bear the same meanings in these Bye-Laws if not
inconsistent with the context;
(h) a resolution shall be a special resolution when it has been passed
by a majority of not less than sixty-six and two-thirds percent
(66 2/3%) of votes cast by such Members in person or, in the case
of such Members as are corporations, by their respective duly
authorized representative or, where proxies are allowed, by proxy
at a General Meeting of which not less than twenty-one (21) clear
days' Notice, specifying (without prejudice to the power contained
in these Bye-Laws to amend the same) the intention to propose the
resolution as a special resolution, has been duly
5
<PAGE>
given. Provided that, except in the case of an Annual General
Meeting, if it is so agreed by a majority in number of the Members
having the right to attend and vote at any such General Meeting,
being a majority together holding not less than ninety-five
percent (95%) in nominal value of the shares giving that right, a
resolution may be proposed and passed as a special resolution at a
General Meeting of which less than twenty-one (21) clear days'
Notice has been given;
(i) a resolution shall be an "ordinary resolution" when it has been
passed by a simple majority of votes cast by such Members as,
being entitled so to do, vote in person or, in the case of any
Member being a corporation, by its duly authorized representative
or, where proxies are allowed, by proxy at a General Meeting of
which not less than twenty-one (21) clear days' Notice has been
duly given;
(j) a "special resolution" shall be effective for any purpose for
which an ordinary resolution is expressed to be required under any
provision of these Bye-Law or the Act.
(k) headings used in these Bye-Laws are for convenience only and are
not to be used or relied upon in the construction of these Bye-
Laws.
(3) In these Bye-Laws, in calculating whether a resolution has been passed
by a particular majority or whether a particular number of shares is represented
at a General Meeting and, generally, for all purposes, in calculating the total
number of votes cast or votes represented, as the case may be, the provisions of
Bye-Law 20 hereof shall be taken into account in all cases in computing the
number of votes cast or votes represented, as the case may be.
(4) Any right or power of the Company under the Act or the Company's
Memorandum of Association or these Bye-Laws which is not expressly subject to
approval by the Members in a General Meeting shall be exercisable by the Board.
SHARE CAPITAL
2. The authorized share capital of the Company is $200,000 divided into the
following classes of shares:
(i) 15,000,000 common shares, par value $0.01 per share ("Common
Shares"); and
(ii) 5,000,000 preferred shares, par value $0.01 per share
("Preferred Shares").
COMMON SHARES
3. (1) Subject to these Bye-Laws, at a General Meeting of the Company every
holder of Common Shares shall be entitled to one vote for every share held by
him on all matters sumitted to a vote of the Company's shareholders.
6
<PAGE>
(2) The Board may in its discretion, at any time, and from time to time,
issue or cause to be issued all or any part of the authorized but unissued
Common Shares of the Company for consideration of such character and value as
the Board shall in its absolute discretion from time to time fix or determine.
AUTHORITY OF BOARD TO ISSUE AND DIVIDE
PREFERRED SHARES INTO DIFFERENT CLASSES
4. (1) The Board may in its discretion at any time, and from time to time,
issue or cause to be issued all or any part of the authorized but unissued
Preferred Shares of the Company for consideration of such character and value as
the Board shall in its absolute discretion from time to time fix or determine.
(2) Without prejudice to the generality of paragraph (1) of this Bye-Law,
the Board is hereby further expressly authorized at any time, and from time to
time, to divide any or all of the authorized but unissued Preferred Shares of
the Company into several classes, to consolidate or sub-divide and to set the
par value of any of the unissued Preferred Shares, and in the resolution or
resolutions establishing a particular series, before issuance of any of the
shares thereof, to fix and determine the number of shares and the designation of
such series, so as to distinguish it from the shares of all other series and
classes, and to fix and determine the voting rights, preferences,
qualifications, privileges, limitations, options, conversion rights, redemption
features, restrictions, and other special or relative rights of such series.
Each of such series may differ from every other series previously authorized, as
may be determined by the Board in any or all respects, to the fullest extent
now, or hereafter permitted by the laws of Bermuda including, but not limited
to, the variations between different series in the following respects:
(a) the distinctive designation of such series and the number of shares
which shall constitute such series, which number may be increased or
decreased (but not below the number of shares thereof then outstanding)
from time to time by the Board;
(b) the annual dividend or dividend rate for such series, and the date or
dates from which dividends shall commence to accrue;
(c) the par value of the shares prior to issue, provided however, that the
par value shall in no case be set at less than $0.01 per share;
7
<PAGE>
(d) the price or prices at which, and the terms and conditions on which, if
any, the shares of such series may be redeemed or made redeemable;
(e) the purchase or sinking fund provisions, if any, for the purchase or
redemption of shares of such series;
(f) the preferential amount or amounts, if any, payable upon shares of such
series in the event of the liquidation, dissolution, or winding up of
the Company;
(g) the terms and conditions, if any, upon which shares of such series may
be converted and the class or series of shares of the Company or other
securities into which such shares may be converted;
(h) the relative seniority, priority or junior rank of such series as to
dividends or assets in relation to any other classes or series of
capital shares then or thereafter to be issued;
(i) such other terms, preferences, qualifications, privileges, limitations,
options, restrictions, and other special rights, if any, of shares of
such series as the Board may, at the time of such resolution or
resolutions, lawfully fix or determine;
(j) cancel shares which, at the date of the passing of the resolution in
that behalf, have not been taken or agreed to be taken by any Person;
(k) where any difficulty arises in regard to any division, consolidation,
or sub-division under this Bye-Law, the Board may settle the same as it
thinks expedient and, in particular, may arrange for the sale of the
shares representing fractions and the distribution of the net proceeds
of sale in due proportion amongst the Members who would have been
entitled to the fractions, and for this purpose the Board may authorize
some Person to transfer the shares representing fractions to the
purchaser thereof, who shall not be bound to see to the application of
the purchase money nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings relating to the sale.
RESTRICTIONS ON CERTAIN "BUSINESS COMBINATIONS"
5. (1) Except as permitted by paragraph (2) of this Bye-Law, no Interested
Shareholder (as hereinafter defined) shall, whether directly or indirectly, be a
party to or take any action in connection with any Business Combination (as
hereinafter defined) with the Company or any
8
<PAGE>
Subsidiary for a period of five years commencing on the date such Person first
became an Interested Shareholder.
(2) The restrictions contained in paragraph (1) of this Bye-Law shall not
apply to a Business Combination: (i) if the Business Combination is approved by
prior resolution of the Continuing Directors (as hereinafter defined) of the
Board (whether such approval is made prior to or subsequent to the acquisition
of, or announcement of public disclosure of the intention to acquire, beneficial
ownership of voting shares that caused the Interested Shareholder to become an
Interested Shareholder); or (ii) if the Business Combination is approved by
prior resolution of at least sixty-six and two-thirds percent (66 2/3%) of
outstanding voting shares of the Company other than those beneficially held by
an Interested Shareholder.
(3) For the purposes of this Bye-Law:
(a) "beneficial owner" when used with respect to any share means a
Person:
(i) who individually or with or through any Subsidiary or
Affiliate beneficially owns such share, directly or
indirectly; or
(ii) who individually or with or through any Subsidiary or
Affiliate (i) beneficially owns such share, directly or
indirectly; or (ii) who individually or with or through any
Subsidiary or Affiliate has:
(a) the right to acquire such share (whether such right is
exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or
understanding (whether or not in writing), or upon the
exercise of conversion rights, exchange rights, warrants
or options or otherwise; provided however, that a Person
shall not be deemed the beneficial owner of any share
tendered pursuant to a tender or exchange offer until
such offer is accepted; or
(b) the right to vote such share pursuant to any agreement,
arrangement or understanding (whether or not in
writing); provided however, that a Person shall not be
deemed the beneficial owner of any share under this sub-
paragraph (ii) if the right to vote such share arises:
(x) solely from a revocable proxy or consent given
in response to a proxy or consent solicitation made
to shareholders or any class of shareholders
generally; or
9
<PAGE>
(y) solely under a nominee or trustee agreement where
the nominee or trustee has no economic interest in
the share (other than the right to be paid normal
nominee or trustee fees or remuneration);
(iii) who has any agreement, arrangement or understanding (whether
or not in writing) for the purpose of acquiring, holding,
voting (except where the right to vote is within the
exclusion of clauses (x) or (y) of paragraph 3(a)(ii)(b) of
this Bye-Law) or disposing of such share with any other
Person who beneficially owns, or whose subsidiaries or
affiliates directly or indirectly beneficially own such
share or any interest therein; but does not include an
underwriter, acting in the ordinary course of his business
as an underwriter, who acquires shares pursuant to any issue
or offer of shares underwritten by him.
(b) "Business Combination" means:
(i) any plan of arrangement, reconstruction or amalgamation
involving the Company or any of its Subsidiaries and an
Interested Shareholder;
(ii) any transaction or series of transactions involving the
sale, purchase, lease, exchange, mortgage, pledge, transfer
or other disposition or encumbrance of assets between the
Company or any of its Subsidiaries and any Interested
Shareholder having an aggregate market value in excess of
five percent (5%) of the consolidated value in the Company
and its Subsidiaries prior to the relevant transaction or
series of transactions;
(iii) the issue or transfer to an Interested Shareholder or any
Affiliate thereof of any securities by the Company or any of
its Subsidiaries other than an issue or distribution to all
shareholders of the Company entitled to participate therein
(such entitlement not being dependent upon or affected by
any plan or proposal by an Interested Shareholder) pro rata
to their respective entitlements.
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Company or any of its Subsidiaries unless
such plan or proposal is initiated, proposed or adopted
independently of, and not by agreement or arrangement with,
any Interested Shareholder or any Affiliate thereof;
10
<PAGE>
(v) the reclassification of any securities or other
restructuring of the capital of the Company or any of its
Subsidiary in such a way as to confer a benefit on an
Interested Shareholder or any Affiliate thereof which is not
conferred on the Members generally; or
(vi) the making by the Company or any of its Subsidiaries of any
loans, advances, guarantees, pledges or financial assistance
to an Interested Shareholder.
(c) The term "Continuing Director" means (i) any member of the Board,
while such Person is a member of the Board who is not an
Interested Shareholder or an Affiliate or Associate or
representative of the Interested Shareholder and was a member of
the Board prior to the time that the Interested Shareholder became
an Interested Shareholder, and (ii) any Person who subsequently
becomes a member of the Board, while such Person is a member of
the Board, who is not an Interested Shareholder or an Affiliate or
Associate or representative of the Interested Shareholder, if such
Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors
then in office;
(d) "Interested Shareholder" means a Member of the Company or an
Affiliate or Associate of such Member other than (i) Frederick C.
Treadway or Treadway Associates, L.P. (including their respective
heirs, successors and assigns) or (ii) any other Person
beneficially owned (as hereinabove defined) by the Company or any
Subsidiary, any profit-sharing employee share ownership or other
employee benefit plan of the Company or any Subsidiary or any
trustee of or fiduciary with respect to any such plan when acting
in such capacity) who is, or has announced or publicly disclosed a
plan or intention to become, the beneficial owner of Common Shares
representing ten percent (10%) or more of the value of the
Company. For the purposes of determining whether a Person is an
Interested Shareholder for the purposes hereof, the number of
shares deemed to be outstanding shall include shares deemed
beneficially owned by such Person through application of paragraph
(3) of this Bye-Law, but shall not include any other shares that
may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise;
(e) "Person" includes: any Person acting in concert with him or any
nominee for him or Person acting on his behalf; (ii) any company
in which such Person holds or beneficially owns ten percent (10%)
or more of the value of the company or of the shares carrying
11
<PAGE>
voting rights or rights over shares; or (iii) any Person or entity
over which the Person acquiring the shares has, directly or
indirectly, the power to direct or cause the direction of
management or policies;
(f) "persons acting in concert" include:
(i) persons who, pursuant to any agreement, arrangement or
understanding (whether formal or informal), actively co-
operate either in the acquisition by any of them of any
holding of shares or of the beneficial ownership of shares
or right over shares in the Company or in the exercise of
voting rights with respect to shares in the Company;
(ii) a company with any of its directors (or their close
relatives, nominees, related trusts or companies in which
any director holds or beneficially owns ten percent (10%) or
more of the shares carrying voting rights or rights over
shares);
(iii) a company with the trustees or managers of any of its
pension, provident or employee benefit funds or any employee
stock option plan which involves the issue of shares in the
company to such trustees for the benefit of employees;
(iv) a Person who is a fund manager with any investment company,
unit trust or other Person whose investments such Person
manages on a discretionary basis, in respect of the relevant
investment accounts;
(v) a company with its parent company or any subsidiary;
(vi) a company, in which ten percent (10%) or more of the shares
carrying voting rights or rights over shares are held or
beneficially owned by a Person, with any other company in
which ten percent (10%) or more of the shares carrying
voting rights or rights over shares are held or beneficially
owned by the same Person; and
(vii) notwithstanding the preceding subparagraphs (i) through
(vi), persons acting in concert shall not include the
formation of a group or syndicate of underwriters/broker-
dealers in connection with any public offering of share
capital of or in the Company and the documentation and
agreements relating thereto.
12
<PAGE>
(g) "rights over shares" includes any rights acquired by a Person or
an agreement to acquire shares or an option to acquire shares or
an irrevocable commitment to accept an offer to acquire shares and
includes warrants or options to subscribe for shares in a company
if immediately exercisable, as if such warrants or option had at
the relevant time been exercised;
(h) "securities" includes shares, debentures, and options or warrants
to subscribe for or purchase any shares or debentures, and any
rights in respect thereof or any other right which if exercised
would enable a Person not otherwise able so to do, to exercise
voting rights in excess of the threshold or, where relevant to
acquire equity in excess of the threshold;
(i) "threshold" means 10% or more of the value of the Company held by
an Interested Shareholder;
(j) "voting rights" means all the voting rights attributable to the
share capital of the Company which are currently exercisable, or,
in the case of options and warrants to subscribe for shares, would
be exercisable if those options and warrants were themselves
exercised, at a General Meeting of the Company;
(k) a Person shall be deemed not to acquire or hold any share if he
acquires or holds such share solely as nominee or trustee thereof
and has no beneficial or economic interest therein other than the
right to be paid normal nominee or trustee fees or remuneration.
EMPLOYEE SHARE PURCHASE
AND COMPANY SHARE REPURCHASE
6. (1) The Board may from time to time:
(a) establish a plan or plans whereby the Company provides money for
the purchase of, or subscription for, fully-paid shares or share
options or in relation to share bonus plans for Common Shares in
the Company being a purchase or subscription by trustees of or for
shares to be held by or for the benefit of employees of the
Company or any of its Subsidiaries;
(b) provide for the making by the Company of loans to Persons, other
than Directors, bona fide in the employment of the Company or any
of its Subsidiaries, with a view to enabling those Persons to
purchase or
13
<PAGE>
subscribe for fully-paid shares in the Company, to be held by
themselves by way of beneficial ownership; and
(c) provide for the giving by the Company, directly or indirectly, of
financial assistance, whether by means of a loan, guarantee, the
provision of security or otherwise, to its bona fide employees, or
the bona fide employees of any of its Subsidiaries, whether or not
they shall also be Directors, in order that they may buy shares in
the Company and the Board may, in its discretion, from time to
time require, as one of the terms of issue of any such shares or
by contract, that any such employee shall be required or allowed
to sell such shares to the Company, upon such terms and at such
price as the Board may by such terms of issue or contract
establish, when such employee ceases to be employed by the Company
or any of its Subsidiaries.
(2) Subject to the Act, the Company's Memorandum of Association and these
Bye-Laws and, where applicable, the rules of any Designated Stock Exchange
and/or any competent regulatory authority, the Company may purchase or otherwise
acquire its own shares upon such terms and conditions as the Board shall
determine.
ALTERATION OF CAPITAL
7. (1) The Company may from time to time by ordinary resolution in accordance
with the Act:
(a) increase its capital by such sum, to be divided into shares of
such amounts, as the resolution shall prescribe;
(b) consolidate and divide all or any of its capital into shares of
larger amount than its existing shares;
(c) divide its shares into several classes, and without prejudice to
any special rights previously conferred on the holders of existing
shares, attach thereto respectively any preferential, deferred,
qualified or special rights, privileges, conditions or such
restrictions, which, in the absence of any such determination by
the Company in a General Meeting, as the Directors may determine,
provided always that where the Company issues shares which do not
carry voting rights, the words "non-voting" shall appear in the
designation of such shares and where the equity capital includes
shares with different voting rights, the designation of each class
of shares, other
14
<PAGE>
than those with the most favorable voting rights, must include the
words "restricted voting" or "limited voting";
(d) sub-divide its shares, or any of them, into shares of smaller
amount than is fixed by the Memorandum of Association (subject,
nevertheless, to the Act), and may by such resolution determine
that, as between the holders of the shares resulting from such
sub-division, one or more of the shares may have any such
preferred rights or be subject to any such restrictions as
compared with the other or others as the Company has power to
attach to unissued or new shares;
(e) change the currency denomination of its share capital; and
(f) cancel any shares which, at the date of the passing of the
resolution, have not been taken, or agreed to be taken, by any
Person, and diminish the amount of its capital by the amount of
the shares so cancelled.
(2) The Board may settle as it considers expedient any difficulty which
arises in relation to any consolidation and division under this Bye-Law and in
particular but without prejudice to the generality of the foregoing may issue
certificates in respect of fractions of shares or arrange for the sale of the
shares representing fractions and the distribution of the net proceeds of sale
(after deduction of the expenses of such sale) in due proportion among the
Members who would have been entitled to the fractions, and for this purpose the
Board may authorize some Person to transfer the shares representing fractions to
their purchaser or resolve that such net proceeds be paid to the Company for the
Company's benefit. Such purchaser will not be bound to see to the application of
the purchase money nor will his title to the shares be affected by any
irregularity or invalidity in the proceedings relating to the sale.
(3) The Company may from time to time by ordinary resolution in accordance
with the Act reduce its authorized or issued share capital or any share premium
account or other undistributable reserve in any manner permitted by applicable
law.
(4) Except so far as otherwise provided by the conditions of issue, or by
these Bye-Laws, any capital raised by the creation of new shares shall be
treated as if it formed part of the original capital of the Company, and such
shares shall be subject to the provisions contained in these Bye-Laws with
reference to the payment of calls and installments, transfer and transmission,
forfeiture, lien, cancellation, surrender, voting and otherwise.
(5) Subject to the Act, all or any of the special rights for the time
being attached to the shares or any class of shares may, unless otherwise
provided by the terms of issue of the shares of that class, from time to time
(whether or not the Company is being wound up) be varied, modified or abrogated
either with the consent in writing of the holders of not less than sixty-six and
two-thirds percent (66 2/3%) of the issued shares of that class or with the
sanction
15
<PAGE>
of a special resolution passed at a separate General Meeting of the holders of
the shares of that class. To every such separate General Meeting all the
provisions of these Bye-Laws relating to General Meetings of the Company shall,
as the case may be, apply, but so that:
(a) the necessary quorum (other than at an adjourned meeting) shall be
two Persons holding or representing by proxy not less than one-
third in nominal value of the issued shares of that class and at
any adjourned meeting of such holders, two holders present in
person or by proxy (whatever the number of shares held by them)
shall be a quorum;
(b) every holder of shares of the class shall be entitled on a vote to
one vote for every such share held by him; and
(c) any holder of shares of the class present in person or by proxy
may demand a vote.
(6) The special rights conferred upon the holders of any shares or class of
shares shall not, unless otherwise expressly provided in the rights attaching to
or the terms of issue of such shares, be deemed to be varied, modified or
abrogated by the creation or issue of further shares ranking pari passu
therewith.
WARRANTS
8. (1) The Board may issue warrants conferring the right upon the holders
thereof to subscribe for any class of shares or securities in the capital of the
Company on such terms as it may from time to time determine.
(2) The Company may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by the
Act. Subject to the Act, the commission may be satisfied by the payment of
cash or by the allotment of fully or partly paid shares or partly in one
and partly in the other.
(3) Neither the Company nor any of its Subsidiaries shall directly or
indirectly give financial assistance to a Person who is acquiring or proposing
to acquire shares in the Company for the purpose of that acquisition whether
before or at the same time as the acquisition takes place or afterwards provided
that nothing in this Bye-Law shall prohibit transactions permitted by the Act.
(4) Except as required by applicable law, no Person shall be recognized by
the Company as holding any share upon any trust and the Company shall not be
bound by or required in any way to recognize (even when having Notice thereof)
any equitable, contingent, future or partial interest in any share or any
fractional part of a share or (except only as otherwise
16
<PAGE>
provided by these Bye-Laws or by applicable law) any other rights in respect of
any share except an absolute right to the entirety thereof in the registered
holder.
(5) Subject to the Act and these Bye-Laws, the Board may at any time after
the allotment of shares but before any Person has been entered in the Register
as the holder, recognize a renunciation thereof by such recipient in favor of
some other Person and may accord to any such recipient of a share a right to
effect such renunciation upon and subject to such terms and conditions as the
Board determines to impose.
SHARE CERTIFICATES
9. (1) Every share certificate shall be issued under the Seal or a facsimile
thereof and shall specify the number and class and distinguishing numbers of the
shares to which it relates, and the amount paid up thereon and may otherwise be
in such form as the Directors may from time to time determine. No certificate
shall be issued representing shares of more than one class. The Board may by
resolution determine, either generally or in any particular case or cases, that
any signatures on any such certificates (or certificates in respect of other
securities) need not be autographic but may be affixed to such certificates by
some mechanical means or may be printed thereon or that such certificates need
not be signed by any Person. Every share certificate shall recite that the
voting rights relating to such shares are subject to the limitations contained
in these Bye-Laws.
(2) In the case of a share held jointly by several Persons, the Company
shall not be bound to issue more than one certificate therefor and delivery of a
certificate to one of several joint holders shall be sufficient delivery to all
such holders.
(3) Where a share stands in the names of two or more Persons, the Person
first named in the Register shall as regards service of Notices and, subject to
the provisions of these Bye-Laws, all or any other matters connected with the
Company, except the transfer of the shares, be deemed the sole holder thereof.
(4) Every Person whose name is entered, upon an allotment of shares, as a
Member in the Register shall be entitled, without payment, to receive one
certificate for all such shares of any one class or several certificates each
for one or more of such shares of such class upon payment for every certificate
after the first of such reasonable out-of-pocket expenses as the Board from time
to time determines.
(5) Subject to paragraph (2) hereof, share certificates shall be issued, in
the case of an issue of shares within twenty-one (21) days (or such longer
period as the terms of the issue provide) after allotment, or in the case of a
transfer of fully or partly paid shares within twenty-one
17
<PAGE>
(21) days after delivery of a transfer to the Company, not being a transfer
which the Company is for the time being entitled to refuse to register and does
not register.
(6) Notwithstanding any provision in these Bye-Laws to the contrary, a
Person may by Notice to the Company elect that no certificate be issued in
respect of shares registered or to be registered in his name and on receipt of
such election the Company shall not be required to issue a certificate for such
shares or may cancel an existing certificate without issuing another certificate
in lieu thereof.
(7) Upon every transfer of shares, the certificate held by the transferor
shall be given up to be cancelled, and shall forthwith be cancelled accordingly,
and a new certificate shall be issued to the transferee in respect of the shares
transferred to him. If any of the shares included in the certificate so given up
shall be retained by the transferor a new certificate for the balance shall be
issued to him.
(8) If a share certificate shall be damaged or defaced or alleged to have
been lost, stolen or destroyed a new certificate representing the same shares
may be issued to the relevant Member upon request and on payment of such fee as
the Designated Stock Exchange may determine to be the maximum payable, or such
lesser sum as the Board may determine and, subject to compliance with such terms
(if any) as to evidence and indemnity and to payment of the costs and reasonable
out-of-pocket expenses of the Company in investigating such evidence and
preparing such indemnity as the Board shall determine and, in case of damage or
defacement, on delivery of the old certificate to the Company, provided always
that where share warrants have been issued, no new share warrant shall be issued
to replace one that has been lost unless the Directors are satisfied beyond
reasonable doubt that the original has been destroyed.
REGISTER OF MEMBERS
10. (1) The Company shall keep in one or more books a Register of its Members
and shall enter therein the following particulars:
(a) the name and address of each Member, the number and, where
appropriate, the class of shares held by such Member and the
amount paid or agreed to be considered as paid on such shares;
(b) the date on which each Person was entered in the Register; and
(c) the date on which any Person ceased to be a Member for one year
after such Person so ceased.
(2) Subject to the Act, the Company may keep an overseas or local or other
branch register of Members resident in any place, and the Board may make and
vary such regulations as
18
<PAGE>
it determines in respect of the keeping of any such register and maintaining a
Registration Office in connection therewith.
INSPECTION OF REGISTER OF MEMBERS
11. The Register and branch register of Members, as the case may be, shall be
open to inspection on every business day by Members without charge or by any
other Person, upon the maximum payment permitted under the Act, subject to such
reasonable restrictions as the Board may impose, so that not less then two (2)
hours in each business day be allowed for inspections, at the Office or such
other place in Bermuda at which the Register is kept in accordance with the Act
or, if appropriate, upon the maximum payment permitted under the Act at the
Registration Office. The Register, including any overseas or local or other
branch register of Members may, after Notice has been given by advertisement in
an appointed newspaper and, where applicable, any other newspapers in accordance
with the requirements of any Designated Stock Exchange to that effect, be closed
at such times or for such periods not exceeding in the aggregate thirty (30)
days in each year as the Board may determine and either generally or in respect
of any class of shares.
RECORD DATES
12. Notwithstanding any provision of these Bye-Laws to the contrary, the
Company or the Directors may fix any date as the record date for:
(a) determining the Members entitled to receive any dividend,
distribution, allotment or issue; and
(b) determining the Members entitled to receive Notice of and to vote
at any General Meeting of the Company.
TRANSFER OF SHARES
13. (1) Subject to these Bye-Laws, any Member may transfer all or any of his
shares by an instrument of transfer in the usual or common form or in any other
form approved by the Board.
(2) The instrument of transfer shall be executed by or on behalf of the
transferor and the transferee provided that the Board may dispense with the
execution of the instrument of transfer by the transferee in any case which it
may determine in its discretion to do so. The Board may also resolve, either
generally or in any particular case, upon request by either the transferor or
transferee, to accept mechanically executed transfers. The transferor shall be
deemed to
19
<PAGE>
remain the holder of the share until the name of the transferee is entered in
the Register in respect thereof. Nothing in these Bye-Laws shall preclude the
Board from recognizing a renunciation of the allotment or provisional allotment
of any share by the allottee in favor of some other Person.
(3) The Board may, in its absolute discretion, and without giving any
reason therefor, refuse to register a transfer of any share issued under any
share plan for employees upon which a restriction on transfer imposed thereby
still subsists, and it may also refuse to register a transfer of any share to
more than four (4) joint holders. Nothing in these Bye-Laws shall impair the
settlement of transactions entered into through the facilities of a Designated
Stock Exchange except as provided by such exchange.
(4) No transfer shall be made to an infant or to a Person of unsound mind
or under other legal disability.
(5) The Board, in so far as permitted by applicable law may, in its
absolute discretion, at any time and from time to time transfer any share upon
the Register to any branch register or any share on any branch register to the
Register or any other branch register. In the event of any such transfer, the
shareholder requesting such transfer shall bear the cost of effecting the
transfer unless the Board otherwise determines.
(6) Unless the Board otherwise agrees (which agreement may be on such
terms and subject to such conditions as the Board in its absolute discretion may
from time to time determine, and which agreement it shall, without giving any
reason therefor, be entitled in its absolute discretion to give or withhold), no
shares upon the Register shall be transferred to any branch register nor shall
shares on any branch register be transferred to the Register or any other branch
register and all transfers and other documents of title shall be delivered for
registration, and registered, in the case of any shares on a branch register, at
the relevant Registration Office, and, in the case of any shares on the
Register, at the Office or such other place in Bermuda at which the Register is
kept in accordance with the Act.
(7) Without limiting the generality of the preceding paragraph, the Board
may decline to recognize any instrument of transfer unless:
(a) the instrument of transfer is in respect of only one class of
share;
(b) the instrument of transfer is delivered to the Office or such
other place in Bermuda at which the Register is kept in
accordance with the Act or the Registration Office (as the case
may be) accompanied by the relevant share certificate(s) and such
other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer (and, if the
instrument of transfer is executed by some other Person on his
behalf, the authority of that Person so to do); and
(c) if applicable, it shall be satisfied to the Board that the
proposed transfer complies with the federal and state securities
laws of the United States.
20
<PAGE>
(8) If the Board refuses to register a transfer of any share in accordance
with these Bye-Laws, it shall, within one hundred twenty (120) days after the
date on which the transfer was delivered to the Company, send to each of the
transferor and transferee Notice of the refusal.
(9) The registration of transfers of shares or of any class of shares may,
after Notice has been given by advertisement in an appointed newspaper and,
where applicable, any other newspapers in accordance with the requirements of
any Designated Stock Exchange to that effect, be suspended at such times and for
such periods (not exceeding thirty (30) days in any year) as the Board may
determine.
TRANSMISSION OF SHARES
14. (1) If a Member dies, the survivor or survivors where the deceased was a
joint holder, and his legal representatives where he was a sole or only
surviving holder, will be the only Persons recognized by the Company as having
any title to his interest in the shares; but nothing in this Bye-Law will
release the estate of a deceased Member (whether sole or joint) from any
liability in respect of any share which had been solely or jointly held by him.
(2) Subject to the Act, any Person becoming entitled to a share in
consequence of the death or bankruptcy or winding-up of a Member may, upon such
evidence as to his title being produced as may be required by the Board, elect
either to become the holder of the share or to have some Person nominated by him
registered as the transferee thereof. If he elects to become the holder he shall
notify the Company in writing either at the Registration Office or Office, as
the case may be, to that effect. If he elects to have another Person registered
he shall execute a transfer of the share in favor of that Person. The provisions
of these Bye-Laws relating to the transfer and registration of transfers of
shares shall apply to such Notice or transfer as aforesaid as if the death or
bankruptcy of the Member had not occurred and the Notice or transfer were a
transfer signed by such Member.
(3) A Person becoming entitled to a share by reason of the death or
bankruptcy or winding-up of a Member shall be entitled to the same dividends and
other advantages to which he would be entitled if he were the registered holder
of the share. However, the Board may determine to withhold the payment of any
dividend payable or other advantages in respect of such share until such Person
shall become the registered holder of the share or shall have effectually
transferred such share, but, subject to the requirements of these Bye-Laws being
met, such a Person may vote at meetings.
21
<PAGE>
UNTRACEABLE MEMBERS
15. (1) Without prejudice to the rights of the Company under paragraph
(2) of this Bye-Law, the Company may cease sending a check for dividend
entitlements or dividend warrants by mail if such check or warrants have been
left uncashed on two consecutive occasions. However, the Company may exercise
the power to cease sending a check for dividend entitlements or dividend warrant
after the first occasion on which such a check or warrant is returned
undelivered.
(2) The Company shall have the power to sell, in such manner as the
Board shall determine, any shares of a Member who is untraceable, but no such
sale shall be made unless:
(a) all checks or warrants in respect of dividends of the shares
in question, being not less than three in total number, for
any sum payable in cash to the holder of such shares in
respect of them sent during the relevant period in the manner
authorized by these Bye-Laws have remained uncashed;
(b) so far as it is aware at the end of the relevant period, the
Company has not at any time during the relevant period
received any indication of the existence of the Member who is
the holder of such shares or of a Person entitled to such
shares by death, bankruptcy or operation of law; and
(c) the Company, if so required by the rules governing the
listing of shares on the Designated Stock Exchange, has given
Notice to, and caused advertisement in newspapers in
accordance with the requirements of, the Designated Stock
Exchange to be made of its intention to sell such shares in
the manner required by the Designated Stock Exchange, and a
period of ninety (90) days or such shorter period as may be
allowed by the Designated Stock Exchange has elapsed since
the date of such advertisement.
For the purpose of the foregoing, the "relevant period" means the period
commencing twelve years before the date of publication of the advertisement
referred to in sub-paragraph (2)(c) of this Bye-Law and ending at the expiration
of the period referred to in that paragraph.
(3) To give effect to any such sale the Board may authorize some
Person to transfer the said shares and an instrument of transfer signed or
otherwise executed by or on behalf of such Person shall be as effective as if it
had been executed by the registered holder or the Person entitled by
transmission to such shares, and the purchaser shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity or invalidity in the proceedings relating to the sale. The
net proceeds of the sale will belong to the Company and upon receipt by the
Company of such net proceeds it shall become indebted to the
22
<PAGE>
former Member for an amount equal to such net proceeds. No trust shall be
created in respect of such debt and no interest shall be payable in respect of
it and the Company shall not be required to account for any money earned from
the net proceeds which may be employed in the business of the Company or as the
Board shall determine. Any sale under this Bye-Law shall be valid and effective
notwithstanding that the Member holding the shares sold is dead, bankrupt or
otherwise under any legal disability or incapacity.
GENERAL MEETINGS OF THE MEMBERS
16. (1) The Board shall convene and the Company shall hold
Annual General Meetings of the Members in accordance with the requirements of
the Act and the Bye-Laws. The Board may, whenever it shall determine, and shall,
when required by the Act or the Bye-Laws, convene a General Meeting, other than
an Annual General Meeting, which shall be called a Special General Meeting.
Except with the unanimous approval of the Board, all Annual or Special General
Meetings of the Company shall be held in Bermuda.
(2) The Board may determine to call Special General Meetings, and
Members holding at the date of delivery of the written Notice not less than one-
tenth of the paid up capital of the Company carrying the right of voting at
General Meetings of the Company shall at all times have the right, by written
Notice to the Board or the Secretary of the Company, to require a Special
General Meeting to be called by the Board for the transaction of any business
specified in such Notice; and such meeting shall be held within sixty (60) days
after the deposit of such Notice. If within twenty-one (21) days of such
delivery, the Board fails to proceed to convene such meeting such Members may do
so in accordance with the provisions of the Act.
NOTICE OF GENERAL MEETINGS
17. (1) An Annual General Meeting and any Special General Meeting of the
Members shall be called by not less than twenty-one (21) clear days' Notice.
(2) Notice of every General Meeting shall be given in any manner
permitted by these Bye-Laws to all Members other than those who, under the
provisions of these Bye-Laws or the terms of issue of the shares they hold, are
not entitled to receive such Notice from the Company.
(3) Notwithstanding that a General Meeting of the Company is called by
shorter Notice than that specified in this Bye-Law, it shall be deemed to have
been duly called if it is so agreed:
23
<PAGE>
(a) in the case of a meeting called as an Annual General
Meeting, by all the Members entitled to attend and vote
thereat;
(b) in the case of any other General Meeting, by a majority in
number of the Members having the right to attend and vote at
the meeting, being a majority together holding not less than
ninety-five percent (95%) in nominal value of the shares
giving that right.
(4) At any Annual or Special General Meeting of the Members, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an Annual or Special General Meeting,
business must be specified in the Notice of meeting (or any supplement thereto)
given by or at the direction of the Board, otherwise properly brought before the
meeting by or at the direction of the Board, or otherwise properly brought
before the meeting by a Member. In addition to any other applicable
requirements, for business to be properly brought before an Annual or Special
General Meeting by a Member, the Member must have given timely Notice thereof in
writing to the Secretary of the Company. To be timely, a Member's Notice must be
delivered to or mailed and received at the Registration Office of the Company,
not less than sixty (60) days prior to such meeting. A Member's Notice to the
Secretary shall set forth as to each matter the Member proposes to bring before
the meeting and any material interest of the Member in such business (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and record
address of the Member proposing such business, (iii) a representation that the
Member is a holder of record of shares of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to present
such proposal or nomination, (iv) the class and number of shares of the Company
which are beneficially owned by the Member, and (v) any material interest of the
Member in such business. Provided at all times that Members may only give Notice
to the Secretary of matters to be brought before an Annual or Special General
Meeting for the purposes of this Bye-Law that are matters that are suitable and
appropriate for submission to General Meetings of the Members of a publicly-
quoted company as determined by the Board.
(5) Notwithstanding anything in the Bye-Laws to the contrary, no
business shall be conducted at an Annual or Special General Meeting except in
accordance with the procedures set forth in this Bye-Law. Provided however, that
nothing in this Bye-Law shall be deemed to preclude discussion by any Member of
any business properly brought before the Annual or Special General Meeting in
accordance with the procedures herein detailed.
(6) The Chairman of an Annual or Special General Meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Bye-Law, and if he should so determine, he shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
24
<PAGE>
(7) Any nomination or nominations of Persons for election to the Board
of the Company made in accordance with the provisions of these Bye-Laws shall be
deemed for the purposes of this Bye-Law to constitute business properly brought
before an Annual or Special General Meeting, as the case may be.
(8) The accidental omission to give Notice of a meeting or (in cases
where instruments of proxy are sent out with the Notice) to send such instrument
of proxy to, or the non-receipt of such Notice or such instrument of proxy by,
any Person entitled to receive such Notice shall not invalidate any resolution
passed or the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
18. (1) No business shall be transacted at any General Meeting unless it
shall have been properly brought before the Annual or Special General Meeting in
accordance with these Bye-Laws and a quorum is present when the meeting proceeds
to business, but the absence of a quorum shall not preclude the appointment,
choice or election of a Chairman which shall not be treated as part of the
business of the meeting. Except as provided to the contrary in these Bye-Laws,
at least three Members representing not less than thirty-three and one-third
percent (33 1/3%) of the outstanding shares carrying the right to vote in the
Company, represented in person or by proxy, shall constitute a quorum for all
purposes. In calculating the amount of voting shares represented in person or by
proxy to determine whether or not a quorum is present for the purposes of this
Bye-Law, the inspectors appointed in accordance with Bye-Law 19 hereof, shall
calculate the number of votes represented in person or by proxy in accordance
with the provisions of Bye-Law 20 hereof.
(2) If within five (5) minutes (or such longer time as the Chairman of
the meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of Members,
shall be dissolved. In any other case, it shall stand adjourned to such other
day and such other time and place as the Chairman of the meeting may determine
and at such adjourned meeting two Members present in person (whatever the number
of shares held by them) shall be a quorum. The Company shall give not less than
seven (7) days' Notice of any meeting adjourned through want of a quorum and
such Notice shall state that two Members present in person (whatever the number
of shares held by them) shall be a quorum.
(3) Each Director shall be entitled to attend and speak at any General
Meeting of the Company.
(4) The Chairman of the Board shall preside as Chairman at every
General Meeting. In his absence, the following shall preside in the order
stated: the Deputy Chairman, any other Director appointed by the Board, the
President, any Executive Vice President or any other Officer of the Company. If
none of the foregoing is present within five (5) minutes after the time
appointed for holding the meeting, or if none of them is willing to act as
Chairman, the Directors present shall choose one of their number to act or if
one Director only is present he shall preside as Chairman if willing to act. If
no Director is present or if each of the Directors present declines to take the
25
<PAGE>
chair, the Persons present and entitled to vote shall elect one of their number
to be Chairman.
(5) The Chairman may, with the consent of any meeting at which a
quorum is present (and shall if so directed by the meeting), adjourn the meeting
from time to time and from place to place but no business shall be transacted at
any adjourned meeting except business which might lawfully have been transacted
at the meeting from which the adjournment took place. When a meeting is
adjourned for three (3) months or more, Notice of the adjourned meeting shall be
given as in the case of an original meeting.
(6) Except as provided to the contrary in these Bye-Laws, it shall not
be necessary to give any Notice of an adjournment or of the business to be
transacted at an adjourned meeting.
INSPECTORS
19. The Board may, in advance of any meeting of Members, appoint one or
more inspectors to act at such meeting or any adjournment thereof. If the
inspectors shall not be so appointed or if any of them shall fail to appear or
act, the Chairman of the meeting may and on the request of any Member entitled
to vote thereat shall, appoint inspectors. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to exercise
the duties of inspector at such meeting with strict impartiality and according
to the best of his ability. The inspectors shall determine the number of shares
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all Members. On the request of
the Chairman of the meeting or any Member entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No Director or candidate for the office of Director shall act as inspector.
Inspectors need not be Members.
VOTING AT GENERAL MEETINGS
20. (1) Subject to these Bye-Laws and to any special rights or other
restrictions as to voting for the time being attached to any shares by or in
accordance with these Bye-Laws or the Act, (1) at any General Meeting on a show
of hands every Member present in person or, in the case of a Member being a
corporation, by a duly authorized representative, or by proxy, shall have one
vote and on a vote every Member present in person or by proxy shall have one
vote for every fully paid share of which he is the holder.
(2) Subject to these Bye-Laws and to the Act, (i) any matter submitted
to the Members at a General Meeting for approval shall be approved by an
ordinary resolution of the Members and (ii) any matter submitted to the Members
at a General Meeting for approval which relates to the amalgamation, merger or
consolidation of the Company with another Company or the sale, lease or exchange
of all or substantially all of the assets of the Company shall be approved by a
special resolution of the Members.
(3) A resolution put to the vote of a meeting shall be decided on a
show of hands unless (before or on the declaration of the
26
<PAGE>
result of the show of hands or on the withdrawal of any other demand for a vote)
a vote is demanded by:
(a) the Chairman of such meeting; or
(b) at least three (3) Members present in person or, in the case
of a Member being a corporation, by its duly authorized
representative, or by proxy, for the time being entitled to
vote at the meeting; or
(c) a Member or Members present in person or, in the case of a
Member being a corporation, by its duly authorized
representative or by proxy, and representing not less
one-tenth (1/10) of the total voting rights of all Members
having the right to vote at the meeting; or
(d) a Member or Members present in person or, in the case of a
Member being a corporation by its duly authorized
representative, or by proxy and holding shares in the Company
conferring a right to vote at the meeting being shares on
which an aggregate sum has been paid up equal to not less than
one-tenth (1/10) of the total sum paid up on all shares
conferring that right.
A demand by a Person as proxy for a Member, or in the case of a Member being a
corporation by its duly authorized representative, shall be deemed to be the
same as a demand by a Member.
(4) Subject to this Bye-Law, at any General Meeting each Member
holding shares of the Company, present in person or by proxy, shall be entitled
to such number of votes as otherwise indicated in this Bye-Law with respect to
such shares, on a non-cumulative basis, for each such share registered in such
Member's name in the Register of Members, provided that, if and for so long as
the votes conferred by the Controlled Shares of any Person shall exceed the
Maximum Percentage applicable to such Person of the votes conferred by all of
the issued and outstanding shares of the Company (adjusted for any votes
represented by Controlled Shares that are not entitled to vote due to the terms
of this Bye-Law), each share comprised in such Controlled Shares shall confer
only such fraction of a vote, such that the total combined voting rights of such
Controlled Shares shall be equal to the Maximum Percentage, which percentage
shall be calculated by reducing such combined voting power of the Company's
Members by a number of votes equal to any votes represented by the Controlled
Shares of such Person or any other Person that are not entitled to vote due to
the terms of these Bye-Laws and calculated as of any date and, with respect to
any record date for determining the Members entitled to vote, calculated as of
such record date, including, without limitation, for any election of directors.
Notwithstanding anything to the contrary in these Bye-Laws, the Maximum
Percentage shall not apply to Frederick C. Treadway or Treadway Associates, L.P.
(including their respective heirs, successors and assigns).
27
<PAGE>
(5) If, as a result of giving effect to the provisions of this Bye-Law
or otherwise, the votes conferred by the Controlled Shares of a Person would
otherwise represent an amount greater than the Maximum Percentage applicable to
such Person, the votes conferred by the Controlled Shares of such Person shall
be reduced in accordance with the foregoing provisions of this Bye-Law. Such
process shall be repeated until the votes conferred by the Controlled Shares of
each Person are less than or equal to the Maximum Percentage applicable to such
Person.
(6) Unless a vote is duly demanded and the demand is not withdrawn, a
declaration by the Chairman that a resolution has been carried, or carried
unanimously, or by a particular majority, or not carried by a particular
majority, or lost, and an entry to that effect made in the minute book of the
Company, shall be conclusive evidence of the fact without proof of the number or
proportion of the votes recorded for or against the resolution.
(7) If a vote is duly demanded, the result of the vote shall be deemed
to be the resolution of the meeting at which the vote was demanded. There shall
be no requirement for the Chairman to disclose the voting figures on a vote.
(8) A vote demanded on the election of a Chairman, or on a question of
adjournment, shall be taken forthwith. A vote demanded on any other question
shall be taken in such manner (including the use of ballot or voting papers) and
either forthwith or at such time (being not later than thirty (30) days after
the date of the demand) and place as the Chairman directs. It shall not be
necessary (unless the Chairman otherwise directs) for Notice to be given of a
vote not taken immediately.
(9) The demand for a vote shall not prevent the continuance of a
meeting or the transaction of any business other than the question on which the
vote has been demanded, and, with the consent of the Chairman, it may be
withdrawn at any time before the close of the meeting or the taking of the vote,
whichever is the earlier.
(10) Where a vote is taken, votes may be given either personally or by
proxy.
28
<PAGE>
(11) A Person entitled to more than one vote on a vote need not use
all his votes or cast all the votes he uses in the same way. Notwithstanding the
preceding sentence, nothing herein is intended to allow for cumulative voting in
the election of Directors and cumulative voting in the election of Directors is
expressly prohibited.
(12) In the case of an equality of votes, whether on a show of hands
or on a vote, the Chairman of such meeting shall be entitled to a second or
casting vote in addition to any other vote he may have.
(13) Where there are joint holders of any share any one of such joint
holder may vote, either in person or by proxy, in respect of such share as if he
were solely entitled thereto, but if more than one of such joint holders be
present at any meeting the vote of the senior who tenders a vote, whether in
person or by proxy, shall be accepted to the exclusion of the votes of the other
joint holders, and for this purpose seniority shall be determined by the order
in which the names stand in the Register in respect of the joint holding.
Several executors or administrators of a deceased Member in whose name any share
stands shall for the purposes of this Bye-Law be deemed joint holders thereof.
(14) A Member who is a patient for any purpose relating to mental
health or in respect of whom an order has been made by any court having
jurisdiction for the protection or management of the affairs of Persons
incapable of managing their own affairs may vote, whether on a show of hands or
on a vote, by his receiver, committee, curator bonis or other Person in the
nature of a receiver, committee or curator bonis appointed by such court, and
such receiver, committee, curator bonis or other Person may vote by proxy, and
may otherwise act and be treated as if he were the registered holder of such
shares for the purposes of General Meetings, provided that such evidence as the
Board may require of the authority of the Person claiming to vote shall have
been deposited at the Office, Registration Office or such other place as the
Board may designate, as appropriate, not less than forty-eight (48) hours before
the time appointed for holding the meeting, or adjourned meeting or vote, as the
case may be.
(15) Any Person entitled under these Bye-Laws to be registered as the
holder of any shares may vote at any General Meeting in respect thereof in the
same manner as if he were the registered holder of such shares, provided that
forty-eight (48) hours at least before the time of the holding of the meeting or
adjourned meeting, as the case may be, at which he proposes to vote, he shall
satisfy the Board of his entitlement to such shares, or the Board shall have
previously admitted his right to vote at such meeting in respect thereof.
(16) No Member shall, unless the Board otherwise determines, be
entitled to attend and vote and to be reckoned in a quorum at any General
Meeting unless he is duly registered and all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
29
<PAGE>
(17) If: (a) any objection shall be raised to the qualification of any
voter; or (b) any votes have been counted which ought not to have been counted
or which might have been rejected; or (c) any votes are not counted which ought
to have been counted; the objection or error shall not vitiate the decision of
the meeting or adjourned meeting on any resolution unless the same is raised or
pointed out at the meeting or, as the case may be, the adjourned meeting at
which the vote objected to is given or tendered or at which the error occurs.
Any objection or error shall be referred to the Chairman of the meeting and
shall only vitiate the decision of the meeting on any resolution if the Chairman
decides that the same may have affected the decision of the meeting. The
decision of the Chairman on such matters shall be final and conclusive.
PROXIES AND CORPORATE REPRESENTATION
21. (1) Any Member entitled to attend and vote at a meeting of the
Company shall be entitled to appoint another Person as his proxy to attend and
vote instead of him. A Member may appoint a proxy in respect of part only of
his holding of shares in the Company. A proxy need not be a Member of the
Company.
(2) The instrument appointing a proxy shall be in writing under the
hand of the appointor or of his attorney duly authorized in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
Officer, attorney or other Person authorized to sign the same. In the case of an
instrument of proxy purporting to be signed on behalf of a corporation by an
Officer thereof it shall be assumed, unless the contrary appears, that such
Officer was duly authorized to sign such instrument of proxy on behalf of the
corporation without further evidence of the fact.
30
<PAGE>
(3) The instrument appointing a proxy and (if required by the Board)
the power of attorney or other authority (if any) under which it is signed, or a
certified copy of such power or authority, shall be delivered to such place or
one of such places (if any) as may be specified for that purpose in or by way of
Notice to or in any document accompanying the Notice convening the meeting (or,
if no place is so specified at the Registration Office or the Office, as may be
appropriate) not less than forty-eight (48) hours before the time appointed for
holding the meeting or adjourned meeting at which the Person named in the
instrument proposes to vote or, in the case of a vote taken subsequently to the
date of a meeting or adjourned meeting, not less than twenty-four (24) hours
before the time appointed for the taking of the vote and in default the
instrument of proxy shall not be treated as valid. No instrument appointing a
proxy shall be valid after the expiration of one (1) year from the date named in
it as the date of its execution, except at an adjourned meeting or on a vote
demanded at a meeting or an adjourned meeting in cases where the meeting was
originally held within one (1) year from such date. Delivery of an instrument
appointing a proxy shall not preclude a Member from attending and voting in
person at the meeting convened and in such event, the instrument appointing a
proxy shall be deemed to be revoked.
(4) Instruments of proxy shall be in any common form or in such other
form as the Board may approve (provided that this shall not preclude the use of
the two-way form) and the Board may send out with the Notice of any meeting,
forms of instrument of proxy for use at the meeting. The instrument of proxy
shall be deemed to confer authority to demand or join in demanding a vote and to
vote on any amendment of a resolution put to the meeting for which it is given
as the proxy may determine. The instrument of proxy shall, unless the contrary
is stated therein, be valid as well for any adjournment of the meeting as for
the meeting to which it relates.
(5) A vote given in accordance with the terms of an instrument of
proxy shall be valid notwithstanding the previous death or insanity of the
principal, or revocation of the instrument of proxy or of the authority under
which it was executed, provided that no intimation in writing of such death,
insanity or revocation shall have been received by the Company at the Office or
the Registration Office (or such other place as may be specified for the
delivery of instruments of proxy in the Notice convening the meeting or other
document sent therewith) two (2) hours at least before the commencement of the
meeting or adjourned meeting, or the taking of the vote, at which the instrument
of proxy is used.
(6) Anything which under these Bye-Laws a Member may do by proxy he
may likewise do by his duly appointed attorney and the provisions of these Bye-
Laws relating to proxies and instruments appointing proxies shall apply, as the
case may be, in relation to any such attorney and the instrument under which
such attorney is appointed.
(7) Any corporation which is a Member of the Company may by any
authorized Officer authorize such Person as it may determine to act as its
31
<PAGE>
representative at any meeting of the Company or any class of Members of the
Company. The Person so authorized shall be entitled to exercise the same powers
on behalf of such corporation as the corporation could exercise if it were an
individual Member of the Company and such corporation shall for the purposes of
these Bye-Laws be deemed to be present in person at any such meeting if a Person
so authorized is present thereat. Any reference in these Bye-Laws to a duly
authorized representative of a Member being a corporation shall mean a
representative authorized under the provisions of this Bye-Law.
(8) If a clearing house is a Member, it may authorize such Person or
Persons as it determines to act as its representative or representatives at any
meeting of the Company or at any meeting of any class of Members provided that,
if more than one Person is so authorized, the authorization shall specify the
number and class of shares in respect of which each such Person is so
authorized. A Person so authorized under the provisions of this Bye-Law shall be
entitled to exercise the same powers on behalf of the clearing house (or its
nominee) which he represents as that clearing house (or its nominee) could
exercise if it were an individual Member. For the purposes of this Bye-Law,
"clearing house" means any clearing house or other similar body recognized by
the laws of the jurisdiction in which the shares of the Company are listed or
quoted on a Designated Stock Exchange.
NOMINATION AND REMOVAL OF DIRECTORS
22. (1) The number of Directors which shall constitute the whole Board
of Directors of the Company shall not be more than fifteen (15). The Board is
divided into three classes, Class I, Class II and Class III. The number of
Directors in each class shall be the whole number contained in the quotient
arrived at by dividing the authorized number of Directors by three and if a
fraction is also contained in such quotient, then if such fraction is one-third
(1/3) the extra Director shall be a member of Class III and if the fraction is
two-thirds (2/3) one of the Directors shall be member of Class III and the other
shall be a member of Class II. Each Director shall serve for a term ending on
the third Annual General Meeting following the annual meeting at which such
Director was elected; provided however, that the Directors first elected to
Class I shall serve for a term ending on the annual meeting next ensuing, the
Directors first elected to Class II shall serve for a term ending on the second
annual meeting following the meeting at which such Directors were first elected,
and the Directors first elected to Class III shall serve a full term as
hereinbefore provided. The foregoing notwithstanding, each Director shall serve
until his successor shall have been duly elected and qualified, unless he shall
resign, become disqualified, disabled or shall otherwise be removed.
(2) For the purpose of the preceding paragraph, reference to the first
election of Directors is to the election at the 1998 Annual General Meeting of
the Company. At each annual election held thereafter, the Directors chosen to
succeed those whose terms then expire shall be identified as being of the same
class as the Directors they succeed. If for any reason the number of Directors
32
<PAGE>
in the various classes shall not conform with the formula set forth in the
preceding paragraph, the Board may redesignate any Director to a different class
in order that the balance of Directors in such classes shall conform thereto.
(3) A Director need not be a Member.
(4) Only Persons who are nominated in accordance with the following
procedures shall be eligible for election as Directors. Nominations of Persons
for election to the Board of the Company may be made at a meeting of Members, or
at the discretion of the Board, by any nominating committee or Person appointed
by the Board, by any Member of the Company entitled to vote for the election of
Director at the meeting who complies with the Notice procedures set forth in
this Bye-Law. Such nominations, other than those made by or at the direction of
the Board, shall be made pursuant to timely Notice to the Secretary of the
Company. To be timely, a Member's Notice shall be delivered to or mailed and
received at the registered office of the Company not less than sixty (60) days
prior to such meeting. Such Member's Notice to the Secretary shall set forth (a)
as to each Person whom the Member proposes to nominate for election or re-
election as a Director, (i) the name, age, business address and residence
address of the Person, (ii) the principal occupation or employment of the
Person, (iii) the class and number of shares of Common Shares of the Company
which are beneficially owned by the Person, (iv) any other information relating
to the Person that is required to be disclosed in solicitations for proxies for
election of Directors pursuant to Schedule 14A of the Exchange Act, and (v) the
consent of each nominee to serve as a Director, if so elected; and (b) as to the
Member giving the Notice (i) the name and record address of the Member and (ii)
the class and number of shares of capital stock of the Company which are
beneficially owned by the Member. The Company may require any proposed nominee
to furnish such other information as may reasonably be required by the Company
to determine the eligibility of such proposed nominee to serve as a Director of
the Company. No Persons shall be eligible for election as a Director of the
Company unless nominated in accordance with the procedures set forth herein.
(5) The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(6) The Directors shall (subject to any resolution of the Members to
the contrary) have the power from time to time and at any time to appoint any
Person as a Director either to fill a casual vacancy on the Board but so that
the number of Directors so appointed shall not exceed any maximum number
determined from time to time by the Members in a General Meeting. Any Director
so appointed by the Board shall hold office only until the next following Annual
General Meeting of the Company and shall then be eligible for re-election at
that meeting.
33
<PAGE>
(7) Neither a Director nor an Alternate Director, as the case may be,
shall be required to hold any shares of the Company by way of qualification and
a Director or an Alternate Director (as the case may be) who is not a Member
shall be entitled to receive Notice of and to attend and speak at any General
Meeting of the Company and of all classes of shares of the Company.
(8) Notwithstanding anything to the contrary in these Bye-Laws, the
Members may, at a General Meeting convened and held in accordance with these
Bye-Laws, by special resolution remove a Director without cause, and by ordinary
resolution with cause, at any time before the expiration of such Director's
period of office or in any agreement between the Company and such Director (but
without prejudice to any claim for damages under any such agreement) provided
that the Notice of any such meeting convened for the purpose of removing a
Director shall contain a statement of the intention so to do and be served on
such Director fourteen (14) days before the meeting and at such meeting such
Director shall be entitled to be heard on the motion for his removal.
(9) A vacancy on the Board created by the removal of a Director under
paragraph (8) of this Bye-Law may be filled by the election or appointment by
the Members at the meeting at which such Director is removed to hold office
until the next appointment of Directors or until their successors are elected or
appointed or, in the absence of such election or appointment, but subject to any
resolution of the Members to the contrary, the Board may fill any vacancy in the
number left unfilled.
(10) A retiring Director shall be eligible for re-election.
(11) The office of a Director shall be vacated if the Director:
(a) resigns his office by Notice delivered to the Company at the
Office or tendered at a meeting of the Board whereupon the
Board resolves to accept such resignation; or
(b) becomes of unsound mind (as determined by the Board in its
sole discretion) or dies; or
(c) without special leave of absence from the Board, is absent
from meetings of the Board for two consecutive meetings, and
the Board resolves that his office be vacated; or
(d) becomes bankrupt or has a receiving order made against him or
suspends payment or comprises with his creditors; or
(e) is prohibited by law from being a Director; or
34
<PAGE>
(f) ceases to be a Director by virtue of any provision of the
Act or is removed from office pursuant to this Bye-Law.
ALTERNATE DIRECTORS
23. (1) Any Director may at any time by Notice delivered to the Office or
at a meeting of the Directors appoint any Person to be his Alternate Director.
Any Person so appointed shall have all the rights and powers of the Director or
Directors for whom such Person is appointed in the alternative provided that
such Person shall not be counted more than once in determining whether or not a
quorum is present. An Alternate Director may be removed at any time by the
Director who appointed him and, subject thereto, the office of Alternate
Director shall continue until the next annual election of Directors or, if
earlier, the date on which the relevant Director ceases to be a Director. Any
appointment or removal of an Alternate Director shall be effected by Notice
signed by the appointor and delivered to the Office or tendered at a meeting of
the Board. An Alternate Director may also be a Director in his own right and may
act as alternate to more than one other Director. An Alternate Director shall,
if his appointor so requests, be entitled to receive Notices of meetings of the
Board or of committees of the Board to the same extent as, but in lieu of, the
Director appointing him and shall be entitled to such extent to attend and vote
as a Director at any such meeting at which the Director appointing him is not
personally present and generally at such meeting to exercise and discharge all
the functions, powers and duties of his appointor as a Director and for the
purposes of the proceedings at such meeting the provisions of these Bye-Laws
shall apply as if he were a Director save that as an alternate for more than one
Director his voting rights shall be cumulative.
(2) An Alternate Director shall only be a Director for the purposes of
the Act and shall only be subject to the provisions of the Act insofar as they
relate to the duties and obligations of a Director when performing the functions
of the Director for whom he is appointed in the alternative and shall alone be
responsible to the Company for his acts and defaults and shall not be deemed to
be the agent of or for the Director appointing him. An Alternate Director shall
be entitled to contract and be interested in and benefit from contracts or
arrangements or transactions and to be repaid expenses and to be indemnified by
the Company to the same extent, as the case may be, as if he were a Director
but he shall not be entitled to receive from the Company any fee in his capacity
as an Alternate Director except only such part, if any, of the remuneration
otherwise payable to his appointor as such appointor may by Notice to the
Company from time to time direct.
(3) Every Person acting as an Alternate Director shall have one vote
for each Director for whom he acts as alternate (in addition to his own vote if
he is also a Director). If his appointor is for the time being unavailable or
unable to act, the signature of an Alternate Director to any resolution in
writing of the Board or a committee of the Board of which his appointor is a
35
<PAGE>
member shall, unless the Notice of his appointment provides to the contrary, be
as effective as the signature of his appointor.
(4) An Alternate Director shall ipso facto cease to be an Alternate
Director if his appointor ceases for any reason to be a Director, however, such
Alternate Director or any other Person may be re-appointed by the Directors to
serve as an Alternate Director provided always that, if at any meeting any
Director retires but is re-elected at the same meeting, any appointment of such
Alternate Director pursuant to these Bye-Laws which was in force immediately
before his retirement shall remain in force as though he had not retired.
DIRECTORS' COMPENSATION
24. The amount, if any, of Directors' fees, retainers, awards of shares,
or other remuneration shall from time to time be determined by the Executive
Committee of the Board. In addition, each Director shall be paid his reasonable
traveling, hotel and incidental expenses in attending and returning from
meetings of the Board or committees appointed by the Board, or any Annual
General Meeting or Special General Meeting of the Members, and shall be paid
all expenses properly and reasonably incurred by him in the conduct of the
Company's business or in the discharge of his duties as a Director. Any
question as to the reasonableness of expenses as provided herein shall be a
matter to be determined by the Executive Committee of the Board. Any Director
who by request, goes or resides abroad for any purposes of the Company or who
performs services which in the opinion of the Executive Committee of the Board
go beyond the ordinary duties of a Director may be paid such extra remuneration
(whether by way of salary or otherwise) as the Executive Committee of the Board
may determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other Bye-Law.
DIRECTORS' AND OFFICERS' INTERESTS
25. (1) A Director may:
(a) hold any other office or place of profit with the Company
(except that of Auditor) in conjunction with his office of
Director for such period and, subject to the relevant
provisions of the Act, upon such terms as the Executive
Committee of the Board may determine. Any remuneration
(whether by way of salary or otherwise) paid to any Director
in respect of any such other office or place of profit shall
be in addition to any remuneration provided for by or
pursuant to any other Bye-Law;
36
<PAGE>
(b) act by himself or his firm in a professional capacity for the
Company (otherwise than as Auditor) and he or his firm may be
remunerated for professional services as if he were not a
Director;
(c) continue to be or become a director, manager or other officer
or member of any other company promoted by the Company or in
which the Company may be interested as a vendor, shareholder
or otherwise and (unless otherwise agreed) no such Director
shall be accountable for any remuneration or other benefits
received by him as a director, manager or other officer or
member of or from his interests in any such other company.
Notwithstanding anything contained in these Bye-Laws to the
contrary, any Director may exercise or cause to be exercised
the voting powers conferred by the shares in any other
company held or owned by the Company, or exercisable by him
as director of such other company in such manner in all
respects as he may determine (including the exercise thereof
in favor of any resolution appointing himself as a director,
manager or other officer of such company), or voting or
providing for the payment of remuneration to the director,
managing director, joint managing director, deputy managing
director, executive director, manager or other officers of
such other company and any Director may vote in favor of the
exercise of such voting rights in manner aforesaid
notwithstanding that he may be, or about to be, appointed a
director, manager or other officer of such a company, and
that as such he is or may become interested in the exercise
of such voting rights in manner aforesaid.
(2) Subject to the Act and to these Bye-Laws, no Director or Officer
or proposed or intending Director or Officer shall be disqualified by his office
from contracting with the Company, either with regard to his tenure of any
office or place of profit or as vendor, purchaser or in any other manner
whatever, nor shall any such contract or any other contract or arrangement in
which any Director or Officer is in any way interested be liable to be avoided,
nor shall any Director or Officer so contracting or being so interested be
liable to account to the Company or the Members for any remuneration, profit or
other benefits realized by any such contract or arrangement by reason of such
Director or Officer holding that office or of the fiduciary relationship thereby
established, provided that such Director or Officer shall disclose the nature of
his interest in any contract or arrangement in which he is interested in
accordance with these Bye-Laws.
(3) A Director or Officer who to his knowledge is in any way, whether
directly or indirectly, interested in a contract or arrangement or proposed
contract or arrangement with the Company shall declare the nature of his
interest at the meeting of the Board at which the question of entering into the
contract or arrangement is first considered, if he knows his interest
37
<PAGE>
then exists, or in any other case at the first meeting of the Board after he
knows that he is or has become so interested.
(4) For the purposes of the preceding paragraph, a Director shall
furnish Notice to the Board to the effect that: (a) he is a member or officer of
a specified company or firm and is to be regarded as interested in any contract
or arrangement which may after the date of the Notice be made with that company
or firm; or (b) he is to be regarded as interested in any contract or
arrangement which may after the date of the Notice be made with a specified
Person who is connected with him; shall be deemed to be a sufficient declaration
of interest under these Bye-Laws in relation to any such contract or
arrangement, provided that no such Notice shall be effective unless either it is
given at a meeting of the Board or the Director or Officer takes reasonable
steps to secure that it is brought up and read at the next Board meeting after
it is given.
GENERAL POWERS OF THE BOARD OF DIRECTORS
26. (1) The business of the Company shall be managed and conducted by
the Board, which may exercise all powers of the Company (whether relating to the
management of the business of the Company or otherwise) which are not by the Act
or by these Bye-Laws required to be exercised by the Company in a General
Meeting, subject nevertheless to the provisions of the Act and of these Bye-Laws
and to such regulations being not inconsistent with such provisions as may be
prescribed by the Company in a General Meeting. No regulations made by the
Company in a General Meeting shall invalidate any prior act of the Board which
would have been valid if such regulations had not been made. The general powers
given by this Bye-Law shall not be limited or restricted by any special
authority or power given to the Board by any other Bye-Law.
(2) Any Person contracting or dealing with the Company in the ordinary
course of business shall be entitled to rely on any written or oral contract or
agreement or deed, document or instrument entered into or executed as the case
may be by any Officer or any two of the Directors acting jointly on behalf of
the Company and the same shall be deemed to be validly entered into or executed
by the Company as the case may be and shall, subject to applicable law, be
binding on the Company.
(3) Without prejudice to the general powers conferred by these Bye-
Laws it is hereby expressly declared that the Board shall have the following
powers, namely:
(a) to give to any Person (including, without limitation, any
Director, Officer, or employee) the right or option of
requiring at a future date that an allotment shall be made
to him of any share at par or at such premium as may be
agreed;
38
<PAGE>
(b) to give to any Director, Officer or employee of the Company
an interest in any particular business or transaction or
participation in the profits thereof or in the general
profits of the Company either in addition to or in
substitution for a salary or other remuneration.
(4) The Board may by power of attorney appoint under the Seal any
company, firm or Person or body of Persons, whether nominated directly or
indirectly by the Board, to be the attorney or attorneys of the Company for such
purposes and with such powers, authorities and discretions (not exceeding those
vested in or exercisable by the Board under these Bye-Laws) and for such period
and subject to such conditions as it may determine, and any such power of
attorney may contain such provisions for the protection and convenience of
Persons dealing with any such attorney as the Board may determine, and may also
authorize any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him. Such attorney or attorneys may, if so
authorized under the Seal of the Company, execute any deed or instrument under
their personal seal with the same effect as the affixation of the Company's
Seal.
(5) The Board may entrust to and confer upon any Director any of the
powers exercisable by it upon such terms and conditions and with such
restrictions as it may determine, and either collaterally with, or to the
exclusion of, its own powers, and may from time to time revoke or vary all or
any of such powers but no Person dealing in good faith and without Notice of
such revocation or variation shall be affected thereby.
(6) All checks, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
monies paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall from
time to time by resolution determine. The Company's banking accounts shall be
kept with such banks or other financial institutions as the Board shall from
time to time determine.
(7) The Board may establish or join with other companies (including
any of its Subsidiaries or other affiliated companies) in establishing and
making contributions out of the Company's monies to any plans or funds for
providing pensions, life insurance or other benefits for employees (which
expression as used in this and the following paragraph shall include any
Director or ex-Director who may hold or have held any executive office or any
office of profit under the Company or any of its Subsidiaries) and ex-employees
of the Company or any of its Subsidiaries and their dependents or any class or
classes of such Person.
(8) The Board may pay, enter into agreements to pay or make grants of
revocable or irrevocable, and either subject or not subject to any terms or
conditions, pensions or other benefits to employees and ex-employees of the
Company or any of its Subsidiaries and their dependents, or to any of such
Persons, including pensions or benefits additional to those, if any, to which
such employees or ex-employees or their dependents are or may become entitled
under
39
<PAGE>
any such plan or fund as mentioned in the preceding paragraph. Any such pension
or benefit may, as the Board considers desirable, be granted to an employee
either before and in anticipation of or upon or at any time after his actual
retirement.
(9) The Board may exercise all the powers of the Company to raise or
borrow money and to mortgage or charge all or any part of the undertaking,
property and assets (present and future) and uncalled capital of the Company
and, subject to the Act, to issue debentures, bonds and other securities,
whether outright or as collateral security for any debt, liability or obligation
of the Company or of any third party.
(10) Debentures, bonds and other securities may be made assignable
free from any equities between the Company and the Person to whom the same may
be issued.
(11) Any debentures, bonds or other securities may be issued at a
discount (other than shares), premium or otherwise and with any special
privileges as to redemption, surrender, drawings, allotment of shares, attending
and voting at General Meetings of the Company, appointment of Directors and
otherwise.
PROCEEDINGS OF THE BOARD OF DIRECTORS
27. (1) The Board may meet for the dispatch of business, adjourn and
otherwise regulate its meetings as it considers appropriate. Actions to be
taken at any meeting shall be determined by a majority of votes cast, provided a
quorum is present. Meetings of the Board of Directors of the Company shall
be held outside the United States.
(2) A meeting of the Board may be convened by the Secretary on request
of the President or by any two (2) Directors, provided that no business shall be
transacted at a Board meeting unless not less than seven (7) clear days' Notice
of the meeting shall be given to each Director with reasonable details of the
business to be transacted and provided further that any Director may by Notice
to the Company agree that no Notice needs or any shorter Notice specified in a
Notice may be given to him. The Secretary shall convene a meeting of the Board
of which Notice may be given in writing or by telephone or in such other manner
as the Board may from time to time determine whenever he shall be required so
hereunder. Any Director may waive Notice of any meeting either prospectively or
retrospectively.
(3) The quorum necessary for the transaction of the business of the
Board may be fixed by the Board and, unless so fixed at any other number, shall
be three (3). An Alternate Director shall be counted in a quorum in the case of
the absence of a Director for whom he is the alternate provided that he shall
not be counted more than once for the purpose of determining whether or not a
quorum is present.
40
<PAGE>
(4) Directors may participate in any meeting of the Board by means of
a conference telephone or other communications equipment through which all
Persons participating in the meeting can communicate with each other
simultaneously and instantaneously and, for the purpose of counting a quorum,
such participation shall constitute presence at a Meeting as if those
participating were present in person.
(5) Any Director who ceases to be a Director at a Board meeting may
continue to be present and to act as a Director and be counted in the quorum
until the termination of such Board meeting if no other Director objects and if
otherwise a quorum of Directors would not be present.
(6) The continuing Directors or a sole continuing Director may act
notwithstanding any vacancy in the Board but, if and so long as the number of
Directors is reduced below the minimum number fixed by or in accordance with
these Bye-Laws, the continuing Directors or Director, notwithstanding that the
number of Directors is below the number fixed by or in accordance with these
Bye-Laws as the quorum or that there is only one continuing Director, may act
for the purpose of filling vacancies in the Board or of summoning General
Meetings of the Company but not for any other purpose.
(7) The Board may elect a Chairman and a Deputy Chairman of its
meetings and determine the period for which they are respectively to hold such
office. If no Chairman or Deputy Chairman is elected, or if at any meeting
neither the Chairman nor any Deputy Chairman is present within five (5) minutes
after the time appointed for holding the same, the Directors present may choose
one of their number to be Acting Chairman of the meeting.
(8) A meeting of the Board at which a quorum is present shall be
competent to exercise all the powers, authorities and discretions for the time
being vested in or exercisable by the Board.
(9) The Board may delegate any of its powers, authorities and
discretions to committees (including, but not limited to, an Executive
Committee, a Compensation Committee, and an Audit/Finance Committee), consisting
of Directors or Officers as it may determine, and they may, from time to time,
revoke such delegation or revoke the appointment of and discharge any such
committees either wholly or in part, and either as to Persons or purposes. Any
committee so formed shall, in the exercise of the powers, authorities and
discretions so delegated, conform to any regulations which may be imposed on it
by the Board.
(10) All acts done by any such committee in conformity with such
regulations, and in fulfillment of the purposes for which it was appointed, but
not otherwise, shall have like force and effect as if done by the Board, and the
Board shall have power, with the consent of the Company in a General Meeting, to
remunerate the members of any such committee, and charge such remuneration to
the current expenses of the Company.
41
<PAGE>
(11) The meetings and proceedings of any committee consisting of two
(2) or more Members shall be governed by the provisions contained in these Bye-
Laws for regulating the meetings and proceedings of the Board so far as the same
are applicable and are not superseded by any regulations imposed by the Board
under the preceding paragraph.
(12) A resolution in writing signed by all the Directors (except such
as are temporarily unable to act through ill-health or disability), (provided
that such number is sufficient to constitute a quorum and further provided that
a copy of such resolution has been given or the contents thereof communicated to
all the Directors for the time being entitled to receive Notices of Board
meetings in the same manner as Notices of meetings are required to be given by
these Bye-Laws) be as valid and effectual as if a resolution had been passed at
a meeting of the Board duly convened and held. Such resolution may be contained
in one document or in several documents in like form each signed by one or more
of the Directors and for this purpose a facsimile signature of a Director shall
be treated as valid.
(13) All acts bona fide done by the Board or by any committee or by
any Person acting as a Director or members of a committee, shall,
notwithstanding that it is afterwards discovered that there was some defect in
the appointment of any member or the Board or such committee or Person acting as
aforesaid or that they or any of them were disqualified or had vacated office,
be as valid as if every such Person had been duly appointed and was qualified
and had continued to be a Director or member of such committee.
OFFICERS
28. (1) The Officers of the Company shall consist of the Chairman,
President, Chief Executive Officer, Executive Vice-President, Senior Vice
President, Vice President, Chief Financial Officer and Secretary and such
additional Officers (who may or may not be Directors) as the Board may from time
to time determine, all of whom shall be deemed to be Officers for the purposes
of the Act and these Bye-Laws.
(2) The Officers shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to them by
the Board from time to time.
(3) The authority of any Officer of the Company so long as such
Officer shall be resident in the United States, shall be limited to maintaining
an oversight and review of and providing recommendations and information to the
Board, but not to any third party, regarding the affairs of the Company
pertaining to any of its Subsidiaries incorporated in the United States and
otherwise to enable the Company to fulfill its role as the holder of shares of
such Subsidiaries. Such Officer shall have no authority (i) to negotiate or
conclude contracts in the name of the Company (or any of its Subsidiaries not
incorporated in the United States) or
42
<PAGE>
otherwise bind the Company (or any of its Subsidiaries not incorporated in the
United States) within the United States, or (ii) to conduct or manage any
activities of the Company (or any of its Subsidiaries not incorporated in the
United States) within or outside of the United States, or (iii) to act in any
way which might result in the Company (or any of its Subsidiaries not
incorporated in the United States) being considered to be engaged in a trade or
business in the United States within the meaning of the Code. Any purported
action or contract done or made by such Officer or any other duly appointed
Officer of the Company in violation of the provisions hereof shall be null and
void ab initio and the Company or any of its Subsidiaries shall in no way be
bound or affected by any such action or contract done or made on violation
hereof.
(4) The Directors shall, as soon as may be after each appointment or
election of Directors, elect the Officers of the Company, and a Chairman and a
Deputy Chairman of the Board of Directors.
(5) The Officers shall receive such remuneration as the Directors may
from time to time determine.
(6) The Company may in accordance with the Act appoint a resident
representative ordinarily resident in Bermuda and the resident representative
shall maintain an office in Bermuda and comply with the provisions of the Act.
The Company shall provide the resident representative with such documents and
information as the resident representative may require in order to be able to
comply with the provisions of the Act. The resident representative shall be
entitled to have Notice of, attend and be heard at all meetings of the Board or
meetings of the Members.
(7) The Secretary, or an Assistant Secretary, shall attend all
meetings of the Members and shall keep correct minutes of such meetings and
enter the same in the proper books provided for the purpose. The Secretary shall
perform such other duties as are prescribed by the Act or these Bye-Laws or as
may be prescribed by the Board.
(8) The Chairman or the Deputy Chairman of the Board of Directors, as
the case may be, shall act as chairman at all meetings of the Members and of the
Directors at which he is present. In the absence of both the Chairman and the
Deputy Chairman, a chairman shall be appointed or elected by those present at
the meeting.
(9) The Officers of the Company shall have such powers and perform
such duties in the management, business and affairs of the Company as may be
delegated to them by the Directors from time to time.
(10) A provision of the Act or of these Bye-Laws requiring or
authorizing a thing to be done by or to a Director and the Secretary shall not
be satisfied by its being done by or to the same Person acting both as Director
and as or in place of the Secretary.
43
<PAGE>
REGISTER OF DIRECTORS AND OFFICERS
29. (1) The Board shall cause to be kept in one or more books at its
Office a Register of Directors and Officers and shall enter therein the
particulars required by the Act.
(2) The Register of Directors and Officers shall be open to inspection
at the Office of the Company on every business day, subject to such reasonable
restrictions as the Board may impose, so that not less than two (2) hours in
each business day be allowed for inspection.
MINUTES
30. The Board shall cause Minutes to be duly entered in books provided for
the purpose: (i) of all elections and appointments of Officers; (ii) of the
names of the Directors present at each meeting of the Directors and of any
committee appointed by the Board; and (iii) of all resolutions and proceedings
of each General Meeting of the Members, meetings of the Board and meetings of
committees of the Board.
SEAL
31. (1) The Company shall have one or more Seals, as the Board may
determine. For the purpose of sealing documents creating or evidencing
securities issued by the Company, the Company may have a securities seal which
is a facsimile of the Seal of the Company with the addition of the words
"Corporate Seal" on its face or in such other form as the Board may approve. The
Board shall provide for the custody of each Seal and no Seal shall be used
without the authority of the Board or of a committee of the Board authorized by
the Board in that behalf. Subject as otherwise provided in these Bye-Laws, any
instrument to which a Seal is affixed shall be signed autographically by one
Director or Officer and the Secretary or by two Directors or by such other
Person (including a Director) or Persons as the Board may appoint, either
generally or in any particular case, save that as regards any certificates for
shares or debentures or other securities of the Company the Board may by
resolution determine that such signatures or either of them shall be dispensed
with or affixed by some method or system of mechanical signature. Every
instrument executed in manner provided by this Bye-Law shall be deemed to be
sealed and executed with the authority of the Board previously given.
(2) Where the Company has a Seal for use abroad, the Board may by
writing under the Seal appoint any agent or committee abroad to be the duly
authorized agent of the Company for the purpose of affixing and using such Seal
and the Board may impose restrictions on the use thereof as it may determine.
Wherever in these Bye-Laws reference is made to the Seal, the
44
<PAGE>
reference shall, when and so far as may be applicable, be deemed to include any
such other Seal as aforesaid.
(3) Any Director or the Secretary or any Person appointed by the Board
for the purpose may authenticate (by affixing the seal or otherwise) any
documents affecting the constitution of the Company and any resolution passed by
the Company or the Board or any committee, and any books, records, documents and
accounts relating to the business of the Company, and to certify copies thereof
or extracts therefrom as true copies or extracts, and if any books, records,
documents or accounts are elsewhere than at the Office, or other Officer of the
Company having the custody thereof shall be deemed to be a Person so appointed
by the Board. A document purporting to be a copy of a resolution, or an extract
from the minutes of a meeting, of the Company or of the Board or any committee
which is so certified shall be conclusive evidence in favor of all Persons
dealing with the Company upon the faith thereof that such resolution has been
duly passed or, as the case may be, that such minutes or extract is a true and
accurate record of proceedings at a duly constituted meeting.
DESTRUCTION OF DOCUMENTS
32. The Company shall be entitled to destroy the following documents at
the following times:
(a) any share certificate which has been cancelled at any time after
the expiration of one (1) year from the date of such
cancellation;
(b) any dividend mandate or any variation or cancellation thereof or
any notification of change of name or address at any time after
the expiration of two (2) years from the date such mandate,
variation, cancellation or notification was recorded by the
Company;
(c) any instrument of transfer of shares which has been registered at
any time after the expiration of seven (7) years from the date of
registration;
(d) any allotment letters after the expiration of seven (7) years
from the date of issue thereof; and
(e) copies of powers of attorney, grants of probate and letters of
administration at any time after the expiration of seven (7)
years after the account to which the relevant power of attorney,
grant of probate or letters of administration related has been
closed;
and it shall conclusively be presumed in favor of the Company that every entry
in the Register purporting to be made on the basis of any such documents so
destroyed was duly and properly made and every share certificate so destroyed
was a valid certificate duly and properly cancelled
45
<PAGE>
and that every instrument of transfer so destroyed was a valid and effective
instrument duly and properly registered and that every other document destroyed
hereunder was a valid and effective document in accordance with the recorded
particulars thereof in the books or records of the Company. Provided always
that: (1) the foregoing provisions of this Bye-Law shall apply only to the
destruction of a document in good faith and without Notice to the Company that
the preservation of such document was relevant to a claim; (2) nothing contained
in this Bye-Law shall be construed as imposing upon the Company any liability in
respect of the destruction of any such document earlier than as aforesaid or in
any case where the conditions of proviso (1) above are not fulfilled; and (3)
references in this Bye-Law to the destruction of any document include references
to its disposal in any manner.
DIVIDENDS AND OTHER DISTRIBUTIONS
33. (1) Subject to the Act, the Board may from time to time declare
dividends in any currency or property to be paid to the Members. The Board may
also make a distribution to the Members out of any contributed surplus (as
ascertained in accordance with the Act).
(2) No dividend shall be paid or other distribution made out of
contributed surplus if to do so would render the Company unable to pay its
liabilities as they become due or the realizable value of its assets would
thereby become less than the aggregate of its liabilities and its issued share
capital and share premium accounts.
(3) Except in so far as the rights attaching to, or the terms of issue
of, any share otherwise provide:
(a) all dividends shall be declared and paid according to the
amounts paid; and
(b) all dividends shall be apportioned and paid pro rata according
to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is
paid.
(4) The Board may from time to time pay to the Members such interim
dividends as appear to the Board to be justified by the profits of the Company
and in particular (but without prejudice to the generality of the foregoing) if
at any time the share capital of the Company is divided into different classes,
the Board may pay such interim dividends in respect of those shares in the
capital of the Company which confer on the holders thereof deferred or non-
preferential rights as well as in respect of those shares which confer on the
holders thereof preferential rights with regard to dividend and provided that
the Board acts bona fide the Board shall not incur any responsibility to the
holders of shares conferring any preference for any damage that they may suffer
by reason of the payment of an interim
46
<PAGE>
dividend on any shares having deferred or non-preferential rights and may also
pay any fixed dividend which is payable on any shares of the Company half-yearly
or on any other dates, whenever such profits, in the opinion of the Board,
justifies such payment.
(5) The Board may deduct from any dividend or other monies payable to
a Member by the Company on or in respect of any shares all sums of money (if
any) presently payable by him to the Company on account of calls or otherwise.
(6) No dividend or other monies payable by the Company on or in
respect of any share shall bear interest against the Company.
(7) Any dividend, interest or other sum payable in cash to the holder
of shares may be paid by check or warrant sent through the mail addressed to the
holder at his registered address or, in the case of joint holders, addressed to
the holder whose name stands first in the Register in respect of the shares at
his address as appearing in the Register or addressed to such Person and at such
address as the holder or joint holders may in writing direct. Every such check
or warrant shall, unless the holder or joint holders otherwise direct, be made
payable to the order of the holder or, in the case of joint holders, to the
order of the holder whose name stands first on the Register in respect of such
shares, and shall be sent at his or their risk and payment of the check or
warrant by the bank on which it is drawn shall constitute a good discharge to
the Company notwithstanding that it may subsequently appear that the same has
been stolen or that any endorsement thereon has been forged. Any one of two or
more joint holders may give effectual receipts for any dividends or other monies
payable or property distributable in respect of the shares held by such joint
holders.
(8) All dividends or bonuses unclaimed for one (1) year after having
been declared may be invested or otherwise made use of by the Board for the
benefit of the Company until claimed. Any dividend or bonuses unclaimed after a
period of six (6) years from the date of declaration shall be forfeited and
shall revert to the Company. The payment by the Board of any unclaimed dividend
or other sums payable on or in respect of a share into a separate account shall
not constitute the Company a trustee in respect thereof.
(9) Whenever the Board has resolved that a dividend be declared or
paid, the Board may further resolve that such dividend be satisfied wholly or in
part by the distribution of specific assets of any kind and in particular of
paid up shares, debentures or warrants to subscribe securities of the Company or
any other company, or in any one or more of such ways, and where any difficulty
arises in regard to the distribution the Board may settle the same as it thinks
expedient, and in particular may issue certificates in respect of fractions of
shares, disregard fractional entitlements or round the same up or down, and may
fix the value for distribution of such specific assets, or any part thereof, and
may determine that cash payments shall be made to any Members upon the footing
of the value so fixed in order to adjust the rights of all parties, and may vest
any such specific assets in trustees as may seem expedient to the
47
<PAGE>
Board and may appoint any Person to sign any requisite instruments of transfer
and other documents on behalf of the Persons entitled to the dividend, and such
appointment shall be effective and binding on the Members. The Board may resolve
that no such assets shall be made available to Members with registered addresses
in any particular territory or territories where, in the absence of a
registration statement or other special formalities, such distribution of assets
would or might, in the opinion of the Board, be unlawful or impracticable and in
such event the only entitlement of the Members aforesaid shall be to receive
cash payments as aforesaid. Members affected as a result of the foregoing
sentence shall not be or be deemed to be a separate class of Members for any
purpose whatsoever.
(10) Whenever the Board has resolved that a dividend be declared
or paid on any class of the share capital of the Company, the Board may further
resolve either:
(a) that such dividend be satisfied wholly or in part in the
form of an allotment of shares credited as fully paid up,
provided that the shareholders entitled thereto will be
entitled to elect to receive such dividend (or part thereof
if the Board so determines) in cash in lieu of such
allotment. In such case, the following provisions shall
apply:
(i) the basis of any such allotment shall be determined
by the Board;
(ii) the Board, after determining the basis of allotment,
shall give not less than two (2) weeks' Notice to the
holders of the relevant shares of the right of
election accorded to them, and shall send with such
Notice, forms of election and specify the procedure to
be followed and the place at which and the latest date
and time by which duly completed forms of election
must be delivered in order to be effective;
(iii) the right of election may be exercised in respect of
the whole or part of that portion of the dividend in
respect of which the right of election has been
accorded; and
(iv) the dividend (or that part of the dividend to be
satisfied by the allotment of shares as aforesaid)
shall not be payable in cash on shares in respect
whereof the cash election has not been duly exercised
("the non-elected shares") and in satisfaction thereof
shares of the relevant class shall be allotted
credited as fully paid up to the holders of the non-
elected shares on the basis of allotment determined as
aforesaid and for such purpose the Board shall
capitalize and apply out of any part of the undivided
profits of the Company (including profits carried and
48
<PAGE>
standing to the credit of any reserves or other
special account other than the Subscription Rights
Reserve) as the Board may determine, such sum as may
be required to pay up in full the appropriate number
of shares of the relevant class for allotment and
distribution to and amongst the holders of the non-
elected shares on such basis; or
--
(b) that the shareholders entitled to such dividend shall be
entitled to elect to receive an allotment of shares
credited as fully paid up in lieu of the whole or such
part of the dividend as the Board may determine. In such
case, the following provisions shall apply:
(i) the basis of any such allotment shall be
determined by the Board;
(ii) the Board, after determining the basis of
allotment, shall give not less than fourteen (14)
days' Notice to the holders of the relevant shares
of the right of election accorded to them and
shall send with such Notice forms of election and
specify the procedure to be followed and the place
at which and the latest date and time by which
duly completed forms of election must be delivered
in order to be effective;
(iii) the right of election may be exercised in respect
of the whole or part of that portion of the
dividend in respect of which the right of election
has been accorded; and
(iv) the dividend (or that part of the dividend in
respect of which a right of election has been
accorded) shall not be payable in cash on shares
in respect whereof the share election has been
duly exercised ("the elected shares") and in lieu
thereof shares of the relevant class shall be
allotted credited as fully paid up to the holders
of the elected shares on the basis of allotment
determined as aforesaid and for such purpose the
Board shall capitalize and apply out of any part
of the undivided profits of the Company (including
profits carried and standing to the credit of any
reserves or other special account other than the
Subscription Rights Reserve) as the Board may
determine, such sum as may be required to pay up
in full the appropriate number of shares of the
relevant class for allotment and distribution to
and amongst the holders of the elected shares on
such basis.
(11) (a) The shares allotted under paragraph (10) of this Bye-Law
shall rank pari passu in all respects with shares of the
same class (if any) then in issue
49
<PAGE>
save only as regards participation in the relevant dividend
or in any other distributions, bonuses or rights paid,
made, declared or announced prior to or contemporaneously
with the payment or declaration of the relevant dividend
unless, contemporaneously with the announcement by the
Board of their proposal under paragraph (10) of this Bye-
Law in relation to the relevant dividend or
contemporaneously with their announcement of the
distribution, bonus or rights in question, the Board shall
specify that the shares to be allotted under paragraph (10)
of this Bye-Law shall rank for participation in such
distribution, bonus or rights.
(b) The Board may do all acts and things considered necessary
or expedient to give effect to any capitalization under
paragraph (10) of this Bye-Law, with full power to the
Board to make such provisions as it determines in the case
of shares becoming distributable in fractions (including
provisions whereby, in whole or in part, fractional
entitlements are aggregated and sold and the net proceeds
distributed to those entitled, or are disregarded or
rounded up or down or whereby the benefit of fractional
entitlements accrues to the Company rather than to the
Members concerned). The Board may authorize any Person to
enter into on behalf of all Members interested, an
agreement with the Company providing for such
capitalization and matters incidental thereto and any
agreement made pursuant to such authority shall be
effective and binding on all concerned.
(12) The Board may resolve in respect of any particular dividend of
the Company that notwithstanding the provisions of paragraph (10) of this Bye-
Law such dividend may be satisfied wholly in the form of an allotment of shares
credited as fully paid up without offering any right to shareholders to elect to
receive such dividend in cash in lieu of such allotment.
(13) The Board may on any occasion determine that rights of election
and the allotment of shares under paragraph (10) of this Bye-Law shall not be
made available or made to any shareholders with registered addresses in any
territory where, in the absence of a registration statement or other special
formalities, the circulation of an offer of such rights of election or the
allotment of shares would or might, in the opinion of the Board, be unlawful or
impracticable, and in such event the provisions aforesaid shall be read and
construed subject to such determination. Members affected as a result of the
foregoing sentence shall not be or be deemed to be a separate class of Members
for any purpose whatsoever.
(14) Any resolution declaring a dividend on shares of any class may
specify that the same shall be payable or distributable to the Persons
registered as the holders of such shares at the close of business on a
particular date, notwithstanding that it may be a date prior to that on which
the resolution is passed, and thereupon the dividend shall be payable or
distributable to them in accordance with their respective holdings so
registered, but without prejudice to the
50
<PAGE>
rights inter se in respect of such dividend of transferors and transferees of
any such shares. The provisions of this Bye-Law shall, as the case may be,
apply to bonuses, capitalization issues, distributions of realized capital
profits or offers or grants made by the Company to the Members.
(15) Before declaring any dividend, the Board may set aside out of the
profits of the Company such sums as it determines as reserves which shall, at
the discretion of the Board, be applicable for any purpose to which the profits
of the Company may be properly applied and pending such application may, also at
such discretion, either be employed in the business of the Company or be
invested in such investments as the Board may from time to time determine and so
that it shall not be necessary to keep any investments constituting the reserve
or reserves separate or distinct from any other investments of the Company. The
Board may also, without placing the same to reserve, carry forward any profits
which it may think prudent not to distribute.
CAPITALIZATION
34. (1) The Board may resolve to capitalize any part of the amount for the
time being standing to the credit of any reserve account or to the credit of the
profit and loss account or otherwise available for distribution by applying such
sum in paying up (i) unissued shares, debentures or other obligations to be
allotted or distributed fully paid pro rata to the Members or any class of
Members or (ii) in full or partly paid shares of those Members who would have
been entitled to such sums if they were distributed by way of dividend or other
distribution. In addition, the Board may, subject to the Act, resolve to
capitalize any part of the amount for the time being standing to the credit of
the Company's share premium account by applying such sum in paying up unissued
shares to be issued to the Members, or class of Members, as fully paid bonus
shares.
(2) The Board may settle, as it considers appropriate, any difficulty
arising in regard to any distribution under the preceding paragraph and in
particular may issue certificates in respect of fractions of shares or authorize
any Person to sell and transfer any fractions or may resolve that the
distribution should be as nearly as may be practicable in the correct proportion
but not exactly so or may ignore fractions altogether, and may determine that
cash payments shall be made to any Members in order to adjust the rights of all
parties, as may seem expedient to the Board. The Board may appoint any Person to
sign on behalf of the Persons entitled to participate in the distribution any
contract necessary or desirable for giving effect thereto and such appointment
shall be effective and binding upon the Members.
51
<PAGE>
SUBSCRIPTION RIGHTS RESERVE
35. The following provisions shall have effect to the extent that they
are not prohibited by and are in compliance with the Act:
(1) If, so long as any of the rights attached to any warrants issued
by the Company to subscribe for shares of the Company shall remain exercisable,
the Company does any act or engages in any transaction which, as a result of any
adjustments to the subscription price in accordance with the provisions of the
conditions of the warrants, would reduce the subscription price to below the par
value of a share, then the following provisions shall apply:
(a) as from the date of such act or transaction the Company shall
establish and thereafter maintain, subject to this Bye-Law, a
reserve (the "Subscription Rights Reserve") in the amount not
less than the sum which for the time being would be required
to be capitalized and applied in paying up in full the
nominal amount of the additional shares required to be issued
and allotted credited as fully paid, pursuant to sub-
paragraph (c) of this Bye-Law, on the exercise in full of all
the subscription rights outstanding and shall apply the
Subscription Rights Reserve in paying up such additional
shares in full as and when the same are allotted;
(b) the Subscription Rights Reserve shall not be used for any
purpose other than that specified above unless all other
reserves of the Company (other than share premium account)
have been extinguished and will then only be used to make
good losses of the Company if and so far as is required by
law;
and immediately upon such exercise so much of the sum standing to the
credit of the Subscription Rights Reserve as is required to pay up in
full such additional nominal amount of shares shall be capitalized and
applied in paying up in full such additional nominal amount of shares
which shall forthwith be allotted credited as fully paid to the
exercising warrantholders; and
(c) upon the exercise of all or any of the subscription rights
represented by any warrant, the relevant subscription rights
shall be exercisable in respect of a nominal amount of shares
equal to the amount in cash which the holder of such warrant
is required to pay on exercise of the subscription rights
represented thereby (or, as the case may be, the relevant
portion thereof in the event of a partial exercise of the
subscription rights), and, in addition, there shall be
allotted in respect of such subscription rights to the
exercising warrantholder, credited as fully paid, such
additional nominal amount of shares as is equal to the
difference between:
52
<PAGE>
(i) the said amount in cash which the holder of such warrant
is required to pay on exercise of the subscription
rights represented thereby (or, as the case may be, the
relevant portion thereof in the event of a partial
exercise of the subscription rights); and
(ii) the nominal amount of shares in respect of which such
subscription rights would have been exercisable having
regard to the provisions of the conditions of the
warrants, had it been possible for such subscription
rights to represent the right to subscribe for shares at
less than par
(d) if, upon the exercise of the subscription rights represented
by any warrant, the amount standing to the credit of the
Subscription Rights Reserve is not sufficient to pay up in
full such additional nominal amount of shares equal to such
difference as aforesaid to which the exercising warrantholder
is entitled, the Board shall apply any profits or reserves
then or thereafter becoming available (including, to the
extent permitted by law, share premium account) for such
purpose until such additional nominal amount of shares is paid
up and allotted as aforesaid and until then no dividend or
other distribution shall be paid or made on the fully paid
shares of the Company then in issue. Pending such payment and
allotment, the exercising warrantholder shall be issued by the
Company with a certificate evidencing his right to the
allotment of such additional nominal amount of shares. The
rights represented by any such certificate shall be in
registered form and shall be transferable in whole or in part
in units of one share in the like manner as the shares for the
time being are transferable, and the Company shall make such
arrangements in relation to the maintenance of a register
therefor and other matters in relation thereto as the Board
may determine and adequate particulars thereof shall be made
known to each relevant exercising warrantholder upon the issue
of such certificate.
(2) Shares allotted under this Bye-Law shall rank pari passu in all
respects with the other shares allotted on the relevant exercise of the
subscription rights represented by the warrant concerned. Notwithstanding
anything contained under paragraph (1) of this Bye-Law, no fraction of any share
shall be allotted on exercise of the subscription rights.
(3) The provisions of this Bye-Law as to the establishment and
maintenance of the Subscription Rights Reserve shall not be altered or added to
in any way which would vary or abrogate, or which would have the effect of
varying or abrogating the provisions for the benefit of any warrantholder or
class of warrantholders under this Bye-Law without the sanction of a special
resolution of such warrantholders or class of warrantholders.
53
<PAGE>
(4) A certificate or report by the Auditors for the time being of the
Company as to whether or not the Subscription Rights Reserve is required to be
established and maintained and if so the amount thereof so required to be
established and maintained, as to the purposes for which the Subscription Rights
Reserve has been used, as to the extent to which it has been used to make good
losses of the Company, as to the additional nominal amount of shares required to
be allotted to exercising warrantholders credited as fully paid, and as to any
other matter concerning the Subscription Rights Reserve shall (in the absence of
manifest error) be conclusive and binding upon the Company and all
warrantholders and shareholders.
ACCOUNTING RECORDS
36. (1) The Board shall cause true accounts to be kept of the sums of
money received and expended by the Company, and the matters in respect of which
such receipt and expenditure take place, and of the property, assets, credits
and liabilities of the Company and of all other matters required by the Act or
necessary to give a true and fair view of the Company's affairs and to explain
its transactions.
(2) The accounting records shall be kept at the Office or, subject to
the Act, at such other place or places as the Board decides and shall always be
open to inspection by the Directors of the Company. No Member (other than a
Director of the Company) shall have any right of inspecting any accounting
record or book or document of the Company except as conferred by law or
authorized by the Board or the Company in a General Meeting.
(3) Subject to the Act, a printed copy of the balance sheet and profit
and loss account, including every document required by law to be annexed
thereto, made up to the end of the applicable financial year and containing a
summary of the assets and liabilities of the Company under convenient heads and
a statement of income and expenditure, together with a copy of the Auditors'
report, shall be sent to each Person entitled thereto at least twenty-one (21)
days before the date of the Annual General Meeting and laid before the Company
at such meeting in accordance with the requirements of the Act provided that
this Bye-Law shall not require a copy of those documents to be sent to any
Person whose address the Company is not aware or to more than one of the joint
holders of any shares or debentures.
AUDIT
37. (1) Subject to the Act, at the Annual General Meeting or at a
subsequent Special General Meeting in each year, the Members shall appoint an
Auditor to audit the accounts of the Company and such Auditor shall hold office
until the Members appoint another Auditor. Such Auditor may be a Member but no
Director or Officer or employee of the Company shall, during his continuance in
office, be eligible to act as an Auditor of the Company.
54
<PAGE>
(2) Subject to the Act, a Person, other than a retiring Auditor, shall
not be capable of being appointed Auditor at an Annual General Meeting unless
Notice of an intention to nominate that Person to the office of Auditor has been
given not less than fourteen (14) days before the Annual General Meeting and
furthermore, the Company shall send a copy of any such Notice to the retiring
Auditor.
(3) The Members may, at any General Meeting convened and held in
accordance with these Bye-Laws, by special resolution remove the Auditor at any
time before the expiration of his term of office and shall by ordinary
resolution at that meeting appoint another Auditor in his stead for the
remainder of his term.
(4) Subject to the Act, the accounts of the Company shall be audited
at least once in every year.
(5) The remuneration of the Auditor shall be fixed by the Company in a
General Meeting or in such manner as the Members may determine.
(6) If the office of Auditor becomes vacant by the resignation or
death of the Auditor, or by his becoming incapable of acting by reason of
illness or other disability at a time when his services are required, the
Directors shall as soon as practicable convene a Special General Meeting to fill
the vacancy.
(7) The statement of income and expenditure and the balance sheet
provided for by these Bye-Laws shall be examined by the Auditor and compared by
him with the books, accounts and vouchers relating thereto; and he shall make a
written report thereon stating whether such statement and balance sheet are
drawn up so as to present fairly the financial position of the Company and the
results of its operations for the period under review and, in case information
shall have been called for from Directors or Officers of the Company, whether
the same has been furnished and has been satisfactory. The financial statements
of the Company shall be audited by the Auditor in accordance with generally
accepted auditing standards. The Auditor shall make a written report thereon in
accordance with generally accepted auditing standards and the report of the
Auditor shall be submitted to the Members in a General Meeting. The generally
accepted auditing standards referred to herein may be those of a country or
jurisdiction other than Bermuda. If so, the financial statements and the report
of the Auditor should disclose this fact and name such country or jurisdiction.
(8) The Auditor shall at all reasonable times have access to all books
kept by the Company and to all accounts and vouchers relating thereto; and he
may call on the Directors or Officers of the Company for any information in
their possession relating to the books or affairs of the Company.
55
<PAGE>
NOTICES
38. (1) Any Notice from the Company to a Member shall be given in
writing or by cable, telex or facsimile transmission message and any such Notice
and (where appropriate) any other document may be served or delivered by the
Company on or to any Member either personally or by sending it through the mail
or other courier service in a prepaid envelope addressed to such Member at his
registered address as appearing in the Register or at any other address supplied
by him to the Company for the purpose or, as the case may be, by transmitting it
to any such address or transmitting it to any telex or facsimile transmission
number supplied by him to the Company for the giving of Notice to him or which
the Person transmitting the Notice reasonably and bona fide believes at the
relevant time will result in the Notice being duly received by the Member or may
also be served by advertisement in appointed newspapers (as defined in the Act)
or in accordance with the requirements of any Designated Stock Exchange. In the
case of joint holders of a share all Notices shall be given to that one of the
joint holders whose name stands first in the Register and Notice so given shall
be deemed a sufficient service on or delivery to all the joint holders.
(2) Any Notice or other document:
(a) if served or delivered by mail, shall be sent airmail
where appropriate and shall be deemed to have been served
or delivered on the day following that on which the
envelope containing the same, properly prepaid and
addressed, is put into the mail; in proving such service
or delivery it shall be sufficient to prove that the
envelope or wrapper containing the Notice or document was
properly addressed and put into the mail and a certificate
in writing signed by the Secretary or other Officer of the
Company or other Person appointed by the Board that the
envelope or wrapper containing the Notice or other
document was so addressed and put into the mail shall be
conclusive evidence thereof; and
(b) if served or delivered in any other manner contemplated by
these Bye-Laws, shall be deemed to have been served or
delivered at the time of personal service or delivery or,
as the case may be, at the time of the relevant dispatch
or transmission; and in proving such service or delivery a
certificate in writing signed by the Secretary or other
Officer of the Company or other Person appointed by the
Board as to the fact and time of such service, delivery,
dispatch or transmission shall be conclusive evidence
thereof.
(3) Any Notice or other document delivered or sent by mail to or left
at the registered address of any Member in pursuance of these Bye-Laws shall,
notwithstanding that such Member is then dead or bankrupt or that any other
event has occurred, and whether or not the
56
<PAGE>
Company has Notice of the death or bankruptcy or other event, be deemed to have
been duly served or delivered in respect of any share registered in the name of
such Member as sole or joint holder unless his name shall, at the time of the
service or delivery of the Notice or document, have been removed from the
Register as the holder of the share, and such service or delivery shall for all
purposes be deemed a sufficient service or delivery of such Notice or document
on all Persons interested (whether jointly with or as claiming through or under
him) in the share.
(4) A Notice may be given by the Company to the Person entitled to a
share in consequence of the death, mental disorder or bankruptcy of a Member by
sending it through the mail in a prepaid letter, envelope or wrapper addressed
to him by name, or by the title of representative of the deceased, or trustee of
the bankrupt, or by any like description, at the address, if any, supplied for
the purpose by the Person claiming to be so entitled, or (until such an address
has been so supplied) by giving the Notice in any manner in which the same might
have been given if the death, mental disorder or bankruptcy had not occurred.
(5) Any Person who by operation of law, transfer or other means
whatsoever shall become entitled to any share shall be bound by every Notice in
respect of such share which prior to his name and address being entered on the
Register shall have been duly given to the Person from whom he derives his title
to such share.
(6) For the purposes of these Bye-Laws, a cable or telex or facsimile
transmission message purporting to come from a holder of shares or, as the case
may be, a Director or Alternate Director, or, in the case of a corporation which
is a holder of shares from a director or the secretary thereof or a duly
appointed attorney or duly authorized representative thereof for it and on its
behalf, shall in the absence of express evidence to the contrary available to
the Person relying thereon at the relevant time be deemed to be a document or
instrument in writing signed by such holder or Director or Alternate Director or
in the terms in which it is received.
WINDING UP
39. (1) The Board shall have power in the name and on behalf of the
Company to present a petition to the court for the Company to be wound up.
(2) A resolution that the Company be wound up by the court or be wound
up voluntarily shall be a special resolution.
(3) If the Company shall be wound up (whether the liquidation is
voluntary or by the court) the liquidator may, with the authority of a special
resolution and any other sanction required by the Act, divide among the Members
in specie or kind the whole or any part of the assets of the Company and whether
or not the assets shall consist of properties of one kind or shall consist of
properties to be divided as aforesaid of different kinds, and may for such
purpose
57
<PAGE>
set such value as he deems fair upon any one or more class or classes of
property and may determine how such division shall be carried out as between the
Members or different classes of Members. The liquidator may, with the like
authority, vest any part of the assets in trustees upon such trusts for the
benefit of the Members as the liquidator with the like authority shall
determine, and the liquidation of the Company may be closed and the Company
dissolved, but so that no contributory shall be compelled to accept any shares
or other property in respect of which there is a liability.
INDEMNITY
40. Indemnification of Directors and Officers of the Company
--------------------------------------------------------
(1) The Directors and Officers (such term to include, for the purposes
of this Bye-Law, any individual appointed to any committee by the Board) for
the time being acting in relation to any of the affairs of the Company and the
liquidator or trustees (if any) for the time being acting in relation to any of
the affairs of the Company and every one of them, and their heirs, executors and
administrators, shall be indemnified and held harmless out of the assets of the
Company from and against all actions, costs, charges, losses, damages and
expenses which they or any of them, their heirs, executors or administrators,
shall or may incur or sustain by or by reason of any act done, concurred in or
omitted in or about the execution of their duty, or supposed duty, or in their
respective offices or trusts, and none of them shall be answerable for the acts,
receipts, neglects or defaults of the others of them or for joining in any
receipts for the sake of conformity, or for any bankers or other Persons with
whom any monies or effects belonging to the Company shall or may be delivered or
deposited for safe custody, or for insufficiency or deficiency of any security
upon which any monies of or belonging to the Company shall be deposited or
invested, or for any other loss, misfortune or damage which may happen in the
execution of their respective offices or trusts, or in relation thereto,
provided that this indemnity shall not extend to any matter in respect of any
fraud or dishonesty which may attach to any of said individuals.
(2) Each Member and the Company agree to waive any claim or right of
action he or it might have, whether individually or by or in the right of the
Company, against any Director or Officer on account of any action taken by such
Director or Officer, or the failure of such Director or Officer to take any
action, in the performance of his duties, or supposed duties, with or for the
Company; provided that such waiver shall not extend to any matter in respect of
any fraud or dishonesty which may attach to such Director or Officer. Any repeal
or modification of this Bye-Law shall not adversely affect any right or
protection of a Director or Officer of the Company existing immediately prior to
such repeal or modification.
(3) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding as
58
<PAGE>
authorized by the Board in the specific case upon receipt of an undertaking by
or on behalf of the Director, Officer, liquidator or trustee to repay such
amount unless it shall ultimately be determined that the individual is entitled
to be indemnified by the Company as authorized in these Bye-Laws or otherwise
pursuant to the laws of Bermuda.
ALTERATION OF BYE-LAWS & AMENDMENT
TO MEMORANDUM OF ASSOCIATION
41. (1) Subject to Bye-Law 41(2) hereof, any amendment to these Bye-Laws
or to the Company's Memorandum of Association shall be approved by the Board and
decided on by an ordinary resolution of the Members; provided however, that any
proposed amendment to Bye-Laws 1, 2, 3, 4, 5, 17, 20, 22, 40 or 41 shall be
approved by the Board and by a special resolution of the Members.
(2) In relation to any proposed amendment to the term "Maximum
Percentage" as set out in Bye-Law 1(1) hereof, the term "Interested Shareholder"
as defined in Bye-Law 5(3)(d), Bye-Law 20(4) and this Bye-Law 41(2), in addition
to the requirements of Bye-Law 41(1) hereof, any such amendment shall require
the approval of Frederick C. Treadway or Treadway Associates, L.P.
*****
***
59
<PAGE>
Exhibit 11
American Safety Insurance Group, Ltd. and Subsidiaries
Computation of Earnings Per Share
March 31, March 31,
1997 1998
------------- ------------
Basic:
Earnings Available to Common
Shareholders............................ $ 862,295 $1,023,737
============= =============
Weighted Average Common Shares
Outstanding............................. 2,872,830 4,429,730
Basic Earnings per Common Share......... $ .30 $ .23
============= =============
Diluted:
Earnings Available to Common
Shareholders............................ $ 862,295 $1,023,733
============= =============
Weighted Average Common Shares
Outstanding............................. 2,872,830 4,429,730
Weighted Average Common Share
Equivalents Associated with Options:.... 91,101 80,725
Total Weighted Average Common
Shares.................................. 2,963,931 4,510,455
============= =============
Diluted Earnings per Common Share....... $ .29 $ .23
============= =============
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3/31/98 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 57,433
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 838
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 60,311
<CASH> 4,059
<RECOVER-REINSURE> 1,480
<DEFERRED-ACQUISITION> 148
<TOTAL-ASSETS> 80,000
<POLICY-LOSSES> 12,390
<UNEARNED-PREMIUMS> 3,214
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 60
<OTHER-SE> 53,581
<TOTAL-LIABILITY-AND-EQUITY> 80,000
2,093
<INVESTMENT-INCOME> 627
<INVESTMENT-GAINS> 37
<OTHER-INCOME> 7
<BENEFITS> 1,335
<UNDERWRITING-AMORTIZATION> 213
<UNDERWRITING-OTHER> 960
<INCOME-PRETAX> 1,078
<INCOME-TAX> 54
<INCOME-CONTINUING> 1,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,024
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
<RESERVE-OPEN> 11,572
<PROVISION-CURRENT> 2,261
<PROVISION-PRIOR> (698)
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 745
<RESERVE-CLOSE> 12,390
<CUMULATIVE-DEFICIENCY> 47
</TABLE>
