AMENDED AND RESTATED SHAREHOLDERS’ AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS’ AGREEMENT (this “Agreement”) of Flagstone Reinsurance Holdings, S.A., a Luxembourg company (the “Company”) amends, restates and replaces the Amended and Restated Shareholders’ Agreement (the “Prior Agreement”), dated as of November 15, 2006, between Flagstone Reinsurance Holdings Limited (the Bermuda predecessor to the Company) and the investors listed on Exhibit A thereto (the “Shareholders”), pursuant to Section 6.4 of the Prior Agreement which permits the Company to make the amendments contained herein.
The Company has filed a Registration Statement on Form S-1, Registration No. 333-138182 (the “Registration Statement”), with the U.S. Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended (the “Securities Act”) to register an underwritten initial public offering of its common shares.
The Company and the Shareholders were parties to a Shareholders’ Agreement dated as of December 20, 2005, as amended by Amendment No. 1 thereto dated as of February 1, 2006 (the “Shareholders’ Agreement”), and the Company and the Shareholders amended and restated and replaced the Shareholders’ Agreement in its entirety with the Prior Agreement, effective simultaneously with the closing of the initial public offering contemplated by the Registration Statement (the “Effective Time”).
The Company changed its place of organization from Bermuda to Luxembourg on May 17, 2010 through a redomestication. In connection with such redomestication, the Company is amending, restating and replacing the Prior Agreement with this Agreement.
The Company and the Shareholders therefore agree, effective as of the Effective Time, that the Shareholders’ Agreement is hereby amended and restated as follows:
ARTICLE I
In this Agreement, the following terms have the following meanings:
“Act” means the Luxembourg Law of 1915, as amended on Commercial Companies.
“Articles” means the Company’s Articles of Incorporation dated May [●], 2010.
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For the purpose of this definition, the term “control” (including, with correlative meaning, the terms “controlling,” “controlled by,” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Board” means the board of directors of the Company from time to time duly appointed or elected in accordance with the Articles.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Confidential Information”, as to each Shareholder, means all information as to the practice, business dealings or affairs of the Company, its Affiliates or their respective customers and clients which may come to the knowledge of such Shareholder by reason of his status as a Shareholder or as a director, officer or employee of the Company or any of its Affiliates; provided, however, that Confidential Information shall not include information which the Shareholder possessed prior to entering into this Agreement or that is or becomes publicly available other than by a breach by such Shareholder of this Agreement.
“Effective Time” has the meaning set forth in the Summary of this Agreement.
“Equity Securities” means any shares of the share capital of the Company, any securities convertible into or exchangeable for shares of the share capital of the Company, and any options, warrants, and other rights to purchase or otherwise acquire from the Company shares of such share capital, or securities convertible into or exchangeable for shares of such share capital.
“Flagstone” means Flagstone Reassurance Suisse SA (successor to Flagstone Reinsurance Limited), a Subsidiary of the Company.
“Person” means any individual or entity.
“Register” and “Registration” mean registration under the Securities Act of an offering of securities.
“Registrable Securities” shall mean all shares of Equity Securities held by a Shareholder party to this Agreement unless (i) they have been effectively registered under Section 5 of the Securities Act and disposed of pursuant to such an effective registration statement, or (ii) all of such shares may be freely sold and transferred during a three-month period pursuant to Rule 144 under the Securities Act (excluding Rule 144(k)) or any successor rule.
“Registration Expenses” shall mean all expenses incurred by the Company in complying with Article IV (“Registration”) of this Agreement, including, without limitation, all federal and state registration, qualification and filing fees and expenses, printing, messenger and delivery expenses, fees and disbursements of counsel and accountants for the Company, Blue Sky fees and expenses (which fees and expenses shall be deemed to include all fees and expenses of the Company arising out of filings required by, and all other costs and expenses incident to compliance with, state securities laws, rules and regulations), application and filing fees and expenses in connection with securities exchanges and the expense of any special audits or comfort letters incident to or required by any such registration.
“Registration Statement” has the meaning set forth in the Summary of this Agreement.
“Representatives” means the Representatives of the Underwriters named in Schedule A to the Underwriting Agreement executed in connection with the initial public offering of the Company’s common shares.
“Securities Act” has the meaning set forth in the Summary of this Agreement.
“Shareholders’ Agreement” has the meaning set forth in the Summary of this Agreement.
“Shares” means shares of the Company, par value $0.01 per share.
“Subsidiary” means any entity of which a majority of the Voting Power in electing the board of directors or equivalent body are, at the time as of which any determination is being made, owned by the Company, either directly or indirectly through Subsidiaries.
“Transfer” means, with respect to the Shares, to sell, assign, give, pledge, charge, encumber, create a trust over, or otherwise dispose of, either voluntarily or involuntarily and with or without consideration, the Shares or any voting rights or other interest therein.
“Underwriting Agreement” means the agreement among the Company and the Representatives relating to the initial public offering of the Company’s Shares.
“Voting Shares” of any entity means the shares of share capital of the entity or other equity interests of the entity entitled to vote for the election of directors of such entity or comparable governing body of such entity.
“Voting Power” of any Person means the total number of votes which may be cast by the Shareholders of the total number of outstanding Voting Shares of such Person.
ARTICLE II
(a) amending the voting rights of the Shares; or
(b) amending the dividend rights of the Shares.
ARTICLE III
Each Shareholder agrees to (i) execute and deliver the lock-up letter agreement (the “Lock-Up Agreement”) in substantially the form attached hereto as Exhibit B in accordance with the terms of the Underwriting Agreement and (ii) unless otherwise consented to in writing by the Company and the other Shareholders, abide by the terms of the Lock-Up Agreement for the period specified therein (the “Lock-Up Period”).
ARTICLE IV
(a) Requests for Registration. On or after the day following the last day of the Lock-Up Period, the holders of Registrable Securities representing at least ten million Shares of the Company, which number of Shares is subject to adjustment in the sole discretion of Board in the event of a share split, consolidation or similar event, may request registration under the Securities Act of all or any portion of such Registrable Securities (the “Initial Demand Registration”). Following the Initial Demand Registration, the holders of Registrable Securities representing at least five million Shares of the Company, which number of Shares is subject to adjustment in the sole discretion of Board in the event of a share split, consolidation or similar event, may request registration under the Securities Act of all or any portion of such Registrable Securities (each a “Subsequent Demand Registration”; together with the Initial Demand Registration, the “Demand Registrations”). Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered. Within ten days after receipt of any such request, the Company shall give written notice of such requested registration to all holders of Registrable Securities and, subject to paragraph (c) below, will include in such registration, in addition to the Registrable Securities that are requested to be registered pursuant hereto, all other Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company’s notice.
(a) Indemnity by the Company. The Company will indemnify and hold harmless, to the fullest extent permitted by law (including the Act), any Shareholder and any underwriter for such Shareholder, and each person, if any, who controls the Shareholder or such underwriter, from and against any and all losses, damages, claims, liabilities, joint or several, costs and expenses (including any amounts paid in any settlement effected with the Company’s consent) to which the Shareholder or any such underwriter or controlling person may become subject under applicable law or otherwise, insofar as such losses, damages, claims, liabilities (or actions or proceedings in respect thereof), costs or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the registration statement or included in the prospectus, as amended or supplemented, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they are made, not misleading, and the Company will reimburse the Shareholder, such underwriter and each such controlling person of the Shareholder or the underwriter, promptly upon demand, for any reasonable legal or any other expenses incurred by them in connection with investigating, preparing to defend or defending against or appearing as a third-party witness in connection with such loss, claim, damage, liability, action or proceeding; provided, however, that the Company will not be liable to any such Shareholder, underwriter or controlling person in any such case to the extent that any such loss, damage, liability, cost or expense arises out of or is based solely upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing by such Shareholder, such underwriter or such controlling persons in writing specifically for inclusion therein; provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations; provided, further, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such claim, loss, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the selling Shareholder, the underwriter or any controlling person of the selling Shareholder or the underwriter, and regardless of any sale in connection with such offering by the selling Shareholder. Such indemnity shall survive the transfer of securities by a selling Shareholder.
(b) Indemnity by the Selling Shareholders. Each Shareholder participating in a registration hereunder will, severally and not jointly, indemnify and hold harmless the Company, any underwriter for the Company, and each person, if any, who controls the Company or such underwriter, from and against any and all losses, damages, claims, liabilities, costs or expenses (including any amounts paid in any settlement effected with the selling Shareholder’s consent) to which the Company or any such controlling person and/or any such underwriter may become subject under applicable law or otherwise, insofar as such losses, damages, claims, liabilities (or actions or proceedings in respect thereof), costs or expenses arise out of or are based solely on (i) any untrue or alleged untrue statement of any material fact contained in the registration statement or included in the prospectus, as amended or supplemented, or (ii) the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, and each such Shareholder will reimburse the Company, any underwriter and each such controlling person of the Company or any underwriter, promptly upon demand, for any reasonable legal or other expenses incurred by them in connection with investigating, preparing to defend or defending against or appearing as a third-party witness in connection with such loss, claim, damage, liability, action or proceeding; provided, however, that the indemnity in this subsection (b) is limited in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in strict conformity with written information furnished by such Shareholder specifically for inclusion therein. The foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement (or alleged untrue statement) or omission (or alleged omission) made in the preliminary prospectus but eliminated or remedied in the amended prospectus at the time the registration statement becomes effective or in the final prospectus, such indemnity agreement shall not inure to the benefit of the Company or any underwriter, or any of their controlling persons, if a copy of the final prospectus was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act; provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations; provided, further, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such claim, loss, damage, liability or action if such settlement is effected without the consent of the Shareholders, as the case may be, which consent shall not be unreasonably withheld. In no event shall the liability of a Shareholder exceed the gross proceeds (net of underwriting discounts and commissions) from the offering received by such Shareholder.
(c) Indemnity Procedures. Promptly after receipt by an indemnified party of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party, promptly notify the indemnifying party of the commencement thereof; but the omission to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than hereunder. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided however, that if the defendants in any action include both the indemnified party and the indemnifying party and there is a conflict of interests which would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party or parties shall have the right to select one separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action and within 15 days after written notice of the indemnified party’s intention to employ separate counsel pursuant to the previous sentence, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. The indemnifying party shall give the indemnified party at least 20 days (or such shorter period as shall reasonably be required under the circumstances) notice of any proposed settlement, together with true and correct copies of any proposed settlement.
(d) Insufficiency of Indemnities. If the indemnification provided for in this Section is unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Shareholders on the other from the offering. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Shareholders on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Shareholders on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting Registration Expenses) received by the Company bears to the total net proceeds from the offering received by the Shareholders. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Shareholders on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Shareholders agree that it would not be just and equitable if contributions pursuant to this Section were determined by pro rata allocation (even if the Shareholders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section, (i) no Shareholder shall be required to contribute any amount in excess of the gross proceeds of the offering to such Shareholder, net of underwriting discounts or commissions and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Shareholders’ obligations in this Section to contribute are several in proportion to their respective underwriting obligations and not joint.
(d) Underwriting Agreement. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Shareholder participating in such underwriting shall also enter into and perform its obligations under such an underwriting agreement. If permitted by the managing underwriter(s), the Shareholders may, at their option, require that any or all of the conditions precedent to the obligations of the underwriters under such underwriting agreement be conditions precedent to the obligations of such Shareholders. If permitted by the managing underwriter(s), the Shareholders shall not be required to make any representations or warranties to or agreement with the Company or the underwriters other than the representations, warranties or agreements regarding the Shareholders, the Shareholders’ right, title and interest in the Registrable Securities and the Shareholders’ intended method of distribution or any other representations or warranties required by law.
(h) Legal Opinions and Accountants’ Letters. Furnish, at the request of any Shareholder requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Shareholders requesting registration of Registrable Securities and (ii) a letter dated such date and a bring-down letter dated the closing date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Shareholders requesting registration of Registrable Securities.
ARTICLE V
Each Shareholder represents and warrants to each other Shareholder and the Company as follows:
(a) At any time incite any employee of the Company or Flagstone to terminate a contract of employment with the Company or Flagstone or seek to interfere, or interfere, with the relationship between the Company or Flagstone and any of its employees, or
(b) Employ any employee of the Company or Flagstone during the term of such employment or for a period of six months thereafter, or at any time when he is a participant in the PSU Plan of the Company.
(a) reveal Confidential Information to any third party who is not a Shareholder or an employee of the Company; provided, however, that each Shareholder may reveal such information to its legal and financial advisers, and its beneficial owners who are subject to confidentiality arrangements with it, or as may be required by law or by any regulatory authority, or
(b) remove from the Company any Confidential Information or interfere in any way with the ability of the Company to use any such Confidential Information.
ARTICLE VI
6.4 Entire Agreement; Amendments. This Agreement and the schedules to this Agreement and the documents referred to in this Agreement and to be delivered pursuant to this Agreement constitute the entire agreement among the parties pertaining to the subject matter of this Agreement, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, with respect to the subject matter of this Agreement, and there are no warranties, representations or other agreements between the parties in connection with the subject matter of this Agreement, except as specifically set forth herein or therein. This Agreement may be amended from time to time upon the written consent of the Company, which may be authorized by the approval of nine Directors; provided, however, that any amendment to this Agreement that materially affects any Shareholder in a manner that is disparate from other Shareholders shall require such Shareholder’s approval; provided, further, that any amendment to Section 2.1 shall require the approval of all Shares then in issue.
(a) Dispute Resolution. Except as otherwise specifically provided in this Agreement, in the event of any dispute, controversy or claim arising out of or related to this Agreement or a breach hereof, whether based in contract, tort, or statute, including its interpretation, scope, formation, performance or termination (“Dispute”), the parties shall settle such Dispute in accordance with the following:
If to the Company:
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00 Xxx Xx Xxxxx
X-0000
Xxxxxxxxxx, Grand Duchy of Luxembourg
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
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with a copy to:
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Cravath, Swaine & Xxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
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If to a Shareholder, to the address of such Shareholder as it shall appear on the records of the Company.
***********************
[Remainder of Page Intentionally Left Blank - Signature Page Follows]
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By
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/s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: Chief Executive Officer
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Exhibit A
Shareholders
Exhibit B
Form of Lock-Up Agreement
(attached)
XXXXXX BROTHERS INC.
CITIGROUP GLOBAL MARKETS INC.
As Representatives of the Several Underwriters,
c/x Xxxxxx Brothers Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Citigroup Global Markets Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
[ ], 2006
Ladies and Gentlemen:
As an inducement to execute the Underwriting Agreement, pursuant to which an offering will be made that is intended to result in the establishment of a public market for the common shares (the “Securities”) of Flagstone Reinsurance Holdings Limited, a Bermuda company, and any successor (by merger or otherwise) thereto, (the “Company”), the undersigned hereby agrees that during the period specified in the following paragraph (the “Lock-Up Period”), the undersigned will not, directly or indirectly (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Securities or securities convertible into or exchangeable for Securities, or sell, grant options, rights or warrants with respect to any shares of Securities or securities convertible into or exchangeable for Securities, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Securities, whether any such transaction described in clause (1) or (2) is to be settled by delivery of Securities or other securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Securities or securities convertible into or exercisable or exchangeable for Securities or any other securities of the Company or (4) publicly disclose the intention to do any of the foregoing.
The Lock-Up Period will commence on the date of this Lock-Up Agreement and continue and include the date 180 days after the public offering date set forth on the final prospectus used to sell the Securities (the “Public Offering Date”) pursuant to the Underwriting Agreement; however, if
(1) during the last 17 days of the initial Lock-Up Period, the Company releases earnings results or material news or a material event relating to the Company occurs, or
(2) prior to the expiration of the initial Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the initial Lock-Up Period,
then in each case the Lock-Up Period will be extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the occurrence of the material news or material event, as applicable, unless the Representatives waive, in writing, such extension.
The undersigned hereby acknowledges and agrees that written notice of any extension of the Lock-Up Period pursuant to the previous paragraph will be delivered by the Representatives to the Company (in accordance with Section 12 of the Underwriting Agreement) and that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned. The undersigned further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this Lock-Up Agreement during the period from the date of this Lock-Up Agreement, up to and including the 34th day following the expiration of the initial Lock-Up Period, it will give notice thereof to the Company and will not consummate such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period (as may have been extended pursuant to the previous paragraph) has expired.
Any Securities received upon exercise of options granted to the undersigned will also be subject to this Agreement. Any Securities acquired by the undersigned in the open market will not be subject to this Agreement. A transfer of Securities to an affiliate, family member or trust may be made, provided the transferee agrees to be bound in writing by the terms of this Agreement prior to such transfer, and no filing by any party (donor, donee, transferor or transferee) under the Exchange Act shall be required or shall be voluntarily made in connection with such transfer.
In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Securities if such transfer would constitute a violation or breach of this Agreement.
This Agreement shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned. This Agreement shall lapse and become null and void if the Public Offering Date shall not have occurred on or before , 2006. This agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
Very truly yours,
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[Name of shareholder]
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